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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 2004


                                       OR

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

                    For the transition period from ___ to ___

                           Commission File No. 0-27654

                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION
             (Exact name of registrant as specified in its charter)

                       New York                              11-3232989
           (State or other jurisdiction                   (I.R.S. Employer
         of incorporation or organization)             Identification Number)

       One Huntington Quadrangle Suite 4C-01
                 Melville, New York                             11747
      (Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (631) 454-1900
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                      Class A Common Stock, par value $.001
                      Class B Common Stock, par value $.001

      Indicate by check mark 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 past 12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

      Indicate by check mark whether the Registrant is an accelerated filer (as
defined under Rule 12b-2 of the Act). Yes __ No [X].

      The aggregate market value of the Registrant's common stock held by
non-affiliates of the Registrant (assuming for this purpose that all officers,
directors and holders of more than 10% of the Company's outstanding voting stock
are affiliates) cannot be determined as ownership and transfer thereof is
restricted pursuant to the Registrant's By-laws, and there is no trading market
for such stock.

      As of December 31, 2004 there were 1798 shares of Class A common stock and
4044 shares of Class B common stock outstanding.

      Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for its 2005 Annual Meeting of Shareholders are incorporated by
reference into Part III of this report.

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<PAGE>

                                     PART I

Item 1. Business

Company Overview

      Long Island Physician Holdings Corporation (the "Company" or "LIPH") is a
New York corporation formed in 1994 and owned by physicians residing and
practicing in New York State. The Company conducts no operating activities of
its own. The Company's principal asset is 67% of the stock in MDNY Healthcare,
Inc. ("MDNY"), an independent practice association-model health maintenance
organization ("HMO"), that currently operates in Nassau and Suffolk counties,
New York. The financial statements of MDNY are consolidated into the audited
financial statements of the Company. Catholic Healthcare Network of Long Island,
Inc. ("CHNLI") owns the remaining 33% of the stock in MDNY. MDNY commenced
operations in 1996. LIPH, MDNY and CHNLI have entered into a Stock Purchase
Agreement dated as of December 31, 2004 (the "Stock Purchase Agreement")
pursuant to which LIPH has agreed, among other things, to purchase CHNLI's stock
in MDNY. The Stock Purchase Agreement remains subject to approval by the New
York State Attorney General's office and New York Supreme Court. At December 31,
2004, MDNY had 40,447 continuing members, comprised of individuals and families,
enrolled in its health maintenance plans and point-of-service plans

      The Company is affiliated with LIPH, LLC (the "LLC"), a New York limited
liability company formed in December 1996. Upon the formation of the LLC, the
shareholders of the Company owned all of the membership interests in the LLC.
The assets of the LLC consist of the stock in three independent practice
associations, Island Practice Association, IPA, Inc. ("Island IPA"), Island
Behavioral Health Association IPA, Inc. (currently inactive) and Island Dental
Professional Association IPA, Inc. (the "IPAs"). MDNY has entered into various
contractual arrangements (the "Professional Services Agreements") with the IPAs
to arrange for the provision of applicable health care and administrative
services to the members of MDNY.

Business Strategy

      MDNY is focusing on the following six areas in 2005 to achieve
profitability, expansion and enrollment growth:

      o     Applying for an Article 42 (accident and health company) license to
            allow MDNY to develop new products and benefit plan designs and
            match increased cost sharing provisions that certain of MDNY's
            competitors have marketed to their customers.

      o     Achieving administrative efficiencies by, among other things,
            increased use of automation and electronic transmission.

      o     Marketing to brokers in Nassau and Suffolk Counties, New York to
            increase name recognition and promote enrollment growth.

      o     Expanding into Queens County, New York, where MDNY has an
            established provider network.

      o     Expanding marketing of MDNY's self-insured products.

      o     In January 2005, MDNY entered into a new agreement with a financial
            advisor to pursue potential partnerships, investments in and/or
            acquisitions of MDNY. MDNY is evaluating proposals from potential
            equity investors.

      Effective January 1, 2005, the New York State Insurance Department
("NYSID") approved an additional 16% rate increase for MDNY's HMO and POS sole
proprietor products respectively. The increased differential on the sole
proprietor products help offset higher than anticipated medical costs for this
member group.

