NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.AND SUBSIDIARIES

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

FORM 10-Q (Mark One) [X] QUARTERLY  REPORT PURSUANT TO SECTION 13 or 15d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2000

                                     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)

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


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

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

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

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

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

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes No

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity, as of May 10, 2000 was 6,741,496 shares.

<PAGE>
           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                                    INDEX

                                                                 Page

PART I   -  FINANCIAL INFORMATION

Item 1   -  FINANCIAL STATEMENTS:                                  3

            CONSOLIDATED BALANCE SHEETS as of June 30, 1999        3
            and March 31, 2000 (unaudited)

            CONSOLIDATED STATEMENTS OF INCOME (unaudited)          4
            for the three months and nine months
            ended March 31, 1999 and 2000

            CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)      5
            for the nine months ended March 31, 1999 and 2000

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             6

Item 2   -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL     12
            CONDITION AND RESULTS OF OPERATIONS

Item 3   -  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT        18
            MARKET RISK

PART II  -  OTHER INFORMATION                                     19

Item 1   -  LEGAL PROCEEDINGS                                     19

Item 2   -  CHANGES IN SECURITIES AND USE OF PROCEEDS             19

Item 3   -  DEFAULTS UPON SENIOR SECURITIES                       19

Item 4   -  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   19

Item 5   -  OTHER INFORMATION                                     19

Item 6   -  EXHIBITS AND REPORTS ON FORM 8-K                      19

<PAGE>
                               CONSOLIDATED BALANCE SHEETS
<TABLE>
<S>

                                                                   <C>                        <C>
                                                                              June 30,               March 31,
                                                                                1999                   2000
                                                                                                    (Unaudited)
ASSETS
Current Assets:
       Cash and cash equivalents                                            $  2,815,863            $ 10,173,831
       Accounts receivable,
                less allowance for possible losses of $846,344 and $676,720   13,233,760              16,775,005
       Rebates receivable                                                      5,303,786               6,910,403
       Deferred income tax                                                       530,000                 325,000
       Other current assets                                                      283,694                 612,157
Total Current Assets                                                          22,167,103              34,796,396

       Property, equipment and software development costs, net                 2,754,522               6,025,816
       Due from affiliates                                                     4,579,280               3,871,269
       Other assets                                                               15,728                   4,320
       Deferred income tax                                                       166,000                     ---
       Deferred offering costs                                                 1,163,378                     ---
                                                                            $ 30,846,011            $ 44,697,801

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
       Accounts payable and accrued expenses                                $ 26,883,745            $ 27,643,941
       Current portion of capital lease obligations                                1,950                 388,456
       Due to officer/stockholder                                                390,000                  30,000
       Due to affiliates                                                         750,968                  38,301
       Income taxes payable                                                      704,489                 352,144
       Other current liabilities                                                 116,544                 169,487
Total Current Liabilities                                                     28,847,696              28,622,329

Capital lease obligations, less current portion                                      ---               2,104,925
Deferred tax liability                                                               ---                 325,000
Total Liabilities                                                             28,847,696              31,052,254

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,  5,312,496 and 6,912,496 shares issued,
          5,312,496 and 6,801,496 shares outstanding                               5,313                    6,913
       Additional paid-in capital                                              2,868,573               12,405,010
       Retained earnings                                                         480,529                2,094,707
       Treasury stock                                                                ---                 (528,358)
       Notes receivable - stockholders                                        (1,356,100)                (332,725)
Total Stockholders' Equity                                                     1,998,315               13,645,547
                                                                            $ 30,846,011             $ 44,697,801


            See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
                          CONSOLIDATED STATEMENTS OF INCOME
                                      (Unaudited)

<TABLE>
<S>                                                            <C>            <C>                <C>               <C>
                                                                          Three months ended               Nine months ended
                                                                               March 31,                       March 31,

                                                                   1999             2000              1999               2000

REVENUES                                                      $ 33,471,531      $ 44,054,704     $ 96,754,613          $ 129,328,464
Cost of claims                                                  30,655,008        39,735,821       87,518,657            118,477,486

GROSS PROFIT                                                     2,816,523         4,318,883        9,235,956             10,850,978

Selling, general and administrative expenses *                   2,506,064         3,635,735        7,482,553              8,768,141

Operating income                                                   310,459           683,148        1,753,403              2,082,837

