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

                                                     FORM 10-Q
(Mark One)

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934

For the quarterly period  ended          September 30, 1999

                                                        OR

[  ] Transition report under 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) filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the past 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 REGISTRANTS  INVOLVED IN BANKRUPTCY  PROCEEDINGS
     DURING THE PAST 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
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 November 10, 1999 was 6,912,496 shares.



<PAGE>


                 NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARY

                                          INDEX

                                                                      Page

PART I        -   FINANCIAL INFORMATION

Item 1        -   FINANCIAL STATEMENTS:                                  3

                  CONSOLIDATED BALANCE SHEETS as of June 30, 1999        3
                  and September 30, 1999 (unaudited)

                  CONSOLIDATED STATEMENTS OF INCOME (unaudited)          4
                  for the three months ended September 30, 1998 and 1999

                  CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)      5
                  for the three months ended September 30, 1998 and 1999

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             6

Item 2        -   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL     10
                  CONDITION AND RESULTS OF OPERATIONS

Item 3        -   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT        14
                  MARKET RISK

PART II       -   OTHER INFORMATION

Item 1        -   LEGAL PROCEEDINGS                                     15

Item 2        -   CHANGES IN SECURITIES AND USE OF PROCEEDS             15

Item 3        -   DEFAULTS UPON SENIOR SECURITIES                       15

Item 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   15

Item 5        -   OTHER INFORMATION                                     15

Item 6        -   EXHIBITS AND REPORTS ON FORM 8-K                      15









<PAGE>



                                                CONSOLIDATED BALANCE SHEETS
<TABLE>
<S>                                                                                  <C>               <C>


                                                                                      June 30,         September 30,
                                                                                         1999                  1999
                                                                                                         (Unaudited)
ASSETS
Current Assets:
       Cash and cash equivalents                                                     $  2,815,863      $ 11,122,608
       Accounts receivable,
       less allowance for possible losses of $846,344 and $96,291                      13,233,760        15,195,751
       Rebates receivable                                                               5,303,786         5,726,027
       Deferred income tax                                                                530,000           243,000
       Other current assets                                                               283,694           291,472
Total Current Assets                                                                   22,167,103        32,578,858

       Property, equipment and software development costs, net                          2,754,522         3,173,741
       Due from affiliates                                                              4,579,280         3,736,193
       Other assets                                                                        15,728            15,728
       Deferred income tax                                                                166,000               ---
       Deferred offering costs                                                          1,163,378               ---
                                                                                     $ 30,846,011      $ 39,504,520

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
       Accounts payable and accrued expenses                                         $ 26,883,745      $ 25,327,779
       Current portion of long-term debt                                                    1,950            22,673
       Due to officer/stockholder                                                         390,000           420,000
       Due to affiliates                                                                  750,968           249,395
       Income taxes payable                                                               704,489            36,444
       Other current liabilities                                                          116,544           155,149
Total Current Liabilities                                                              28,847,696        26,211,440

Long-term debt, less current portion                                                          ---           126,739
Deferred tax liability                                                                        ---             6,000
Total Liabilities                                                                      28,847,696        26,344,179

COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S 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                                      5,313             6,913
          6,912,496 shares issued and outstanding
       Additional paid-in capital                                                       2,868,573        12,439,092
       Retained earnings                                                                  480,529         1,034,311
       Notes receivable - stockholders                                                 (1,356,100)         (319,975)
Total Stockholders' Equity                                                              1,998,315        13,160,341
                                                                                     $ 30,846,011      $ 39,504,520



                  See accompanying notes to consolidated financial statements

</TABLE>
<PAGE>


                                   CONSOLIDATED STATEMENTS OF INCOME
                                              (Unaudited)
<TABLE>
<S>                                                                                  <C>                       <C>
                                                                                               Three months ended
                                                                                                  September 30,
                                                                                          1998                     1999

REVENUES                                                                             $ 30,522,392              $ 39,527,050
Cost of claims                                                                         27,005,937                36,177,173

GROSS PROFIT                                                                            3,516,455                 3,349,877

Selling, general and administrative expenses *                                          2,246,410                 2,573,491

Operating income                                                                        1,270,045                   776,386

Other income (expense):
       Other income, net                                                                  164,785                   219,623
       Public Offering costs                                                             (227,396)                      ---
                                                                                          (62,611)                  219,623

Income before income taxes                                                              1,207,434                   996,009

Provision for income taxes                                                                502,000                   442,228

NET INCOME                                                                           $    705,434              $    553,781

Earnings per common shares:
       Basic                                                                                $0.14                     $0.09
       Diluted                                                                              $0.14                     $0.09

