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

                                    FORM 10-Q
<TABLE>
<S>                                                                                  <C>    <C>

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

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

                                       OR

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

For the transition period from              to
                               ------------    -------------
</table>

                        Commission file number 000-26749

                        NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
-------------------------------------------------------------------------------
                      (Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S>                                                                              <C>    <C>
                    Delaware                                             11-2581812
--------------------------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)   (IRS Employer Identification No.)


 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
                                                   ----------------------------
</TABLE>

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

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

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         The number of shares outstanding of the issuer's Common Stock, as of
May 8, 2002 was 7,266,519 shares.


<PAGE>


                 NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES



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


                                                                                               Page

PART I        -   FINANCIAL INFORMATION

ITEM 1        -   CONDENSED FINANCIAL STATEMENTS:                                              3

                  CONSOLIDATED BALANCE SHEET as of June 30, 2001                               3
                  and March 31, 2002 (unaudited)

                  CONSOLIDATED STATEMENT OF INCOME (unaudited)                                 4
                  for the three months and nine months ended March 31, 2001
                  and 2002

                  CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)                             5
                  for the nine months ended March 31, 2001 and 2002

                  CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         6

ITEM 2        -   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                           15
                  CONDITION AND RESULTS OF OPERATIONS

ITEM 3        -   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT                              21
                  MARKET RISK

PART II       -   OTHER INFORMATION                                                           22

ITEM 1        -   LEGAL PROCEEDINGS                                                           22

ITEM 2        -   CHANGES IN SECURITIES AND USE OF PROCEEDS                                   23

ITEM 3        -   DEFAULTS UPON SENIOR SECURITIES                                             23

ITEM 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                         23

ITEM 5        -   OTHER INFORMATION                                                           23

ITEM 6        -   EXHIBITS AND REPORTS ON FORM 8-K                                            24


</table>

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1 - CONDENSED FINANCIAL STATEMENTS
            NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                ($ in thousands)
<table>

                                                                                             <c>             <c>
                                                                                                       June 30,    March 31,
                                                                                                         2001        2002
                                                                                                      --------    --------
Assets                                                                                                            (unaudited)
Current:

  Cash and cash equivalents (including cash equivalent investments of $1,216                       $    12,475    $ 5,616
         and $1,245
  Accounts receivable, less allowance for possible losses of $1,847                                     30,081     60,694
           and $2,552
  Rebates receivable                                                                                     7,789     11,070
  Due from affiliates                                                                                      987        415
  Deferred tax asset                                                                                     1,103      1,728
  Other current assets                                                                                   1,004        929
-----------------------------------------------------------------------------------------------------------------------------------
     Total current assets                                                                               53,439     80,452
  Property, equipment and software development costs, net                                                8,584      9,025
  Due from affiliates                                                                                    3,832      3,583
  Intangible assets, net of accumulated amortization of $39 and $237                                       266      2,693
  Goodwill                                                                                              12,944     51,032
  Other assets                                                                                              45        596
  Deferred tax asset                                                                                        --        158
-----------------------------------------------------------------------------------------------------------------------------------
     Total Assets                                                                                      $79,110   $147,539
-----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
  Accounts payable and accrued expenses                                                              $  57,646   $101,843
  Current portion of capital lease obligations                                                             542        635
  Convertible notes payable                                                                                 --     11,600
  Revolving credit facility and loans payable-current                                                      110      4,225
  Due to officer/stockholder                                                                               542        554
  Due to affiliates                                                                                        344          6
  Other current liabilities                                                                              1,346        500
-----------------------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                                           60,530    119,363
  Capital lease obligations, less current portion                                                        1,333        955
  Revolving credit facility, less current portion                                                           --      5,000
  Long term loans payable and other liabilities                                                             73        536
  Deferred tax liability                                                                                 1,702      2,143
-----------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                                                  63,638    127,997
-----------------------------------------------------------------------------------------------------------------------------------
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, 7,312,496 and
    7,457,519 shares issued and 7,121,496 and 7,266,519 outstanding                                          7         7
  Additional paid-in-capital                                                                            13,255    13,885
  Retained earnings                                                                                      3,254     6,394
  Treasury stock at cost, 191,000 shares                                                                  (744)     (744)
  Notes receivable - stockholders                                                                         (300)       --
-----------------------------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                                                         15,472    19,542
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                                                       $ 79,110  $147,539
-----------------------------------------------------------------------------------------------------------------------------------

</table>
          See accompanying condensed notes to consolidated financial statements

<PAGE>


               NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

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



  <table>
  
                                                                               <c>               <c>
                                                             Three months ended                Nine months ended
                                                                  March 31                          March 31
                                                            2001            2002            2001              2002
                                                            ----            ----            ----              ----

Revenues                                              $   72,374    $   145,683    $   192,513      $      313,837
Cost of claims                                            66,222        136,251        177,107             289,412
--------------------------------------------------------------------------------------------------------------------

Gross Profit                                              6,152          9,432          15,406              24,425

Selling, general and administrative expenses*             5,858          7,295          14,584              19,336
---------------------------------------------------------------------------------------------------------------------

Operating income                                            294          2,137             822               5,089

Interest income (expense), net                              253           (336)            672                (108)

Other income, net                                            --             38              --                  63
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

Income before income taxes                                  547          1,839           1,494               5,044
Provision for income taxes                                  270            736             751               1,904
---------------------------------------------------------------------------------------------------------------------

Net Income                                            $     277     $    1,103      $      743        $      3,140
---------------------------------------------------------------------------------------------------------------------

Earnings per common share:
    Basic                                             $    0.04      $    0.15      $     0.10        $       0.44
---------------------------------------------------------------------------------------------------------------------
    Diluted                                           $    0.04      $    0.14      $     0.10        $       0.41
---------------------------------------------------------------------------------------------------------------------

Weighted average number of common shares outstanding:
    Basic                                                7,121           7,209           7,094               7,179
---------------------------------------------------------------------------------------------------------------------
    Diluted                                              7,151           8,023           7,101               7,750
---------------------------------------------------------------------------------------------------------------------


* Includes amounts charged by affiliates aggregating: $  1,017     $       244     $     2,993        $      1,642
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------