Other income (expense):
       Other income, net                                           167,934           235,637          519,738                724,341
       Public Offering costs                                       (46,000)              ---          (82,904)                   ---
                                                                   121,934           235,637          436,834                724,341

Income before income taxes                                         432,393           918,785        2,190,237              2,807,178

Provision for income taxes                                          105,000          390,000          731,000              1,193,000

NET INCOME                                                       $  327,393     $    528,785       $1,459,237             $1,614,178

Earnings per common shares:
       Basic                                                          $0.06            $0.08            $0.28                  $0.24
       Diluted                                                        $0.06            $0.08            $0.28                  $0.24


Weighted average number of common shares
  outstanding:
       Basic                                                       5,312,496       6,871,870        5,169,411              6,712,871
       Diluted                                                     5,312,496       6,871,870        5,169,411              6,712,871


* Includes amounts charged by affiliates aggregating:               $997,532        $840,728       $2,361,913             $2,138,972


                See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)
<TABLE>
<S>                                                            <C>                 <C>
                                                                         Nine months ended
                                                                              March 31,
                                                                      1999                 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                 $1,459,237            $1,614,178
       Depreciation and amortization                                 545,087               851,561
       Bad debt expense                                               24,607               600,000
       Allowance for possible losses                                 550,000                   ---
       Compensation expenses accrued to officer/stockholder          270,000                30,000
       Deferred income taxes                                          52,000               696,000
       Interest accrued on stockholders' loans                       (85,425)              (12,750)
       Changes in assets and liabilities:
           (Increase) decrease in:
              Accounts receivable                                 (4,637,906)           (4,141,246)
              Other current assets                                  (107,361)             (328,463)
              Rebates receivable                                    (354,628)           (1,606,617)
              Due to/from affiliates                                (407,403)               (4,656)
              Other assets                                               ---                11,408
           Increase (decrease) in:
              Accounts payable and accrued expenses                2,209,932               760,196
              Due to officer/stockholder                                 ---              (390,000)
              Income taxes payable                                   547,202              (352,345)
              Other liabilities                                      144,131                52,943

Net cash provided by (used in) operating activities                  209,473            (2,219,791)

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                       (1,549,638)           (1,586,124)
       Loans from stockholders                                        10,774                   ---
       Interest received on notes from stockholder                   170,850                   ---
       Repayment of note by stockholder                               40,000             1,036,125

Net cash used in investing activities                             (1,328,014)             (549,999)

CASH FLOWS FROM FINANCING ACTIVITIES:
       Sale of common stock                                        2,000,000            10,701,415
       Repayment of debt and capital lease obligations                (5,051)              (45,299)
       Treasury stock                                                    ---              (528,358)
       Deferred  offering costs                                     (145,050)                  ---

Net cash provided by financing activities                          1,849,899            10,127,758

Net increase  in cash and cash equivalents                           731,358             7,357,968
Cash and cash equivalents, beginning of period                     1,305,792             2,815,863
Cash and cash equivalents, end of period                          $2,037,150           $10,173,831

Non cash investing activities:

</TABLE>
During the nine months ended March 31, 2000, the Company incurred capital lease
obligations for equipment in the amount of $2,537,730.

          See accompanying notes to consolidated financial statements

<PAGE>
          NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.    BASIS OF PRESENTATION

     The unaudited  consolidated  financial  statements  include the accounts of
     National   Medical   Health  Card  Systems,   Inc.  and  its  wholly  owned
     subsidiaries, National Medical Health Card IPA, Inc. and Specialty Pharmacy
     Care,  Inc.,  (the "Company") and have been prepared as if the entities had
     operated as a single  consolidated  group  since  inception.  All  material
     intercompany   balances  and  transactions  have  been  eliminated  in  the
     consolidation.

     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared by the Company in accordance  with generally  accepted  accounting
     principles for interim financial  information and substantially in the form
     prescribed by the Securities  and Exchange  Commission in  instructions  to
     Form  10-Q and  Article  10 of  Regulation  S-X.  Accordingly,  they do not
     include all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.  In the opinion of
     the Company's  management,  the March 31, 2000 and 1999  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 Companys  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, 1999.  The results of  operations  for the
     three and nine  month  periods  ended  March 31,  2000 are not  necessarily
     indicative  of the  results  to be  expected  for the full  year or for any
     future period.