      There is no assurance that MDNY's actions will achieve positive results
from operations or adequate working capital and equity, and no assurance that
any equity investment will be completed on terms acceptable to MDNY and its
shareholders, if at all.

Going Concern Qualification

      The consolidated financial statements of the Company and of MDNY as of
December 31, 2004 and for the year then ended have been prepared assuming that
the Company and MDNY will each continue as a going concern.


                                       1
<PAGE>


Potential Obligations with Respect to New York Market Stabilization Pools

      MDNY is subject to certain state-regulated risk allocation pools
("Stabilization Pools") created by NYSID. The Stabilization Pools are designed
to encourage insurers to remain in or enter the small group and individual
health insurance markets and protect all insurers and health maintenance
organizations ("HMO") in those markets from extreme losses due to open
enrollment of persons for coverage who are very ill or have a history of poor
health. Under NYSID Regulation 146, as amended ("Regulation 146"), certain
insurers and HMOs participating in those markets in New York State are required
either to make payments to or receive payments from the Stabilization Pools
based upon criteria stated in Regulation 146.

      For years up to and including 1999, two separate pools are in operation.
The first pool (Demographic) used an age/sex relative morbidity table to measure
the relative risk for each insurer and HMO with respect to the demographic
characteristics of the persons covered by that insurer or HMO. The second pool
(Specified Medical Condition) used a list of specified, high-cost medical
conditions ("SMC"), which was intended to protect insurers and HMOs from part of
the adverse financial effects of covering a disproportionate number of people
with such conditions. For the years 1999 and after, a single pool operates based
on the experience of each insurer with respect to specified medical conditions
using new methodology under Regulation 146. The impact of the SMC pools for
years 1999-2004 could not be estimated as certain information (regional factors)
critical to determining the impact was not released to MDNY until January 2005.

      In January 2005, at the direction of NSYID, a limited scope audit was
performed by Alicare, Inc., an outside consultant engaged by NYSID ("Alicare"),
on MDNY's data submissions for years 1999 to 2003 with respect to the
Stabilization Pools. During this audit, Alicare released to MDNY preliminary
regional factors for years 1999-2004, which, when compared to MDNY's average
risk factors, would determine whether MDNY would receive payments from or make
payments to the Stabilization Pools. Based upon these regional factors, MDNY had
an estimated obligation of up to $30 million to the Stabilization Pools with
respect to such years. In February 2005, MDNY disputed the assessment in
writing, stating, among other things, that certain aspects of NYSID's
methodology were flawed, that not all insurers and HMOs had consistently applied
the criteria used to determine the eligibility of SMC claims and that NYSID had
failed to ensure such consistent application. MDNY requested that NYSID review
such methodology, and in light of MDNY's objections, allow MDNY to resubmit its
data for such years reflecting higher average risk scores proposed by MDNY.

      On April 5, 2005, Alicare advised MDNY that MDNY would receive $314,863
from the Stabilization Pools with respect to 1998, and that Alicare's
preliminary calculations showed that MDNY would receive approximately $1.1
million with respect to 1999 and 2000. On April 7, 2005, Alicare orally advised
MDNY that, because MDNY previously contributed to the Stabilization Pools in
1999, 77% of such $1.1 million would be paid to MDNY under the original SMC pool
for 1999 and 22% would be used to offset amounts due to the new SMC pool under
Regulation 146.

      On April 8, 2005, NYSID notified MDNY ("Contribution Notice") that Alicare
had calculated the results of the SMC pool data submissions for the period 1999
through 2004. The Contribution Notice and related invoices summarized MDNY's
estimated net calculated contribution for each such year as follows, based on 5%
of MDNY's incurred claims for such year pursuant to Regulation 146, and provided
that net payments were due by May 15, 2005:

         1999     $2,593,889
         2000     $4,511,036
         2001     $4,913,465
         2002     $5,073,270
         2003     $5,612,751
         2004     $4,807,861

      On April 12, 2005, NYSID telephonically advised MDNY that NYSID did not
view the Contribution Notice as a final and definitive determination as to
whether MDNY had net payment obligations with respect to the Stabilization Pools
or as to the amount of such obligations, if any; that NYSID might retract the
Contribution Notice in whole or part; and that NYSID would reevaluate the
determinations made in the Contribution Notice in light of MDNY's comments and
concerns regarding the Alicare audit.