</table>


        See accompanying condensed notes to consolidated financial statements


<PAGE>


                  NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                ($ in thousands)
<TABLE>
<S>                                                                                   <C>                       <C>
                                                                                                    Nine months ended
                                                                                                        March 31,
                                                                                               2001                     2002
                                                                                               ----                     ----
Cash flows from operating activities:
      Net income                                                                         $     743                 $   3,140
      Adjustments to reconcile net income to net cash provided by
       operating activities:
      Depreciation and amortization                                                          1,802                     2,281
      Amortization of deferred gain                                                             --                       (63)
      Net gain on sale of capital assets                                                        --                      (370)
      Bad debt expense and allowance for possible losses                                       378                       675
      Compensation expense accrued to officer/stockholder                                      358                        13
      Deferred income taxes                                                                   (40)                     (343)
      Interest accrued on stockholders' loans                                                 (19)                      --
      Changes in assets and liabilities, net of effect from
       acquisitions:
                  (Increase) decrease in:
                    Accounts receivable                                                     (8,154)                  (31,289)
                    Rebates receivable                                                        (719)                   (3,281)
                    Other current assets                                                      (150)                       68
                    Due to/from affiliates                                                    (625)                      483
                    Other assets                                                                44                       (54)
                  Increase (decrease) in:
                    Accounts payable and accrued expenses                                   10,144                    43,032
                    Other current liabilities                                                  (44)                     (595)
                    Other long term liabilities                                                  9                       380
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                    3,727                    14,077
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
                  Capital expenditures                                                      (2,543)                   (2,376)
                   Proceeds from sale of capital assets                                         31                     1,321
                   Acquisition of Centrus, net of cash acquired                                 --                   (40,284)
                   Acquisition of PAI, net of cash acquired                                 (4,487)                       --
                   Acquisition of PMP, net of cash and cash equivalents                     (6,684)                       --
                   Repayment of note by stockholder                                             --                       300
                   Interest received on notes from stockholders                                 39                        --
---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                      (13,644)                  (41,039)
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
                   Proceeds from exercise of stock options                                      --                       380
                   Proceeds from convertible note offering                                      --                    11,600
                   Proceeds from revolving credit facility                                   4,000                    28,700
                   Repayment of revolving credit facility, net                              (4,000)                  (19,506)
                   Deferred financing costs                                                     --                      (532)
                   Repayment of debt and capital lease obligations                            (518)                     (539)
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                                           (518)                   20,103

---------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                                                   (10,435)                  (6,859)
Cash and cash equivalents at beginning of period                                             15,725                   12,475
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                                $   5,290              $     5,616
---------------------------------------------------------------------------------------------------------------------------------
                       See accompanying condensed notes to consolidated financial statements

</table>
<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

              CONDENSED 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. (the "Company") and its wholly owned
subsidiaries,  Pharmacy Associates, Inc. ("PAI"), Interchange PMP, Inc. ("PMP"),
Centrus  Corporation  f/k/a  HSL  Acquisition  Corp.  (see  Note 2)  ("Centrus")
National Medical Health Card IPA, Inc. ("IPA"),  PSCNY IPA, Inc. ("PSCNY"),  and
Specialty  Pharmacy Care,  Inc.  ("Specialty");  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"  refer to the Company and its  subsidiaries,  on a consolidated
basis. 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, 2002 and 2001 unaudited interim financial  statements
include all adjustments,  consisting of normal recurring adjustments,  necessary
for a fair presentation of results for these interim periods.  In the opinion of
the  Company's  management,  the  disclosures  contained  in this  Form 10-Q are
adequate  to  make  the  information  presented  not  misleading  when  read  in
conjunction with the Notes to Consolidated  Financial Statements included in the
Company's  Form 10-K for the year ended June 30, 2001. The results of operations
for the three and nine month  periods  ended March 31, 2002 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, 2001 (the "Annual Report").

2.       BUSINESS ACQUISITIONS

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

     The aggregate  purchase price of the Acquisition was $40.0 million in cash,
of which  $3.0  million  is held in  escrow to  secure  certain  indemnification
obligations. The Company acquired approximately $1.5 million of HSL's assets and
also agreed to assume  approximately $1.5 million of HSL's liabilities  relating
to the Centrus  business.  The  acquisition was accounted for under the purchase
method of accounting and the results of Centrus' operations were included in the
consolidated  financial  statements  commencing with the  acquisition  date. The
excess of the acquisition  costs over the fair value of identifiable  net assets
acquired  was  $40,668,451,  which  consists of the  following  components:  (i)
customer  relationships valued at $2,415,000,  which will be amortized over five
(5) years; (ii) an employment  agreement and a consulting  agreement valued at a
combined  value of $89,000,  which will be amortized  over two (2) years:  (iii)
non-compete  contracts valued at $76,000,  which will be amortized over four (4)
years,  and (iv) goodwill of  $38,088,451,  which will not be amortized per SFAS
142 (see Note 8). In addition,  the Company has agreed to pay HSL, as additional
purchase  price,  up to $4 million  over a period of three years if the acquired
Centrus  business  achieves  certain  financial  performance  targets during the
two-year period following the Closing. HSL may also be entitled to an additional
incentive  payment based on the financial  performance  of the Centrus  business
during the one-year period following the Closing.

     Simultaneously  with  the  consummation  of the  Acquisition,  the  Company
entered  into an  Employment  Agreement  and a Stock Option  Agreement  with the
former  president of Centrus,  pursuant to which he will serve as Executive Vice
President  of Managed  Care for the Company.  Additionally,  several  members of
Centrus'  management  team have joined the Company as employees or  consultants,
and have been granted stock  options to purchase an aggregate of 450,000  shares
of Common Stock, under the Company's 1999 Stock Option Plan, as amended.

     On January 29, 2002,  the Company and certain of its  subsidiaries  entered
into a $40 million secured  revolving  credit facility (the  "Facility")  with 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. The Facility has a three year term, provides for
borrowing  up to $40 million at the London  InterBank  Offered Rate (LIBOR) plus
2.40% and is secured by receivables  and other assets of the Company and certain
of its subsidiaries. Borrowings of $28.7 million under the Facility were used to
finance part of the purchase price of the  Acquisition  and will also be used by
the Company and certain of its  subsidiaries  for working  capital  purposes and
future  acquisitions  in support of its  business  plan.  As of April 30,  2002,
approximately $10,966,000 was outstanding under the Facility.

     On January 22, 2002 the Company  completed a convertible note offering (the
"Note Offering") in the aggregate  principal  amount of $11.6 million,  which is
subordinated  to the  Facility.  Pursuant  to  the  Note  Offering,  subscribers
received a  promissory  note (each a "Note")  paying  interest  quarterly on the
unpaid  principal  balance  at the  rate  of 12%  per  annum.  The  subscribers,
including  Kenneth Daley and Gerald  Shapiro,  who are directors of the Company,
are  all  accredited  investors.  The  Notes  have a term  of one  year,  unless
otherwise  extended pursuant to the terms of the Note. The Notes are convertible
at anytime at the election of the holders into shares of the common  stock,  par
value $.001 per share (the "Common Stock") of the Company ("Conversion  Shares")
at a  conversion  price per share equal to $12.00,  the fair value of the Common
Stock  on  January  22,  2002.  The  Note  holders  have  been  granted  certain
registration  rights  with  respect  to  the  Conversion  Shares  pursuant  to a
Registration  Rights  Agreement.  Proceeds  from the Note  Offering were used to
finance part of the purchase price of the  Acquisition  and will also be used by
the Company and certain of its  subsidiaries  for working  capital  purposes and
future acquisitions in support of its business plan.

     The Company  completed two  acquisitions  in its fiscal year ended June 30,
2001;  PAI  which  was  acquired  and  included  in the  consolidated  financial
statements  as of July 20, 2000 and PMP which was  acquired  and included in the
consolidated financial statements as of March 5, 2001.

     The  summarized  unaudited pro forma results of operations  set forth below
for the three and nine months ended March 31, 2001 and March 31, 2002 assume the
Centrus,  PAI and PMP  acquisitions  had occurred as of the beginning of each of
these periods.