2.   PUBLIC OFFERING

     The  registration  statement  for  the  Company's  Public  Offering  became
     effective on July 28, 1999 ("the Public Offering"). The Company consummated
     the Public Offering on August 2, 1999 and issued 1,600,000 shares of common
     stock at an  offering  price of $7.50 per share.  The  Company  granted the
     underwriters   of  the  Public  Offering   200,000   warrants  for  nominal
     consideration.  The warrants  entitle the  underwriters to purchase 200,000
     shares of common  stock from the Company at $9.00 per share.  The  warrants
     are  exercisable  for four years  commencing on July 29, 2000. In addition,
     the underwriters were granted an overallotment option by the Company to buy
     300,000 shares of common stock at $7.50 per share  exercisable by September
     11, 1999. The  underwriters  did not exercise this option.  Concurrent with
     the Public Offering,  the Selling Stockholder sold 400,000 shares of common
     stock from his holdings at $7.50 per share. The Company  received  proceeds
     of $12,883,100  representing  payment for the sale of the 1,600,000  shares
     plus 73% of the proceeds from the sale of the 400,000 shares by the Selling
     Stockholder for repayment of $1,992,900 of indebtedness owed by the Selling
     Stockholder  and  affiliates  to the  Company.  Such  proceeds  were net of
     underwriting discounts and commissions, a non-accountable expense allowance
     and a financial advisory fee paid to the underwriters plus certain fees and
     expenses paid by the Company.

3.    STOCK OPTIONS

     On August 3, 1999,  and after,  the Company  granted  incentive  options to
     employees  under the 1999 Stock Option Plan (the "Plan") to purchase shares
     of common stock at $7.50 per share.  These options vest within a three year
     period  commencing  upon the completion of one year of employment  with the
     Company.  These options  terminate  after five years.  As of March 31, 2000
     140,800 options had been granted.

     On August 3,  1999,  the  Company  granted  non-statutory  options to three
     outside  directors under the Plan to purchase an aggregate of 30,000 shares
     of common stock at $7.50 per share.  These options vest within a three year
     period commencing August 3, 1999 and terminate on August 3, 2004.

     On February 1, 2000,  the Company  granted  incentive  options to employees
     under the Plan to purchase shares of common stock at $5.87 per share. These
     options  vest within a two and four year period  commencing  on the date of
     grant.  These  options  terminate  on  December  7, 2003,  July 1, 2005 and
     December 7, 2005. As of March 31, 2000,  345,179  options had been granted.
     Simultaneously  with this grant was the  surrender of 345,179  options that
     were granted by the principal stockholder. The terms of the new options are
     identical to those of the options surrendered.

4.    EMPLOYMENT AGREEMENT

     The  Company  entered  into  an  employment  agreement  with  the  majority
     stockholder  effective  July  1,  1999.  Pursuant  to this  agreement,  the
     majority  stockholder  has  agreed  to serve as  Chairman  of the  Board of
     Directors at an annual  salary of $200,000,  subject to  adjustment  by the
     Board of Directors.  The agreement commenced on July 1, 1999 and has a term
     of two years,  unless  terminated by the Company for cause, or in the event
     the stockholder  becomes permanently  disabled.  The agreement provides for
     certain  fringe   benefits   payable  to  or  on  behalf  of  the  majority
     stockholder,  such as the use of an automobile.  In addition, the agreement
     provides  for  certain   termination   benefits  payable  to  the  majority
     stockholder,  which depending upon the reason for termination, can equal up
     to two years salary.

     In January 2000 the Board of Directors  agreed to pay a bonus of $60,000 to
     this officer/stockholder for the year ended June 30, 2000.

5.   EARNINGS PER SHARE

     Outstanding  options and warrants  issued by the Company are excluded  from
     the calculation of diluted earnings per share for the three months and nine
     months ended March 31, 2000 as they are antidilutive. Options issued by the
     majority  stockholder  that were  outstanding for the three and nine months
     ended March 31, 1999 are excluded from the computation of diluted  earnings
     per share since, upon exercise, the underlying common stock would be issued
     by the majority stockholder in accordance with the option agreements.

6.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:
<TABLE>
<S>                                   <C>                 <C>
                                           June 30,            March 31,
                                             1999                2000
     Claims payable                      $17,553,036         $20,282,256
     Rebates payable to sponsors           7,062,159           6,262,139
     Other payables                        2,268,550           1,099,546
                                         $26,883,745         $27,643,941
</TABLE>
     During  September  1999 rebates  payable were reduced by $736,000  when the
     Company  reevaluated  its liability to a plan sponsor.  Cost of claims were
     decreased by the same amount.

