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, 2003
                               ----------------------------------------

                                       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
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(Address of Principal Executive Offices)                       (Zip Code)

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


                                 Not Applicable
                   ------------------------------------------
                     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
                                             ---   ---

         Indicate  by  check  whether  the  registration  is  an  accelerated
 filer  (as  defined  in  Rule  12b-2  of  the  Exchange Act.)  Yes    No   X
                                                                  ----    ----
                          ----------------------------

                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 6, 2004 was 7,965,327 shares.


<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

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

                                   INDEX                                                                         Page

                        FORWARD-LOOKING STATEMENTS                                                                3

PART I        -   FINANCIAL INFORMATION                                                                           4
------            ---------------------

ITEM 1        -   CONDENSED FINANCIAL STATEMENTS:                                                                 4

                  CONSOLIDATED BALANCE SHEET as of                                                                4
                  December 31, 2003 (unaudited) and June 30, 2003

                  CONSOLIDATED STATEMENT OF INCOME (unaudited)                                                    5
                  for the three months and six months ended December 31, 2003 and 2002

                  CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)                                                6
                  for the six months ended December 31, 2003 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                                                 29
                  MARKET RISK

ITEM 4        -   CONTROLS AND PROCEDURES                                                                        29

PART II       -   OTHER INFORMATION                                                                              31
-------           -----------------

ITEM 1        -   LEGAL PROCEEDINGS                                                                              31

ITEM 2        -   CHANGES IN SECURITIES AND USE OF PROCEEDS                                                      31

ITEM 3        -   DEFAULTS UPON SENIOR SECURITIES                                                                31

ITEM 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            32

ITEM 5        -   OTHER INFORMATION                                                                              32

ITEM 6        -   EXHIBITS AND REPORTS ON FORM 8-K                                                               32

</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 for the fiscal  year ended
June 30, 2003,  filed with the Securities  and Exchange  Commission on September
29, 2003.



<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>    <C>    <C>    <C>    <C>

                                                                                        December 31,             June 30,
Assets                                                                                     2003                     2003
                                                                                       ------------              --------
Current:                                                                               (Unaudited)

  Cash and cash equivalents (including cash equivalent investments of $1,189             $ 7,019                   $5,222
            in each period)

  Restricted cash
                                                                                           2,088                    2,383
  Accounts receivable, less allowance for doubtful accounts of $2,366                     65,727                   52,022
             and $2,014, respectively

  Rebates receivable                                                                      20,508                   24,584
  Inventory                                                                                1,814                     -
  Due from affiliates                                                                        274                    4,165
  Deferred tax asset                                                                       2,065                    2,065
  Other current assets                                                                     1,983                    1,714
 --------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
      Total current assets                                                               101,478                   92,155

  Property, equipment and software development costs, net                                  9,683                    8,239
  Intangible assets, net of accumulated amortization of $1,655 and                         2,438                    2,291
  $1,210, respectively
  Goodwill                                                                                57,385                   53,669
  Other assets                                                                               369                      386
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                    $  171,353               $  156,740
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:

  Accounts payable and accrued expenses                                               $  121,523               $  106,675
  Revolving credit facility and loans payable-current                                      8,778                   15,683
  Current portion of capital lease obligations                                               468                      481
  Due to officer/stockholder                                                                   -                    1,117
  Income taxes payable                                                                     2,015                      629
  Other current liabilities                                                                  155                      137
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                                           132,939                  124,722
  Capital lease obligations, less current portion                                            101                      327
  Long term loans payable and other liabilities                                            2,207                    1,020
  Deferred tax liability                                                                   2,245                    2,245
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                                   137,492                  128,314
 --------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies
Stockholders' Equity:

  Preferred stock $.10 par value; 10,000,000 shares authorized, none outstanding               -                        -
  Common Stock, $.001 par value, 25,000,000 shares authorized, 8,099,997 and
    7,812,907 shares issued, 7,908,997 and 7,621,907 outstanding, respectively                 8                        8

  Additional paid-in-capital                                                              16,597                   15,027

  Retained earnings                                                                       18,000                   14,135

  Treasury stock at cost, 191,000 shares                                                    (744)                    (744)
---------------------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                                           33,861                   28,426
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                                       $  171,353               $  156,740
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
                          See accompanying condensed notes to consolidated financial statements
</TABLE>


<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,
                                                                          2003           2002           2003           2002
                                                                          ----           ----           ----           ----

Revenue (includes co-payments collected of $125, $0, $161 and        $    163,896  $     150,964  $     314,725  $     298,331
  $0, respectively.  Excludes co-payments retained by the
  pharmacies of $50,950, $49,384, $97,519 and $74,332,
  respectively)

Cost of claims (excludes co-payments retained by the                      148,219        139,308        285,533        275,796
  pharmacies of $50,950, $49,384, $97,519 and $74,332,
  respectively)

-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Gross Profit                                                               15,677         11,656         29,192         22,535

Selling, general and administrative expenses                               11,821          8,677         22,369         17,018
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

Operating income                                                            3,856          2,979          6,823          5,517

Other income (expense):
Interest expense                                                             (160)          (311)          (405)          (631)
Interest income                                                                31             71             62            127
Other income, net                                                              42             38             81             77
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                                              (87)          (202)          (262)          (427)
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

Income before provision for income taxes                                    3,769          2,777          6,561          5,090
Provision for income taxes                                                  1,551          1,139          2,696          2,087
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

Net income                                                                  2,218  $       1,638  $       3,865  $       3,003
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

Earning per common share:
  Basic                                                                      0.29  $        0.22  $        0.50  $        0.40
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
  Diluted                                                                    0.25  $        0.20  $        0.45  $        0.38
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

Weighted average number of common shares outstanding:
  Basic                                                                     7,764          7,611          7,703          7,568
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
  Diluted                                                                   8,888          8,088          8,681          8,004
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

</TABLE>

      See accompanying condensed notes to consolidated financial statements



<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

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

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


                                                                                                Six months ended
                                                                                                  December 31,


                                                                                            2003                   2002
Cash flows from operating activities:
           Net income                                                                   $   3,865               $  3,003
             Adjustments to reconcile net income to net cash
              provided by operating activities:

                Depreciation and amortization                                                2,722                 2,123
                Amortization of deferred gain                                                (212)
                                                                                                                     (77)
                Net gain on disposal of capital assets                                        269                      -
                Provision for doubtful accounts                                               352                    418
                Compensation expense accrued to officer/stockholder                            37                    278
                Interest accrued on stockholders'/affiliate's loans                             -                    (84)
             Changes in assets and liabilities, net of effect from acquisitions:
                Restricted cash                                                               295                    664
                Accounts receivable                                                       (13,168)                   703
                Rebates receivable                                                          4,076                 (7,455)

                Inventory                                                                  (1,275)                     -
                Other current assets                                                         (267)                  (936)
                Due to/from affiliates                                                        (32)                  (273)
                Other assets                                                                  (79)                     5
                Accounts payable and accrued expenses                                       12,716                 5,595
                Income taxes payable and other current liabilities                           1,401                  (462)
                Other long term liabilities                                                  1,398                   275
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                   12,098                 3,777
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
             Capital expenditures                                                          (3,928)                  (768)
             Repayment of loan from affiliate                                               2,660                      -
             Repayment of loan from officer                                                   107                      -
             Proceeds from disposal of capital assets                                           -                     22
             Acquisition of Integrail                                                        (16)                 (1,449)
             Acquisition of PAI                                                                -                  (1,000)
             Acquisition of Centrus                                                            -                      (3)
             Acquisition of PPP, net of cash acquired                                      (3,646)                     -
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                      (4,823)                (3,198)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
             Proceeds from exercise of stock options                                        1,571                    418
             Repayment of convertible note offering                                          -                    (8,000)
             Proceeds from revolving credit facility                                      400,838                335,650
             Repayment of revolving credit facility                                      (407,726)              (328,542)
             Deferred financing costs                                                          95                     94
             Repayment of debt and capital lease obligations                                 (256)                  (509)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                                                      (5,478)                  (889)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                        1,797                   (310)
Cash and cash equivalents at beginning of period                                            5,222                  1,768
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                               $  7,019             $    1,458
------------------------------------------------------------------------------------------------------------------------------
                                 See accompanying condensed notes to consolidated financial statements

</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 ("Centrus"), National Medical Health Card
IPA, Inc. ("IPA"), Specialty Pharmacy Care, Inc. ("Specialty"),  Integrail, Inc.
("Integrail"),  NMHCRX Mail Order, Inc. ("Mail Order"),  NMHCRX Contracts,  Inc.
("Contracts"),  Ascend Specialty Pharmacy Services, Inc. (See Note 3) ("Ascend")
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, 2003 and 2002 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 for the year ended June 30, 2003.  The results of operations  for the three
and six month periods ended December 31, 2003 are not necessarily  indicative of
the operating results to be expected for the full year.

     For information  concerning the Company's significant  accounting policies,
reference is made to the Company's Annual Report on Form 10-K for the year ended
June 30, 2003 (the "Annual Report").