Weighted average number of common shares outstanding:
       Basic                                                                            4,971,578                 6,355,974
       Diluted                                                                          4,971,578                 6,355,974


* Includes amounts charged by affiliates aggregating:                                    $658,566                  $675,982


                                See accompanying notes to consolidated financial statements


</TABLE>
<PAGE>


                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (Unaudited)
<TABLE>
<S>                                                                                     <C>                      <C>

                                                                                                 Three months ended
                                                                                                   September 30,
                                                                                           1998                    1999
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                        $705,434                $553,781
       Depreciation and amortization                                                      153,468                 253,915
       Bad debt recovery                                                                  (66,795)                    ---
       Bonus accrued to officers/stockholders                                             300,000                     ---
       Compensation expenses accrued to officer/stockholder                                90,000                  30,000
       Deferred income taxes                                                              (71,000)                459,000
       Interest accrued on stockholders' loans                                            (28,475)                    ---
       Changes in assets and liabilities:
           (Increase) decrease in:
              Accounts receivable                                                      (1,760,438)             (1,961,991)
              Other  assets                                                               (73,937)                 (7,778)
              Rebates receivable                                                          116,215                (422,241)
              Due to/from affiliates                                                     (352,501)                341,514
           Increase (decrease) in:
              Accounts payable and accrued expenses                                     1,351,178              (1,555,966)
              Income taxes payable                                                        573,000                (668,045)
              Other liabilities                                                           110,884                  38,606

Net cash provided by (used in) operating activities                                     1,047,033              (2,939,205)

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                              (385,943)               (522,297)
       Loans to stockholders                                                              (90,100)                    ---
       Repayment of note by stockholder                                                        ---               1,036,125

Net cash provided by (used in) investing activities                                      (476,043)                513,828

CASH FLOWS FROM FINANCING ACTIVITIES:
           Sale of common stock                                                               ---              10,735,497
           Repayment of debt                                                               (3,406)                 (3,375)

Net cash provided by (used in) financing activities                                        (3,406)             10,732,122

Net increase  in cash and cash equivalents                                                567,584               8,306,745
Cash and cash equivalents, beginning of period                                          1,305,792               2,815,863
Cash and cash equivalents, end of period                                               $1,873,376             $11,122,608

Non cash investing activities:

During the three months ended September 30, 1999, the Company  incurred  capital
lease obligations for equipment in the amount of $150,837.



                                See accompanying notes to consolidated financial statements

</TABLE>

<PAGE>


                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARY

                          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  subsidiary  National
Medical  Health Card IPA, 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 September
30,  1999  and  1998  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, 1999.  The results of operations  for the three
month period ended  September  30, 1999 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 its holding 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 certain  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 and become  exercisable  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 September 30, 1999,
131,100 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 and become  exercisable  within a
three year period commencing August 3, 1999 and terminate on August 3, 2004.

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.

5.    EARNINGS PER SHARE

Outstanding  options and  warrants  issued by the  Company for the three  months
ended September 30, 1999 are excluded from the  calculation of diluted  earnings
per share as they are antidilutive.  Options issued by the majority  stockholder
that were outstanding for the three months ended September 30, 1999 and 1998 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:
                                        June 30,              September 30,
                                          1999                   1999
     Claims payable                   $17,553,036            $16,813,432
     Rebates payable to sponsors        7,062,159              7,086,760
     Other payables                     2,268,550              1,427,587
                                      $26,883,745            $25,327,779

     During the quarter ended September 30, 1999 rebates payable were reduced by
     $736,000 when the Company reevaluated its liability to a plan sponsor. Cost
     of claims for the quarter were decreased by the same amount.

7.    RELATED PARTY TRANSACTIONS

     Certain  costs  paid  to  the  affiliates  were   capitalized  as  software
     development  costs.  For the quarter  ended  September  30, 1999 the amount
     charged by affiliates and capitalized was $145,719.

     The Company  purchased  furniture and fixtures from an affiliate during the
     quarter  ended  September  30, 1999 for  approximately  $45,000.  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:
                                                          September 30,
                                                      1998                1999
     Software maintenance and related services  $   163,614         $   226,748
     Management and consulting fees                 350,787             308,810
     Administrative and bookkeeping services         91,883              47,424
     Rent and utilities                              52,282              93,000
                                                   $658,566            $675,982

8.    MAJOR CUSTOMERS AND PHARMACIES

     For the three months ended September 30, 1998 and 1999,  approximately  67%
     and 54%,  respectively,  of the  revenues  were from  three  plan  sponsors
     administering  multiple  plans.  Amounts due from these three  sponsors at
     September  30,  1998  and  1999  approximated  $2,933,000  and  $6,729,000,
     respectively.  Revenues for the quarter ended September 30, 1998 included
     a one-time rate increase of $500,000 from a major plan sponsor.