      On April 14, 2005, NYSID notified MDNY that the payment due dates for the
invoices was extended to May 16, 2005 and further advised that the payment due
for calendar year 2004 was postponed until further notice.

      On June 16, 2005, NYSID notified MDNY that, as a result of discussions
between NYSID and representatives of various regulated health plans concerning
the collection and distribution of funds from the Stabilization Pools under
Regulation 146, NYSID "anticipates that at this time, liabilities to the pools
cannot be determined in regards to the amount or timeframe for payment. We will
provide you with additional information as it becomes available."


                                       2
<PAGE>

      In mid-June, NYSID orally indicated to MDNY that a proposed agreement was
being finalized whereby NYSID would provide for contributions from all payors of
12.5% for 1999-2003 and 50% for 2004, and eliminate any liability for distressed
plans on condition that such plans forego amounts payable to them under the old
pool methodology. NYSID also indicated that a new regulation would be drafted
for 2005 and subsequent years.

      On July 13, 2005, NYSID notified MDNY as follows:

            "Due to the financially impaired status of MDNY at this time, the
            Insurance Department is not imposing any liability on MDNY for
            payments to the SMC Pools under the Fourth Amendment to Regulation
            146 [citation omitted] for years 1999 through 2004 other than the
            deposits for estimated SMC contributions previously remitted by MDNY
            for 1999 and 2000. However, please be advised that the Insurance
            Department will continue to evaluate MDNY's financial condition and
            its impact on any liabilities under the pools for 2005, and for
            future years."

      The effect of the July 13 notice is to relieve MDNY from liability under
Regulation 146 with respect to 1999 through 2004, to forfeit deposits of
$318,625 and $300,000 made by MDNY with respect to 1999 and 1998, and to leave
open the possibility of liability under Regulation 146 with respect to 2005 and
subsequent years. The amount of liability, if any, with respect to 2005 and
subsequent years cannot be estimated.

      There can be no assurance that NYSID will determine that MDNY does not
have significant payment obligations to the Stabilization Pools with respect to
2005 and subsequent years. Any definitive determination by NYSID that MDNY has
significant payment obligations with respect to the Stabilization Pools for such
years would have a material adverse effect on the business and financial
condition and operations of MDNY and the Company.

      In light of the continued uncertainty between January 2005 and July 13,
2005 regarding MDNY's potential obligations to the Stabilization Pools and the
related regulatory and financial statement disclosure implications, LIPH was
unable to complete its Annual Report on Form 10-K for the year ended December
31, 2004 prior to the scheduled filing date.

Stock Purchase Agreement among LIPH, CHNLI and MDNY

      MDNY is subject to the New York Women's Health and Wellness Act, which, as
of January 1, 2003, obligates MDNY to provide contraceptive drugs and devices to
its members, in conflict with the ethical policies of the Diocese of Rockville
Centre (the "Diocese"), to which CHNLI and CHSLI are subject. In light of this
conflict, the Company, MDNY and CHNLI executed the Stock Purchase Agreement so
as to allow CHNLI to exit as an MDNY shareholder. The Diocese allowed its
subscriber contract with MDNY to expire on December 31, 2004 resulting in the
loss of approximately 3,800 members. Catholic Health Services of Long Island,
Inc. ("CHSLI"), an affiliate of CHNLI, on behalf of five catholic hospitals that
act as providers to MDNY (the "Hospitals"), will not renew the respective
Hospital subscriber contracts with MDNY upon expiration thereof on January 1,
2006. MDNY will continue to provide health care insurance to the employees of
the Hospitals through 2005. At December 31, 2004, a total of 7,450 members in
MDNY were enrolled from CHSLI. Premiums from the Diocese and the Hospitals
represented approximately 28% and 27% of total premiums earned by MDNY during
both 2004 and 2003. The expiration of MDNY's subscriber contracts with the
Hospitals on January 1, 2006 an the resulting loss of business will have a
material adverse effect on MDNY's business and financial condition.

      The Company, MDNY and CHNLI entered into a Stock Purchase Agreement dated
as of December 31, 2004. Pursuant to the Stock Purchase Agreement, LIPH will
purchase from CHNLI all shares of Class B common stock of MDNY owned by CHNLI,
and CHNLI will contribute to the capital of MDNY, and for cancellation, a
Subordinated Note dated December 18, 1997 made by MDNY in favor of CHNLI in the
original principal amount of $1.4 million, together with all interest accrued
thereon (the "Section 1307 Contribution"). Upon the closing of such purchase,
LIPH will be the sole stockholder of MDNY.