2. STOCK-BASED COMPENSATION

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition  to SFAS No. 123's fair value method of  accounting  for  stock-based
employee  compensation.  SFAS No. 148 also amends the  disclosure  provisions of
SFAS No. 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.  While SFAS No. 148
does not amend SFAS No. 123 to require  companies to account for employee  stock
options using the fair value method,  the disclosure  provisions of SFAS No. 148
are  applicable  to  all  companies  with  stock-based  employee   compensation,
regardless  of whether they account for that  compensation  using the fair value
method of SFAS No. 123 or the intrinsic  value method of APB No. 25. The Company
adopted SFAS No. 148 effective December 31, 2002.

     The following table illustrates the effect on net income if the Company had
applied the fair value  recognition  provisions  of SFAS No. 123 to  stock-based
compensation:
<TABLE>
<S>                                                                <C>    <C>    <C>    <C>    <C>    <C>

                                                                        Three Months Ended December 31,
                                                              ----------------------------------------------------
                                                              ----------------------------------------------------
                                                                        2003                       2002
                                                                        ----                       ----
     Reported net income                                          $     2,218              $      1,638
     Stock compensation expense included in net                             -                        -
       income
     Pro forma compensation expense                                      (499)                     (413)
       Pro forma net income                                       $     1,719              $      1,225
     Pro forma earnings per share:
       Basic                                                      $      0.22              $       0.16
       Diluted                                                    $      0.19              $       0.15


                                                                         Six Months Ended December 31,
                                                              ----------------------------------------------------
                                                              ----------------------------------------------------
                                                                        2003                       2002
                                                                        ----                       ----
     Reported net income                                          $     3,865               $     3,003
     Stock compensation expense included in net                             -                         -
       income
     Pro forma compensation expense                                      (985)                     (792)
       Pro forma net income                                       $     2,880              $      2,211
     Pro forma earnings per share:
       Basic                                                      $      0.37              $       0.29
       Diluted                                                    $      0.33              $       0.28
</TABLE>


3. BUSINESS ACQUISITIONS

     On July 31, 2003, the Company entered into a Stock Purchase  Agreement with
Portland   Professional   Pharmacy  ("PPRX"),   Portland  Professional  Pharmacy
Associates   ("PRXA",   and  together  with  PPRX,  "PPP")  and  the  individual
shareholders  (the "PPP  Shareholders") to purchase all of the shares of PPP for
$3,150 (the "PPP Acquisition").  PPP provides  specialty-pharmacy  services in a
broad range of areas, including women's health, pediatric care, men's health and
transplant.  Funds  for the  PPP  Acquisition  were  supplied  by the  Company's
revolving credit facility that was put in place in January 2002 (see below). The
Company  intends to  position  PPP as a  preferred  provider  with PPP's  target
markets  while  focusing on the  extension  of their  specialty  services to the
Company's PBM division.

     The  purchase  price  for the  stock  of PPP  was  $3,150.  At the  time of
acquisition, PPP had approximately $1,664 of assets which included $177 of cash,
$889  of  accounts  receivable,  $539  of  inventory  and  $59 of  property  and
equipment.  PPP also had approximately $1,423 of liabilities which included $609
of bank debt, which was paid off at closing, and $814 of miscellaneous payables.
The  acquisition  was accounted for under the purchase  method of accounting and
the results of PPP'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 $2,973,  which
consists of the following components (subject to a final formal valuation of the
assets): (i) customer relationships valued at $295, which will be amortized over
seven (7) years; (ii) employment and non-compete agreements valued at $100 each,
which will be amortized  over four (4) years;  (iii) the  Portland  Professional
Pharmacy  trade name valued at $100 which will be amortized over four (4) years;
and (iv)  goodwill of $2,378,  which will not be amortized for book purposes per
SFAS 142. For tax purposes, the Company has made an election which will allow it
to amortize the goodwill and other  intangibles over fifteen years. In addition,
the Company agreed to pay to the PPP Shareholders up to $7,000 over a three-year
period if the PPP business achieved certain financial targets. To date, $322 has
been earned and accrued.

     In connection with the PPP Acquisition, several members of PPP's management
team have joined the Company as  employees,  and have been granted stock options
to purchase an aggregate of 150,000 shares of Common Stock,  under the Company's
1999  Stock  Option  Plan,  as  amended.  As of August 1,  2003,  the  Company's
wholly-owned  subsidiary,  Ascend Specialty Pharmacy Services,  Inc.  ("Ascend")
acquired  all of the shares of PPP.  Each of PRXA and PPRX  continues to operate
under their respective names, as subsidiaries of Ascend, in the state of Maine.

     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"),  a New York  corporation,  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 (the "Escrowed Amount") 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, $75 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 $1,719,  which  consists of the
following  components:  (i) software and company know how valued at $797,  which
will be amortized  over three (3) years;  and (ii) goodwill of $922,  which will
not be amortized for book purposes per SFAS 142. For tax purposes,  the goodwill
and other  intangibles  will be  amortized  over fifteen  years.  Funds for this
transaction were supplied by the Company's  revolving credit facility.  With the
achievement of certain operational  milestones for the first 12 months specified
in the  Agreement,  the entire  Escrowed  Amount was  released to the Sellers in
November 2003.

     The Company  entered into an Asset Purchase  Agreement (the "Asset Purchase
Agreement"),  dated as of January 29, 2002, with 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  "Centrus
Acquisition").  The  aggregate  purchase  price of the Centrus  Acquisition  was
$40,000 in cash. The Company acquired approximately $1,400 of HSL's assets which
included $900 of property and  equipment and $500 of software.  The Company also
agreed  to assume  approximately  $1,400 of HSL's  liabilities  relating  to the
Centrus  business  which  included  $1,100 of rebates due to  sponsors,  $100 of
capital leases, and $200 of miscellaneous  payables. The Centrus 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 $40,672,  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
$38,098  which will not be  amortized  for book  purposes  per SFAS 142. 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 $4,000  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.  The financial  performance  targets were achieved
during the first year and $2,000 has been  earned.  Of this  amount,  $1,000 was
paid in May 2003 and another  $1,000 will be paid in May 2004. As of the current
date, it appears,  subject to final  adjustments,  that the minimum  performance
targets for the second year will be achieved  during the second year which would
obligate the Company to pay up to a maximum of an additional  $1,000 in May 2004
and $1,000 in May 2005.

     On January 29, 2002,  the Company and certain of its  subsidiaries  entered
into a $40,000  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  borrowings  of up to $40,000 at the London
InterBank  Offered  Rate  (LIBOR) plus 2.40% (3.52% at December 31, 2003) and is
secured  by  receivables  and other  assets of the  Company  and  certain of its
subsidiaries  as defined.  Borrowings of $28,700 under the Facility were used to
finance part of the purchase price of the Centrus  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, 2003 was  approximately  $8,774,  which was all classified as
short term debt. The Facility  requires the Company to remain in compliance with
certain  financial  and other  covenants.  The financial  maintenance  covenants
include:  1) consolidated  net worth (total assets less total  liabilities),  2)
consolidated tangible net worth (consolidated net worth less intangible assets),
3)  quarterly  EBITDA,  4)  accounts  receivable  turnover  (revenue  divided by
accounts  receivable),  5) debt to consolidated  net worth, 6) current assets to
current  liabilities,  7)  consolidated  interest  coverage  ratio  (EBITDA less
capital   expenditures   divided  by  interest   expense,   8)  annual   capital
expenditures,  and 9) debt service  coverage (EBITDA divided by interest expense
plus short term debt excluding  borrowings under the Facility).  Other covenants
under the Facility restrict the Company's ability to pay dividends, incur senior
debt,  and sell assets  other than in the  ordinary  course.  The Company was in
compliance with all covenants at December 31, 2003.

The summarized unaudited pro forma results of operations set forth below for the
three and six months ended December 31, 2003 and 2002 assumes the Integrail and
PPP 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, 2003                 December 31, 2002
                                                            -----------------                 -----------------
 Revenue                                               $           163,896                 $           154,881
 Net income (loss)                                     $             2,218                 $             1,325
 Net income per common share:
   Basic                                               $              0.29                 $              0.17
   Diluted                                             $              0.25                 $              0.16
 Pro forma weighted-average number of
  common shares outstanding:
   Basic                                                             7,764                               7,611
   Diluted                                                           8,888                               8,088


                                                             Six Months Ended                  Six Months Ended
                                                            December 31, 2003                 December 31, 2002
                                                            -----------------                 -----------------
 Revenue                                               $           316,064                 $           305,499
 Net income (loss)                                     $             3,840                 $             1,292
 Net income per common share:
   Basic                                               $              0.50                 $              0.17
   Diluted                                             $              0.44                 $              0.16
 Pro forma weighted-average number of
  common shares outstanding:
   Basic                                                             7,703                               7,568
   Diluted                                                           8,681                               8,004
</TABLE>

     This pro forma financial  information is presented for information purposes
only.  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.

     The change in the  carrying  amount of  goodwill  for the six months  ended
December 31, 2003 is as follows:

Balance as of July 1, 2003                                    $         53,669

PPP acquisition                                                          2,378
PPP additional consideration earned                                        322
Centrus additional consideration earned                                  1,000
Integrail final valuation                                                   16

                                                              -----------------
                                                              -----------------
Balance as of December 31, 2003                               $         57,385

Approximately $49,512 of the Company's December 31, 2003 goodwill is deductible
for income tax purposes on a straight-line basis over 15 years.