                                              Three Months Ended March 31
                                              ---------------------------
                                             2001                      2002
                                             ----                      ----

Revenues                                  $137,550,993             $168,474,078
Net income                                $  1,183,631             $  1,200,190
Net income per common share:
   Basic                                  $       0.17             $       0.17
   Diluted                                $       0.17             $       0.15
Pro forma weighted average number
 of common shares outstanding:
   Basic                                     7,121,496                7,209,053
   Diluted                                   7,150,501                8,022,652


                                                 Nine Months Ended March 31
                                                 --------------------------
                                              2001                      2002
                                              ----                      ----

Revenues                                $389,900,211               $472,734,080
Net income                              $  2,575,687               $  3,859,684
Net income per common share:
   Basic                                $       0.36               $       0.54
   Diluted                              $       0.36               $       0.50
Pro forma weighted average number of
common shares outstanding:
   Basic                                   7,093,759                  7,178,540
   Diluted                                 7,101,385                  7,749,738

     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.

3.      STOCK OPTIONS

     During the nine months ended March 31, 2002,  the Company  granted  552,457
stock  options and 127,654  stock  options were  cancelled  for a net of 424,803
stock options under the 1999 Stock Option Plan (the "Plan"). The options granted
during this period are  exercisable  at prices  ranging from $3.50 to $15.10 and
terminate  between  four and 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
March 31, 2002 equal 1,577,456, net of 82,523 options exercised to date.

         See also Note 11 hereto ("Subsequent Events").

<page>
4.       EARNINGS PER SHARE

     A reconciliation  of shares used in calculating  basic and diluted earnings
per share follows:
<table>
       
                                                                <c>                    <c>
                                                                                 Three months ended March 31,
                                                                                 2001                  2002
                                                                                 ----                  ----
     Basic weighted average # of shares outstanding                         7,121,496               7,209,052
     Effect of assumed exercise of employee stock options                      29,005                 771,933
     Contingently issuable shares  related to the PAI acquisition                   -                  41,667
                                                                            ---------               ---------
     Diluted weighted average # of shares outstanding                       7,150,501               8,022,652
                                                                            =========               =========

                                                                                Nine months ended March 31,
                                                                                 2001                 2002
                                                                                 ----                 ----
     Basic weighted average # of shares outstanding                         7,093,759               7,178,539
     Effect of assumed exercise of employee stock options                       7,626                 539,062
     Contingently issuable shares related to the PAI acquisition                   -                   32,137
                                                                            ---------              ----------
     Diluted weighted average # of shares outstanding                       7,101,385               7,749,738
                                                                            =========              ==========
</table>

     The effect of the assumed  conversion of  convertible  notes under the Note
Offering  has  been  evaluated.  The  conversion  would  be  anti-dilutive,  and
accordingly  is not  included in the  calculation  of diluted  weighted  average
number of shares outstanding.

5.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:
                                                June 30,               March 31,
                                                  2001                    2002
                                                  ----                    ----

     Claims Payable                          $46,615,563            $ 86,557,378
     Rebates Payable to sponsors               6,479,069              10,290,199
     Other Payables                            4,550,931               4,995,691
                                             -----------            ------------
                                             $57,645,563            $101,843,268

6.       RELATED PARTY TRANSACTIONS

     Certain costs paid to affiliates were  capitalized as software  development
costs.  For the nine  months  ended  March  31,  2002,  the  amount  charged  by
affiliates and capitalized was approximately $96,000.

     As of January 1, 2002,  the Company has  eliminated the majority of related
party service transactions with the exception being rent as described below. For
the  periods  presented,  certain  general,  administrative  and other  expenses
reflected in the financial  statements include  allocations of certain corporate
expenses from affiliates which take into consideration  personnel,  estimates of
the time spent to provide services or other appropriate bases. These allocations
include  services and expenses for 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 a  stand-alone  basis,
management believes that any variance in costs would not be material.

General and administrative expenses related to transactions with affiliates
included in the statement of income are:
<table>

                                                                        <c>                      <c>
                                                                                Three months ended
                                                                                   March 31,
                                                                             2001                      2002
                                                                             ----                      ----
     Software maintenance and related services                            $ 291,011                 $ 13,786
     Management and consulting fees                                         386,428                   56,967
     Administrative and bookkeeping services and supplies                   210,311                   72,383
     Rent and utilities                                                     129,458                  100,684
                                                                          ---------              -----------
                                                                         $1,017,208                 $243,820
                                                                        ===========               ==========

                                                                                Nine months ended
                                                                                   March 31,
                                                                             2001                      2002
                                                                             ----                      ----
     Software maintenance and related services                           $  851,316                 $495,194
     Management and consulting fees                                       1,171,805                  255,980
     Administrative and bookkeeping services and supplies                   579,181                  502,189
     Rent and utilities                                                     390,458                  389,029
                                                                         ----------                ---------
                                                                         $2,992,760               $1,642,392
                                                                         ==========               ==========

</table>

     The  Company  has accrued  approximately  $165,000 of interest  income from
affiliates,  arising  from two loans,  for the nine months ended March 31, 2002.
This  compares to  approximately  $299,000  for the nine months  ended March 31,
2001. The two loans are as follows:  (i) Sandata  Technologies,  Inc.  (formerly
Sandata, Inc.), a corporation of which Mr. Brodsky is the Chairman of the Board,
Treasurer and a principal  stockholder  ("Sandata"),  owed the Company  $500,000
principal  plus interest  pursuant to a promissory  note dated May 31, 2000. The
Note was paid in full in August 2001; (ii) a non-recourse  promissory note dated
July 31, 2000, made payable to the order of the Company by P.W. Capital,  LLC, a
company affiliated with Mr. Brodsky,  in the amount of $3,890,940.  Such note is
payable in annual installments of $400,000, consisting of principal and interest
at the rate of 8-1/2%  per annum on each of the  first  and  second  anniversary
dates,  with the total  remaining  balance of  principal  and  interest  due and
payable on July 31, 2003.  The note is  collateralized  by  1,000,000  shares of
$.001  par  value  Common  Stock of the  Company  registered  in the name of Mr.
Brodsky and is subject to his personal guarantee. The first $400,000 payment due
under the note as of July 31, 2001 was  satisfied by  offsetting an equal amount
owed to Mr.  Brodsky by the Company.  Effective July 31, 2001, the interest rate
on the note was changed to the prime rate in effect from time to time.

     The Company  currently  occupies 29,915 square feet of office space located
at 26 Harbor Park Drive, Port Washington,  New York 11050 (the "Facility").  The
Company subleases the Facility from BFS Realty, LLC, an affiliate of Mr. Brodsky
(the  "Affiliate").  The  Affiliate  leases the Facility  from the Nassau County
Industrial  Development  Agency,  pursuant to a lease which was entered  into by
that agency and the Affiliate in July 1994, and which expires in March 2005. The
Affiliate has the right to become the owner of the Facility  upon  expiration of
the Lease. The Affiliate subleases a portion of the Facility to the Company (the
"Lease").  As of November 1, 2001,  the  Company and the  Affiliate  amended the
Lease.  The Lease provides that,  effective  August 1, 2001, the rent payable by
the Company shall be an aggregate  annual rent of $308,305.  While  formerly the
Company made estimated monthly real estate tax, utility and  maintenance-expense
payments to the Affiliate,  the Lease now provides that the Company will pay its
pro-rata share of such expenses  directly,  to the entities to whom payment must
be made. The Company  estimates that such monthly  expenses will  approximate an
aggregate  of $336,000  per year.  The annual rent will  increase by 5% per year
during the term of the Lease. The annual expenses are also expected to increase,
although the Company  cannot  estimate by how much.  The Lease  expires in July,
2010. The Company  believes that the Facility is adequate for current  purposes.
Leasehold improvements made to this space during the nine months ended March 31,
2002, was approximately $60,000.