      In consideration of the sale, assignment and transfer of the Class B
Shares and of the Section 1307 Contribution, LIPH will pay CHNLI a closing
payment of $10.00. As additional consideration, LIPH will pay to CHNLI the
percentage specified below of the net amount of cash and the fair market value
of all securities and other property paid by an acquiror and received by LIPH in
respect of its equity interest in MDNY upon any sale to a third party by LIPH of
its stock in MDNY or of all or substantially all of MDNY's business (through a
sale of stock or assets, or a merger, consolidation or similar transaction) that
is consummated prior to December 31 of the year specified below (or with respect
to calendar year 2008, certain transactions consummated after December 31,
2008), but not to exceed $4.5 million in the aggregate (the amount of CHNLI's
equity investment in MDNY):

                  Percentage of Sale Proceeds                 Year
                  ---------------------------                 ----
                  33.3%                                       2005
                  25.0%                                       2006
                  20.0%                                       2007
                  15.0%                                       2008


                                       3
<PAGE>

      Conditions to closing under the Stock Purchase Agreement include: (i) the
termination of the Shareholders Agreement and the Stock Subscription and
Purchase Agreement, each dated as of October 11, 1995, between LIPH, MDNY and
CHNLI, as amended, (ii) execution and delivery of mutual releases by CHNLI, the
Diocese and CHSLI, on the one hand, and MDNY and LIPH, on the other hand, from
all claims arising through the closing date, except for claims arising under the
Agreement and certain other agreements in effect among the releasing parties as
of the closing date, (iii) resignation of the four MDNY directors designated by
CHNLI, as directors and officers of MDNY, (iv) payment in full of all premiums
then payable under the MDNY Group Applications effective as of December 31, 2002
between MDNY and each of the Diocese and CHSLI, as agent for the Hospitals; (v)
no premiums under such Group Applications being more than 30 days past due; (vi)
execution and delivery of an agreement whereby the Hospitals and certain related
Catholic nursing homes agree to pay the same penalties and interest on past due
premiums and other amounts payable by them to MDNY as those applicable under
current regulations to late payments due from MDNY to the Hospitals; (viii)
consent by each of NYSID (which granted consent in March 2005), the New York
Department of Health (which was granted in August 2005), the Attorney General of
the State of New York and the Supreme Court of the State of New York to the
Agreement and the transactions contemplated thereby; and (ix) payment in full of
all payments due and owing by MDNY to the Hospitals for services rendered to the
extent required by the provider agreements between MDNY and the Hospitals, and
no such payments, with respect to clean claims, being more than 45 days past
due.

      Upon closing of the purchase of the Class B shares, the Certificate of
Incorporation and By-laws of MDNY and the composition of MDNY's Board of
Directors will be modified to reflect, among other things, that CHNLI is no
longer a shareholder in MDNY and the composition and number of MDNY's Directors
will be changed to include the requisite number of enrollee representatives.

Certain Regulatory Matters

      The New York State Department of Health ("NYSDOH") and the NYSID require
MDNY to maintain reserves in the form of cash and statutory net worth.

      During the second quarter 2000, the NYSID performed its first financial
audit of MDNY and the IPAs as of June 30, 2000. On May 10, 2001, MDNY received
from NYSID a Draft Report on Examination of MDNY as of June 30, 2000 (the "Draft
Report"). The Draft Report stated, among other things, NYSID's determinations
that, as of June 30, 2000, MDNY was insolvent in the amount of $4,311,487 and
that MDNY's required contingency reserves were impaired in the amount of
$12,231,333. These determinations resulted from NYSID's position that MDNY
should have reported the IPAs' obligations in MDNY's financial statements.
MDNY's position was that the IPAs, not MDNY, are responsible for their own
obligations, and MDNY disputed NYSID's attribution of IPA liabilities to MDNY.