4. STOCK OPTIONS

     During the six months ended December 31, 2003, the Company  granted 494,671
stock options and 83,739 stock options were cancelled for a net of 410,932 stock
options  under the 1999 Stock  Option Plan (the  "Plan").  The  options  granted
during this period are  exercisable  at prices  ranging from $9.75 to $21.13 and
terminate  five to ten 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, 2003
equal 2,149,736, net of 619,226 options exercised to date.


5. 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,
                                                                             -------------------------------------

                                                                                        2003               2002
                                                                                        ----               ----
   Basic                                                                             7,764,485          7,610,907
   Effect of assumed exercise of employee stock options                              1,083,754            476,908
   Effect of assumed exercise of warrants                                               40,154                 -
                                                                                    ----------          ---------
   Diluted weighted average number of shares outstanding                             8,888,393          8,087,815
                                                                                    ==========          =========

                                                                                 Six Months Ended December 31,
                                                                             -------------------------------------
                                                                                        2003                2002
                                                                                        ----                ----
   Basic                                                                             7,702,690          7,567,673
   Effect of assumed exercise of employee stock options                                935,378            435,862
   Effect of assumed exercise of warrants                                               42,558                 -
                                                                                    ----------          ---------
   Diluted weighted average number of shares outstanding                             8,680,626          8,003,535
                                                                                    ==========          =========
</TABLE>

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:
<TABLE>
<S>                                                                       <C>    <C>    <C>    <C>    <C>    <C>

                                                                          December 31,              June 30,
                                                                              2003                    2003
                                                                          -----------             -----------
Claims payable                                                           $     82,966           $    76,195
Rebates payable to sponsors                                                    31,228                24,082
Trade payables, accrued expenses and other payables                             7,329                 6,398
                                                                              -------               -------
                                                                         $    121,523           $   106,675
                                                                              =======               =======
</TABLE>

7. RELATED PARTY TRANSACTIONS

     As of January 1, 2002,  the  Company  had  eliminated  the  majority of its
historical related party service  transactions with the exception being rent and
some  administrative  services.  For the  periods  presented,  certain  general,
administrative and other expenses reflected in the financial  statements include
allocations of certain  corporate  expenses from  affiliates,  which  management
believes were made on a reasonable basis.

     General and administrative expenses related to transactions with affiliates
included  in the  statement  of  income  were $235 for the  three  months  ended
December  31,  2003 and $223 for the  three  months  ended  December  31,  2002.
Included in the  statement of income for the six months ended  December 31, 2003
and 2002 were general and  administrative  expenses related to transactions with
affiliates of $478 and $520, respectively.

     Due from  affiliates  at June  30,  2003  included  a note  from a  company
affiliated by common ownership.  As of December 31, 2003, the entire balance due
from this  affiliate,  including  accrued  interest,  was  paid.  This note 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.

     On February 8, 2001, the President gave to the Company his Promissory  Note
in the amount of $34 as evidence of the loan. On April 12, 2002,  the Promissory
Note was amended and the Company  agreed to increase the loan to $100.  The loan
bears  interest  at 8%, and was due on April 25,  2003.  The  interest  rate was
lowered  effective July 1, 2002 to the rate at which the Company  borrows money.
The repayment  obligation under the Promissory Note,  including accrued interest
has been  satisfied  through a set-off  from the bonus paid to the  President in
July 2003 as part of his annual compensation.

     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 loaned him $250 as
an advance against the potential  bonus.  The loan was evidenced by a promissory
note made in favor of the Company.  The loan bore an interest rate of 9% and was
due and payable on September  30, 2003 in the event the bonus was not earned.  A
bonus has been paid and the loan repaid as of January 2004.

     The Company  currently  occupies office space at 26 Harbor Park Drive, Port
Washington,  New York 11050 (the "Leased  Premises").  The Company subleases the
Leased   Premises   from  an  affiliate  of  the  Chairman  of  the  Board  (the
"Affiliate").  The Affiliate has the right to purchase the Leased  Premises from
the landlord upon expiration of this lease in March 2005 for a purchase price of
$1. The Affiliate subleases a portion of the Leased Premises to the Company (the
"Lease"). Additional space is currently being built in the Leased Premises which
will allow the Company to reconfigure  its existing space and to move all of its
employees in Port Washington into contiguous  space. As of October 23, 2003, the
Company and the Affiliate  amended the Lease.  Effective when the space is ready
for occupancy,  the Company will lease  additional  square footage in the Leased
Premises.  The total square  footage  leased by the Company at that time will be
34,270.  The annual  rent will then be $531 per annum plus  expenses  related to
real estate  taxes,  utilities  and  maintenance  which are paid directly to the
entities to whom payment must be made.  Annual rent increases will be based upon
the Consumer  Price Index plus 2.5% subject to a maximum annual cap of 3.5%. The
lease  expires  on  December  31,  2013.  In  addition,  the  Company  has early
termination rights which it may exercise by delivery of a notice to the landlord
60 days prior to the end of the December 31, 2008 lease year.  In  consideration
of such early  termination  rights,  the Company  would pay to the Affiliate the
rent that would  otherwise  be payable by the Company to the  Affiliate  for the
succeeding 30 months,  subject to  adjustments if the Affiliate is able to lease
the Leased  Premises to another  party  during said 30 month  period.  Leasehold
improvements  made to this  facility  were  $1,214  during the six months  ended
December 31, 2003.

8. MAJOR CUSTOMERS AND PHARMACIES

     For the three and six months ended December 31, 2003, approximately 39% and
40%, respectively,  of the consolidated revenue of the Company was from two plan
sponsors,   MVP  Health  Plan,   Inc.  and  Boston  Medical  Center   HealthNet,
administering  multiple  plans.  For the three and six months ended December 31,
2002 approximately 46% and 42%, respectively, of the consolidated revenue of the
Company was from two plan sponsors  administering  multiple  plans.  Amounts due
from these sponsors as of December 31, 2003 approximated $11.4 million.

     For the three months ended December 31, 2003  approximately  46% of cost of
claims was from three pharmacy  chains.  For the three months ended December 31,
2002,  approximately  50% of the cost of claims were from three pharmacy chains.
For the six months ended December 31, 2003  approximately  33% of cost of claims
was from three  pharmacy  chains.  For the six months  ended  December 31, 2002,
approximately 49% of the cost of claims were from three pharmacy chains. Amounts
payable to the three  pharmacy  chains at December  31, 2003 were  approximately
$23.2 million.

9. SUPPLEMENTAL CASH FLOW INFORMATION

     During the six months ended  December  31, 2003 and December 31, 2002,  the
Company  paid $405 and $631 in interest  and $1,308 and $1,506 in income  taxes,
respectively. In a non-cash transaction, the Company issued 41,668 shares of its
common stock, valued at $250, as additional  compensation to the shareholders of
PAI in August 2002.

10.      LITIGATION

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plan Inc.  ("MHP") in the United  States  District  Court for the Eastern
District of Michigan.  The amended 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 and
breached  its  fiduciary  duties by making a profit.  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 Midwest's failure to pay under a contract.  In late June 2002,  Midwest
agreed to make two payments in the amount of $1.34  million and $1.36 million to
partially settle the Company's  claims against Midwest.  Midwest has now added a
fiduciary duty claim. The Company continues to have counterclaims  totaling over
$200,000 against Midwest for Midwest's  failure to pay the amounts it had agreed
to pay Health  Card for goods and  services.  The  Company's  motion for partial
summary  judgment  and motion to dismiss the  fiduciary  duty claim is currently
scheduled  to be heard in  February,  2004.  The court has not set a trial date.
Discovery  closed  September 30, 2003. The Company intends to vigorously  defend
the action. The Company is unable to provide an estimate of any particular loss,
if any, which may be associated with the MHP claims.

11. RECENT DEVELOPMENTS

     The Company  entered into an amended and restated  preferred stock purchase
agreement,  dated as of November 26, 2003, with New Mountain Partners, L.P. (the
"purchase agreement").  Pursuant to the purchase agreement,  the Company agreed,
subject  to various  conditions,  to issue to New  Mountain  Partners a total of
6,956,522  shares of series A preferred  stock at a purchase price of $11.50 per
share, for aggregate proceeds of approximately  $80,000. Once certain conditions
have been met or waived,  including  receipt of  certain  stockholder  approvals
sought by a  definitive  proxy  statement  to be  distributed  to the  Company's
stockholders, the Company will be obligated to complete the sale of the series A
preferred stock to New Mountain Partners and to use approximately $50,000 of the
proceeds of the sale of the series A preferred  stock to fund the purchase price
for a tender  offer  for up to  4,545,455  shares of the  Company's  outstanding
common  stock at $11.00 per share.  Bert  Brodsky,  the chairman of the board of
directors, and certain stockholders related to him, currently hold (assuming the
exercise of 330,000 options and warrants held by Mr. Brodsky), in the aggregate,
approximately 60% of the Company's  outstanding  common stock and have agreed to
tender  4,448,900  shares,  or  approximately  54% of the Company's  outstanding
common stock, held by them, into the tender offer.