7.   RELATED PARTY TRANSACTIONS

     Certain  costs  paid  to  the  affiliates  were   capitalized  as  software
     development  costs.  For the nine  months  ended  March 31, 2000 the amount
     charged by affiliates and capitalized was $388,757.

     The Company  purchased  furniture and fixtures from an affiliate during the
     nine  months  ended March 31, 2000 for  approximately  $143,729.  The price
     included a 20% purchasing and handling fee.

     For the  periods  presented,  certain  general,  administrative  and  other
     expenses  reflected in the  financial  statements  include  allocations  of
     certain  corporate  expenses from affiliates which take into  consideration
     personnel,  estimates  of the  time  spent  to  provide  services  or other
     appropriate  bases.  These  allocations  include  services and expenses for
     general management,  information systems maintenance, financial consulting,
     employee   benefits   administration,   legal   communications   and  other
     miscellaneous services.

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

     General and administrative expenses related to transactions with affiliates
     included in the statement of income are:
<TABLE>
<S>                                               <C>                      <C>
                                                         Three months ended March 31,
                                                       1999                        2000
     Software maintenance and related services   $    196,967                $   260,944
     Management and consulting fees                   651,870                    436,308
     Administrative and bookkeeping services           64,138                     59,957
     Rent and utilities                                84,557                     83,519
                                                 $    997,532                $   840,728

                                                          Nine months ended March 31,
                                                       1999                        2000
     Software maintenance and related services  $    536,871                $   717,944
     Management and consulting fees                1,449,141                    960,952
     Administrative and bookkeeping services         184,073                    190,557
     Rent and utilities                              191,828                    269,519
                                                $  2,361,913                $ 2,138,972
</TABLE>
8.   MAJOR CUSTOMERS AND PHARMACIES

     For the  three  months  ended  March  31,  1999,  approximately  61% of the
     revenues were from three plan sponsors  administering  multiple plans.  For
     the three months ended March 31,  2000,  approximately  38% of the revenues
     were from two plan  sponsors  administering  multiple  plans.  For the nine
     months  ended  March  31,  1999  and  2000,   approximately  66%  and  47%,
     respectively,  of the revenues were from three plan sponsors  administering
     multiple  plans.  Amounts due from these three  customers at March 31, 2000
     approximated $3,845,000.

     In October 1999 the Company  entered into a new two year  arrangement  with
     one of its  major  sponsors.  As  consideration  for this  arrangement  the
     Company  settled  certain fees due from this sponsor and reduced revenue by
     $821,000 during September 1999.

     For the three months ended March 31, 1999 and 2000,  approximately  25% and
     43% of the cost of  claims  were  from two  pharmacy  chains.  For the nine
     months ended March 31, 1999 and 2000, approximately 28% and 42% of the cost
     of claims were from the same two pharmacy chains.  Amounts payable to these
     two pharmacy chains at March 31, 2000 were approximately $8,247,000.

9.   LITIGATION

     On February 9, 1999, the Company was informed by counsel that an action was
     brought  against it by the West Contra Costa Unified School District and an
     individual plaintiff in the State of California.  The case was subsequently
     removed to Federal court. The complaint alleges,  among other things,  that
     the parties  entered into a contract in November  1996,  for services to be
     provided  by  the  Company  and,  subsequently,  the  Company  unilaterally
     terminated the contract on December 16, 1996. The complaint further alleges
     that this termination was in violation of the terms of the contract and one
     or more statutory  provisions;  that the termination resulted in the school
     district  incurring  approximately  $150,000 in additional costs due to its
     having to enter  into a fee for  service  arrangement  with the  Company in
     order to continue providing  prescription benefits to its plan members; and
     that, due to the wrongful termination of the contract,  the school district
     was forced to secure a  replacement  for the benefits and the services that
     were to have  been  provided  under  the  contract  with  the  Company.  In
     connection  with this last  circumstance,  the  complaint  alleges that the
     school district incurred approximately $400,000 in additional expenses. The
     complaint  also seeks treble  damages.  If treble damages were allowable in
     this case and a  judgment  were to be  entered  against  the  Company,  the
     Company  would be liable for damages in excess of  $1,500,000.  The Company
     denies the allegations and intends to vigorously defend this action. In the
     opinion  of  management,  the  outcome of this  litigation  will not have a
     material adverse effect on the Company's  financial position or its results
     of operations.

