U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

 (Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended       December 31, 2002
                               -------------------------

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                 to
                               ------------    --------------

                        Commission file number 000-26749

                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

        Delaware                                          11-2581812
------------------------------------------------------------------------------
(State or Other Jurisdiction of               (IRS Employer Identification No.)
Incorporation or Organization)

 26 Harbor Park Drive, Port Washington, NY                         11050
-----------------------------------------------------------------------------
(Address of Principal Executive Offices)                        (Zip Code)

Registrant's Telephone Number, Including Area Code (516) 626-0007
                                                   --------------------------



Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

     Indicate  by check  whether  the  registrant:  (1) has  filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
  Yes X                          No
     ----------                     -------------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

Yes                        No
     -------------             -------------

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     The  number of shares  outstanding  of the  issuer's  Common  Stock,  as of
February 7, 2003 was 7,610,907 shares.


<PAGE>

<TABLE>
<S>                                                                        <C>    <C>    <C>    <C>    <C>    <C>

           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                            INDEX                                                                       Page
                                                                                                        ----
               FORWARD-LOOKING STATEMENTS                                                                3

PART I     -   FINANCIAL INFORMATION                                                                     4

ITEM 1     -   CONDENSED FINANCIAL STATEMENTS:                                                           4

               CONSOLIDATED BALANCE SHEET as of June 30, 2002                                            4
               and December 31, 2002 (unaudited)

               CONSOLIDATED STATEMENT OF INCOME (unaudited)                                              5
               for the three months and six months ended December 31, 2001 and 2002

               CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)                                          6
               for the six months ended December 31, 2001 and 2002

               CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      7

ITEM 2     -   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                                        17
               CONDITION AND RESULTS OF OPERATIONS

ITEM 3     -   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT                                           27
               MARKET RISK

ITEM 4    -    CONTROLS AND PROCEDURES                                                                  27

PART II    -   OTHER INFORMATION                                                                        29

ITEM 1     -   LEGAL PROCEEDINGS                                                                        29

ITEM 2     -   CHANGES IN SECURITIES AND USE OF PROCEEDS                                                29

ITEM 3     -   DEFAULTS UPON SENIOR SECURITIES                                                          29

ITEM 4     -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                      29

ITEM 5     -   OTHER INFORMATION                                                                        29

ITEM 6     -   EXHIBITS AND REPORTS ON FORM 8-K                                                         30

</TABLE>

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES



Forward Looking Statements

     When  used  herein,  the  words  "may,"  "could,"  "estimate,"   "believe,"
"anticipate,"  "think,"  "intend,"  "expect"  and similar  expressions  identify
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995.  Such  statements  are not  guarantees of future
performance  and involve  known and unknown risks and  uncertainties,  and other
factors, which could cause actual results to differ materially from those in the
forward-looking statements. Readers are cautioned not to place undue reliance on
such  statements,  which speak only as of the date hereof.  For a discussion  of
such risks and uncertainties,  including risks relating to pricing,  competition
in the  bidding  and  proposal  process,  our  ability  to  consummate  contract
negotiations with prospective clients,  dependence on key members of management,
government  regulation,  acquisitions  and  affiliations,  the  market  for  PBM
services, and other factors,  readers are urged to carefully review and consider
various disclosures made by National Medical Health Card Systems,  Inc. ("Health
Card" or the  "Company")  which  attempt  to advise  interested  parties  of the
factors which affect Health Card's business,  including, without limitation, the
disclosures  made  under  the  caption  "Business"  in Item 1 and  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7 of the Company's  Annual Report on Form 10-K, as amended,  for the fiscal
year ended June 30, 2002, filed with the SEC on December 26, 2002.



<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1 - CONDENSED FINANCIAL STATEMENTS
           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                ($ in thousands)

<TABLE>
<S>                                                                                        <C>                        <C>
                                                                                      June 30,               December 31,
                                                                                        2002                     2002
  Assets                                                                                ----                     ----
  Current:                                                                                                   (Unaudited)

  Cash and cash equivalents (including cash equivalent investments of $1,187       $   1,768                 $     1,458
            and $1,185, respectively)
  Restricted cash                                                                      2,653                       1,989
  Accounts receivable, less allowance for doubtful accounts of $2,248
            and $2,666, respectively                                                  59,285                      58,205
  Rebates receivable                                                                  15,775                      23,231
  Due from affiliates                                                                    504                       4,080
  Deferred tax asset                                                                   1,542                       1,542
  Other current assets                                                                   610                       1,621
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
     Total current assets                                                             82,137                      92,126

  Property, equipment and software development costs, net                              9,031                       8,411
  Due from affiliates                                                                  3,620                           -
  Intangible assets, net of accumulated amortization of $406 and $777,respectively     2,523                       2,724
  Goodwill                                                                            52,035                      52,912
  Other assets                                                                           549                         451
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                $  149,895                  $  156,624
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
 Liabilities and Stockholders' Equity
  Current Liabilities:

  Accounts payable and accrued expenses                                           $  100,525                  $  105,427
  Revolving credit facility and loans payable-current                                 13,835                      20,948
  Convertible notes payable                                                            8,000                           -
  Current portion of capital lease obligations                                           556                         457
  Due to officer/stockholder                                                             696                         574
  Income taxes payable                                                                     -                         370
  Other current liabilities                                                            1,178                          96
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
  Total current liabilities                                                          124,790                     127,872
  Capital lease obligations, less current portion                                        809                         579
  Long term loans payable and other liabilities                                          865                       1,072
  Deferred tax liability                                                               2,154                       2,154
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
    Total liabilities                                                                128,618                     131,677
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
 Stockholders' Equity:

  Preferred stock $.10 par value; 10,000,000 shares authorized, none outstanding           -                           -
  Common Stock, $.001 par value, 25,000,000 shares authorized,  7,550,239 and
    7,801,907 shares issued, 7,359,239 and 7,610,907 outstanding, respectively             8                           8
  Additional paid-in-capital                                                          14,292                      14,959
  Retained earnings                                                                    7,721                      10,724
  Treasury stock at cost, 191,000 shares                                                (744)                       (744)
   ----------------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                                       21,277                      24,947
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                                   $  149,895                  $  156,624
  -----------------------------------------------------------------------------------------------------------------------
  -----------------------------------------------------------------------------------------------------------------------
</TABLE>

      See accompanying condensed notes to consolidated financial statements

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENT OF INCOME
                (Amounts in thousands, except per share amounts)
                                   (Unaudited)


<TABLE>
<S>                                                      <C>    <C>                       <C>           <C>    <C>    <C>

                                                                 Three months ended                          Six months ended
                                                                    December 31,                               December 31,

                                                                  2001             2002                  2001              2002
                                                                  ----             ----                   ---              ----

Revenues                                                     $  87,509         $ 150,964             $ 168,154           $298,331
Cost of claims                                                  79,769           139,308               153,161            275,796
-----------------------------------------------------------------------------------------------------------------------------------

Gross Profit                                                     7,740            11,656                14,993             22,535

Selling, general and administrative expenses*                    6,058             8,677                12,041             17,018
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

Operating income                                                 1,682             2,979                 2,952              5,517

Other income (expense):
Interest expense                                                   (49)             (311)                 (109)              (631)
Interest income                                                    141                71                   337                127
Other income, net                                                   25                38                    25                 77
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
                                                                   117              (202)                  253               (427)

Income before provision for income taxes                         1,799             2,777                 3,205              5,090
Provision for income taxes                                         751             1,139                 1,168              2,087
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                    $  1,048          $  1,638            $    2,037          $   3,003
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
    Basic                                                     $   0.15          $   0.22            $     0.28          $    0.40
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
    Diluted                                                   $   0.13          $   0.20            $     0.27          $    0.38
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding:
    Basic                                                        7,184             7,611                 7,164              7,568
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
    Diluted                                                      7,781             8,088                 7,614              8,004

* Includes amounts charged by affiliates aggregating:         $    700          $    223            $    1,399          $     520
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
      See accompanying condensed notes to consolidated financial statements

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                ($ in thousands)
                                   (Unaudited)

<TABLE>
<S>                                                                                <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                Six months ended
                                                                                                  December 31,


                                                                                           2001                   2002
Cash flows from operating activities:                                                      ----                   ----
             Net income                                                               $   2,037                $   3,003
               Adjustments to reconcile net income to net cash
                (used in) provided by operating activities:
                  Depreciation and amortization                                           1,429                    2,123
                  Amortization of deferred gain                                               -                      (77)
                  Net gain on disposal of capital assets                                    (17)                       -
                  Provision for doubtful accounts                                           627                      418
                  Compensation expense accrued to officer/stockholder                       275                      278
                  Deferred income taxes                                                    (347)                       -
                  Interest accrued on stockholders'/affiliate's loans                      (125)                     (84)
                Changes in assets and liabilities, net of effect from
                acquisitions:
                  Restricted cash                                                        (4,023)                     664
                  Accounts receivable                                                    (1,601)                     703
                  Rebates receivable                                                        (69)                  (7,455)
                  Other current assets                                                      428                     (936)
                  Due to/from affiliates                                                    240                     (273)
                  Other assets                                                              (28)                       5
                  Accounts payable and accrued expenses                                  (2,086)                   5,595
                  Income taxes payable and other current liabilities                        182                     (462)
                  Other long term liabilities                                              (734)                     275
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities                                      (3,812)                   3,777
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
             Capital expenditures                                                        (1,838)                    (768)
             Acquisition of Integrail, net of cash acquired                                   -                   (1,449)
             Acquisition of PAI, net of cash acquired                                    (1,000)                  (1,000)
             Acquisition of Centrus, net of cash acquired                                     -                       (3)
             Proceeds from disposal of capital assets                                     1,321                       22
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                    (1,517)                  (3,198)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
             Proceeds from exercise of stock options                                          -                      418
             Repayment of convertible note offering                                           -                   (8,000)
             Proceeds from revolving credit facility                                          -                  335,650
             Repayment of revolving credit facility                                           -                 (328,542)
             Deferred financing costs                                                         -                       94
             Repayment of debt and capital lease obligations                               (379)                    (509)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                                                      (379)                    (889)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                                (5,708)                    (310)
Cash and cash equivalents at beginning of period                                         10,877                    1,768
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                            $   5,169                $   1,458
------------------------------------------------------------------------------------------------------------------------------
      See accompanying condensed notes to consolidated financial statement