     If the tender offer is fully  subscribed by the Company's  stockholders and
assuming the exercise of 330,000 options and warrants held by Mr. Brodsky, after
the tender offer is completed,  New Mountain  Partners will own securities  that
are initially  convertible  into  approximately  65% of the Company's issued and
outstanding common stock and prior to conversion of the series A preferred stock
will be entitled to cast that number of votes that is equal to approximately 61%
of the Company's  aggregate  voting power.  Following the closing of the sale of
the  series  A  preferred  stock  and  the  tender  offer   (collectively,   the
"Contemplated  Transactions"),  New Mountain Partners will initially be entitled
to nominate and elect 60% of the members of the Company's board of directors.

     The Company will primarily use the remaining proceeds from the issuance and
sale of the series A preferred  stock of  approximately  $22 million,  excluding
expenses related to the closing of the Contemplated Transactions,  for potential
acquisitions  and  working  capital  purposes.  However,  except  under  certain
circumstances,  the Company will be  prohibited  from using such proceeds to pay
any outstanding amounts due under the Company's  outstanding credit facility for
six months following the closing of the Contemplated Transactions.

     The preferred  stock will provide for an initial annual cash dividend equal
to 7% of the  investment  amount,  which  decreases  to  3.5%  after  the  fifth
anniversary of issuance.  The preferred  stock will be  convertible  into common
stock at a price of  $11.50  per  share of  common  stock,  or an  aggregate  of
approximately 7 million shares of the Company's common stock.

     The  series A  preferred  stock may be  redeemed  at the  Company's  option
subsequent  to the  fourth  anniversary  of its  issuance,  subject  to  certain
conditions.  After  the  tenth  anniversary  of the  issuance  of the  series  A
preferred  stock,  each holder of shares of series A preferred stock may require
the  Company  to  redeem  all or a part of that  holder's  shares  of  series  A
preferred stock.

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

Results of Operations

Three Months Ended December 31, 2003
Compared to Three Months Ended December 31, 2002

     Revenue  increased $12.9 million,  or approximately 9%, from $151.0 million
for the three months ended  December 31, 2002,  to $163.9  million for the three
months ended December 31, 2003.  Revenue  recognized for contracts recorded on a
gross revenue basis was $150.7  million for the three months ended  December 31,
2002 and $163.4  million for the three months ended  December 31, 2003.  Revenue
recognized  for  contracts  recorded on a net revenue basis was $0.3 million for
the three months  ended  December 31, 2002 and $0.5 million for the three months
ended  December 31, 2003.  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
contracts that Health Card  recognizes net revenue,  there is no impact on gross
profit  since  neither the  prescription  revenue  nor the related  costs of the
prescriptions   is  recorded.   Health  Card  includes  in  revenue  only  those
co-payments  collected in its mail order facility in Miramar,  Florida.  For the
three  months  ended  December 31,  2003,  there was  approximately  $125,000 of
co-payments  included in revenue versus zero for the three months ended December
31, 2002.  Co-payments retained by pharmacies on prescriptions filled for Health
Card's  members and not included in Health Card's revenue were $51.0 million and
$49.4  million,  for  the  three  months  ended  December  31,  2003  and  2002,
respectively.

     Of the $12.9 million increase in revenue in the three months ended December
31, 2003, $4.5 million was due to the inclusion of PPP which was included in the
revenue for the quarter  ended  December 31, 2003,  but not in the quarter ended
December 31, 2002. Another  approximate $28.3 million of the increase was due to
revenue related to new sponsors or new services offered during the quarter ended
December  31, 2003  excluding  contracts  recorded on a net  revenue  basis.  An
additional  increase of  approximately  $23.6 million was  attributable to other
existing   sponsors   related  to,   among  other   things,   higher  costs  for
pharmaceuticals,  availability  of new  drugs,  plan  participant  growth and an
increase  in the  average  number of  claims  per plan  participant,  as well as
changes in the amount of rebates retained and other miscellaneous revenue items.
These  revenue  increases  were offset by revenue  decreases  related to: 1) the
termination of existing  customer  contracts  including a major  sponsor,  which
terminated its contract with Health Card effective December 31, 2002, leading to
a  reduction  in revenue of  approximately  $41.1  million,  and 2) the  Company
recognized  on a net revenue  basis one  contract  during the three months ended
December 31, 2003 that was  recognized  on a gross  revenue  basis for one month
during the three  months ended  December  31, 2002.  Due to a change in contract
terms effective  November 1, 2002,  this customer's  revenue was recognized on a
net basis from that point.  The revenue impact of this change was a reduction in
gross revenue of approximately $2.4 million.

     Cost of claims  increased $8.9 million,  or  approximately  6%, from $139.3
million for the three months ended  December 31, 2002, to $148.2 million for the
three months ended  December 31,  2003.  PPP  accounted  for $3.7 million of the
increase.  Increases  in cost of claims  totaling  approximately  $48.3  million
related  to the  activity  of new  sponsors  as well as the  growth in  existing
sponsors were offset by the factors described in the previous paragraph, namely,
the loss of sponsors which reduced cost of claims by approximately $39.4 million
and the  recognizing of a certain  contract on a net revenue basis which reduced
cost of claims by approximately  $2.4 million.  In addition,  cost of claims was
reduced by the fact that there was an increase of $1.3 million in gross  rebates
received,  which is treated as a reduction in cost of claims. As a percentage of
revenue, cost of claims decreased from 92.3% to 90.4% for the three months ended
December  31, 2002 and  December  31,  2003,  respectively.  These same  factors
contributed  to the declining  costs as a percentage of revenue.  The terminated
major  sponsor  is a managed  care  organization.  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.  While not all of the revenue
associated with this sponsor was replaced by new business, the new business, for
the most part was not managed  care, so  consequently  the cost of claims on the
new  business  was lower than on the  business it  replaced.  In  addition,  the
contracts  recognized on a net revenue basis decreased the overall Company costs
as a percentage of revenue due to the cost not being recognized on the contracts
recorded on the net revenue basis.  The acquisition of PPP in July 2003 also had
an impact in  reducing  the cost of claims as  specialty  pharmacy  distribution
typically generates lower cost of claims than a PBM.

     Gross  profit  increased  from $11.7  million  for the three  months  ended
December 31, 2002 to $15.7 million for the three months ended December 31, 2003;
a $4.0  million,  or 34.5%,  increase.  In addition to PPP adding  approximately
$800,000 to gross profit,  the replacement of the terminated  major sponsor with
new greater margin business led to greater gross profits for the Company,. Gross
profit,  as a percentage of revenue,  increased  from 7.7% to 9.6% for the three
months  ended  December  31,  2002 and  December  31,  2003,  respectively.  The
contracts  the  Company  recognizes  on a net  revenue  basis have the effect of
improving the Company's  gross margin as a percentage of revenue due to the fact
that  recorded  revenue  and cost is lower  since only the  administrative  fees
related to these contracts are recorded. Competitive pressures which have led to
a decline in some  prices that the Company  charges its  sponsors,  have had the
effect of partially offsetting the increases in gross margin described above.

     Selling,  general,  and administrative  expenses increased $3.1 million, or
approximately  36%,  from $8.7 million for the three  months ended  December 31,
2002  to  $11.8   million  for  the  three  months  ended   December  31,  2003.
Approximately $2.1 million,  or 71%, of this increase in selling,  general,  and
administrative  expenses  is  related  to new  entities  which  were part of the
Company in the three months  ended  December 31, 2003 which were not part of the
Company  during all of the three  months ended  December 31, 2002.  The services
provided by these entities include specialty pharmacy  distribution  through the
Company's  acquisition  of PPP as of July  31,  2003  (see  Note 3 of  Item  1),
predictive modeling and consulting services through the Company's acquisition of
Integrail  as of  November  1,  2002  (see  Note 3 of Item 1),  and  mail  order
distribution  through the  Company's  owned  facility in Miramar,  Florida as of
July,  2003.  The major  components  of the $2.1  million  increase  in expenses
related to new services was: 1) salaries and benefits - approximately  $822,000,
2)  postage  and  supplies  -  approximately  $174,000,  3)  equipment  rental -
approximately  $165,000,  and 4) depreciation  and  amortization - approximately
$152,000.

     General  and  administrative   expenses  charged  by  affiliates  increased
approximately  $12,000,  or 5%,  year-over-year  from approximately  $223,000 to
approximately $235,000 for the three months ended December 31, 2002 and December
31, 2003,  respectively.  The increase  reflects  escalations on existing rental
properties rather than an increase in services provided.

     Selling,  general,  and  administrative  expenses  as a percent  of revenue
increased from 5.7% for the three months ended December 31, 2002 to 7.2% for the
three  months ended  December 31, 2003.  The main reason for the increase is the
impact of recognizing  more  contracts on a net revenue  basis,  as that has the
effect of dividing  these same  expenses  over a smaller  gross revenue base. In
addition, the three new services described above also led to an increase in this
percentage,  particularly mail order which led to an increase of 0.7% due to the
fact that resources were required to be hired in advance of the revenue.

     For the three  months ended  December  31, 2002 and December 31, 2003,  the
Company  recognized other expense,  net, of approximately  $202,000 and $87,000,
respectively. The components of the approximate $115,000 decrease in net expense
were an  approximate  $151,000  decrease  in  interest  expense  incurred on the
Company's  revolving  credit  facility (See Note 3 of Item 1) and an approximate
$4,000  increase in other income related to the  amortization of a deferred gain
on a sale  leaseback.  These  increases were partially  offset by an approximate
$40,000  decrease in interest  income due to the  affiliated  company note being
repaid as of July 31,  2003 (See Note 7 of Item 1).  The  decrease  in  interest
expense  is  primarily  due to  the  Company's  increased  cash  generated  from
operations  and the fact that interest rates on the Company's  revolving  credit
facility have declined year over year.