      With respect to years prior to 2001, MDNY was contractually obligated to
pay a capitated amount to Island IPA for covered services provided by
participating providers. Through 2001, however, MDNY continued to pay medical
claims to Island IPA relating to claims with dates of service prior to January
1, 2001 in excess of capitated amounts for years prior to 2001. These payments
resulted from medical claim obligations due by Island IPA to providers of
approximately $23.2 million at December 31, 2001, reflected in MDNY's financial
statements as payments in excess of capitation as of December 31, 2001 (the
"Island Debt"). NYSID's position was that the Island Debt should be carried on
the financial statements of MDNY as a liability of MDNY and not of Island IPA,
causing MDNY to be deficient in its reserves.

      In order to meet NYSID's concerns, MDNY converted the capitation-based
contract with Island IPA to a fee for service based IPA Participation Agreement
effective January 1, 2001.

      In addition, with NYSID's approval, MDNY, Island IPA, and CHSLI, on behalf
of the Hospitals, entered into a Recovery and Subordination Agreement (the
"Recovery and Subordination Agreement"), dated July 12, 2001 and effective
January 1, 2002. The Recovery and Subordination Agreement provides, among other
things, as follows: (i) Island IPA is required to pay the Island Debt pursuant
to a Repayment Plan whereby Island IPA is obligated to withhold, and remit to
MDNY, 5% of all payments due to Island IPA participating providers (the "IPA
Withhold"), MDNY will make claims payments to Island IPA or its participating
providers on a fee-for-service basis, MDNY is required to pay Island IPA a $1.50
per member per month network access fee, and Island IPA is required to pay to
MDNY the net revenue it receives from sources other than MDNY; (ii) until the
Island Debt is repaid, Island IPA, Island IPA's participating providers and the
Hospitals agreed (a), in the event that MDNY becomes insolvent (pursuant to a
court approved order or admits its inability to pay its debts), to subordinate
their rights to payment by MDNY of outstanding claims (including IBNR) to all
other outstanding claims in an amount equal to the amount of the then
outstanding Island Debt, and (b) that, after payment of third party claims, the
claims of Island IPA and its providers will be subordinated to the claims of the
Hospitals; and (iii) the amount of the Island Debt outstanding from time to time
will be carried on the financial statements of MDNY as an admitted asset. The
aggregate amount owed by MDNY to the subordinating parties in the form of
medical claims payable was approximately $14 million and $20 million as of
December 31, 2004 and 2003, respectively.


                                       4
<PAGE>

      In 2003 and 2002 the Island Debt was adjusted for additional claims and
reduced by the IPA Withhold pursuant to the Recovery and Subordination
Agreement. The Island Debt was approximately $18.5 million and $22.2 million at
December 31, 2004 and 2003, respectively.

      On July 31, 2002, NYSID issued its Report on Examination of The MDNY
Healthcare, Inc. as of June 30, 2000 dated April 2, 2001 and revised July 31,
2002 (the "Final Report"). The Final Report states, among other things, that,
based on the execution of the Recovery and Subordination Agreement, "the IPA
receivable will be allowed as an admitted asset and the examination insolvency
will be eliminated. [NYSID] will monitor the impact of the [Recovery and
Subordination] Agreement."

      In January 2003, NYSID notified MDNY that MDNY was impaired by $850,332 at
September 30, 2002 and required MDNY to submit a restoration plan to remedy the
impairment. (Impairment is the amount by which reported net worth is less than
the amount of required reserves). In February 2003, MDNY submitted a remedial
plan (the "MDNY Remedial Plan") to NYSID whereby: MDNY would continue
negotiations with certain potential acquirors regarding a proposed sale of MDNY;
MDNY would engage an investment banking firm; the Company and CHNLI, as the
stockholders in MDNY, would be offered the alternative of making additional
capital contributions to MDNY or selling all or part of MDNY; and the IPA
providers agreed to reduce the physician fee schedule effective April 1, 2003.
In April 2003, NYSID accepted the MDNY Remedial Plan.

      On April 10, 2003, with the filing of the December 31, 2002 Annual Report,
NYSID was notified that MDNY was impaired by $3 million. As a result of the
impairment, NYSID directed MDNY to take appropriate action to achieve net worth
of at least $7 million (MDNY's escrow deposit requirement) by July 10, 2003. On
May 14, 2003, NYSID directed MDNY to provide monthly financial statements.

      In June 2003, NYSID revised and finalized its Market Conduct Report on
Examination of MDNY as of September 30, 2002 and made recommendations regarding
certain operational deficiencies found in MDNY's policies and procedures.