10.  CAPITAL LEASE OBLIGATIONS

     The Company leases equipment and software under capital leases.  The assets
     acquired  under capital  leases have a cost of $2,537,730  and  accumulated
     amortization  of $52,690 as of March 31, 2000.  Amortization  of the leased
     assets is included in depreciation expense.

     The  following is a schedule,  by year, of future  minimum  lease  payments
     under  capitalized  leases,  together  with  the  present  value of the net
     minimum lease payments at March 31, 2000.

<TABLE>
<S>
     Payments for the year ending June 30,:
     <C>                                <C>
          2000                               $171,688
          2001                                686,754
          2002                                686,754
          2003                                632,104
          2004                                522,804
          2005                                338,851
     Total minimum lease payments           3,038,955
     Less: Amount representing interest       545,574
     Present value of net minimum lease
          payments                          2,493,381
     Less:  Current portion                   388,456
     Long-term lease obligations           $2,104,925

</TABLE>
<PAGE>

            NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANICIAL
                         CONDITION AND RESULTS OF OPERATIONS


Results of Operations

Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 2000

Revenues  increased $10.6 million,  or approximately 32%, from $33.5 million for
the three  months  ended  March 31, 1999 to $44.1  million for the three  months
ended March 31, 2000. The increase resulted primarily from $11.8 million in fees
related to new  sponsors.  The  remaining  balance  representing  a decrease  of
approximately   $1.2   million  was  due   primarily  to  the  loss  of  certain
sponsors,partially  offset  by other  existing  sponsors  as a result  of higher
charges relating to  pharmaceuticals,  new drugs, plan participant growth and an
increase in the average number of claims per plan participant.

Cost of claims increased $9 million,  or  approximately  29%, from $30.7 million
for the three months ended March 31, 1999 to $39.7  million for the three months
ended March 31, 2000. As a percentage of revenues, cost of claims decreased from
92% for the three months ended  March 31, 1999 to 90% for the three months ended
March 31, 2000, as a result of more favorable arrangements with a sponsor.

Gross  profit  increased  approximately  $1.5  million from $2.8 million for the
three  months  ended March 31, 1999 to $4.3  million for the three  months ended
March 31, 2000, primarily as a result of the increase in revenues, offset by the
increase in the cost of claims.

Selling,  general and administrative  expenses, which include amounts charged by
affiliates,  increased $1.1 million or approximately  44%, from $2.5 million for
the three months ended March 31, 1999 to $3.6 million for the three months ended
March 31,  2000.  The  increase  resulted  primarily  from a  $600,000  bad debt
expense,  increases in  compensation,  benefits,  sales and  marketing and other
expenses related to the expansion of the Company's business.

General and administrative expenses charged by affiliates decreased $157,000, or
approximately  16%,  from  $998,000 for the three months ended March 31, 1999 to
$841,000 for the three months ended March 31, 2000.

Other income increased $114,000,  from $122,000 for the three months ended March
31,  1999 to  $236,000  for the three  months  ended  March 31,  2000,  due to a
$127,000  increase in interest  income  earned on short-term  investments  and a
$46,000  decrease  in Public  Offering  costs,  offset by a $42,000  decrease in
shareholder  and affiliate  interest  income and a $17,000  increase in interest
expense.

The provision for income taxes increased  $285,000,  from $105,000 for the three
months  ended March 31, 1999 to $390,000  for the three  months  ended March 31,
2000, as a result of increased taxable income.

Nine Months Ended March 31, 1999 Compared to Nine Months Ended March 31, 2000

Revenues  increased $32.5 million,  or approximately 34%, from $96.8 million for
the nine months ended March 31, 1999 to $129.3 million for the nine months ended
March 31,  2000.  The increase  resulted  primarily  from $25.8  million in fees
related to new sponsors.  The remaining  increase of approximately  $6.7 million
was due  primarily  to other  existing  sponsors  as a result of higher  charges
relating to pharmaceuticals,  new drugs, plan participant growth and an increase
in the  average  number of claims per plan  participant.  Revenues  for the nine
months ended March 31, 1999 included a one-time rate increase of $500,000 from a
major client. The revenue for the nine months ended March 31, 2000 was net of an
$821,000  reduction in revenue when the Company  settled certain fees due from a
major sponsor as consideration for a new two year arrangement with this sponsor.