     Income before the provision for income taxes increased  approximately  $1.0
million, or 36%, from approximately $2.8 million, for the quarter ended December
31, 2002, to approximately $3.8 million for the quarter ended December 31, 2003.
The primary  factors  leading to the  increase  were the gross  profit  increase
described above and the reduction in interest  expense offset by the increase in
selling, general and administrative expenses related to the new activities.

     The effective tax rate was  approximately  41% for both periods  presented.
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, 2003 was  approximately  $2.2
million as compared to approximately $1.6 million for the quarter ended December
31, 2002; a 35%  increase.  Earnings per diluted  share  increased by $0.05,  to
$0.25 for the quarter ended December 31, 2003.


Six Months Ended December 31, 2003
Compared to Six Months Ended December 31, 2002

     Revenue  increased $16.4 million,  or approximately 6%, from $298.3 million
for the six months ended December 31, 2002, to $314.7 million for the six months
ended December 31, 2003.  Revenue  recognized for contracts  recorded on a gross
revenue basis was $297.8  million for the six months ended December 31, 2002 and
$313.6  million for the six months ended December 31, 2003.  Revenue  recognized
for  contracts  recorded  on a net  revenue  basis was $0.5  million for the six
months  ended  December  31,  2002 and $1.1  million  for the six  months  ended
December 31, 2003.  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 contracts
that Health Card  recognizes  net  revenue,  there is no impact on gross  profit
since   neither  the   prescription   revenue  nor  the  related  costs  of  the
prescriptions   is  recorded.   Health  Card  includes  in  revenue  only  those
co-payments  collected  in its mail order  facility.  For the six  months  ended
December 31, 2003, there was approximately  $161,000 of co-payments  included in
revenue  versus zero for the six months ended  December  31,  2002.  Co-payments
retained by pharmacies on prescriptions filled for Health Card's members and not
included in Health Card's revenue were $97.5 million and $74.3 million,  for the
six months ended December 31, 2003 and 2002, respectively.

     Of the $16.4 million  increase in revenue in the six months ended  December
31, 2003, $7.3 million was due to the inclusion of PPP which was included in the
revenue for the six months ended  December  31, 2003,  but not in the six months
ended December 31, 2002.  Another  approximate $51.2 million of the increase was
due to revenue  related to new sponsors or new services  offered  during the six
months ended  December 31, 2003  excluding  contracts  recorded on a net revenue
basis. An additional increase of approximately $67.7 million was attributable to
other  existing  sponsors  related to,  among  other  things,  higher  costs for
pharmaceuticals,  availability  of new  drugs,  plan  participant  growth and an
increase  in the  average  number of  claims  per plan  participant,  as well as
changes in other  miscellaneous  revenue  items.  These revenue  increases  were
offset by revenue  decreases related to: 1) the termination of existing customer
contracts  including a major sponsor,  which terminated its contract with Health
Card  effective  December  31,  2002,  leading  to a  reduction  in  revenue  of
approximately  $97.3 million,  2) the Company  recognized on a net revenue basis
one contract  during the six months ended  December 31, 2003 that was recognized
on a gross revenue  basis for four months  during the six months ended  December
31, 2002. Due to a change in contract  terms  effective  November 1, 2002,  this
customer's  revenue was  recognized on a net basis from that point.  The revenue
impact of this change was a reduction  in gross  revenue of  approximately  $9.2
million,  and 3) rebates  payable to the  Company's  sponsors  increased by $3.3
million for the six months ended December 31, 2003 as compared to the six months
ended  December  31,  2002.  Since these  rebates are treated as a reduction  in
revenue, this led to a reduction in the overall year-over-year revenue increase.

     Cost of claims  increased $9.7 million,  or  approximately  4%, from $275.8
million for the six months ended  December 31, 2002,  to $285.5  million for the
six months  ended  December  31,  2003.  PPP  accounted  for $6.0 million of the
increase.  Increases in cost of claims  totaling  approximately  $110.1  million
related  to the  activity  of new  sponsors  as well as the  growth in  existing
sponsors were offset by the factors described in the previous paragraph, namely,
the loss of sponsors which reduced cost of claims by approximately $92.6 million
and the  recognizing of a certain  contract on a net revenue basis which reduced
cost of claims by approximately  $9.2 million.  In addition,  cost of claims was
reduced by the fact that there was an increase of $4.6 million in gross  rebates
received,  which is treated as a reduction in cost of claims. As a percentage of
revenues,  cost of claims decreased from 92.4% to 90.7% for the six months ended
December  31, 2002 and  December  31,  2003,  respectively.  These same  factors
contributed  to the declining  costs as a percentage of revenue.  The terminated
major  sponsor  is a managed  care  organization.  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.  While not all of the revenue
associated with this sponsor was replaced by new business, the new business, for
the most part was not managed  care, so  consequently  the cost of claims on the
new  business  was lower than on the  business it  replaced.  In  addition,  the
contracts  recognized on a net revenue basis decrease the overall  Company costs
as a percentage of revenue due to the cost not being recognized on the contracts
recorded on the net revenue basis.  The acquisition of PPP in July 2003 also had
an impact in  reducing  the cost of claims as  specialty  pharmacy  distribution
typically generates lower cost of claims than a PBM.

     Gross profit increased from $22.5 million for the six months ended December
31, 2002 to $29.2  million for the six months  ended  December  31, 2003, a $6.7
million,  or 29.5%,  increase.  In addition to PPP adding $1.3  million to gross
profit,  the replacement of the terminated major sponsor with new greater margin
business  led to greater  gross  profits for the  Company.  Gross  profit,  as a
percentage  of  revenue,  increased  from 7.6% to 9.3% for the six months  ended
December 31, 2002 and December 31, 2003, respectively. The contracts the Company
recognizes  on a net revenue  basis have the effect of improving  the  Company's
gross margin as a percentage  of revenue due to the fact that  recorded  revenue
and cost is lower since only the administrative  fees related to these contracts
are recorded.  Competitive  pressures which have led to a decline in some prices
that the Company charges its sponsors has had the effect of partially offsetting
the increases in gross margin described above.

     Selling,  general,  and administrative  expenses increased $5.4 million, or
approximately 31%, from $17.0 million for the six months ended December 31, 2002
to $22.4 million for the six months ended December 31, 2003.  Approximately $4.1
million,  or 78%,  of this  increase  in selling,  general,  and  administrative
expenses  is related to new  entities  which were part of the Company in the six
months ended  December 31, 2003 which were not part of the Company during all of
the six months ended December 31, 2002. The services  provided by these entities
include specialty  pharmacy  distribution  through the Company's  acquisition of
PPP,   predictive   modeling  and  consulting  services  through  the  Company's
acquisition  of  Integrail,  and mail order  distribution  through the Company's
owned  facility in Miramar,  Florida.  The major  components of the $4.1 million
increase in expenses  related to new  services  was: 1) salaries  and benefits -
approximately  $1,643,000,  2) postage and supplies - approximately $315,000, 3)
equipment  rental -  approximately  $184,000,  4)  travel  and  entertainment  -
approximately  $184,000,  and 5) depreciation  and  amortization - approximately
$227,000.

     Of  the  remaining  approximate  22%  increase  in  selling,   general  and
administrative  expenses  during the six months ended  December  31,  2003,  the
majority of the increase is related to the  increased  revenue and volume in the
PBM.  Salary  and  benefits  related to new hires,  temporary  help,  travel and
entertainment,  and  commissions  to internal  sales  people as well as external
brokers  have all  increased  year  over  year due to the  increased  volume  of
activity.

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately  $42,000,  or 8%,  year-over-year  from approximately  $520,000 to
approximately  $478,000 for the six months ended  December 31, 2002 and December
31, 2003, respectively.  The decrease reflects the fact that these related party
services are continuing to be replaced by Company employees.

     Selling,  general,  and  administrative  expenses  as a percent  of revenue
increased  from 5.7% for the six months ended  December 31, 2002 to 7.1% for the
six months  ended  December  31,  2003.  The main reason for the increase is the
impact of recognizing  more  contracts on a net revenue  basis,  as that has the
effect of dividing  these same  expenses  over a smaller  gross revenue base. In
addition, the three new services described above also led to an increase in this
percentage  particularly  mail order which led to an increase of 0.6% due to the
fact that resources were required to be hired in advance of the revenue.

     For the six months ended  December  31, 2002 and  December  31,  2003,  the
Company recognized other expense,  net, of approximately  $427,000 and $262,000,
respectively. The components of the approximate $165,000 decrease in net expense
were an  approximate  $226,000  decrease  in  interest  expense  incurred on the
Company's  revolving  credit  facility (See Note 3 of Item 1) and an approximate
$4,000  increase in other income related to the  amortization of a deferred gain
on a sale  leaseback.  These  increases were partially  offset by an approximate
$65,000  decrease in interest  income due to the  affiliated  company note being
repaid as of July 31,  2003 (See Note 7 of Item 1).  The  decrease  in  interest
expense  is  primarily  due to  the  Company's  increased  cash  generated  from
operations  and the fact that interest rates on the Company's  revolving  credit
facility have declined year over year.