         See also Note 11 hereto ("Subsequent Events").

7.       MAJOR CUSTOMERS AND PHARMACIES

     For the  three  months  ended  March  31,  2001,  approximately  17% of the
consolidated  revenues of the Company were from one plan  sponsor  administering
multiple plans. For the three months ended March 31, 2002,  approximately 37% of
the   consolidated   revenues  of  the  Company  were  from  two  plan  sponsors
administering  multiple  plans.  For the  nine  months  ended  March  31,  2001,
approximately  19% of the  revenues  were  from one plan  sponsor  administering
multiple  plans,  while 22% of the  revenues for the nine months ended March 31,
2002 were from two plan sponsors  administering multiple plans. Amounts due from
these sponsors at March 31, 2002 approximated $2,174,000.

     For the three months ended March 31, 2001, approximately 28% of the cost of
claims were from two pharmacy chains. For the three months ended March 31, 2002,
approximately  19% of the cost of claims were from one pharmacy  chain.  For the
nine months ended March 31, 2001,  approximately  25% of the cost of claims were
from two pharmacy chains and  approximately  20% of the cost of claims were from
one pharmacy chain for the nine months ended March 31, 2002.  Amounts payable to
this pharmacy chain at March 31, 2002 was approximately $14,589,000.

8.       RECENTLY ISSUED ACCOUNTING STANDARDS

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

     SFAS 142  requires  the  disclosure  of net income and  earnings  per share
computed on a pro forma basis by reversing the goodwill amortized in the periods
presented. Such pro forma disclosures are required in the period of adoption and
thereafter  until  all  periods  presented  reflect  goodwill  accounted  for in
accordance with SFAS 142. Had SFAS 142 been effective prior to July 1, 2001, our
net income would have been $374,000 or $0.05 per basic and diluted share for the
three months ended March 31, 2001 and  $975,000,  or $0.14 per basic and diluted
share for the nine months ended March 31, 2001.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets,"  which  replaces  SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." SFAS 144 provides updated  guidance  concerning the recognition
and  measurement of an impairment  loss for certain types of long-lived  assets,
expands  the scope of a  discontinued  operation  to include a  component  of an
entity and eliminates the current exemption to consolidation when control over a
subsidiary is likely to be  temporary.  SFAS 144 is effective for the Company on
July 1, 2002.  The  Company  does not expect the  adoption of SFAS 144 to have a
material impact on the Company's 2003 financial statements.

     The consolidated  financial  statements reflect, for all periods presented,
the adoption of the classification requirements pursuant to Emerging Issues Task
Force  ("EITF") No. 00-14,  Accounting for Certain Sales  Incentives,  which was
effective in the Company's third quarter of 2001, and was subsequently  codified
as EITF No. 01-9,  Accounting for Consideration Given by a Vendor to a Customer.
Accordingly,  the Company reduced cost of claims for the prior periods presented
for rebates received from pharmaceutical  manufacturers and reduced revenues for
the rebates which are shared with the  Company's  customers.  Historically,  the
Company recorded the net difference between the rebates received and paid out as
a reduction to cost of claims.





9.       SUPPLEMENTAL CASH FLOW INFORMATION

     During the nine months ended March 31, 2001 and March 31, 2002, the Company
paid  $178,489 and $540,748 in interest  and $838,210 and  $2,071,516  in income
taxes, respectively.  During the nine months ended March 31, 2001, in a non-cash
transaction, the Company issued 400,000 shares of its unregistered Common Stock,
valued at $849,920,  as part of the acquisition of PAI in July 2000.  During the
nine months ended March 31, 2002, in a second non-cash transaction,  the Company
issued 62,500 shares of its unregistered  Common Stock,  valued at $250,000,  as
additional  consideration  to  the  stockholders  of  PAI in  August  2001.

10.      LITIGATION

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

11.      SUBSEQUENT EVENTS

     On April 12, 2002,  the Company and James Bigl,  then the  President of the
Company,  entered  into an Amendment to  Promissory  Note  pursuant to which the
Company  agreed to increase the amount loaned to Mr. Bigl to $100,000.  The loan
bears interest at 8%, and is due on April 25, 2003.

     On April 30, 2002, the board of Directors adopted  resolutions  authorizing
an  increase  by one in the  number  of  Directors  constituting  the  Board  of
Directors,  and appointing James Bigl to fill the newly created vacancy.  On the
same  date,  the Board  accepted  the  resignation  of Bert E.  Brodsky as Chief
Executive  Officer of the Company  and  appointed  Mr.  Bigl as Chief  Executive
Officer.  In  conjunction  with his new  positions,  the Board  granted Mr. Bigl
100,000  options to purchase Common Stock at an option price of $9.00 per share,
vesting over a four-year  period,  and increased his salary,  effective June 12,
2002.

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plans Inc.  ("MHP") in the United States  District  Court for the Eastern
District of  Michigan.  The  complaint  alleges,  among other  things,  that the
parties entered into a contract dated July 1999 (the  "Agreement"),  and further
alleges  that  the  Company  has  overcharged  MHP  for  the  administration  of
prescription  benefit  services in  contravention to the terms of the Agreement.
MHP is seeking three (3) million  dollars in damages.  The Company  believes the
claims  alleged in the  complaint  are without  merit and intends to  vigorously
defend the action.


<PAGE>


       NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

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

Results of Operations

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

     Revenues increased $73.3 million, or approximately 101%, from $72.4 million
for the three  months  ended  March 31,  2001,  to $145.7  million for the three
months ended March 31, 2002. Of the increase,  $51.6 million, or 70%, was due to
the  inclusion of revenues  from Centrus from January 29 through March 31, 2002.
PMP accounted for another $5.1 million of the increase  since it was acquired on
March 5, 2001 and included  three  months of revenue in the quarter  ended March
31, 2002  compared to less than one month in the quarter  ended March 31,  2001.
Another  $14.3  million  of the  increase  was due to  revenues  related  to new
sponsors or new services  offered  during the quarter ended March 31, 2002.  The
majority of the balance of the increase,  or $2.3 million,  was due primarily to
increased  revenues from other existing  sponsors as a result of several factors
including  higher  charges  relating to increased cost of  pharmaceuticals,  new
drugs,  plan participant  growth and an increase in the average number of claims
per plan participant.

     Cost of claims increased $70.0 million,  or approximately  106%, from $66.2
million for the three  months ended March 31,  2001,  to $136.2  million for the
three months ended March 31, 2002.  Centrus accounted for $49.8 million,  or 71%
of the increase.  PMP  accounted  for another $4.7 million of the  increase.  An
increase in gross rebates  received  accounted for $0.8 million of the increase.
The balance of the  increase is related to the  increased  revenue as  described
above. As a percentage of revenues, cost of claims increased from 91.5% to 93.5%
for the three months ended March 31, 2001 and March 31, 2002, respectively.  The
increase  relates  primarily to the higher cost of claims on the Centrus book of
business, which serves primarily, managed care clients.  Industry-wide,  managed
care  clients  have a greater  cost of claims,  and  consequently  a lower gross
margin,  than other  types of  business in the PBM  industry.  Centrus'  cost of
claims for the quarter  ended March 31, 2002 ran about 3 to 6 percentage  points
greater then the rest of the Company's business, and since Centrus accounted for
35% of the Company's  revenue in the quarter,  this impacted the overall cost of
claims percentage.