Cost of claims increased $31 million,  or approximately  35%, from $87.5 million
for the nine months  ended March 31, 1999 to $118.5  million for the nine months
ended March 31, 2000. As a percentage of revenues, cost of claims increased from
90% for the nine months  ended  March 31, 1999 to 92% for the nine months  ended
March 31, 2000,  as a result of higher drug costs.  During the nine months ended
March 31,  2000  rebates  payable  were  reduced by  $736,000  when the  Company
reevaluated its liability to a plan sponsor.  Cost of claims for the nine months
were decreased by the same amount.

Gross profit  increased  approximately  $1.7 million,  from $9.2 million for the
nine  months  ended March 31,  1999 to $10.9  million for the nine months  ended
March 31, 2000, primarily as a result of the increase in revenues, offset by the
increase in the cost of claims.

Selling,  general and administrative  expenses, which include amounts charged by
affiliates,  increased $1.3 million, or approximately 17%, from $7.5 million for
the nine months ended  March 31, 1999  to $8.8 million for the nine months ended
March 31, 2000. The increase resulted  primarily from increases in compensation,
benefits, sales and marketing and other expenses related to the expansion of the
Company's business.

General and administrative expenses charged by affiliates decreased $223,000, or
approximately  9%, from  $2,362,000  for the nine months ended March 31, 1999 to
$2,139,000  for the nine months ended March 31,  2000,  primarily as a result of
lower compensation to the majority stockholder.

Other income increased  $287,000,  from $437,000 for the nine months ended March
31, 1999 to $724,000 for the nine months ended March 31, 2000, due to a $334,000
increase in interest  income  earned on  short-term  investments  and an $83,000
decrease in Public  Offering costs offset by a $112,000  decrease in shareholder
and affiliate interest income and an $18,000 increase in interest expense.

The provision for income taxes  increased  $462,000,  from $731,000 for the nine
months  ended March 31, 1999 to  $1,193,000  for the nine months ended March 31,
2000, as a result of increased taxable income.

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.  As of March 31,  2000,  the
Company  had  working  capital  of $6.2  million.  Net  cash  used in  operating
activities  was $2.2 million for the nine months ended March 31, 2000  resulting
primarily  from  increases  in  accounts  receivable  due to the  growth  of the
Company's business.  Net cash used in investing  activities was $550,000 for the
nine months ended March 31, 2000 resulting  primarily from capital  expenditures
associated  with the expansion of the Company's  computer  systems,  offset by a
repayment of a note by  stockholder.  Net cash provided by financing  activities
was $10.1 million and resulted primarily from the Public Offering.

The registration statement for the Company's Public Offering became effective on
July 28,  1999 ("the  Public  Offering").  The  Company  consummated  the Public
Offering  on August 2, 1999 and issued  1,600,000  shares of common  stock at an
offering price of $7.50 per share.  The Company granted the  underwriters of the
Public Offering 200,000 warrants for nominal consideration. The warrants entitle
the  underwriters to purchase 200,000 shares of common stock from the Company at
$9.00 per share.  The warrants are exercisable for four years commencing on July
29, 2000. In addition,  the underwriters were granted an overallotment option by
the Company to buy 300,000 shares of common stock at $7.50 per share exercisable
by September 11, 1999. The underwriters did not exercise this option. Concurrent
with the Public Offering,  the Selling Stockholder sold 400,000 shares of common
stock from his  holdings at $7.50 per share.  The Company  received  proceeds of
$12,883,100  representing  payment for the sale of the 1,600,000 shares plus 73%
of the proceeds from the sale of the 400,000  shares by the Selling  Stockholder
for repayment of $1,992,900 of indebtedness owed by the Selling  Stockholder and
affiliates to the Company. Such proceeds were net of underwriting  discounts and
commissions,  a non-accountable  expense allowance and a financial  advisory fee
paid to the underwriters plus certain fees and expenses paid by the Company.

The Company  anticipates  that the net  proceeds of the Public  Offering and the
repayment of certain affiliate and shareholder  debt,  together with anticipated
cash  flow  from  operations,  will  be  sufficient  to  satisfy  the  Company's
contemplated  cash  requirements  for at least  24  months.  This is based  upon
current levels of capital expenditures and anticipated operating results for the
next 24 months.  Alternatively,  revolving  credit lines and debt  financing are
being  evaluated  as backups to  anticipated  cash needs.  In the event that the
Company's plans change or its assumptions prove to be inaccurate or the proceeds
of the Public Offering  otherwise  prove to be insufficient to fund  operations,
the  Company  could  be  required  to  seek  additional  financing  sooner  than
anticipated.