      As of December 31, 2004 MDNY reported a net operating loss of $1.4 million
and statutory net worth of $5.4 million. The contingent reserve requirement at
December 31, 2004 was $6.7 million. (NYSID reserve requirements are calculated
based upon the greater of the contingent reserve or escrow deposit. The
contingent reserve is calculated by incrementally adding 1% of premiums written
not to exceed 5% (i.e., $6.7 million)). The escrow deposit is calculated as 5%
of the following year's expected medical costs. MDNY's contingent reserve is
currently capped at 5% of the current year's billed premium.

      The failure of MDNY to meet reserve requirements, the failure of MDNY or
the IPAs to comply with other existing laws and regulations or a significant
change in such laws or regulations could materially and adversely affect the
operations, financial condition and prospects of the Company and MDNY.

      According to the NYSID Final Report, the composition of MDNY's Board of
Directors does not comply with Part 98-1.11(f) of the Administrative Rules and
Regulations of the NYSDOH, which requires that at least 20% of MDNY's directors
must be enrollees of MDNY. The NYSID Final Report recommends that the requisite
number of "enrollee representatives" be elected to MDNY's Board of Directors.
Upon the closing under the Stock Purchase Agreement among LIPH, MDNY and CHNLI,
it is anticipated that MDNY's Board of Directors will include the requisite
number of enrollee representatives.

      In January 2005, MDNY entered into a new agreement with a financial
advisor to pursue potential partnerships, investments in and/or acquisitions of
MDNY. MDNY is considering proposals from potential equity investors. There is no
assurance that any equity investment will be completed on terms acceptable to
MDNY and its shareholders, if at all.


                                       5
<PAGE>

MDNY

Business Overview

      MDNY is an independent practice association-model HMO that is licensed by
the State of New York to operate in Nassau and Suffolk counties, New York. At
December 31, 2004, MDNY had 88 full-time employees. MDNY's operations commenced
on January 1, 1996. MDNY provides health care insurance to its members for a
fixed monthly premium, plus a co-payment, as applicable, by the member to a
participating physician for each office visit generally, and a dispensing fee or
co-payment to the pharmacy for each prescription filled. The basic benefits
provided within a member's benefit plan consist of primary and specialty
physician care, inpatient and outpatient hospital services, emergency and
preventive health care, laboratory and radiology services, ambulance services,
eye care, physical and rehabilitative therapy services, chiropractic services,
mental health care, and alcohol and substance abuse counseling. For an increased
monthly premium, members have the option to receive prescription drugs and other
supplemental benefits through the purchase of benefit plan "riders". At December
31, 2004, MDNY had 40,447 continuing members comprised of individuals and
families, enrolled in its health maintenance plans. MDNY's primary product lines
include point-of-service plans and traditional HMO plans. A significant
component of MDNY's membership and, therefore, premium revenue is derived from
small groups and sole proprietors enrolling through associations or directly.
This member group has traditionally experienced higher medical loss ratios than
the other groups in MDNY's member base. Effective January 1, 2004, NYSID
approved a 16% rate differential with respect to HMO sole proprietor products
and POS sole proprietor members to help offset the higher medical loss ratio
associated with this member group. MDNY's management currently monitors and
evaluates MDNY's financial performance based on the combined service area of
Nassau and Suffolk counties.

      MDNY entered into the Professional Services Agreements for the provision
of applicable healthcare services to members, pursuant to which Island IPA
arranges for the provision of medical and surgical services and Island Dental
Professional Association IPA, Inc. arranges for the provision of dental
services. Each IPA is responsible for contracting with individual health care
providers and for overseeing the initial and continuous screening of
participating health care providers. MDNY made direct payments to IPA
participating providers in 2004 for professional and ancillary services rendered
to members.

      All physicians who, through their contractual relationship with an IPA,
participate in MDNY's provider network are required to participate in MDNY's
quality improvement and utilization review programs. The quality improvement
program is designed not only to maintain but also to continually improve the
delivery of necessary medical care and includes:

      o     Utilization reviews, management programs and outcome studies, which
            evaluate statistical information with respect to services used by
            members and prescribed by participating physician providers relating
            to such topics as preventive care services, prescription drugs,
            physician visits, emergency room use, hospital admissions and
            referrals made by primary care physicians to specialists;

      o     Quality of care reviews, which identify issues affecting members,
            such as physician availability, physician treatment patterns and the
            structure and content of medical records;

      o     Periodic peer reviews, which evaluate the quality and
            appropriateness of medical care provided by a particular physician
            and review, among other things, diagnoses, tests, prescription drug
            usage and the utilization level of the physician by the members; and

      o     A physician committee infrastructure to oversee medical policy and
            the quality improvement program.