</TABLE>

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (All $ in thousands, except per share amounts)
                                   (Unaudited)



1. BASIS OF PRESENTATION

     The unaudited  consolidated  financial  statements  include the accounts of
National Medical Health Card Systems,  Inc. (the "Company" or "Health Card") and
its wholly owned subsidiaries,  Pharmacy Associates,  Inc. ("PAI"),  Interchange
PMP, Inc. ("PMP"), Centrus Corporation,  formerly known as HSL Acquisition Corp.
(see Note 2)  ("Centrus"),  National  Medical  Health  Card IPA,  Inc.  ("IPA"),
formerly known as PSCNY IPA, Inc., Specialty Pharmacy Care, Inc.  ("Specialty"),
Integrail,  Inc.  ("Integrail"),  NMHCRX Mail Order, Inc. ("Mail Order"), NMHCRX
Contracts,  Inc.  ("Contracts"),  and PBM  Technology  Inc.  ("PBM Tech").  Also
included  on a  consolidated  basis  are  the  accounts  of  NMHC  Funding,  LLC
("Funding"),   a  limited  liability  company  of  which  the  Company  and  its
subsidiaries  are the  owners of all of the  membership  interests.  Unless  the
context otherwise requires,  references herein to the "Company" or "Health Card"
refer to the Company and its subsidiaries, on a consolidated basis. All material
inter-company   balances  and   transactions   have  been   eliminated   in  the
consolidation.

     The unaudited  consolidated  financial statements have been prepared by the
Company in  accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information and  substantially in the form
prescribed by the Securities  and Exchange  Commission in  instructions  to Form
10-Q and in Article 10 of Regulation S-X.  Accordingly,  they do not include all
of the  information  and footnotes  required by such  accounting  principles for
complete financial statements.  In the opinion of the Company's management,  the
December 31, 2002 and 2001 unaudited  interim financial  statements  include all
adjustments,  consisting of normal recurring  adjustments,  necessary for a fair
presentation  of  results  for these  interim  periods.  In the  opinion  of the
Company's  management,  the disclosures contained in this Form 10-Q are adequate
to make the information  presented not misleading when read in conjunction  with
the Notes to Consolidated  Financial  Statements  included in the Company's Form
10-K,  as amended,  for the year ended June 30, 2002.  The results of operations
for the three and six month periods ended December 31, 2002 are not  necessarily
indicative of the operating results to be expected for the full year.

     Certain  amounts in the prior period have been  reclassified  to conform to
the current  period  presentation.  For  information  concerning  the  Company's
significant  accounting  policies,  reference  is made to the  Company's  Annual
Report on Form 10-K,  as amended,  for the year ended June 30, 2002 (the "Annual
Report").

2. BUSINESS ACQUISITIONS

     As of  November  1, 2002,  the  Company  and its wholly  owned  subsidiary,
Integrail  Acquisition  Corp.,  entered into an Asset  Purchase  Agreement  with
Health Solutions,  Ltd.  ("HSL"),  and certain of its security holders (together
with HSL,  the  "Sellers").  Pursuant to the  Agreement,  Health  Card  acquired
substantially  all of the assets of the Integrail  division of HSL's operations,
for a purchase price of $1,400. Integrail provides software and analytical tools
in the area of informatics which allows for the blending of medical and pharmacy
data to predict future outcomes.

     Half of the $1,400  purchase price was paid at the closing  directly to the
Sellers,  and half was deposited into escrow as security for the  performance of
certain  indemnification  obligations  of  the  Sellers.  The  Company  acquired
approximately  $500  of  HSL's  assets  which  included  $158  of  property  and
equipment,  $225 of  software,  $76 of  prepaid  expenses,  and $41 of  accounts
receivable.  The Company also agreed to assume approximately $500 of liabilities
related to Integrail  which included $166 of debt under capital  leases,  $78 of
miscellaneous  payables,  and $259 due to HSL for prior  equipment  and services
provided to  Integrail  by HSL.  The  acquisition  was  accounted  for under the
purchase  method of accounting  and the results of Integrail's  operations  were
included  in  the  consolidated   financial   statements   commencing  with  the
acquisition  date.  The excess of the  acquisition  costs over the fair value of
identifiable  net assets  acquired was $1,449,  which  consists of the following
components:  (i)  software  and company  know how valued at $575,  which will be
amortized  over three (3) years;  and (ii)  goodwill of $874,  which will not be
amortized  for book  purposes per SFAS 142 (see Note 8). The  allocation  of the
purchase price is preliminary subject to final valuation.  For tax purposes, the
goodwill and other  intangibles will be amortized over fifteen years.  Funds for
this  transaction  were supplied by the revolving  credit  facility that was put
into place in January 2002. (See below).  The Agreement provides that if certain
operational  milestones  are achieved over the next 12 months,  certain  amounts
will be released from the escrow to the Sellers.

     The Company  entered into an Asset Purchase  Agreement (the "Asset Purchase
Agreement"),  dated as of January 29, 2002, with Health  Solutions,  Ltd., a New
York corporation  ("HSL"),  HSL Acquisition Corp., a Delaware  corporation and a
wholly-owned  subsidiary of the Company ("Sub"), and the security holders of HSL
named therein, pursuant to which the Company agreed to acquire certain assets of
HSL relating to the pharmacy benefit management  business (PBM) conducted by HSL
under the name  "Centrus"  (the  "Acquisition").  Centrus  provides PBM services
primarily to managed care organizations in the northeast. The Company intends to
continue to use the Centrus assets to provide PBM services. The Centrus business
complements  the  Company's  business  while  significantly   strengthening  the
Company's presence in the managed care market.

     The aggregate purchase price of the Acquisition was $40 million in cash, of
which  $3  million  is  held  in  escrow  to  secure   certain   indemnification
obligations,  ($2  million  has been  released  as of July  2002).  The  Company
acquired  approximately $1.4 million of HSL's assets which included $0.9 million
of property and equipment and $0.5 million of software.  The Company also agreed
to assume  approximately  $1.4  million  of HSL's  liabilities  relating  to the
Centrus  business which  included $1.1 million of rebates due to sponsors,  $0.1
million of capital  leases,  and $0.2  million of  miscellaneous  payables.  The
acquisition  was accounted for under the purchase  method of accounting  and the
results of  Centrus'  operations  were  included in the  consolidated  financial
statements  commencing with the acquisition  date. The excess of the acquisition
costs over the fair value of  identifiable  net assets  acquired was  $40,671.5,
which consists of the following components: (i) customer relationships valued at
$2,415,  which  will be  amortized  over  five  (5)  years;  (ii) an  employment
agreement  valued at $83,  which will be  amortized  over two (2)  years:  (iii)
non-compete  contracts  valued at $76,  which  will be  amortized  over four (4)
years,  and (iv)  goodwill of  $38,094.8,  which will not be amortized  for book
purposes  per SFAS 142 (see Note 8). For tax  purposes,  the  goodwill and other
intangibles  will be amortized over fifteen years. In addition,  the Company has
agreed to pay HSL as additional purchase price up to $4 million over a period of
three (3) years if the acquired  Centrus  business  achieves  certain  financial
performance  targets during the two-year period  following the Closing.  HSL may
also be entitled  to an  additional  incentive  payment  based on the  financial
performance of the Centrus  business  during the one-year  period  following the
Closing.  It is the  Company's  expectation  that some of these  monies  will be
earned and paid out over the next three years.

     Simultaneously  with  the  consummation  of the  Acquisition,  the  Company
entered  into an  Employment  Agreement  and a Stock Option  Agreement  with the
former  president of Centrus,  pursuant to which he will serve as Executive Vice
President  of Managed  Care for the Company.  Additionally,  several  members of
Centrus'  management  team have joined the Company as  employees,  and have been
granted  stock  options to purchase  an  aggregate  of 300,000  shares of Common
Stock, under the Company's 1999 Stock Option Plan, as amended.

     On January 29, 2002,  the Company and certain of its  subsidiaries  entered
into a $40 million secured  revolving  credit facility (the "Facility") with HFG
Healthco-4 LLC, a specialty  finance  company.  In connection with the Facility,
the Company  and certain of its  subsidiaries  have  agreed to  transfer,  on an
on-going basis,  their accounts  receivable to Funding.  Funding  utilizes those
receivables as collateral to secure borrowings under the facility.  The Facility
has a three year term,  provides  for  borrowing up to $40 million at the London
InterBank  Offered  Rate  (LIBOR)  plus 2.40% (3.8% at December 31, 2002) and is
secured  by  receivables  and other  assets of the  Company  and  certain of its
subsidiaries.  Borrowings  of $28.7  million  under  the  Facility  were used to
finance part of the purchase price of the  Acquisition  and will also be used by
the Company and certain of its  subsidiaries  for working  capital  purposes and
future  acquisitions in support of its business plan. The outstanding balance as
of December 31, 2002 was approximately  $20.9 million,  which was all classified
as short term. The Facility  requires the Company to maintain certain  financial
and other  covenants.  The  Company  was in  compliance  with all  covenants  at
December 31, 2002.