     Gross profit increased from $6.1 million,  for the three months ended March
31,  2001,  to $9.4  million for the three  months  ended March 31, 2002; a $3.3
million,  or 53% increase.  In addition to the revenue volume increase,  Centrus
accounted for $1.8 million,  or 55%, of the increase.  PMP accounted for another
$0.4 million,  and the net increase in rebates after  accounting  for the amount
that is shared with sponsors  accounted for another $1.1 million,  or 33%. Gross
profit,  as a percentage of revenue,  declined from 8.5% to 6.5%,  for the three
months  ended  March 31, 2001 and March 31,  2002,  respectively.  The  decrease
year-over-year is principally  related to the lower margins achieved by Centrus.
There is also a general  decline in margins in the industry  due to  competitive
pressures.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $1.4 million,  or approximately 25%, from $5.9
million for the three  months ended March 31, 2001 to $7.3 million for the three
months ended March 31, 2002. Approximately 93% of the increase, or $1.3 million,
was related to the inclusion of Centrus in the consolidated numbers.  There were
quarter over quarter  increases in several areas which were partially  offset by
the  elimination of goodwill  amortization  due to the adoption of SFAS 142. Per
SFAS 142, the Company no longer amortizes  goodwill as of July 1, 2001 (see Note
8).

     Selling,  general,  and administrative  expenses as a percentage of revenue
declined  from 8.1% for the quarter ended March 31, 2001 to 5.0% for the quarter
ended  March 31,  2002.  The  primary  reason  for the  decline is that with the
Centrus acquisition revenues increased  approximately 101% quarter over quarter,
while selling, general, and administrative expenses only increased approximately
25% over these periods as there are benefits from economies of scale.

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately $773,000, or 76%, quarter over quarter from $1,017,000 to $244,000
for the three months ended March 31, 2001 and March 31, 2002, respectively.  The
Company has  eliminated  most of the related  party  service  transactions  with
affiliates  effective  January 1, 2002. The majority of the decrease  related to
reduced  information  technology  services and management  and  consulting  fees
procured from affiliated companies.  The use of outside consultants for the most
part  replaced  the  use of  affiliated  companies  to  update  the  information
technology infrastructure.

     For the three  months ended March 31, 2001,  the Company  recognized  other
income,  net, of  approximately  $253,000.  For the three months ended March 31,
2002, the Company  incurred other expense,  net of approximately  $298,000.  The
components  of  the  approximate  $551,000  increase  in  net  expense  were  an
approximate  $375,000 increase in interest expense,  and an approximate $213,000
decrease in interest income, and an approximate $38,000 gain on sold assets. The
primary  reasons  for the net  increase  in expense  were the  interest  expense
incurred on the  Company's  revolving  credit  facility and on the Note Offering
during the quarter ended March 31, 2002 to finance the  acquisition of Centrus -
see Item 2 of Part I. Partially  offsetting the increase in interest expense was
an approximate  $38,000 gain on the sale of assets  related to a  sale/leaseback
transaction,  which gain of  approximately  $459,000  was  recorded  as deferred
revenue and is being recognized over the life of the lease,  which is thirty-six
(36) months.

     Income before income taxes increased  approximately $1.3 million,  or 236%,
from  approximately  $0.5 million for the three months ended March 31, 2001,  to
approximately  $1.8  million  for the three  months  ended March 31,  2002.  The
primary  reason for the increase  was the  increased  gross margin  generated as
described above.  Centrus  contributed $0.5 million of the increase prior to the
interest expense incurred to acquire Centrus.

     EBITDA (earnings before interest, taxes, depreciation and amortization) for
these same periods  showed a increase of  approximately  $2.0 million,  or 210%,
from  approximately  $1.0  million for the three  months ended March 31, 2001 to
approximately  $3.0  million  for the three  months  ended March 31,  2002.  The
majority  of the  increase  is due to the $1.8  million  increase  in  operating
income,  which again was due to the increase in gross profit  dollars  generated
during the quarter  ended March 31, 2002 as compared to the quarter  ended March
31, 2001.

     The effective tax rate  decreased from 49% for the three months ended March
31, 2001 to 40% for the three months ended March 31, 2002. The decrease  stemmed
primarily  from the adoption of SFAS 142.  Effective July 1, 2001 the Company is
no longer amortizing goodwill pursuant to SFAS 142 which results in lowering the
effective rate due to the fact that the goodwill  related to the PAI acquisition
is no longer a permanent difference,  since it is not deductible for book or tax
purposes (See Note 8).

  Nine Months Ended March 31, 2002 Compared to Nine Months Ended March 31, 2001

     Revenues  increased  $121.3  million,  or  approximately  63%,  from $192.5
million for the nine months ended March 31, 2001, to $313.8 million for the nine
months ended March 31, 2002. Of the increase,  $51.6 million, or 43%, was due to
the  inclusion of revenues  from Centrus from January 29 through March 31, 2002.
PMP accounted for another $18.8 million of the increase since it was acquired on
March 5, 2001 and included  nine months of revenue as of March 31, 2002 compared
to less than one month in the nine months  ended March 31, 2001.  Another  $23.2
million of the  increase  was due to  revenues  related to new  sponsors  or new
services  offered  during the nine months ended March 31, 2002.  The majority of
the balance of the increase,  or $27.7  million,  was due primarily to increased
revenues from other existing  sponsors as a result of several factors  including
higher charges relating to increased cost of  pharmaceuticals,  new drugs,  plan
participant  growth and an  increase  in the  average  number of claims per plan
participant.

     Cost of claims increased $112.3 million,  or approximately 63%, from $177.1
million for the nine months ended March 31, 2001, to $289.4 million for the nine
months ended March 31, 2002. Centrus accounted for $49.8 million,  or 44% of the
increase.  PMP accounted  for another  $16.9 million or 15% of the increase.  An
increase in gross rebates  received  accounted  for $4.3 million,  or 4%, of the
increase.  The balance of the  increase is related to the  increased  revenue as
described above. As a percentage of revenues,  cost of claims increased slightly
from 92.0% to 92.2% for the nine months ended March 31, 2001 and March 31, 2002,
respectively. The increase relates primarily to the acquisition of Centrus which
generates higher cost of claims due to its managed care business (see above).