     For the three months ended September 30, 1998 and 1999,  approximately  28%
     and 41% of the cost of  claims  were  from  two  pharmacy  chains.  Amounts
     payable to these two pharmacy  chains at  September  30, 1998 and 1999 were
     approximately $3,408,000 and $7,429,000, respectively.

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.   SUBSEQUENT EVENTS

     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 the quarter ended September 30, 1999.




             NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARY

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


Results of Operations

Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998

Revenues increased $9 million, or approximately 30%, from $30.5 million for  the
three months  ended  September 30, 1998 to $39.5 million  for   the three months
ended September 30, 1999. The increase  resulted  primarily from $5.3 million in
fees related to new  sponsors.  The  remaining  increase of  approximately  $4.5
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
quarter  ended  September 30, 1998 included a one-time rate increase of $500,000
from a major client.  The revenue for the three months ended  September 30, 1999
was net of a $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  $9.2  million,  or  approximately   34%, from  $27
million for the three months ended  September  30, 1998 to $36.2 million for the
three months ended  September  30, 1999.  As a percentage  of revenues,  cost of
claims  increased from 89% for the three months ended  September 30, 1998 to 92%
for the three  months  ended  September  30,  1999.  During  the  quarter  ended
September  30, 1999 rebates  payable  were reduced by $736,000  when the Company
reevaluated its liability to a plan sponsor. Cost of claims for the quarter were
decreased by the same amount. The increase in the cost of claims as a percentage
of revenues,  when removing the $500,000 rate increase noted above, was 2%. This
2% was caused by higher drug costs.

Gross  profit  decreased   approximately  $200,000,  from  $3.5 million  for the
three months ended September 30, 1998 to $3.3 million for the three months ended
September 30, 1999, primarily as a result of the increase in revenues, offset by
the increase in the cost of claims.  The gross profit percentage for the quarter
ending September 30, 1998 was affected by the one-time rate increase of $500,000
noted above.  The gross profit  percentage  for the quarter ended  September 30,
1999 was more indicative of the current trend, with the one-time items discussed
above aggregating to only a reduction in gross profit of $85,000.

Selling,  general and administrative  expenses, which include amounts charged by
affiliates,  increased $400,000, or approximately 18%, from $2.2 million for the
three months ended September 30, 1998 to $2.6 million for the three months ended
September  30,  1999.  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 increased $17,000, or
approximately 3%, from $659,000 for the three months ended September 30, 1998 to
$676,000 for the three months ended September 30, 1999.

Other  income  increased  $283,000,  from a net expense of $63,000 for the three
months ended September 30, 1998 to income of $220,000 for the three months ended
September  30, 1999,  due to $84,000 of interest  income earned on proceeds from
the Public Offering and a $227,000 decrease in Public Offering costs offset by a
$28,000 decrease in shareholder and affiliate interest income.

The provision for income taxes  decreased  $60,000,  from $502,000 for the three
months ended September 30, 1998 to $442,000 for the three months ended September
30, 1999, as a result of decreased 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 September 30, 1999, the
Company  had  working  capital  of $6.4  million.  Net  cash  used by  operating
activities  was $2.9  million  for the three  months  ended  September  30, 1999
resulting  primarily from increases in accounts  receivable due to the growth of
the Company's business,  and a decrease in accounts payable and accrued expenses
due to the Company's  improved  working capital  position.  Net cash provided by
investing  activities was $514,000 for the three months ended September 30, 1999
resulting  primarily from a repayment of a note by stockholder offset by capital
expenditures  associated with the expansion of the Company's  systems.  Net cash
provided by financing  activities was $10.7 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 its holding 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 certain  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  believes  that  the  net  proceeds  of its recent  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.  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.

Other Matters

Inflation

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

Year 2000 Readiness

The Year 2000 problem is the result of computer programs being written using two
digits,  rather than four,  to define the  applicable  year.  Programs that have
time-sensitive  software may recognize a date using "00" as the Year 1900 rather
than the Year 2000,  which could result in  miscalculations  or system failures.
The Company has  implemented a Year 2000  compliance  review  designed to ensure
that its computer  systems,  applications  and embedded  operating  systems will
function  properly beyond 1999. This  compliance  review involves  assessing the
risks of the Year 2000 issue, and planning and instituting mitigation actions to
minimize those risks. The Company's standard for compliance  requires that for a
computer  system  or  business  process  to be Year 2000  compliant,  it must be
designed to operate without error in date and date-related data prior to, on and
after January 1, 2000. The Company  believes that all of its "mission  critical"
systems have been identified, and has completed compliance testing.