     The  summarized  unaudited pro forma results of operations  set forth below
for the three and six  months  ended  December  31,  2001 and 2002  assumes  the
Centrus and  Integrail  acquisitions  had occurred as of the  beginning of these
periods.
<TABLE>
<S>                                                             <C>    <C>    <C>       <C>    <C>    <C>
                                                                 Three Months Ended                Three Months Ended
                                                                  December 31, 2001                December 31, 2002
                                                                 ------------------                ------------------
     Revenues                                                     $      158,647                    $        151,019
     Net income                                                   $          102                    $          1,373
     Net income per common share:
       Basic                                                      $         0.01                    $           0.18
       Diluted                                                    $         0.01                    $           0.17
     Pro forma weighted average number of
        common shares outstanding:
       Basic                                                           7,183,996                           7,610,907
       Diluted                                                         7,781,377                           8,087,815


                                                                  Six Months Ended                  Six Months Ended
                                                                  December 31, 2001                December 31, 2002
                                                                  -----------------                -----------------
     Revenues                                                     $      325,094                    $        298,550
     Net income                                                   $          580                    $          1,417
     Net income per common share:
       Basic                                                      $         0.08                    $           0.19
       Diluted                                                    $         0.08                    $           0.18
     Pro forma weighted average number of
        common shares outstanding:
       Basic                                                           7,163,616                           7,567,673
       Diluted                                                         7,613,615                           8,003,535
</TABLE>

     Pro forma adjusted net income per common share, including acquisitions, may
not be  indicative  of actual  results,  primarily  because  pro forma  earnings
include  historical  results of  operations  of the  acquired  entity and do not
reflect any cost  savings or  potential  sales  erosion that may result from the
Company's integration efforts. In particular,  Integrail experienced significant
losses,  which included the write-off of assets, prior to the acquisition by the
Company.


3. STOCK OPTIONS

     During the six months ended December 31, 2002, the Company  granted 297,285
stock  options and 128,645  stock  options were  cancelled  for a net of 168,640
stock options under the 1999 Stock Option Plan (the "Plan"). The options granted
during this period are  exercisable  at prices  ranging  from $7.19 to $9.98 and
terminate five to seven years from the grant date. The total number of shares of
common stock  reserved by the Company for  issuance  under the Plan is 2,850,000
plus an indeterminable number of shares of common stock issuable pursuant to the
anti-dilution  provisions of the Plan or upon the exercise of "reload  options."
There are no options  outstanding  that contain the "reload"  provision.  Shares
issuable  pursuant to options  granted  under the Plan as of  December  31, 2002
equal 1,895,991, net of 385,243 options exercised to date.

4. EARNINGS PER SHARE

A reconciliation of shares used in calculating basic and diluted earnings per
share follows:
<TABLE>
<S>     <C>                                                                        <C>    <C>    <C>    <C>    <C>

                                                                                             Three Months Ended
                                                                                                 December 31,
                                                                                    ------------------------------------
                                                                                    ------------------------------------
                                                                                             2001               2002
                                                                                             ----               ----
   Basic                                                                                 7,183,996          7,610,907
   Effect of assumed exercise of employee stock options                                    555,714            476,908
   Contingently issuable shares related to an acquisition                                   41,667                 -
                                                                                         ---------          ---------

   Diluted weighted average number of shares outstanding                                 7,781,377          8,087,815
                                                                                         =========          =========


                                                                                                Six Months Ended
                                                                                                  December 31,
                                                                                    ------------------------------------
                                                                                    ------------------------------------
                                                                                              2001               2002
                                                                                              ----               ----
   Basic                                                                                 7,163,616          7,567,673
   Effect of assumed exercise of employee stock options                                    422,628            435,862
   Contingently issuable shares related to an acquisition                                   27,371                  -
                                                                                         ---------          ---------
   Diluted weighted average number of shares outstanding                                 7,613,615          8,003,535
                                                                                         =========          =========


5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

                                                                         June 30,                December 31,
                                                                           2002                      2002
                                                                           ----                      ----
           Claims Payable                                             $   74,195                $    72,294
           Rebates Payable to Sponsors                                    16,921                     28,329
           Trade Payables                                                  6,693                      2,182
           Other Payables                                                  2,716                      2,622
                                                                      ----------                -----------
                                                                      $  100,525                $   105,427
                                                                      ==========                ===========
</TABLE>

6. RELATED PARTY TRANSACTIONS

     As of January 1, 2002,  the  Company  has  eliminated  the  majority of its
historical related party service  transactions with the exception being rent and
some  administrative  services as described  below.  For the periods  presented,
certain general,  administrative  and other expenses  reflected in the financial
statements  include  allocations of certain  corporate  expenses from affiliates
which take into consideration personnel,  estimates of the time spent to provide
services or other allocation  methodologies.  These allocations include services
and expenses for employee benefits  administration,  legal,  communications  and
other miscellaneous services.

     Management  believes the  foregoing  allocations  were made on a reasonable
basis.  Although these allocations do not necessarily  represent the costs which
would  have been or may be  incurred  by the  Company  on a  stand-alone  basis,
management believes that any variance in costs would not be material.

     General and administrative expenses related to transactions with affiliates
included in the statement of income are:
<TABLE>
<S>                                                                        <C>    <C>    <C>    <C>    <C>    <C>
                                                                             Three Months Ended
                                                                                December 31,
                                                                       -------------------------------
                                                                       -------------------------------
                                                                               2001            2002
                                                                               ----            ----
Software maintenance and related services                                   $   227          $    -
Management and consulting fees                                                  122              12
Administrative, accounting services and supplies                                226              81
Rent and utilities                                                              125             130
                                                                            -------          ------
                                                                            $   700          $  223
                                                                            =======          ======

                                                                              Six Months Ended
                                                                                December 31,
                                                                       -------------------------------
                                                                       -------------------------------
                                                                               2001            2002
                                                                               ----            ----
Software maintenance and related services                                   $   482          $    -
Management and consulting fees                                                  199              58
Administrative, accounting services and supplies                                430             109
Rent and utilities                                                              288             353
                                                                            -------         -------
                                                                            $ 1,399         $   520
                                                                            =======         =======

</TABLE>

     Due from  affiliates  includes a note from another  company  affiliated  by
common ownership.  As of December 31, 2002, the balance due from this affiliate,
including accrued interest, was $3,703.1.  Such amount bore interest at 8.5% per
annum,  payable  quarterly.  The note was  collateralized by 1,022,758 shares of
$.001  par  value  common  stock of the  Company  registered  in the name of the
Company's Chairman of the Board and was secured by his personal  guarantee.  The
original note was replaced by a new non-recourse  promissory note dated July 31,
2000,  payable to the Company in the amount of $3,890.9.  The note is payable in
annual installments of $400, consisting of principal and interest at the rate of
8.5% per annum on each of the first and second anniversary dates, with the total
remaining  balance of  principal  and interest due and payable on July 31, 2003.
The note is  collateralized  by 1,000,000 shares of $.001 par value common stock
of the Company registered in the name of the Company's Chairman of the Board and
is secured by his personal guarantee.  The first two $400 payments due under the
note as of July 31, 2001 and 2002 were  satisfied by  offsetting an equal amount
owed by the Company to the Chairman of the Board.  Effective  July 31, 2001, the
interest  rate on the note was  changed to the prime rate in effect from time to
time (4.25% at December 31, 2002).

     On February 8, 2001, the President gave to the Company his Promissory  Note
in the amount of $34 as evidence of the loan by the Company to the President. On
April 12, 2002, the  Promissory  Note was amended and Company agreed to increase
the loan to $100.  The loan bears  interest at 8%, and is due on April 25, 2003.
The interest  rate was lowered  effective  July 1, 2002 to the rate at which the
Company borrows money (3.8% at December 31, 2002).

     In  connection  with  a  potential  bonus,  to  be  earned  pursuant  to an
employment  agreement  dated  September  30, 2002,  between the President of the
Company's mail order operations and the Company, the Company has loaned him $250
as an advance against the potential bonus. The loan is evidenced by a promissory
note  executed by the Mail Order  President  in favor of the  Company.  The loan
bears an interest rate of 9% and is due and payable on September 30, 2003 in the
event the bonus is not earned.

     The Company currently occupies  approximately  26,500 square feet of office
space at 26 Harbor  Park Drive,  Port  Washington,  New York 11050 (the  "Leased
Premises").  The Company subleases the Leased Premises from BFS Realty,  LLC, an
affiliate of the Chairman of the Board (the  "Affiliate").  The Affiliate leases
the  Leased  Premises  from the Nassau  County  Industrial  Development  Agency,
pursuant to a lease which was entered  into by the agency and the  Affiliate  in
July 1994,  and which  expires in March  2005.  The  Affiliate  has the right to
become the owner of the Leased  Premises  upon  expiration  of this  lease.  The
Affiliate  subleases  a portion  of the  Leased  Premises  to the  Company  (the
"Lease").  As of November 1, 2001,  the  Company and the  Affiliate  amended the
Lease.  The Lease provides that,  effective  August 1, 2001, the rent payable by
the Company  shall be an  aggregate  annual  rent of $308.  While  formerly  the
Company  made  estimated  monthly  real estate tax,  utilities  and  maintenance
expense payments to the Affiliate,  the Lease now provides that the Company will
pay its pro-rata share of such expenses directly to the entities to whom payment
must be made. The Company  estimates that such monthly expenses will approximate
an  aggregate  of $336 per year.  The annual  rent will  increase by 5% per year
during the term of the Lease. The annual expenses are also expected to increase,
although the Company  cannot  estimate by how much.  The Lease  expires in July,
2010.  The Company  believes  that the Leased  Premises are adequate for current
purposes.