     Income before the provision for income taxes increased  approximately  $1.5
million,  or 29%,  from  approximately  $5.1  million,  for the six months ended
December  31,  2002,  to  approximately  $6.6  million for the six months  ended
December 31, 2003.  The primary  factors  leading to the increase were the gross
profit increase  described above and the reduction in interest expense offset by
the increase in selling,  general and administrative expenses related to the new
activities.

     The effective tax rate was  approximately  41% for both periods  presented.
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, 2003 was  approximately
$3.9 million as compared to approximately  $3.0 million for the six months ended
December 31,  2002; a 29%  increase.  Earnings  per diluted  share  increased by
$0.07, to $0.45 for the six months ended December 31, 2003.

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.  Effective  July 2003,  the
Company also  requires  cash to carry  inventory in its mail order and specialty
pharmacy  facilities.  The Company also requires cash to execute its strategy of
pursuing  acquisitions of other PBM companies or of companies  providing related
services.  As of December 31, 2003, the Company had a working capital deficit of
$31.5  million as compared to a working  capital  deficit of $32.6 million as of
June 30, 2003. The primary reason for the improvement in working capital was the
profitability  generated by the Company during the six months ended December 31,
2003. This improvement was achieved even after the $3.6 million in cash paid for
the  acquisition  of PPP and the $1.3  million  current  liability  incurred for
additional  consideration  to be paid in  connection  with the  Centrus  and PPP
acquisitions.  These transactions increased goodwill and other intangible assets
which are long-term assets,  while decreasing  working capital.  The Company has
now acquired five 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.
In  addition,  the  Company's  revolving  credit  facility  is treated  all as a
short-term  liability per generally accepted  accounting  principles even though
its terms do not expire until January 2005.

     Net cash  provided by operating  activities  was $12.1  million for the six
months ended  December 31, 2003.  Net cash provided by operating  activities was
$3.8  million for the six months ended  December 31, 2002.  The main factor that
led to the $8.3 million  increase in cash  provided by  operations  was the $7.1
million increase in the change in accounts payables and accrued expenses.

     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 $4.8 million for the six months
ended  December 31,  2003,  as compared to $3.2 million for the six months ended
December  31,  2002.  The  primary  differences  in the  two  periods  were  the
acquisition  of PPP and the  repayment  of  affiliate  loans in the period ended
December 31, 2003, and a $3.2 million  increase in capital  expenditures for the
six months ended  December 31, 2003 as compared to the six months ended December
31, 2002. The net cash outlay for PPP was $3.6 million, representing the initial
payment of $3.2 million to the Sellers, $609,000 to pay off PPP's bank debt plus
$64,000 of related  expenses.  Cash in the amount of approximately  $177,000 was
assumed in the acquisition. In addition, $322,000 has been accrued as additional
purchase price related to an earn-out provision.

     During the six months ended  December 31, 2003 the Company  repaid a net of
approximately $6.9 million under its revolving credit facility. The repayment of
the  affiliated  note plus the  increased  profitability  and related  cash flow
enabled the Company to borrow less during the six months.

     On January 29,  2002,  the  Company  entered  into a $40 million  revolving
credit  facility (the  "Facility"),  details of which are set forth in Note 3 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 4, 2004, approximately $7.2 million was outstanding under the Facility,
and the Company was in compliance with its financial covenants.

     Three of these  financial  covenants  are based upon the  EBITDA  (earnings
before interest,  taxes, depreciation and amortization) generated by the Company
over specified  periods of time. These covenants,  EBITDA for the current fiscal
quarter,  interest  coverage ratio,  and debt service  coverage for the previous
twelve  months,  are  evaluated  by the  Lender  as a measure  of the  Company's
liquidity  and its ability to meet all of its  obligations  under the  Facility.
EBITDA is presented as cash flow from  operations  plus or minus the net changes
in assets and liabilities and the changes in certain non-cash  reconciling items
from net cash from  operations  to net income over the reported  periods.  While
EBITDA is not a measure of financial  performance  nor liquidity under generally
accepted accounting principles,  it is provided as information for investors for
analysis purposes in light of the financial  covenants referred to above. EBITDA
is not meant to be  considered a  substitute  or  replacement  for net income as
prepared in accordance  with  accounting  principles  generally  accepted in the
United States.  EBITDA,  which increased by  approximately  $1.9 million or 25%,
from $7.6 million for the six months ended December 31, 2002 to $9.5 million for
the  six  months  ended  December  31,  2003,  is  calculated  as  follows  (see
Consolidated Statement of Cash Flows comprising Item 1 hereof for more details):


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

                                                     Six Months Ended December 31,
                                                   2003                      2002
                                         ------------------------- --------------------------
                                         ------------------------- --------------------------
Cash flow from operations                        $   12,098                $   3,777
Provision for income taxes                            2,696                    2,087
Other (income) expense, net                             262                      427
Net change in assets and liabilities                 (5,064)                   1,884
Non-cash  items to  reconcile  net cash                (446)                    (535)
from operations to net income
                                         ------------------------- --------------------------
                                         ------------------------- --------------------------
EBITDA                                            $   9,546                $   7,640
                                         ========================= ==========================
</TABLE>

     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, 2003 was approximately $569,000.

     The Company has entered into various real estate operating leases with both
related and unrelated  parties.  The Company has entered into various  operating
leases and a sale-leaseback  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, for the year ended June
30, 2003 for a further description of these various leases.

The total future payments under these contractual obligations as of December 31,
2003, 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          3-5            After
                                                           1 Year                             Years          5 Years
                                        -----------     --------------      ----------      ----------      ----------
                                        -----------     --------------      ----------      ----------      ----------
Long Term Debt                       $       8,778  $           8,778  $            -  $            -  $            -
Capital Lease Obligations                      569                468             101               -               -
Operating Leases                            12,495              3,040           4,812           2,424           2,219
Sale-leasebacks                                790                510             280               -               -
                                        -----------     --------------      ----------      ----------      ----------
                                        -----------     --------------      ----------      ----------      ----------
   Total Contractual Cash
        Obligations                  $      22,632  $          12,796  $        5,193  $        2,424  $        2,219
                                        ===========     ==============      ==========      ==========      ==========
</TABLE>

     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  two years so no
additional  consideration was due and payable.  It is the Company's  expectation
that these amounts will not be earned in the third year 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  first  two years  after  acquisition.  The
financial performance targets were achieved during the first year and $2 million
has been earned.  Of this amount, $1 million was paid in May 2003 and another $1
million will be paid in May 2004. As of the current date, it appears, subject to
final adjustments, that the minimum performance targets for the second year will
be achieved during the second year which would obligate the Company to pay up to
a maximum of an additional $1,000 in May 2004 and $1,000 in May 2005.

     The shareholders of PPP are eligible to receive additional consideration of
up to  $7,000,000,  if certain  financial  targets  are met over the first three
years.  Such amounts earned are payable within 45 days after the first,  second,
and third anniversary of the date of acquisition.  In the sole discretion of the
Company,  up to 50% of any amounts earned can be paid in the Company's  stock in
lieu of cash.  To date,  $321,988  has been  earned and  accrued  as  additional
purchase price.

     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. If the remaining  milestone is reached,  the cash outlay by the Company
would be $100,000.


     The Company  entered into an amended and restated  preferred stock purchase
agreement,  dated as of November 26, 2003, with New Mountain Partners, L.P. (the
"purchase agreement").  Pursuant to the purchase agreement,  the Company agreed,
subject  to various  conditions,  to issue to New  Mountain  Partners a total of
6,956,522  shares of series A preferred  stock at a purchase price of $11.50 per
share, for aggregate proceeds of $80,000,003.  Once certain conditions have been
met or waived,  including receipt of certain  stockholder  approvals sought by a
definitive proxy statement to be distributed to the Company's stockholders,  the
Company will be  obligated to complete the sale of the series A preferred  stock
to New Mountain Partners and to use approximately $50 million of the proceeds of
the sale of the series A preferred stock to fund the purchase price for a tender
offer for up to 4,545,455  shares of the Company's  outstanding  common stock at
$11.00 per share.  Bert  Brodsky,  the chairman of the board of  directors,  and
certain   stockholders  related  to  him,  currently  hold,  in  the  aggregate,
approximately 60% of the Company's  outstanding  common stock and have agreed to
tender  4,448,900  shares,  or  approximately  54% of the Company's  outstanding
common stock, held by them, into the tender offer.

     If the tender  offer is fully  subscribed  by the  Company's  stockholders,
after the tender offer is completed,  New Mountain  Partners will own securities
that are initially  convertible into  approximately  65% of the Company's issued
and  outstanding  common stock and prior to conversion of the series A preferred
stock  will be  entitled  to  cast  that  number  of  votes  that  is  equal  to
approximately 61% of the Company's aggregate voting power. Following the closing
of the sale of the series A preferred stock and the tender offer  (collectively,
the  "Contemplated  Transactions"),  New  Mountain  Partners  will  initially be
entitled to  nominate  and elect 60% of the  members of the  Company's  board of
directors.