<PAGE>
Other Matters

Inflation

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

Year 2000

By December  1999,  the Company had  carefully  reviewed and upgraded all of its
management  and  information  systems,  using  internal  staff and outside firms
specializing in computer  systems,  networking,  telecommunications,  accounting
software  and  associated  products,  in an effort to minimize any impact of the
year 2000. While the Company's  project to assess and correct Y2K related issues
regarding the year 2000 has been completed,  and the Company has not experienced
any Y2K related  events,  interactions  with other  companies'  systems  make it
difficult  to  conclude  there  will  not be  future  effects.  The  Company  is
monitoring the situation  carefully and at this time,  management  believes that
the impact of the year 2000 will have no material  effect on its  operations  or
financial results.

Forward-Looking Statements

This  report  contains  or may  contain  forward-looking  statements  within the
meaning  of  Section  21E of the  Securities  Exchange  Act  of  1934  including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of  Financial  Condition  and Results of  Operations"  and the Notes to
Consolidated Financial Statements.  These forward-looking statements, as defined
in Section 21E of the Securities  Exchange Act of 1934, are dependent on certain
events, risks and uncertainties that may be outside the Company's control. These
forward-looking  statements  may include  statements of  management's  plans and
objectives for the Company's future operations and statements of future economic
performance;  the Company's capital budget and future capital requirements,  and
the Company's meeting its future capital needs; and the assumptions described in
this report  underlying  such  forward-looking  statements.  Actual  results and
developments  could differ materially from those expressed in or implied by such
statements  due to a number of factors,  including,  without  limitation,  those
described in the context of such forward-looking statements, and the factors set
forth  in  the   Company's   Form  10-K.   All   subsequent   written  and  oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this section.

<PAGE>
          NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES



ITEM 3     -      QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK

Not applicable.


<PAGE>
           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                             PART II - OTHER INFORMATION


Item 1  - Legal Proceedings

See Form 10-Q for the period ended December 31, 1999.

Item 2  - Changes in Securities and Use of Proceeds

On August 3, 1999, and after, the Company granted incentive options to employees
under the 1999 Stock Option Plan (the "Plan") to purchase shares of common stock
at $7.50 per share.  These  options  vest within a three year period  commencing
upon the  completion of one year of employment  with the Company.  These options
terminate  after five  years.  As of March 31,  2000  140,800  options  had been
granted.

On August 3, 1999, the Company  granted  non-statutory  options to three outside
directors  under the Plan to purchase an  aggregate  of 30,000  shares of common
stock at $7.50  per  share.  These  options  vest  within  a three  year  period
commencing August 3, 1999 and terminate on August 3, 2004.

On February 1, 2000, the Company  granted  incentive  options to employees under
the 1999 Stock  Option Plan (the  "Plan") to purchase  shares of common stock at
$5.87 per share. These options vest within a two and four year period commencing
on the date of grant.  These options terminate on December 7, 2003, July 1, 2005
and December 7, 2005.  As of March 31, 2000,  345,179  options had been granted.
Simultaneously  with this grant was the  surrender of 345,179  options that were
granted by the principal stockholder. The terms of the new options are identical
to those of the options surrendered.

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

None.

Exhibit 27 - Financial Data Schedule (Electronic Filing Only)

<PAGE>


                                 SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  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:    May 15, 2000                   By:      /s/ Bert E. Brodsky
                                                     Bert E. Brodsky
                                                     Chairman of the Board
                                                     and Chief Executive Officer



<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  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:    May 15, 2000                   By:
                                                     Bert E. Brodsky
                                                     Chairman of the Board
                                                     and Chief Executive Officer



<PAGE>





                                                    May 15, 2000



Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C.  20549

     Re: National Medical Health Card Systems, Inc.
         File No: 000-26749

Dear Sir or Madam:

Transmitted  herewith  through  the EDGAR  system  is Form 10-Q for the  quarter
ending March 31, 2000 for National Medical Health Card Systems, Inc. If you have
any questions or comments, please contact me at (516) 484-4400, extension 215.



                                                   Very truly yours,




                                                   Linda Scarpantonio
                                                   Legal Coordinator