7. MAJOR CUSTOMERS AND PHARMACIES

     For the three and six months ended December 31, 2001,  approximately 13% of
the   consolidated   revenues  of  the  Company   were  from  one  plan  sponsor
administering  multiple  plans.  For the three  months  ended  December 31, 2002
approximately 46% of the consolidated revenues of the Company were from two plan
sponsors  administering  multiple  plans.  For the six months ended December 31,
2002,  approximately  42% of the consolidated  revenues of the Company were from
two plan sponsors  administering multiple plans. Amounts due from these sponsors
as of December 31, 2002 approximated $16.3 million.

     For the three and six months ended December 31, 2001,  approximately 32% of
the cost of claims were from two pharmacy  chains.  For the three and six months
ended December 31, 2002, approximately 50% and 49%, respectively, of the cost of
claims were from three pharmacy chains.  Amounts payable to these three pharmacy
chains at December 31, 2002 were approximately $30.5 million.

8. RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
Nos. 141 and 142,  Business  Combinations  and  Goodwill and Other  Intangibles,
respectively.  SFAS 141 requires all business combinations  initiated after June
30, 2001 to be accounted for using the purchase method. Under SFAS 142, goodwill
is no longer subject to  amortization  over its estimated  useful life.  Rather,
goodwill is subject to at least an annual  assessment for impairment by applying
a fair-value based test.  Additionally,  an acquired  intangible asset should be
separately recognized if the benefit of the intangible asset is obtained through
contractual  or other  legal  rights,  or if the  intangible  asset can be sold,
transferred,  licensed, rented or exchanged, regardless of the acquirer's intent
to do so.  The  Company  has  adopted  these  SFAS's  as of July 1, 2001 and has
performed  the  requisite  impairment  testing.  As of June 30, 2002 there is no
impairment to the goodwill recorded on the accompanying balance sheet.

     SFAS 142  requires  the  disclosure  of net income and  earnings  per share
computed on a pro forma basis by reversing the goodwill amortized in the periods
presented. Such pro forma disclosures are required in the period of adoption and
thereafter  until  all  periods  presented  reflect  goodwill  accounted  for in
accordance with SFAS 142. No pro forma is required as all periods presented have
now been accounted for in accordance with SFAS 142.

     In  October  2001,  the  FASB  issued  SFAS  No.  144,  Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets,  that is applicable to financial
statements  issued for fiscal years  beginning  after  December  15, 2001,  with
transition provisions for certain matters.  FASB's new rules on asset impairment
supersede SFAS No. 121,  Accounting for the Impairment of Long-Lived  Assets and
for Long-Lived  Assets to be Disposed of, and provide a single  accounting model
for  long-lived  assets  to be  disposed  of.  Although  retaining  many  of the
fundamental  recognition  and  measurement  provisions  of SFAS No. 121, the new
rules significantly change the criteria that would have to be met to classify an
asset as  held-for-sale.  The new rules  supersede the  provisions of Accounting
Principals  Board  Opinion No. 30 ("APB No. 30") with  regard to  reporting  the
effects of a disposal of a segment of a business,  and require  expected  future
operating  losses from  discontinued  operations to be displayed in discontinued
operations in the period in which the losses are incurred  rather than as of the
measurement  date  as  presently  required  By APB No.  30.  In  addition,  more
dispositions  will qualify for discontinued  operations  treatment in the income
statement.  The Company does not believe that the implementation of SFAS No. 144
will have any impact on its  financial  statements as of and for the year ending
June 30, 2003.

     On December 31, 2002, the Financial  Accounting Standards Board issued FASB
Statement No. 148,  Accounting  for  Stock-Based  Compensation  - Transition and
Disclosure.  Statement  148  amends  FASB  Statement  No.  123,  Accounting  for
Stock-Based  Compensation,  to provide  alternative methods of transition to the
fair value  method of  accounting  for  stock-based  employee  compensation.  In
addition,  Statement  148 amends the  disclosure  provisions of Statement 123 to
require  disclosure  in the summary of  significant  accounting  policies of the
effects of an entity's  accounting  policy with respect to stock-based  employee
compensation on reported net income and earnings per share in annual and interim
financial  statements.  Statement  148 does not amend  Statement  123 to require
companies to account for their employee  stock-based awards using the fair value
method.  However, the disclosure  provisions are required for all companies with
stock-based employee  compensation,  regardless of whether they utilize the fair
method of accounting  described in Statement  123 or the intrinsic  value method
described in APB Opinion No. 25,  Accounting for Stock Issued to Employees.  The
Company  will be required to comply  with the  requirements  of FASB No. 148 for
their quarter ended March 31, 2003 interim financial statements.

9. SUPPLEMENTAL CASH FLOW INFORMATION

     During the six months ended  December  31, 2001 and December 31, 2002,  the
Company  paid $109 and $631 in  interest  and $698 and  $1,506 in income  taxes,
respectively.  In non-cash  transactions,  the Company  issued 62,500 shares and
41,668  shares of its common  stock,  each issue valued at $250,  as  additional
compensation  to the  shareholders  of PAI  in  August  2001  and  August  2002,
respectively.

10.      LITIGATION

See Item 1 of Part II of this Quarterly Report on Form 10-Q.


<PAGE>


ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended December 31, 2002
Compared to Three Months Ended December 31, 2001

     Revenues increased $63.5 million,  or approximately 73%, from $87.5 million
for the three months ended  December 31, 2001,  to $151.0  million for the three
months ended  December 31, 2002. Of the  increase,  $81.0 million was due to the
inclusion of revenues from  Centrus,  which was included in the revenues for the
quarter ended December 31, 2002, but not in the quarter ended December 31, 2001.
Another $5.7 million of the increase was due to revenues related to new sponsors
or new services  offered during the three months ended December 31, 2002.  These
increases  were  partially  offset  by a $29  million  decrease  related  to two
factors:  1) a major sponsor  terminated its contract with Health Card effective
June 30, 2002,  and 2) there were  certain  contracts  during the quarter  ended
December 31, 2002 that the Company  recognized  on a net revenue basis versus no
contracts  during the three  months  ended  December  31,  2001 that the Company
recognized on a net revenue  basis.  The specific  terms of the  contracts  that
Health Card enters into with its sponsors  will  determine  whether  Health Card
recognizes the gross revenue  related to the cost of the  prescriptions  filled.
For those few contracts  that Health Card  recognizes  net revenue,  there is no
impact on gross  profit since  neither the revenue nor the related  costs of the
prescriptions  is  recorded.  The  majority of the balance of the  increase,  or
approximately  $6 million,  was due  primarily to increased  revenues from other
existing  sponsors  as a result of  several  factors  including  higher  charges
relating to  increased  cost of  pharmaceuticals,  new drugs,  plan  participant
growth and an increase in the average number of claims per plan participant.

     Cost of claims increased $59.5 million,  or  approximately  75%, from $79.8
million for the three months ended  December 31, 2001, to $139.3 million for the
three months ended December 31, 2002. Centrus accounted for $78.8 million of the
increase. This increase was partially offset by the two factors described in the
previous paragraph, namely, the loss of a major sponsor and the recognizing of a
few  contracts  on a net revenue  basis.  As a percentage  of revenues,  cost of
claims  increased  from 91.2% to 92.3% for the three months  ended  December 31,
2001 and December 31, 2002, respectively.  The increase relates primarily to the
higher cost of claims on the Centrus book of business, which serves managed care
clients  primarily.  Industry-wide,  managed care clients have a greater cost of
claims,  and consequently a lower gross margin,  than other types of business in
the PBM industry.  Centrus'  cost of claims for the three months ended  December
31,  2002  ran  about 7 - 12  percentage  points  greater  than  the rest of the
Company's business, and since Centrus accounted for 54% of the Company's revenue
in the three months ended  December 31, 2002,  this impacted the overall cost of
claims percentage.

     Gross  profit  increased  from  $7.7  million  for the three  months  ended
December 31, 2001 to $11.6 million for the three months ended December 31, 2002;
a $3.9 million, or 51%, increase. In addition to the revenue volume increase and
consequent gross margin increase, Centrus accounted for $2.2 million, or 56%, of
the gross profit increase.  Gross profit,  as a percentage of revenue,  declined
from 8.8% to 7.7% for the three months ended  December 31, 2001 and December 31,
2002,  respectively.  The  decrease  is again  principally  related to the lower
margins  achieved by Centrus.  The Company has also seen some  decline in profit
margins due to competitive pressures.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $2.6 million,  or approximately 43%, from $6.1
million for the three  months  ended  December  31, 2001 to $8.7 million for the
three months ended December 31, 2002. This increase is primarily  related to the
acquisition of Centrus.  While the expenses specifically related to Centrus were
$3.0 million in the quarter ended December 31, 2002,  this was partially  offset
by reductions in other areas of the Company  related to the full  integration of
Centrus. The Company analyzed every department in the Company and made decisions
concerning  the most  efficient  way to operate  regardless  of  location.  This
evaluation  has led to synergies  across the Company and has allowed the Company
to maximize the utilization of its resources.  It is anticipated  that this kind
of analysis and deployment of resources will continue as the Company grows.

     Selling, general, and administrative expenses also increased in the quarter
ended December 31, 2002 due to the start-up of two new  activities.  The Company
acquired  Integrail  as of  November  1, 2002 (See Note 2 of Item 1). In the two
months since the Company acquired Integrail,  approximately $337,000 of expenses
were  incurred  primarily  related to salary and benefits and  depreciation  and
amortization.  The other  activity  was the  start-up of the build out of a mail
order facility in Miramar Florida.  Currently, the Company outsources the actual
fulfillment  of  prescriptions  that are  ordered  by mail.  By  bringing  these
services in- house the Company  will be better able to control  service and cost
for its  customers.  For the quarter  ended  December  31,  2002,  approximately
$112,000  of  expenses  were  incurred  on this  endeavor.  It is the  Company's
expectation that the facility will be up and running in the March to April, 2003
timeframe.