     Gross profit increased from $15.4 million,  for the nine months ended March
31,  2001,  to $24.4  million for the nine months  ended March 31,  2002; a $9.0
million,  or 59% increase.  In addition to the revenue volume increase,  Centrus
accounted  for $1.8  million,  or 20%, of the  increase.  PMP accounted for $1.9
million,  or 21%,  of the  increase,  and  the net  increase  in  rebates  after
accounting  for the amount that is shared with  sponsors  accounted  for another
$3.3 million,  or 37%. Gross profit, as a percentage of revenue,  decreased from
8.0% to 7.8%,  for the nine  months  ended  March 31,  2001 and March 31,  2002,
respectively.  The decrease  year-over-year is again principally  related to the
lower margins achieved by Centrus.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $4.7 million, or approximately 33%, from $14.6
million for the nine months  ended March 31, 2001 to $19.3  million for the nine
months ended March 31, 2002. Approximately 28% of the increase, or $1.3 million,
was related to the  inclusion of Centrus from January 29, 2002 to March 31, 2002
in the  consolidated  numbers.  There were also year over year  increases in the
following areas: (i) an approximate  $1,318,000 increase in expenditures related
to  increases  in  compensation  and  benefits,  primarily  associated  with new
employees including senior management;  (ii) an approximate $485,000 increase in
depreciation and amortization expenses related to increased hardware procurement
and software  development  in prior  periods;  (iii) an  approximate  $1,296,000
increase in the use of outside  consultants  primarily  to update the  Company's
information technology infrastructure;  (iv) an approximate $301,000 increase in
commission  expense  related to the  increase in new revenues not related to the
acquisitions;  and  (v) an  approximate  $169,000  reduction  in the  amount  of
internal salaries that were capitalized related to enhancements to the Company's
reporting  system.  Partially  offsetting  these  increases  was an  approximate
$233,000  decrease in intangible  amortization  due to the adoption of SFAS 142.
Per SFAS 142, the Company no longer  amortizes  goodwill as of July 1, 2001 (see
Note 8).

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately  $1,351,000,  or 45%, year-over-year from $2,993,000 to $1,642,000
for the nine months ended March 31, 2001 and March 31, 2002,  respectively.  The
Company has  eliminated  most of the related  third party  service  transactions
effective  January 1, 2002.  The  majority  of the  decrease  related to reduced
information  technology services and management and consulting services procured
from  affiliated  companies.  The use of outside  consultants  for the most part
replaced the use of affiliated  companies to update the  information  technology
infrastructure.

     For the nine months  ended March 31,  2001,  the Company  recognized  other
income,  net, of  approximately  $672,000.  For the nine months  ended March 31,
2002, the Company  incurred other expense,  net, of approximately  $45,000.  The
components  of  the  approximate  $717,000  increase  in  net  expense  were  an
approximate  $362,000  increase in interest  expense,  an  approximate  $418,000
decrease in interest income, and an approximate $63,000 gain on sold assets. The
primary  reasons  for the net  increase  in expense  were the  interest  expense
incurred on the  Company's  revolving  credit  facility and on the Note Offering
during the year to finance  the  acquisition  of Centrus - see Item 2 of Part I.
Partially offsetting the increase in interest expense was an approximate $63,000
gain on the sale of assets related to a sale/leaseback transaction.

     Income before income taxes increased  approximately $3.5 million,  or 238%,
from  approximately  $1.5 million for the nine months  ended March 31, 2001,  to
approximately $5.0 million for the nine months ended March 31, 2002. The primary
reason for the increase was the  increased  gross margin  generated as described
above.  Centrus  contributed  $0.5 million of the increase prior to the interest
expense incurred to acquire Centrus.

     EBITDA for these same  periods  showed an  increase of  approximately  $4.7
million,  or 173%,  from  approximately  $2.7  million for the nine months ended
March 31, 2001 to approximately $7.4 million for the nine months ended March 31,
2002.  The  majority  of the  increase  is due to the $4.3  million  increase in
operating  income,  which again was due to the increase in gross profit  dollars
generated  during the nine  months  ended March 31, 2002 as compared to the nine
months ended March 31, 2001.

     The effective tax rate  decreased  from 50% for the nine months ended March
31, 2001 to 38% for the nine months ended March 31, 2002.  The decrease  stemmed
primarily  from the adoption of SFAS 142.  Effective July 1, 2001 the Company is
no longer amortizing goodwill pursuant to SFAS 142 which results in lowering the
effective rate due to the fact that the goodwill  related to the PAI acquisition
is no longer a permanent difference,  since it is not deductible for book or tax
purposes (See Note 8).

     The increase in income before income taxes and the lower overall  effective
tax rate for the nine months ended March 31, 2002 as compared to the nine months
ended March 31, 2001,  led to a $2.4  million,  or 322%,  increase in net income
from $0.7 million to $3.1 million.

Liquidity and Capital Resources

     The Company's  primary cash  requirements are for capital  expenditures and
operating  expenses,  including cost of  pharmaceuticals,  software and hardware
upgrades and the funding of accounts receivable.  The Company also requires cash
for potential  acquisitions of other pharmacy benefit management companies or of
companies  providing related  services.  As of March 31, 2002, the Company had a
working  capital  deficit of $38.9  million,  as compared  to a working  capital
deficit of $7.1  million as of June 30,  2001.  The  Company's  working  capital
deficit  increased in the quarter ended March 31, 2002 due to the acquisition of
Centrus,  as the  Company  paid $40.0  million in cash.  The  decline in working
capital was partially offset by the increased profitability generated during the
nine months ended March 31, 2002.

     Net cash  provided by  operating  activities  was $3.7 million for the nine
months  ended March 31, 2001,  as compared to $14.1  million for the nine months
ended March 31, 2002. For the nine months ended March 31, 2002, accounts payable
increased  by $43.0  million  primarily  related to Centrus'  claims and rebates
payables  being  added in the third  quarter.  At the same  time,  accounts  and
rebates receivables increased by $34.6 million,  again primarily due to Centrus.
The net  effect  of these two items was $8.4  million  of net cash  provided  by
operations.  For the nine  months  ended  March 31,  2001  accounts  and rebates
receivables  increased by $8.9 million and accounts  payable  increased by $10.1
million,  a net  provision of cash of only $1.2  million,  a difference  of $7.2
million during the two periods.

     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. The Company has put in place a $40 million
revolving  credit  facility  for  acquisitions  and working  capital  financing.
However, if such terms of trade were to change materially, and/or if the Company
were unable to obtain  sufficient  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 $13.6 million for the nine months
ended  March 31, 2001 as  compared  to $41.0  million for the nine months  ended
March 31, 2002. The primary differences in the two periods were the acquisitions
completed. The nine months ended March 31, 2001 included the acquisitions of PAI
and PMP which used net cash of $11.1  million.  The nine months  ended March 31,
2002 included the  acquisition  of Centrus which used $40.3 million of net cash.
The  difference in the amount of net cash required for these three  acquisitions
was $29.2  million.  The net cash outlay for PAI was $4.5 million,  representing
the initial payment of $6.0 million plus $0.2 million of related expenses,  less
PAI's cash balance at July 20, 2000 of $1.7 million. The net cash outlay for PMP
was $6.7  million,  representing  the initial  payment of $6.8 million plus $0.2
million of related  expenses,  less PMP's cash  balance at March 5, 2001 of $0.3
million.  The net cash outlay for Centrus was $40.3  million,  representing  the
initial payment of $40.0 million plus $0.3 of related expenses. None of Centrus'
existing cash was acquired.  Partially offsetting the increase in cash used over
the two periods was the $1.3  million  gross  proceeds  from the  sale/leaseback
transaction in October 2001.