     The Company will primarily use the remaining proceeds from the issuance and
sale of the series A preferred  stock of  approximately  $22 million,  excluding
expenses related to the closing of the Contemplated Transactions,  for potential
acquisitions  and  working  capital  purposes.  However,  except  under  certain
circumstances,  the Company will be  prohibited  from using such proceeds to pay
any outstanding amounts due under the Company's  outstanding credit facility for
six months following the closing of the Contemplated Transactions.

     The preferred  stock will provide for an initial annual cash dividend equal
to 7% of the  investment  amount,  which  decreases  to  3.5%  after  the  fifth
anniversary of issuance.  The preferred  stock will be  convertible  into common
stock at a price of  $11.50  per  share of  common  stock,  or an  aggregate  of
approximately 7 million shares of the Company's common stock.

     The  series A  preferred  stock may be  redeemed  at the  Company's  option
subsequent  to the  fourth  anniversary  of its  issuance,  subject  to  certain
conditions.  After  the  tenth  anniversary  of the  issuance  of the  series  A
preferred  stock,  each holder of shares of series A preferred stock may require
the  Company  to  redeem  all or a part of that  holder's  shares  of  series  A
preferred stock.

     The  Company  anticipates  that  current  cash  positions,  after  its five
acquisitions  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.  Depending on the Company's evaluation
of future  acquisitions,  additional  cash may be  required  to  complete  these
acquisitions.  In addition,  the Company will require cash to acquire  inventory
for its mail order and specialty distribution operations.  In the event that the
Company's  plans  change  or its  assumptions  prove  to be  inaccurate,  or the
proceeds  from  the  Facility  and the  Contemplated  Transactions  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,  revenue 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, for
the year ended June 30,  2003),  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

          (b) 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.  Revenue is reduced by the amount of
     rebates paid to the Company's sponsors.

          (c) 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. There are several
     factors from EITF 99-19 that leads the Company to recognize the majority of
     its  revenue  on a  gross  basis.  These  include:  the  Company  acts as a
     principal and not an agent and is the primary  obligor in the  relationship
     among the pharmacies,  the sponsors and the Company, the Company has credit
     risk,  the Company has certain  latitude  in  establishing  price,  and the
     Company has discretion in supplier selection.  In certain cases,  primarily
     because  the  amount  the  Company  earns is  fixed,  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 prescription  revenue nor the related cost of the prescriptions
     is recorded.

          (d) Health Card includes in revenue only those  co-payments  collected
     from  individual  members by its mail order  facility in Miramar,  Florida.
     Co-payments  retained by pharmacies  on the remainder of the  prescriptions
     filled for Health Card's members are not included in Health Card's reported
     revenue. Health Card discloses these amounts parenthetically on the face of
     its Consolidated Statement of Income.

          (e)  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 management in order to allow timely decisions regarding required disclosure.

     Under the supervision and with the participation of management, chiefly the
Company's  principal  executive  officer and the Company's  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,  the Company's  principal executive
officer and the Company's  principal financial officer have concluded that these
controls and procedures are effective. There have been no significant changes in
the  Company's   internal  controls  including  those  controls  over  financial
reporting in this period,  or in other factors that could  significantly  affect
these controls, subsequent to the date of the evaluation.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

     The legal proceeding described below should be read in conjunction with the
legal proceeding disclosure in the following earlier reports: Part I, Item 3 and
Note 9 to the consolidated  financial  statements of Health Card's Annual Report
on From  10-K for the year  ended  June 30,  2003 and Part II,  Item 1 of Health
Card's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plan Inc.  ("MHP") in the United  States  District  Court for the Eastern
District of Michigan.  The amended 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 and
breached  its  fiduciary  duties by making a profit.  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 Midwest's failure to pay under a contract.  In late June 2002,  Midwest
agreed to make two payments in the amount of $1.34  million and $1.36 million to
partially settle the Company's  claims against Midwest.  Midwest has now added a
fiduciary duty claim. The Company continues to have counterclaims  totaling over
$200,000 against Midwest for Midwest's  failure to pay the amounts it had agreed
to pay Health  Card for goods and  services.  The  Company's  motion for partial
summary  judgment  and motion to dismiss the  fiduciary  duty claim is currently
scheduled  to be heard in  February,  2004.  The court has not set a trial date.
Discovery  closed  September 30, 2003. The Company intends to vigorously  defend
the action. The Company is unable to provide an estimate of any particular loss,
if any, which may be associated with the MHP claims.


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 4 to the Financial
Statements comprising Item 1 of Part I of this Form 10-Q.