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately  $477,000, or 68%,  year-over-year from approximately  $700,000 to
approximately $223,000 for the three months ended December 31, 2001 and December
31, 2002,  respectively.  The majority of the decrease  related to the hiring of
employees  which allowed the Company to bring  in-house  certain  services which
historically had been obtained from related parties.

     Selling,  general,  and  administrative  expenses  as a percent  of revenue
improved  from 6.9% for the  quarter  ended  December  31,  2001 to 5.7% for the
quarter  ended  December 31, 2002.  This  improvement  stems from the  continued
growth of the Company due to improving efficiencies with scale.

     For the three months ended December 31, 2001, the Company  recognized other
income, net, of approximately  $117,000. For the three months ended December 31,
2002, the Company incurred other expense,  net, of approximately  $202,000.  The
components  of  the  approximate  $319,000  increase  in  net  expense  were  an
approximate  $262,000 increase in interest expense,  and an approximate  $70,000
decrease in interest  income,  and an approximate  $13,000 increase in amortized
gain on assets  sold  during the fiscal  year ended June 30,  2002.  The primary
reasons for the net increase in expense were the  interest  expense  incurred on
the Company's  revolving  credit  facility during the quarter ended December 31,
2002 to finance the acquisition of Centrus and Integrail (see Note 2 of Item 1),
and the  reduction in interest  income since all balances go towards  paying off
the revolving  credit  facility.  Partially  offsetting the increase in interest
expense was an  approximate  $52,000  increase  in deferred  gain on the sale of
assets  related to a  sale/leaseback  transaction,  which gain of  approximately
$459,000 was recorded as deferred  revenue and is being recognized over the life
of the lease, which is thirty-six (36) months.

     Income before the provision for income taxes increased  approximately  $1.0
million, or 54%, from approximately $1.8 million, for the quarter ended December
31, 2001, to  approximately  $2.8,  million for the quarter  ended  December 31,
2002.  The primary reason for the increase was the improving  efficiencies  that
come with scale arising from the integration of the acquisitions the Company has
completed.  For the three months ended December 31, 2002 revenues  increased 73%
over the three months  ended  December 31, 2001,  while  selling,  general,  and
administrative  expenses  increased  only 43%. In  addition,  while gross margin
percentages declined  period-over-period  due to the acquisition of Centrus, the
gross  profit  dollars  increased  by  51%.  These  factors  contributed  to the
continued improvement in the Company's profitability.  The overall profitability
was  diminished,  however by the start-up of the Integrail  acquisition  and the
build out of the mail order facility.

     EBITDA  (earnings before interest,  taxes,  depreciation and  amortization)
increased by approximately  $1.6 million or 68%, from $2.4 million for the three
months  ended  December  31,  2001 to $4.1  million for the three  months  ended
December 31, 2002. The primary factor for the increase was the approximate  $1.3
million,  or 77%,  increase in operating  income  described  above. In addition,
there was an approximate $176,000 increase in depreciation and amortization, and
an approximate $169,000 increase in other intangibles amortization.

     The effective tax rate  decreased from 41.7% for the quarter ended December
31, 2001 to 41.0% for the quarter ended  December 31, 2002.  The tax rate of 41%
represents the Company's estimated tax rate for the full fiscal year.

     Net income for the quarter ended December 31, 2002 was  approximately  $1.6
million as compared to approximately $1.0 million for the quarter ended December
31, 2001; a 56%  increase.  Earnings per diluted  share  increased by $0.07,  to
$0.20 for the quarter ended December 31, 2002.

Six Months Ended December 31, 2002
Compared to Six Months Ended December 31, 2001

     Revenues  increased  $130.2  million,  or  approximately  77%,  from $168.1
million for the six months ended  December 31, 2001,  to $298.3  million for the
six months ended  December 31, 2002. Of the increase,  $156.4 million was due to
the inclusion of revenues  from Centrus,  which was included in the revenues for
the six months ended December 31, 2002, but not in the six months ended December
31, 2001.  Another  $6.9 million of the increase was due to revenues  related to
new sponsors or new services  offered  during the six months ended  December 31,
2002. These increases were partially offset by a $52 million decrease related to
two  factors:  1) a major  sponsor  terminated  its  contract  with  Health Card
effective  June 30,  2002,  and 2) there were certain  contracts  during the six
months  ended  December  31, 2002 that the Company  recognized  on a net revenue
basis versus no contracts during the six months ended December 31, 2001 that the
Company  recognized on a net revenue basis.  The specific terms of the contracts
that Health Card enters into with its sponsors  will  determine  whether  Health
Card  recognizes  the gross  revenue  related  to the cost of the  prescriptions
filled.  For those few contracts that Health Card recognizes net revenue,  there
is no impact on gross profit since  neither the revenue nor the related costs of
the prescriptions is recorded.  The majority of the balance of the increase,  or
approximately  $19 million,  was due primarily to increased  revenues from other
existing  sponsors  as a result of  several  factors  including  higher  charges
relating to  increased  cost of  pharmaceuticals,  new drugs,  plan  participant
growth and an increase in the average number of claims per plan participant.

     Cost of claims increased $122.6 million,  or approximately 80%, from $153.2
million for the six months ended  December 31, 2001,  to $275.8  million for the
six months ended December 31, 2002.  Centrus accounted for $152.3 million of the
increase. This increase was partially offset by the two factors described in the
previous paragraph, namely, the loss of a major sponsor and the recognizing of a
few  contracts  on a net revenue  basis.  As a percentage  of revenues,  cost of
claims  increased from 91.1% to 92.4% for the six months ended December 31, 2001
and December  31, 2002,  respectively.  The  increase  relates  primarily to the
higher cost of claims on the Centrus book of business, which serves managed care
clients  primarily.  Industry-wide,  managed care clients have a greater cost of
claims,  and consequently a lower gross margin,  than other types of business in
the PBM industry.  Centrus' cost of claims for the six months ended December 31,
2002 ran about 7 - 11 percentage  points  greater than the rest of the Company's
business,  and since Centrus  accounted for 52% of the Company's  revenue in the
six months ended  December 31,  2002,  this  impacted the overall cost of claims
percentage.

     Gross profit increased from $15.0 million for the six months ended December
31, 2001 to $22.5  million for the six months  ended  December  31, 2002; a $7.5
million,  or 50%,  increase.  In  addition to the revenue  volume  increase  and
consequent gross margin increase, Centrus accounted for $4.1 million, or 55%, of
the gross profit increase.  Gross profit,  as a percentage of revenue,  declined
from 8.9% to 7.6% for the six months  ended  December  31, 2001 and December 31,
2002,  respectively.  The  decrease  is again  principally  related to the lower
margins  achieved by Centrus.  The Company has also seen some  decline in profit
margins due to competitive pressures.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $5.0 million, or approximately 41%, from $12.0
million for the six months ended  December 31, 2001 to $17.0 million for the six
months  ended  December  31, 2002.  This  increase is  primarily  related to the
acquisition of Centrus.  While the expenses specifically related to Centrus were
$6.1 million in the six months  ended  December  31,  2002,  this was  partially
offset  by  reductions  in  other  areas  of the  Company  related  to the  full
integration of Centrus. The Company analyzed every department in the Company and
made  decisions  concerning  the most  efficient  way to operate  regardless  of
location.  This  evaluation  has led to  synergies  across the  Company  and has
allowed  the  Company  to  maximize  the  utilization  of its  resources.  It is
anticipated that this kind of analysis and deployment of resources will continue
as the Company grows.

     Selling,  general,  and  administrative  expenses also increased in the six
months ended  December 31, 2002 due to the start-up of two new  activities.  The
Company acquired Integrail as of November 1, 2002 (See Note 2 of Item 1). In the
two months  since the  Company  acquired  Integrail,  approximately  $337,000 of
expenses were incurred primarily related to salary and benefits and depreciation
and amortization. The other activity was the start-up of the build out of a mail
order facility in Miramar Florida.  Currently, the Company outsources the actual
fulfillment  of  prescriptions  that are  ordered  by mail.  By  bringing  these
services  in-house the Company  will be better able to control  service and cost
for its  customers.  For the quarter  ended  December  31,  2002,  approximately
$112,000  of  expenses  were  incurred  on this  endeavor.  It is the  Company's
expectation that the facility will be up and running in the March to April, 2003
timeframe.

     In addition,  there were three one-time  expenses that the Company incurred
in the six months  ended  December  31, 2002.  These  included 1)  approximately
$350,000 of expenses incurred related to two acquisitions  which the company did
not complete,  2)  approximately  $127,000 related to a settlement of a New York
State sales tax audit,  and 3) the payment of $100,000  related to a  terminated
consulting agreement.

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately $879,000, or 63%, year-over-year from approximately  $1,399,000 to
approximately  $520,000 for the six months ended  December 31, 2001 and December
31, 2002,  respectively.  The majority of the decrease  related to the hiring of
employees  which allowed the Company to bring  in-house  certain  services which
historically had been obtained from related parties.

     Selling,  general,  and  administrative  expenses  as a percent  of revenue
improved  from 7.2% for the six months  ended  December 31, 2001 to 5.7% for the
six months ended December 31, 2002.  This  improvement  stems from the continued
growth of the Company due to improving efficiencies with scale.