     Net cash used in financing  activities was  approximately  $0.5 million for
the nine  months  ended  March 31,  2001.  This  compares  to the $20.1  million
provided by financing activities in the nine months ended March 31, 2002. During
the nine months ended March 31, 2002, the Company put in place the Note Offering
and the revolving  credit facility which  initially  brought in $40.3 million of
cash  into the  Company.  (See  Note 2 of the  Condensed  Notes to  Consolidated
Financial  Statements  Part I.) Of this,  $19.5  million was repaid by March 31,
2002.

     During  fiscal year 2000,  the Company  entered  into three  capital  lease
transactions  for hardware and  software.  The purchase  price of these  capital
assets was  $2,537,730.  One  hardware  lease is for a term of 57  months,  with
monthly payments of $40,322.  Another hardware lease is for a term of 60 months,
with monthly payments of $3,245.  The software lease is for a term of 33 months,
with monthly payments of $13,662.  The principal  balance of these three capital
leases as of March 31, 2002 was $1,473,410.

     PAI  stockholders  were  eligible to receive up to $1,000,000 in additional
consideration  payable  in  combination  of cash and  Common  Stock  if  certain
financial targets of PAI were met for the fiscal year ended June 30, 2001. These
targets were  achieved,  and $750,000 in cash was paid, and 62,500 shares of the
Company's  Common  Stock  valued  at $4.00  per  share  were  issued  to the PAI
stockholders  at the end of August 2001.  The PAI  stockholders  are eligible to
receive one more payment of up to $1 million if certain financial targets of PAI
are met for the fiscal year ended June 30, 2002. It is the Company's expectation
that these amounts will be earned and paid by the end of August 2002.

     The members of PMP are eligible to receive  additional  consideration of up
to $1,000,000 if certain PMP clients are retained over the next three years.  It
is the  Company's  expectations  that  these  amounts  will not be earned as the
identified  clients were not  generally  retained  directly,  although they were
replaced.

     The   shareholders   of  Centrus  are   eligible   to  receive   additional
consideration  of up  to  $4,000,000,  payable  over  three  years,  if  certain
financial targets are met over the next two years.

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

     On January 29,  2002,  the  Company  entered  into a $40 million  revolving
credit facility (the  "Facility") with a specialty  finance company,  to be used
for working capital purposes and future acquisitions.  The Facility replaced the
Company's existing credit facilities with its former lenders. The Facility has a
three-year  term  and  is  secured  by  the  Company's  and  its   subsidiaries'
receivables  and other  assets.  Interest is payable  monthly and  provides  for
borrowing  of up to $40 million at the London  Inter-Bank  Offered  Rate (LIBOR)
plus 2.4%.  Borrowings  of $28.7 million under the Facility were used to finance
part of the purchase price of the Company's recent  acquisition of Centrus.  The
Facility  contains  various  covenants  that,  among other  things,  require the
Company to  maintain  certain  financial  ratios,  as defined in the  agreements
governing  the Facility.  As of April 30, 2002,  approximately  $10,966,000  was
outstanding under the Facility.

     The  Company  anticipates  that  current  cash  positions,  after its three
acquisitions  and the  repayment  of certain  affiliate  and  shareholder  debt,
together  with  anticipated  cash flow from  operations,  will be  sufficient to
satisfy the Company's  contemplated  cash  requirements  for at least 24 months.
This is based  upon  current  levels of  capital  expenditures  and  anticipated
operating  results for the next 24 months.  However,  it is one of the Company's
stated goals to acquire other pharmacy benefit management  companies,  evidenced
by the  three  acquired  within  the last 2 years.  This will  require  cash and
depending on the Company's  evaluation of future  acquisitions,  additional cash
may be required. In the event that the Company's plans change or its assumptions
prove  to  be  inaccurate  or  the  proceeds  from  the  Facility  prove  to  be
insufficient to fund operations and acquisitions,  the Company could be required
to seek additional financing sooner than anticipated.  There can be no assurance
that such  financing  could be obtained at rates or on terms  acceptable  to the
Company, if at all.


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

     An action was commenced against the Company on December 8, 1998 by the West
Contra Costa Unified School  District (the "School  District") and an individual
plaintiff in the State of California. The case was subsequently moved to Federal
court. The complaint alleged,  among other things, that the parties entered into
a contract in November  1996, and that the Company  unilaterally  terminated the
contract  on  December  16,  1996.  The  complaint   further  alleged  that  the
termination resulted in the School District incurring  approximately $150,000 in
costs and  $867,000 in  expenses to obtain  coverage  from  December  1996 until
October 1997. The complaint also sought treble damages. The parties have reached
an agreement  pursuant to which the Company has paid to the plaintiffs an amount
that is lower than the amount of costs and  expenses  claimed,  and is funding a
part of the plaintiffs'  litigation against another  defendant.  The proceeds of
any settlement  with or verdict  against such defendant will be divided  between
the Company and the School District.

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plans Inc.  ("MHP") in the United States  District  Court for the Eastern
District of  Michigan.  The  complaint  alleges,  among other  things,  that the
parties entered into a contract dated July 1999 (the  "Agreement"),  and further
alleges  that  the  Company  has  overcharged  MHP  for  the  administration  of
prescription  benefit  services in  contravention to the terms of the Agreement.
MHP is seeking three (3) million  dollars in damages.  The Company  believes the
claims  alleged in the  complaint  are without  merit and intends to  vigorously
defend the action.


ITEM 2    -       CHANGES IN SECURITIES AND USE OF PROCEEDS
                  -----------------------------------------

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

     Pursuant  to the terms of the PAI  Agreement,  the Company  issued  400,000
shares of unregistered  Common Stock of the Company to certain PAI  stockholders
at the time of the  acquisition.  The stock issued to the PAI  stockholders  was
valued  at  $849,920.  In August  2001,  the  Company  issued  62,500  shares of
unregistered  Common Stock of the Company to the PAI  stockholders as additional
consideration.  These shares were valued at  $250,000..  The Company was advised
that the  issuance  of such  shares  was  exempt  from  registration  under  the
Securities Act by virtue of Section 4(2) thereof.

     On January 22, 2002, the Company  completed a convertible  note offering in
the aggregate principal amount of $11.6 million.  For a complete  description of
this note offering,  see Note 2 of the Condensed Notes to Consolidated Financial
Statements  in Part I hereof.  The Company was advised that the issuance of such
shares  was  exempt  from  registration  under the  Securities  Act by virtue of
Section 4(2) thereof.

ITEM 3    -     DEFAULTS UPON SENIOR SECURITIES

     None.