Information Technology Systems

The  Company  recently  completed  a  comprehensive  review  of its  information
technology  systems  and is  involved  in a program  to update  its  information
systems and  applications  in  preparation  for the Year 2000.  The Company will
incur internal staff costs as well as outside  consulting and other expenditures
related to this initiative.  Historical and anticipated  expenditures related to
remediation, testing, conversion,  replacement and upgrading system applications
in  connection  with the Year 2000 problem are  expected to total  approximately
$100,000. Total expenses, including depreciation and amortization of new package
systems,  are not expected to have a material  impact on 's financial  condition
during the conversion process. Year 2000 costs are expensed as incurred.

Non-IT Technology

An inventory and assessment of all non-IT systems  (including  items  containing
embedded chips, such as elevators,  electronic door locks,  telephones) has been
completed.  The great  majority of these  non-IT  systems are not believed to be
potential  sources of significant  disruption,  although the  contingency  plans
(described  below) will  address  non-IT Year 2000 failure as well as IT systems
failure.  The Company's  telephone  system was  determined to be the only non-IT
system not Year 2000  compliant.  A new system was  purchased  and installed and
certified to be Year 2000 compliant by the vendor.

The Company's management intends to develop a "worst-case scenario" with respect
to Year  2000  non-compliance  and to  develop  contingency  plans  designed  to
minimize  the  effects of such  scenario.  The  contingency  plans will  involve
analysis  of the  use of  alternative,  non-IT  methods  of  processing  claims,
including  manual  processing,  in the event of IT system failure on the part of
outside parties.  The manual  processing of claims would also be assisted,  in a
worst case  scenario,  by the use of paper claim forms  rather than the computer
formats currently being used. As to claims  management,  the worst case scenario
would require that another  switching  company be used to process  claims.  This
option has already been researched and contingency plans  formulated.  Switching
companies  electronically route pharmacy claims to the appropriate  prescription
benefit  management  company.  The Company is  currently  testing its  switching
network.  One major vendor of claims management  services with which The Company
does business,  PHI, has certified  that software  licensed from it is Year 2000
compliant.  All  client  formats  have been  reviewed  and have been found to be
either Year 2000 compliant or very nearly so. There has also been  communication
between  vendors and The Company  with  respect to the  exchange of billing tape
formats, in an effort to be certain that The Company's formats are acceptable to
the vendors, and vice versa.

The  Company is  attempting  to contact  vendors and others on whom it relies to
assure that their systems will be converted in a timely fashion.  However, there
can be no assurance  that the systems of other  companies on which The Company's
systems  rely  will  also be  converted  in a timely  fashion,  so that any such
failure to convert by another  company  would not have an adverse  effect on The
Company's information systems.  Furthermore,  no assurance can be given that any
or all of The Company's  information systems are or will be Year 2000 compliant,
or that the ultimate costs required to address Year 2000 issues or the impact of
any failure to achieve substantial Year 2000 compliance will not have a material
adverse  effect on The  Company's  business,  operating  results  and  financial
condition.

There is still  uncertainty about the broader scope of the Year 2000 issue as it
may affect The Company and third  parties that are  critical to its  operations.
For example,  lack of readiness by  electrical  and water  utilities,  financial
institutions, governmental agencies or other providers of general infrastructure
could pose  significant  impediments  to The  Company's  ability to carry on its
normal  operations.  In the event  that The  Company is unable to  complete  its
remedial actions and is unable to implement  adequate  contingency  plans in the
event that problems are encountered, there could be a material adverse effect on
its business, operating results and financial condition.

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.

ITEM 3     -      QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK

Not applicable.



<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARY

                         PART II - OTHER INFORMATION


Item 1  - Legal Proceedings

See Form 10-K for the period ended June 30, 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 and  become  exercisable
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
September 30, 1999, 131,100 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 and become  exercisable  within a
three year period commencing August 3, 1999 and terminate on August 3, 2004.

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:    November 15, 1999            By:      /s/ Bert E. Brodsky
                                                   Bert E. Brodsky
                                                   Chairman of the Board
                                                   and Chief Executive Officer



<PAGE>








                                                     November 15, 1999



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 September 30, 1999 for National Medical Health Card Systems,  Inc. If you
have any questions or comments,  please contact me at (516) 484-4400,  extension
303.



                                                     Very truly yours,



                                                     Barbara E. Dale
                                                     Paralegal