     For the six months ended  December 31, 2001, the Company  recognized  other
income,  net, of approximately  $253,000.  For the six months ended December 31,
2002, the Company incurred other expense,  net, of approximately  $427,000.  The
components  of  the  approximate  $680,000  increase  in  net  expense  were  an
approximate  $522,000 increase in interest expense,  and an approximate $210,000
decrease in interest  income,  and an approximate  $52,000 increase in amortized
gain on assets  sold  during the fiscal  year ended June 30,  2002.  The primary
reasons for the net increase in expense were the  interest  expense  incurred on
the Company's revolving credit facility during the six months ended December 31,
2002 to finance the acquisition of Centrus and Integrail (see Note 2 of Item 1),
and the  reduction in interest  income since all balances go towards  paying off
the revolving  credit  facility.  Partially  offsetting the increase in interest
expense was an  approximate  $52,000  increase  in deferred  gain on the sale of
assets  related to a  sale/leaseback  transaction,  which gain of  approximately
$459,000 was recorded as deferred  revenue and is being recognized over the life
of the lease, which is thirty-six (36) months.

     Income before the provision for income taxes increased  approximately  $1.9
million,  or 59%,  from  approximately  $3.2  million,  for the six months ended
December  31,  2001,  to  approximately  $5.1  million for the six months  ended
December  31,  2002.  The  primary  reason for the  increase  was the  improving
efficiencies   that  come  with  scale  arising  from  the  integration  of  the
acquisitions  the Company has  completed.  For the six months ended December 31,
2002 revenues  increased 77% over the six months ended December 31, 2001,  while
selling,  general, and administrative  expenses increased only 41%. In addition,
while  gross  margin  percentages   declined   period-over-period   due  to  the
acquisition of Centrus, the gross profit dollars increased by 50%. These factors
contributed  to the continued  improvement  in the Company's  profitability.  As
mentioned previously,  the acquisition of Integrail and the start-up of the mail
order facility had the impact of reducing  profitability in the six months ended
December 31, 2002.

     EBITDA  increased by  approximately  $3.3 million or 75%, from $4.4 million
for the six months  ended  December  31, 2001 to $7.7 million for the six months
ended December 31, 2002. The primary factor for the increase was the approximate
$2.6 million, or 87%, increase in operating income described above. In addition,
there was an approximate $405,000 increase in depreciation and amortization, and
an approximate $298,000 increase in other intangibles amortization.

     The  effective  tax rate  increased  from  36.4% for the six  months  ended
December 31, 2001 to 41.0% for the six months ended  December 31, 2002.  The tax
rate of 41%  represents  the  Company's  estimated  tax rate for the full fiscal
year.

     Net income for the six months  ended  December  31, 2002 was  approximately
$3.0 million as compared to approximately  $2.0 million for the six months ended
December 31,  2001; a 47%  increase.  Earnings  per diluted  share  increased by
$0.11, to $0.38 for the six months ended December 31, 2002.

Liquidity and Capital Resources

     The Company's  primary cash  requirements are for capital  expenditures and
operating  expenses,  including cost of  pharmaceuticals,  software and hardware
upgrades and the funding of accounts receivable.  The Company also requires cash
for  potential  acquisitions  of other PBM  companies or of companies  providing
related  services.  As of December 31, 2002,  the Company had a working  capital
deficit  of $35.7  million as  compared  to a working  capital  deficit of $42.7
million as of June 30, 2002. The primary  reason for the  improvement in working
capital was the  profitability  generated  by the Company  during the six months
ended December 31, 2002. In addition,  there was a $3.7 million reclassification
of a long term loan  receivable  to short  term  since it is now due  within one
year,  (See Note 6 - Related Party  Transactions of Item 1). The Company has now
acquired four companies  since July 2000 utilizing  primarily cash. This has had
the effect of increasing the Company's working capital deficits until sufficient
profitability is generated to pay back the cost of the acquisitions.

     Net cash used in operating  activities  was $3.8 million for the six months
ended  December 31, 2001.  Net cash  provided by operating  activities  was $3.8
million for the six months ended  December  31,  2002.  For the six months ended
December 31, 2002,  accounts payable increased by $5.6 million while for the six
months  ended  December 31, 2001  accounts  payable  decreased by $2.1  million,
generating cash of $7.7 million. This increase in cash from operating activities
was  partially  offset by an  increase of $5.1  million in accounts  and rebates
receivables  for the six months  ended  December 31, 2002 as compared to the six
months ended December 31, 2001.

     Historically,  the timing of the Company's accounts receivable and accounts
payable has generally been a net source of cash from operating activities.  This
is the result of the terms of trade in place with plan sponsors on the one hand,
and the Company's pharmacy network on the other hand. These terms generally lead
to the  Company's  payments to  participating  pharmacies  being slower than its
corresponding  collections  from plan sponsors.  The Company  believes that this
situation is not unusual in the pharmacy benefit management industry and expects
to operate on similar terms for the foreseeable future. However, there can be no
assurance that such terms of trade will continue in the future and, if they were
to change  materially,  the Company could  require  additional  working  capital
financing. Furthermore, if such terms of trade were to change materially, and/or
if the Company were unable to obtain additional working capital financing, there
could  be a  material  adverse  effect  on  the  Company's  business,  financial
condition, or results of operations.

     Net cash used in investing  activities  was $3.2 million for the six months
ended  December 31,  2002,  as compared to $1.5 million for the six months ended
December  31,  2001.  The  primary  differences  in the  two  periods  were  the
acquisition of Integrail in the period ended December 31, 2002, the $1.3 million
gross proceeds from a sale/leaseback transaction in October 2001, and a decrease
in capital  expenditures.  The net cash  outlay for  Integrail  was  $1,448,500,
representing the initial payment of $1,400,000 plus $48,500 of related expenses.
No cash was assumed in the acquisition.

     During the six months ended December 31, 2002 the Company borrowed a net of
approximately $7.1 million under its revolving credit facility. These funds were
primarily  utilized to repay the  principal  balance of the  Convertible  Notes,
which had been put in place to  acquire  Centrus,  which  has had the  effect of
significantly reducing the interest expense that the Company incurs.

     The  Company  has entered  into  various  capital  lease  transactions  for
hardware and  software.  The Company has also  assumed  various  capital  leases
through its  acquisitions.  The  principal  balance of all capital  leases as of
December 31, 2002 was approximately $1,036,000.

     The Company has entered into various real estate operating leases with both
related and unrelated  parties.  The Company has entered into various  operating
leases with  unrelated  third  parties for office  equipment.  These leases have
different  payment terms and expiration  dates.  The Company also entered into a
sale-leaseback  operating  lease of certain fixed assets  (principally  computer
hardware and externally  developed  software) with an affiliate of the Company's
Vice Chairman.  See Note 9 to the Consolidated  Financial Statements  comprising
Item 8 of Form 10 -K, as amended, for the year ended June 30, 2002 for a further
description of these various leases.

     On January 29,  2002,  the  Company  entered  into a $40 million  revolving
credit  facility (the  "Facility"),  details of which are set forth in Note 2 to
the  financial  statements  in Part 1.  Borrowings  of $28.7  million  under the
Facility  were  used to  finance  part of the  purchase  price of the  Company's
acquisition of Centrus.  The Facility  contains  various  covenants that,  among
other things,  require the Company to maintain certain  financial  ratios. As of
February 7, 2003 approximately $18.8 million was outstanding under the Facility,
and the Company was in compliance with its financial ratios covenants.

The total future payments under these contractual obligations as of December 31,
2002, is as follows:
<TABLE>
<S>                                                                       <C>    <C>    <C>    <C>    <C>    <C>

Contractual Obligations                                              Payments Due by Period
                                                                          ($ in thousands)

                                                  Total            Less than         1-3 Years         4-5 Years         After
                                                                     1 Year                                             5 Years
Long Term Debt                              $     20,955       $     20,948      $          7       $        -      $        -
Capital Lease Obligations                          1,036                457               579                -               -
Operating Leases                                  11,385              2,174             5,089              953           3,169
Sale-leaseback                                       830                460               370                -               -
                                             -----------       ------------      ------------       ----------      ----------
                                             -----------       ------------      ------------       ----------      ----------
   Total Contractual Cash                   $     34,206       $     24,039      $      6,045       $      953      $    3,169
        Obligations
</TABLE>


     PAI  stockholders  were  eligible to receive up to $2,000,000 in additional
consideration  payable  in  combination  of cash and  common  stock  if  certain
financial  targets of PAI were met for the fiscal  years ended June 30, 2001 and
2002.  These  targets have been  achieved and the $2 million has been earned and
paid. At the end of August 2001, $750,000 in cash was paid, and 62,500 shares of
the  Company's  Common  Stock  valued at $4.00 per share were  issued to the PAI
stockholders.  At the end of August 2002,  $750,000 in cash was paid, and 41,668
shares of the  Company's  Common  Stock valued at $6.00 per share were issued to
the PAI stockholders.

     The members of PMP are eligible to receive  additional  consideration of up
to  $1,000,000  if certain PMP clients are  retained  over the first three years
after acquisition. These targets were not met in the first year so no additional
consideration  was due and payable.  It is the Company's  expectation that these
amounts  will  not be  earned  in the  second  and  third  years  either  as the
identified  clients were not  generally  retained  directly,  although they were
replaced.

     The   shareholders   of  Centrus  are   eligible   to  receive   additional
consideration  of up  to  $4,000,000,  payable  over  three  years,  if  certain
financial  targets  are  met  over  the  next  two  years.  It is the  Company's
expectation  that some of these monies will be earned and paid out over the next
three years.

     The Sellers of Integrail  are eligible to receive from monies put in escrow
up to $700,000 if certain  operational  milestones  are achieved  over the first
twelve months.

     In  February  1998,   the  Company   entered  into  an  agreement  with  an
unaffiliated party for computer software products and professional services. The
agreement  required the Company to pay an initial  license fee. In addition,  if
certain  milestones are met based on the number of processed  claims, as defined
in the agreement, the initial license fee increases in specified increments.  To
date, four such  milestones  have been met,  resulting in a 100% increase in the
license fee. The  agreement  also  provides for the annual  payment of a fee for
maintenance  and updating  services equal to 18% of the initial  license fee, as
defined.   It  is  anticipated,   based  on  internal  growth  and  the  Centrus
acquisition,  that the last milestone will be met. If the remaining milestone is
reached, the cash outlay by the Company would be $100,000.