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

     A. The registrant  held its 2001 Annual Meeting of  Shareholders on January
24, 2002.

     B. Six (6) directors  were elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders  and until their  respective  successors are
duly elected and qualified,  or until their earlier resignation or removal.  The
names of these  directors  and votes cast in favor of their  election  and votes
withheld are as follows:

  Name                               Votes For                    Votes Withheld

  Bert E. Brodsky                    6,878,015                           3,600
  Gerald Shapiro                     6,878,015                           3,600
  Kenneth J. Daley                   6,878,015                           3,600
  Ronald L. Fish                     6,878,015                           3,600
  Paul J. Konigsberg                 6,878,015                           3,600
  Gerald Angowitz                    6,878,015                           3,600

     C. A proposal to change the Company's state of incorporation  from New York
to Delaware was approved as set forth below:

      Votes For                          Votes Against              Abstentions

       5,551,115                          25,958                       2,000


     D. A proposal to amend the Company's 1999 Stock Option Plan to increase the
number of shares reserved for issuance thereunder,  from 1,650,000 to 2,850,000,
was approved as follows:


      Votes For                          Votes Against              Abstentions

       5,393,265                          168,358                    17,450

     E.  The  adoption  of  the  proposal  to  change  the  Company's  state  of
incorporation  from New York to Delaware also resulted in the  classification of
the Board of Directors, as follows:


Class I (to serve until the 2002 annual meeting): Gerald Shapiro and Ronald Fish
Class II (to serve until the 2003 annual meeting):Gerald Angowitz and
                                                    Kenneth J. Daley
Class III (to serve until the 2004 annual meeting): Bert E. Brodsky and
                                                     Paul J. Konigsberg


     Effective as of February 15, 2002,  the rights and duties of the  Company's
shareholders,  directors  and  officers  are  governed  by  the  Certificate  of
Incorporation and By-Laws of the Delaware corporation into which the Company was
merged to effect the  reincorporation.  A detailed description of the effects of
the  reincorporation  has been previously  reported in the Company's  Definitive
Proxy Statement, which was filed with the SEC on December 21, 2001.

ITEM 5  -   OTHER INFORMATION
            -----------------

    None.

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

(a) Exhibits

Exhibit
Number     Description of Exhibit

3.1        Restated Certificate of Incorporation of Health Card (1)
3.2        Certificate of Amendment, filed May 25, 1999, to Certificate of
            Incorporation of Health Card (1)
3.3        Restated Certificate of Incorporation of Health Card, as amended (2)
3.4        Amended and Restated By-Laws of Health Card (1)
4.1        Form of Specimen Common Stock Certificate (1)
4.2        Form of Warrant Agreement, including form of
            Representatives' Warrants (1)
10.1       Mail Service Provider Agreement, dated July 1, 1996,
            between Health Card and Thrift Drug, Inc. d/b/a
            Express Pharmacy Services (1)
10.2       Amendment to Mail Service Provider Agreement, dated
            January 1, 1997, between Health Card and Thrift Drug, Inc.
            d/b/a Express Pharmacy Services (1)
10.3       Software License Agreement and Professional Service Agreement,
            dated February 18, 1998, between Health Card and
            Prospective Health, Inc. (1)
10.4       1999 Stock Option Plan (1)
10.5       Employee Covenant Agreement, dated June 15, 1998, between
            Health Card  and Mary Casale (1)
10.6       Employee Covenant Agreement, dated June 16, 1998, between
            Health Card and Ken Hammond (1)
10.7       Stock Option Agreement, dated August 3, 1999, between Health Card
            and Ken Hammond (4)
10.8       Employment Agreement, dated March 27, 2000, between Health Card and
            David Gershen (4)
10.9       Stock Option Agreement, dated May 1, 2000, between Health Card and
            David Gershen (4)
10.10      Employment Agreement, dated May 3, 2000, between Health Card and
            James Bigl (4)
10.11      Stock Option Agreement, dated June 12, 2000, between Health Card and
            James Bigl (4)
10.12      Stock Option Agreement, dated August 3, 1999, between Health Card
            and Kenneth J. Daley (4)
10.13      Stock Option Agreement, dated August 3, 1999, between Health Card and
            Gerald Angowitz (4)
10.14      Assignment, dated November 1, 1996, from Sandata, Inc., to BFS
            Realty, LLC (1)
10.15      Lease, dated August 10, 1998, between 61 Manorhaven Boulevard, LLC
            and Health Card (1)
10.16      Letter, dated June 3, 1999, from Bert Brodsky to Health Card (1)
10.17      Letter, dated June 3, 1999, from Gerald Shapiro to Health Card (1)
10.18      Agreement of Guaranty, dated June 1, 1998, by Bert E. Brodsky in
            favor of Health Card (1)
10.19      Promissory Note, dated July 31, 2000, made payable by P.W. Capital,
            LLC to the order of Health Card, in the amount of $3,890,940 (4)
10.20      Letter dated June 8, 1999, from P.W. Capital Corp. to Health Card (1)
10.21      Letter, dated June 9, 1999, from Bert E. Brodsky to Health Card (1)
10.22      Letter, dated June 8, 1999, from the Bert E. Brodsky Revocable Trust
            to Health Card (1)
10.23      Letter Agreement, dated June 30, 1999, between the Bert E. Brodsky
            Revocable Trust and Health Card (1)
10.24      Employment Agreement, dated July 1, 1999, between Health Card and
            Bert E. Brodsky (1)
10.25      Letter, dated June 8, 1999, from Bert E. Brodsky to Health Card (1)
10.26      Form of Lock-Up Agreement (1)
10.27      Acquisition and Merger Agreement, dated as of June 27, 2000, between
            Health Card and Pharmacy Associates, Inc. (3)
10.28      Lease Agreement, dated March 4, 1996, between Pharmacy Associates,
            Inc. and Executive Park Partnership (4)
10.29      Amendment to Lease, dated November 2, 1998, between Pharmacy
            Associates, Inc. and Executive Park Partnership (4)
10.30      Amendment to Lease, dated November 19, 1998, between Pharmacy
            Associates, Inc. and Executive Park Partnership (4)
10.31      Lease Agreement, dated July 8, 1999, between Pharmacy Associates,
            Inc. and Executive Park Partnership (4)
10.32      Asset Purchase Agreement dated as of March 5, 2001 among National
            Medical Health Card Systems, Inc., PMP Acquisition Corp.,
            Provider Medical Pharmaceutical, LLC and members of PMP (5)
10.33      Employment Agreement, dated June 4, 2001, between National Medical
            Health Card Systems, Inc. and Tery Baskin (6)
10.34      Stock Option Agreement, dated June 4, 2001, between National Medical
            Health Card Systems, Inc. and Tery Baskin (6)
10.35      Stock Option Agreement, dated June 12, 2001, between National
            Medical Health Card Systems, Inc. and James Bigl (6)
10.36      Asset Purchase  Agreement dated January 29, 2002 by and among the
            Company,  Health  Solutions  Limited ("HSL"), HSL Acquisition Corp.,
            a wholly-owned  subsidiary of the Company, and the security holders
            of HSL (7)
10.37      Receivables  Purchase  and  Transfer  Agreement  dated  January  29,
            2002 by and among the Company and certain of its subsidiaries and
            NMHC Funding, LLC (7)
10.38      Loan  and  Security  Agreement  dated  January  29,  2002 by and
            between  NMHC  Funding,  LLC and HFC Healthco-4, LLC, an affiliate
            of Healthcare Finance Group, Inc. (7)
10.39      Lease Agreement dated as of August 1, 2001,  between  National
            Medical Health Card Systems,  Inc. and BFS Realty, LLC (6)
10.40      Amended Lease  Agreement  dated as of August 1, 2001,  between
            National  Medical Health Card Systems, Inc. and BFS Realty, LLC

(b)      Reports on Form 8-K

     A Form 8-K was  filed  with  the  Securities  and  Exchange  Commission  on
February 11, 2002 related to the acquisition of Centrus.

     (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 Current Report on
Form 8-K for events dated January 29, 2002 and incorporated herein by reference.



<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:    May   , 2002               By: /s/ Bert E. Brodsky
                                        -----------------------------------
                                            Bert E. Brodsky
                                            Chairman of the Board


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