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

Exhibit
Number       Description of Exhibit
<TABLE>
<S>                                                                <C>    <C>    <C>    <C>    <C>    <C>
 2.1     Asset  Purchase  Agreement  dated as of November 1, 2002, by and between  Health Card,
         Integrail  Acquisition  Corp.,  Health Solutions, Ltd., and certain security holders of
         Health Solutions, Ltd. (10)
 2.2     Assignment  Agreement  dated as of November 1, 2002,  by and between  Health Card,
         Integrail  Acquisition  Corp.,  and Health Solutions, Ltd. (10)
 2.3     Stock Purchase Agreement dated July 31, 2003, among Health Card and Portland
         Professional Pharmacy, Portland Professional Pharmacy Associates and the individuals
         listed on Schedule I thereto (12)
 2.4     Stock Purchase Agreement dated October 30, 2003 by and between Health Card and New
         Mountain Partners, L.P. (13)
 3.1     Certificate of Incorporation of Health Card (7)
 3.2     By-Laws of Health Card (7)
 4.1     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 16, 1998, between Health Card and Ken Hammond (1)
10.6     Stock Option Agreement, dated August 3, 1999, between Health Card and Ken Hammond (4)
10.7     Employment Agreement, dated March 27, 2000, between Health Card and David Gershen (4)
10.8     Stock Option Agreement, dated May 1, 2000, between Health Card and David Gershen (4)
10.9     Employment Agreement, dated May 3, 2000, between Health Card and James Bigl (4)
10.10    Stock Option Agreement, dated June 12, 2000, between Health Card and James Bigl (4)
10.11    Stock Option Agreement, dated August 3, 1999, between Health Card and Kenneth J. Daley (4)
10.12    Stock Option Agreement, dated August 3, 1999, between Health Card and Gerald Angowitz (4)
10.13    Lease, dated August 10, 1998, between 61 Manorhaven Boulevard, LLC and Health Card (1)
10.14    Acquisition and Merger Agreement, dated as of June 27, 2000, between Health Card
         and Pharmacy Associates, Inc. (3)
10.15    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 (5)
10.16    Employment Agreement, dated June 4, 2001, between National Medical Health Card
         Systems, Inc. and Tery Baskin (6)
10.17    Stock Option Agreement, dated June 4, 2001, between National Medical Health Card
         Systems, Inc. and Tery Baskin (6)
10.18    Stock Option Agreement, dated June 12, 2001, between National Medical Health Card
         Systems, Inc. and James Bigl (6)
10.19    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)
10.20    Receivables  Purchase and Transfer  Agreement dated January 29, 2002 by and
         among the Company and certain of its  subsidiaries and NMHC Funding, LLC (8)
10.21    Amendment No. 1 dated September 25, 2002 to Receivables  Purchase and Transfer
         Agreement by and among the Company and certain of its subsidiaries and NMHC Funding, LLC (14)
10.22    Amendment  No. 2 dated June 30, 2003 to  Receivables  Purchase and Transfer
         Agreement by and among the Company and certain of its subsidiaries and NMHC Funding, LLC (14)
10.23    Amendment No. 3 dated  October 30, 2003 to  Receivables  Purchase and Transfer
         Agreement by and among the Company and certain of its subsidiaries and NMHC Funding, LLC (14)
10.24    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)
10.25    Lease Agreement dated as of August 1, 2001, between National Medical Health Card
         Systems, Inc. and BFS Realty, LLC (6)
10.26    Amended Lease Agreement dated as of August 1, 2001,  between  National Medical Health Card
         Systems, Inc. and BFS Realty,  LLC (6)
10.27    2003 Employee Stock Purchase Plan (11)
10.28    Amendment No. 2 dated April 15, 2002 to Employment Agreement between Health Card and James Bigl (12)
10.29    Amendment No. 3 dated October 14, 2002 to Employment Agreement between Health Card and James Bigl (12)
10.30    Amendment No. 4 dated November 6, 2002 to Employment Agreement between Health Card and James Bigl (12)
10.31    Stock Option Agreement between Health Card and James Bigl dated February 20, 2001 (12)
10.32    Stock Option Agreement between Health Card and James Bigl dated April 30. 2002  (12)
10.33    Stock Option Agreement between Health Card and James Bigl dated June 26, 2002 (12)
10.34    Stock Option Agreement between Health Card and James Bigl dated July 22, 2003 (12)
10.35    Employment Agreement dated October 14, 2002 between Health Card and Bert Brodsky  (12)
10.36    Employment Agreement dated November 20, 2002 between Health Card and Agnes Hall (12)
10.37    Stock Option Agreement between Health Card and Agnes Hall dated January 8, 2001 (12)
10.38    Amendment to Stock Option Agreement between Health Card and Agnes Hall dated January 8, 2001 (12)
10.39    Stock Option Agreement between Health Card and Agnes Hall dated August 10, 2001 (12)
10.40    Amendment to Stock Option Agreement between Health Card and Agnes Hall dated August 10, 2001 (12)
10.41    Stock Option Agreement between Health Card and Agnes Hall dated December 4, 2001 (12)
10.42    Amendment to Stock Option Agreement between Health Card and Agnes Hall dated December 4, 2001 (12)
10.43    Stock Option Agreement between Health Card and Agnes Hall dated July 31, 2002 (12)
10.44    Amendment to Stock Option Agreement between Health Card and Agnes Hall dated July 31, 2002 (12)
10.45    Stock Option Agreement between Health Card and Agnes Hall dated August 1, 2003 (12)
10.46    First Amendment dated November 6, 2002 to Employment Agreement between Health Card and David Gershen (12)
10.47    Stock Option Agreement between Health Card and David Gershen dated February 20, 2001 (12)
10.48    Stock Option Agreement between Health Card and David Gershen dated September 24, 2001 (12)
10.49    Stock Option Agreement between Health Card and David Gershen dated August 1, 2002 (12)
10.50    Stock Option Agreement between Health Card and David Gershen dated August 1, 2003 (12)
10.51    First Amendment dated November 6, 2002 to Employment Agreement between Health Card and Tery Baskin (12)
10.52    Stock Option Agreement between Health Card and Tery Baskin dated July 20, 2000 (12)
10.53    Stock Option Agreement between Health Card and Tery Baskin dated August 10, 2001 (12)
10.54    Stock Option Agreement between Health Card and Tery Baskin dated August 1, 2002 (12)
10.55    Stock Option Agreement between Health Card and Tery Baskin dated September 19, 2002 (12)
10.56    Stock Option Agreement between Health Card and Tery Baskin dated August 1, 2003 (12)
10.57    Employment Agreement between Health Card and Patrick McLaughlin dated January 29, 2002  (12)
10.58    Stock Option Agreement between Health Card and Patrick McLaughlin dated January 29, 2002 (12)
10.59    Stock Option Agreement between Health Card and Patrick McLaughlin dated August 1, 2003 (12)
10.60    Amendment to Stock Option Agreement dated January 29, 2002 between Health Card and Patrick McLaughlin (12)
10.61    Stock Option Agreement between Health Card and Gerald Angowitz dated November 20, 2000 (12)
10.62    Stock Option Agreement between Health Card and Gerald Angowitz dated February 20, 2001 (12)
10.63    Stock Option Agreement between Health Card and Gerald Angowitz dated April 9, 2003 (12)
10.64    Stock Option Agreement between Health Card and Kenneth J. Daley dated November 20, 2000 (12)
10.65    Stock Option Agreement between Health Card and Kenneth J. Daley dated February 20, 2001 (12)
10.66    Stock Option Agreement between Health Card and Kenneth J. Daley dated April 9, 2003 (12)
10.67    Stock Option Agreement between Health Card and Ronald L. Fish dated November 20, 2000 (12)
10.68    Stock Option Agreement between Health Card and Ronald L. Fish dated February 20, 2001 (12)
10.69    Stock Option Agreement between Health Card and Ronald L. Fish dated April 9, 2003 (12)
10.70    Stock Option Agreement between Health Card and Paul J. Konigsberg dated November 20, 2000 (12)
10.71    Stock Option Agreement between Health Card and Paul J. Konigsberg dated February 20, 2001 (12)
10.72    Stock Option Agreement between Health Card and Paul J. Konigsberg dated April 9, 2003 (12)
10.73    Stock Option Agreement between Health Card and Bert E. Brodsky dated February 20, 2001 (12)
10.74    Stock Option Agreement between Health Card and Gerald Shapiro dated February 20, 2001 (12)
10.75    Sixth Amendment to Employment Agreement, dated October 30, 2003, by and between National
         Medical Health Card Systems, Inc. and James J. Bigl (14)
10.76    Lease dated November 1, 2002 between B/A Airport Park Solutions, LLC and Health Card (12)
10.77    Lease Addendum dated March 10, 2003 between B/A Airport Park Solutions, LLC and Health Card (12)
10.78    Lease Agreement dated November 18, 2002 between Sunbeam Development Corporation and
         NMHCRx Mail Order, Inc. (12)
10.79    Lease Expansion and Modification Agreement dated July 31, 2003 between Sunbeam Development
         Corporation and NMHCRx Mail Order, Inc. (12)
10.80    AmerisourceBergen Prime Vendor Agreement, dated July 21, 2003 between NMHCRx Mail Order, Inc.
         d/b/a NMHCmail and AmerisourceBergen Drug Corporation (12)
10.81    Release, dated October 30, 2003, by Sandata Technologies, Inc. and Sandsport, Inc. (14)
10.82    Amendment to Lease Agreement, dated as of October 23, 2003, by and among BFS Realty,  LLC
         and National Medical Health Card Systems, Inc. (14)
10.83    Lease Agreement, dated August 1, 2001, between Brodsky Sibling Realty
         Juniper Road, LLC and National Medical Health Card Systems, Inc. (14)
10.84    Lease  Agreement (30 Sea Cliff), dated May 1, 2002, between Living in Style,
         LLC and National  Medical Health Card Systems, Inc. (14)
10.85    Amendment to Lease Agreement (30 Sea Cliff),  dated as of October 30, 2003,
         between Living in Style, LLC and National Medical Health Card Systems, Inc. (14)
10.86    Lease  Agreement (32 Sea Cliff), dated May 1, 2002, between Living in Style, LLC
         and National Medical Health Card Systems, Inc. (14)
10.87    Amendment to Lease Agreement (32 Sea Cliff),  dated as of October 30, 2003,
         between Living in Style, LLC and National Medical Health Card Systems, Inc. (14)
10.88    Second Amendment to Employment  Agreement,  dated October 30, 2003, by and between
         National Medical Health Card Systems,  Inc. and Bert E. Brodsky (14)
14.      Code of Ethics (12)
21.      List of Subsidiaries (12)
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 5, 2003(14)
23.2     Consent of Goldstein Golub Kessler LLP to the  incorporation by reference
         in the Registration  Statement on Form S-8 (File No. 333-8224) of its report
         dated August 31, 2003(14)
31.1     Rule 13a-14(a)/15d-14(a) Certification of CEO pursuant to Section 302 of
         the Sarbanes-Oxley Act 31.2 Rule 13a-14(a)/15d-14(a) Certification of CFO
         pursuant to Section 302 of the Sarbanes-Oxley Act
32.1     Section 1350 Certification of CEO as adopted by Section 906 of the Sarbanes-Oxley
         Act 32.2 Section 1350 Certification of CFO as adopted by Section 906 of the
         Sarbanes-Oxley Act

(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 Current 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 number 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-Q for the
quarter ended December 31, 2002 and incorporated herein by reference.
(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.
(12) Denotes document filed as an Exhibit to Health Card's Report on Form 10-K
for the year ended June 30, 2003.
(13) Denotes document filed as an Exhibit to Health Card's Form 8-K filed on November 13, 2003
and incorporated herein by reference.
(14) Denotes document filed as an Exhibit to Health Card's Report on Form 10-K/A Amendment
Number 2 for the year ended June 30, 2003.
</TABLE>

    (b) Reports on Form 8-K

1. A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on October 3, 2004 in connection with the appointment of a new Chief
Financial Officer.

2. A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 13, 2003 in connection with the Stock Purchase Agreement
entered into between the Health Card and New Mountain Partners, L.P.

3. A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 17, 2003 reporting results of the Company's Fiscal First
Quarter ended September 30, 2003.

4. A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 18, 2003 reporting the transcript of a conference call
made on November 17, 2003.

<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 17, 2004          By:     /s/ James J. Bigl
                                        ----------------------------------------
                                                James J. Bigl,
                                                Chief Executive Officer




                                     By:      /s/Stuart F. Fleischer
                                        ---------------------------------------
                                                 Stuart F. Fleischer
                                                 Chief Financial Officer

<PAGE>

                                                                   EXHIBIT 31.1

                                  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 (the
                  "Registrant");

         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;

         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 the
                  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-15(e) and 15d-15(e)) for the Registrant, and we have:

                  a) designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, 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 and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

                  c) disclosed in this report any changes in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting.

         5.       The Registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, 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 and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonable likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; 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 over financial reporting.

          Date: February 17, 2004                    /s/ James J. Bigl
                                                      --------------------------
                                                         James J. Bigl,
                                                         Chief Executive Officer


<PAGE>



                                                                   EXHIBIT 31.2

                                  CERTIFICATION

I, Stuart F. Fleischer, 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 (the
                  "Registrant");

         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;

         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 the
                  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-15(e) and 15d-15(e)) for the Registrant, and we have:

                  a) designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, 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 and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

                  c) disclosed in this report any changes in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting.

         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 and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; 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 over financial reporting.

         Date:  February 17, 2004                    /s/ Stuart F. Fleischer
                                                     --------------------------
                                                         Stuart F. Fleischer
                                                         Chief Financial Officer

<PAGE>


                                                                   EXHIBIT 32.1

                            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,
2003 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, to my knowledge:

          (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 17, 2004



<PAGE>



                                                                   EXHIBIT 32.2

                            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,
2003, as filed with the  Securities  and Exchange  Commission on the date hereof
(the "Report"), I, Stuart F. Fleischer,  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, to my knowledge:

          (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/ Stuart F. Fleischer

Stuart F. Fleischer
Chief Financial Officer
February 17, 2004