     The  Company  anticipates  that  current  cash  positions,  after  its four
acquisitions  and the  repayment  of certain  affiliate  and  shareholder  debt,
together  with  anticipated  cash flow from  operations,  will be  sufficient to
satisfy the Company's  contemplated  cash  requirements  for at least 24 months.
This is based  upon  current  levels of  capital  expenditures  and  anticipated
operating  results for the next 24 months.  However,  it is one of the Company's
stated  goals  to  acquire  other  pharmacy  benefit  management  companies  and
companies providing related services,  evidenced by the four acquired since July
2000. This will require cash and depending on the Company's evaluation of future
acquisitions,  additional  cash may be  required.  In  addition,  the Company is
building a mail order  facility in Florida  which will require cash to build out
the facility and acquire inventory. In the event that the Company's plans change
or its  assumptions  prove to be  inaccurate,  or the proceeds from the Facility
prove to be insufficient to fund operations and acquisitions,  the Company could
be required to seek additional  financing sooner than anticipated.  There can be
no  assurance  that  such  financing  could  be  obtained  at  rates or on terms
acceptable to the Company, if at all.

Other Matters

Inflation

     Management  does not  believe  that  inflation  has had a material  adverse
impact on Health Card's net income.

Critical Accounting Policies and Estimates

General

     Health  Card's  discussion  and  analysis of its  financial  condition  and
results  of  operations  are based upon  Health  Card's  unaudited  consolidated
financial  statements,  which have been prepared in accordance  with  accounting
principles  generally  accepted in the United States.  The  preparation of these
financial  statements  requires Health Card to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses; these
estimates and judgments also effect related disclosures of contingent assets and
liabilities.  On an on-going  basis,  Health Card  evaluates  its  estimates and
judgments,  including those related to revenue recognition, bad debt, intangible
assets, income taxes, and financing operations.  Health Card bases its estimates
on  experience  and  on  various  other  assumptions  that  are  believed  to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.

     The Company believes that of its significant  accounting policies (See Note
1 to the Consolidated  Financial  Statements  comprising Item 8 of Form 10-K, as
amended,  for the year ended June 30, 2002),  the following may involve a higher
degree of judgment and complexity than others:

Revenue Recognition

     (a) The Company has historically entered into two types of arrangements for
the payment of  administrative  fees:  fee for service  (per claim  charges) and
capitation  (per  member  per  month   charges).   Under  the  fee  for  service
arrangement, the Company is paid by its sponsors for the Company's contractually
agreed upon rates based upon actual claims adjudicated, plus a fixed transaction
fee.  Under  the  capitation  arrangement,  the fee is  based on the  number  of
participants per month;  the Company pays for the cost of  prescriptions  filled
and thus shares the risk of  operating  profit or loss with these  plans.  Since
January 1, 2000,  all  services  have been  provided on a fee for service  basis
only.

     Revenue under the fee for service arrangement is recognized when the claims
are adjudicated.  Included as revenue are the Company's  administrative fees and
charges  relating  to  pharmaceuticals  dispensed  by the  Company's  network of
pharmacies.  Revenues are reduced by the amount of rebates paid to the Company's
sponsors.

     (b) The specific  terms of the contracts  that Health Card enters into with
its sponsors will  determine  whether  Health Card  recognizes the gross revenue
related to the cost of the  prescriptions  filled. In certain limited cases, the
Company has not  recognized  the gross revenue or cost related to  prescriptions
filled for a specific sponsor.  This has no impact on the Company's gross profit
since neither the revenue nor the related cost of the prescriptions is recorded.

     (c)  Rebates  are  recognized  when  the  Company  is  entitled  to them in
accordance with the terms of its  arrangements  with drug  manufacturers,  third
party rebate administrators, and sponsors, and when the amount of the rebates is
determinable.   The  Company  records  the  gross  rebate   receivable  and  the
appropriate  payable to the sponsors  based on  estimates,  which are subject to
final  settlement.  The  estimates  are based upon the claims  submitted and the
Company's rebate experience,  and are adjusted as additional information becomes
available.

Bad Debt

     Health Card maintains allowances for doubtful accounts for estimated losses
resulting from the liability of its sponsors to make required  payments.  If the
financial condition of Health Card's sponsors were to deteriorate,  resulting in
an impairment of their ability to make  payments,  additional  allowances may be
required.

Goodwill and Intangible Asset Impairment

     In  assessing  the  recoverability  of the  Company's  goodwill  and  other
intangibles,  the Company must make assumptions  regarding estimated future cash
flows and other factors to determine the fair value of the respective assets. If
these estimates or their related  assumptions  change in the future, the Company
may be required to record  impairment  charges for these  assets not  previously
recorded.  On July 1, 2001 the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible  Assets," and will be required
to analyze its goodwill for impairment issues on a periodic basis thereafter. To
date, the Company has not recorded any impairment losses related to goodwill and
other intangible assets.

Deferred Taxes

     Health  Card  periodically  considers  whether  or not it  should  record a
valuation allowance to reduce its deferred tax assets to the amount that is more
likely than not to be realized.  While Health Card has considered future taxable
income  and  ongoing  tax  planning  strategies  in  assessing  the need for the
valuation allowance, in the event Health Card were to determine that it would be
able to  realize  its  deferred  tax  assets in the  future in excess of its net
recorded  amount,  an adjustment to the deferred tax asset would increase income
in the  period  such  determination  was  made.  Likewise,  should  Health  Card
determine  that it would not be able to realize all or part of its net  deferred
tax asset in the  future,  an  adjustment  to the  deferred  tax asset  would be
charged to income in the period such determination was made.

Capitalized Software

     The costs of  software  developed  for  internal  use  incurred  during the
preliminary project stage are expensed as incurred. Direct costs incurred during
the application  development  stage are  capitalized.  Costs incurred during the
post-implementation/operation   stage  are  expensed  as  incurred.  Capitalized
software  development  costs are amortized on a  straight-line  basis over their
estimated useful lives,  commencing on the date the software is placed into use,
primarily three years.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4 - CONTROLS AND PROCEDURES

     Disclosure controls and procedures are the controls and procedures designed
to ensure  that  information  that the  Company is  required  to disclose in its
reports under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods required. They include, without limitation, controls and
procedures  designed to ensure that  information is accumulated and communicated
to our  management  in  order  to  allow  timely  decisions  regarding  required
disclosure.

     Under the supervision and with the participation of management, chiefly our
principal  executive officer and our principal  financial  officer,  Health Card
evaluated  the  effectiveness  of the design  and  operation  of its  disclosure
controls  and  procedures  within 90 days of the filing  date of this  quarterly
report.  Based on that  evaluation,  our  principal  executive  officer  and our
principal  financial  officer have  concluded that these controls and procedures
are effective.  There have been no significant changes in our internal controls,
or in other factors that could significantly  affect these controls,  subsequent
to the date of the evaluation.

<PAGE>
                          PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plans Inc.  ("MHP") in the United States  District  Court for the Eastern
District of  Michigan.  The  complaint  alleges,  among other  things,  that the
parties entered into a contract dated July 1999 (the  "Agreement"),  and further
alleges  that  the  Company  has  overcharged  MHP  for  the  administration  of
prescription  benefit  services in  contravention to the terms of the Agreement.
MHP is seeking $3 million  dollars in damages.  The Company  filed an answer and
counterclaim on June 12, 2002. In the counterclaim,  the Company claimed damages
in excess of $2.8  million  based on MHP's  failure to pay under a contract.  In
late June 2002,  MHP agreed to make two payments in the amount of $1.34  million
and $1.36  million to partially  settle the Company's  claims  against MHP. As a
part of that payment, MHP dropped one of its two claims against the Company that
had sought to setoff or recoup alleged  overcharges by the Company.  The Company
continues to have counterclaims  totaling approximately $150,000 against MHP for
its  failure to pay the  amounts it had agreed to pay Health  Card for goods and
services.  MHP has informed  the Company that its expert is reviewing  its claim
and that the amount of such claim may be modified.  Trial currently is scheduled
for  September 22, 2003.  Factual  discovery  cut-off is February 28, 2003.  The
Company  believes  the claims  alleged in the  complaint  are without  merit and
intends to vigorously defend the action.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

     For  information  concerning  the Company's 1999 Stock Option Plan, and the
options currently issued and outstanding thereunder, see Note 3 to the Financial
Statements comprising Item 1 of Part I of this Form 10-Q.

     Pursuant to the terms of the PAI Agreement, in August 2001 and August 2002,
the Company issued 62,500 and 41,668 shares respectively, of unregistered Common
Stock of the Company to the PAI stockholders as additional consideration.  These
issuances  were  valued at $250,000  each.  The Company was advised in each case
that the  issuance  of such  shares  was  exempt  from  registration  under  the
Securities Act by virtue of Section 4(2) thereof.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 5 - OTHER INFORMATION

None.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits
<TABLE>
<S>                                                       <C>    <C>    <C>    <C>    <C>    <C>

Exhibit
Number       Description of Exhibit


  3.1         Certificate of Incorporation of Health Card (7)
  3.4         By-Laws of Health Card (7)
  4.1         Form of Specimen Common Stock Certificate (9)
  4.2         Form of Warrant Agreement, including form of Representatives' Warrants (1)
 10.1         Mail Service Provider Agreement, dated July 1, 1996, between Health Card and
               Thrift Drug, Inc. d/b/a Express Pharmacy Services (1)
 10.2         Amendment to Mail Service Provider Agreement, dated January 1, 1997, between
               Health Card and Thrift Drug, Inc. d/b/a Express Pharmacy Services (1)
 10.3         Software License Agreement and Professional Service Agreement, dated
               February 18, 1998, between Health Card and Prospective Health, Inc. (1)
 10.4         1999 Stock Option Plan (1)
 10.5         Employee Covenant Agreement, dated June 15, 1998, between Health Card and
               Mary Casale (1)
 10.6         Employee Covenant Agreement, dated June 16, 1998, between Health Card and
               Ken Hammond (1)
 10.7         Stock Option Agreement, dated August 3, 1999, between Health Card and
               Ken Hammond (4)
 10.8         Employment Agreement, dated March 27, 2000, between Health Card and
               David Gershen (4)
10.9          Stock Option Agreement, dated May 1, 2000, between Health Card and
                David Gershen (4)
10.10         Employment Agreement, dated May 3, 2000, between Health Card
               and James Bigl (4)
10.11         Stock Option Agreement, dated June 12, 2000, between Health Card
               and James Bigl (4)
10.12         Stock Option Agreement, dated August 3, 1999, between Health Card and
               Kenneth J. Daley (4)
10.13         Stock Option Agreement, dated August 3, 1999, between Health Card and
               Gerald Angowitz (4)
10.14         Assignment, dated November 1, 1996, from Sandata, Inc., to BFS Realty, LLC (1)
10.15         Lease, dated August 10, 1998, between 61 Manorhaven Boulevard, LLC and
               Health Card (1)
10.16         Letter, dated June 3, 1999, from Bert Brodsky to Health Card (1)
10.17         Letter, dated June 3, 1999, from Gerald Shapiro to Health Card (1)
10.18         Agreement of Guaranty, dated June 1, 1998, by Bert E. Brodsky in favor of
               Health Card (1)
10.19         Promissory Note, dated July 31, 2000, made payable by P.W. Capital, LLC to the order of
               Health Card, in the amount of $3,890,940 (4)
10.20         Letter, dated  June 8, 1999, from P.W. Capital Corp. to Health Card (1)
10.21         Letter, dated June 9, 1999, from Bert E. Brodsky to Health Card (1)
10.22         Letter, dated June 8, 1999, from the Bert E. Brodsky Revocable Trust to Health Card (1)
10.23         Letter Agreement, dated June 30, 1999, between the Bert E. Brodsky Revocable Trust
               and Health Card (1)
10.24         Employment Agreement, dated July 1, 1999, between Health Card and Bert E. Brodsky (1)
10.25         Letter, dated June 8, 1999, from Bert E. Brodsky to Health Card (1)
10.26         Form of Lock-Up Agreement (1)
10.27         Acquisition and Merger Agreement, dated as of June 27, 2000, between Health Card
               and Pharmacy Associates, Inc. (3)
10.28         Lease Agreement, dated March 4, 1996, between Pharmacy Associates, Inc. and
               Executive Park Partnership (4)
10.29         Amendment to Lease, dated November 2, 1998, between Pharmacy Associates, Inc. and
               Executive Park Partnership (4)
10.30         Amendment to Lease, dated November 19, 1998, between Pharmacy Associates, Inc.
               and Executive Park Partnership (4)
10.31         Lease Agreement, dated July 8, 1999, between Pharmacy Associates, Inc. and
               Executive Park Partnership (4)
10.32         Asset Purchase Agreement dated as of March 5, 2001 among National Medical Health
               Card Systems, Inc., PMP Acquisition Corp., Provider Medical Pharmaceutical, LLC
               and members of PMP (3)
10.33         Employment Agreement, dated June 4, 2001, between National Medical Health Card
               Systems, Inc. and Tery Baskin (6)
10.34         Stock Option Agreement, dated June 4, 2001, between National Medical Health
               Card Systems, Inc.  and Terry Baskin (6)
10.35         Stock Option Agreement, dated June 12, 2001, between National Medical Health Card
               Systems, Inc. and James Bigl (6)
10.36         Asset Purchase Agreement dated January 29, 2002 by and among the Company, Health
               Solutions Limited ("HSL"), HSL Acquisition Corp., a wholly-owned subsidiary of the
               Company, and the security holders of HSL (8)
10.37         Receivables Purchase and Transfer Agreement dated January 29, 2002 by and among the
               Company and certain of its subsidiaries and NMHC Funding, LLC (8)
10.38         Loan and Security Agreement dated January 29, 2002, by and between NMHC Funding,
               LLC and HFC Healthco-4, LLC, an affiliate of Healthcare Finance Group, Inc. (8)
10.39         Lease Agreement dated as of August 1, 2001, between National Medical Health
               Card Systems,  Inc. and BFS Realty, LLC (6)
10.40         Amended Lease Agreement dated as of August 1, 2001, between National Medical Health Card
               Systems, Inc. and BFS Realty, LLC
10.41         2003 Employee Stock Purchase Plan (11)
10.42         Asset Purchase Agreement dated as of November 1, 2002, by and between the Company,
               Integrail Acquisition Corp., Health Solutions, Ltd., and certain security
               holders of Health Solutions, Ltd.
10.43         Assignment Agreement dated as of November 1, 2002, by and between the Company,
              Integrail Acquisition Corp., and Health Solutions, Ltd.
23.1          Consent of Ernst & Young LLP to the incorporation by reference in the Registration Statement on
               Form S-8 (File No. 333-8224) of  its report dated September 30, 2002 (10)
23.2          Consent of Goldstein Golub Kessler LLP to the incorporation by reference in the Registration
               Statement on Form S-8 (File No. 333-82224) of its report dated August 31, 2001 (10)
23.3          Consent of BDO Seidman LLP to the incorporation by reference in the Registration Statement on
               Form S-8 (File No. 333-82224) of its report dated September 19, 2000 (10)
99.1          Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act
99.2          Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act
</TABLE>

            --------------------

          (1) Denotes document filed as an Exhibit to Health Card's Registration
     Statement on Form S-1  (Registration  Number:  333-72209) and  incorporated
     herein by reference.

          (2) Denotes  documentation filed as an Exhibit to Health Card's Report
     on Form 10-K for the fiscal year ended June 30, 1999.

          (3) Denotes document filed as an Exhibit to Health Card's Form 8-K for
     an event dated July 20, 2000 and incorporated herein by reference.

          (4) Denotes  documentation filed as an Exhibit to Health Card's Report
     on Form 10-K for the year ended June 30, 2000.

          (5) Denotes document filed as an Exhibit to Health Card's Form 8-K for
     an event dated March 5, 2001.


          (6) Denotes  document  filed as an Exhibit to Health  Card's Report on
     Form 10-K for the year ended June 30, 2001.

          (7) Denotes  document filed as an Exhibit to Health Card's  Definitive
     Proxy   Statement  on  Schedule   14-A  filed  on  December  21,  2001  and
     incorporated herein by reference.

          (8) Denotes  document  filed as an Exhibit to Health  Card's Report on
     Form 8-K for events  dated  January  29,  2002 and  incorporated  herein by
     reference.

          (9) Denotes  document  filed as an Exhibit to Health Card's  Amendment
     No. 1 on Form 8-K/A filed with the  Securities  and Exchange  Commission on
     May 21, 2002 and incorporated herein by reference.

          (10) Denotes  document  filed as an Exhibit to Health Card's Form 10-K
     for the fiscal year ended June 30, 2002.

          (11) Denotes document filed as an Exhibit to Health Card's  Definitive
     Proxy  Statement  on Schedule  14-A on October 25, 2002,  and  incorporated
     herein by reference.

(b) Reports on Form 8-K

         None

<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



                                    NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                                                 (Registrant)



Date:    February 14, 2003          By:  /s/ James J. Bigl
                                        ----------------------------------------
                                             James J. Bigl,
                                             Chief Executive Officer




                                    By: /s/David J. Gershen
                                       -----------------------------------------
                                           David J. Gershen,
                                           Chief Financial Officer and Treasurer




<PAGE>



                                  CERTIFICATION

I, James J. Bigl, Chief Executive Officer, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of National
                  Medical Health Card Systems, Inc. and its Subsidiaries;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report; and

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of registrant
                  as of, and for, the periods presented in this quarterly
                  report.

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant, and we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data, and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

          Date: February 14, 2003                    /s/ James J. Bigl
                                                      --------------------------
                                                         James J. Bigl,
                                                         Chief Executive Officer

<PAGE>



                                  CERTIFICATION

I, David Gershen, Chief Financial Officer, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of National
                  Medical Health Card Systems, Inc. and its Subsidiaries;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report; and

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of registrant
                  as of, and for, the periods presented in this quarterly
                  report.

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant, and we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data, and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date:  February 14, 2003                    /s/David Gershen
                                                     --------------------------
                                                        David Gershen,
                                                        Chief Financial Officer

<PAGE>

                                                                    EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Quarterly  Report of National  Medical  Health Card
Systems,  Inc. (the  "Company") on Form 10-Q for the period ending  December 31,
2002 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the  "Report"),  I,  James J. Bigl,  Chief  Executive  Officer of the  Company,
certify,  pursuant to 18 U.S.C.  ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:


     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and result of  operations of the
Company.

/s/ James J. Bigl
    James J. Bigl
    Chief Executive Officer

February 14, 2003

<PAGE>

                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Quarterly  Report of National  Medical  Health Card
Systems,  Inc. (the  "Company") on Form 10-Q for the period ending  December 31,
2002, as filed with the  Securities  and Exchange  Commission on the date hereof
(the  "Report"),  I, David  Gershen,  Chief  Financial  Officer of the  Company,
certify,  pursuant to 18 U.S.C.  ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley  Act of  2002,  that:  (1) The  Report  fully  complies  with the
requirements  of section 13(a) or 15(d) of the Securities  Exchange Act of 1934;
and (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

/s/David Gershen
   David Gershen
   Chief Financial Officer

February 14, 2003