      The quality improvement program utilizes computerized claims information
as well as medical records which are maintained by the physicians and to which
MDNY has access. In addition and as required by state law, MDNY has an
established appeals, complaints and procedures for members and participating
physician providers. All appeals, complaints, and grievances are investigated
and resolved pursuant to the procedures established by MDNY in accordance with
New York State regulations.

      Additionally, the Company believes that educating MDNY's members with
respect to health care is a critical component in health care cost containment.
MDNY's quarterly newsletter to its members contains, among other items,
information on preventive health care. MDNY also distributes information by
telefax to participating providers. To further promote member participation in
controlling health care costs, MDNY requires co-payments by its members for most
office visits and some other services. Certain contracts also require members to
pay co-payments for inpatient services.

      The Company is subject to the risk of disruption in MDNY's health care
provider network. Network hospitals and other health care providers could
terminate their contracts with MDNY. All MDNY contracts with hospitals that
serve a significant portion of its business are generally subject to multiple
year contracts. All hospital contracts can be terminated on specified notice.
MDNY is routinely engaged in negotiations with health care providers, including
various hospitals and hospital systems, involving payment arrangements and other
contract terms. During such negotiations, hospitals, hospital systems,
physicians and other providers may threaten to or, in fact, provide notice of
termination of their agreement with MDNY as part of their negotiation strategy.
These disputes could adversely affect MDNY or could expose MDNY to regulatory or
other liabilities. Cost-containment arrangements entered into by MDNY could be
adversely affected by difficulties encountered in the implementation or
administration of such agreements, regulatory actions, contractual disputes, or
the failure of the providers to comply with the terms of such agreements.
Furthermore, the effect of mergers and consolidations of health care providers
or potential unionization of, or concerted action by, physicians, hospitals or
other providers in MDNY's service areas, could enhance the providers' bargaining
power with respect to higher reimbursement levels and changes to MDNY's
utilization review and administrative procedures.


                                       6
<PAGE>

      MDNY has contracts with approximately 30 hospitals in its Long Island, New
York service area providing for inpatient and outpatient care to MDNY's members.
MDNY reimburses hospitals under these contracts based on negotiated per diems,
diagnostic related groups ("DRGs"), case rates and fee schedules and, to a
lesser extent, at prices discounted from the hospital's billed charges. The
Company believes that the rates in these contracts are generally competitive.

      MDNY has various multi-year agreements subject to annual price negotiation
with hospitals and hospital systems that are designed to provide predictability
with respect to hospital costs and is currently negotiating with other hospital
and hospital systems for similar multi-year arrangements. Contract pricing with
24 hospitals was renegotiated in 2004, and contract pricing with 21 hospitals is
subject to renegotiation in 2005. In addition, there has been significant
consolidation among hospitals in MDNY's service area, which tends to enhance the
combined entity's bargaining power with managed care payors. As a result, there
is the risk that certain hospitals may seek higher rates or seek to impose
limitations on MDNY's utilization management efforts. There can be no assurance
that MDNY will be able to secure multi-year agreements in the future.

MDNY Products

      Provided below are summary descriptions of MDNY's main products. The
benefits actually provided to MDNY members with respect to such products may
vary depending upon the certificate of coverage filed by MDNY with NYSID.

HMO Product

      MDNY's HMO products are offered through two plan designs: MDFlex and
MDFocus, which were previously marketed as MDValue, MDSelect and MDClassic ("HMO
Product"). Although currently there are members enrolled in MDValue, MDSelect
and MDClassic plans, MDNY stopped actively marketing these plans as of January
1, 2001.

      MDFocus and MDFlex plans are offered with a comprehensive selection of
copays and require the member to select a personal physician who specializes in
primary care (a primary care physician or "PCP") to oversee their healthcare
needs. In the MDFlex program, the member must stay within MDNY's extensive
participating provider network for healthcare services and is required to obtain
referrals for out-of-network care. In the MDFocusplan, members have access to a
more defined, selective network. All MDNY plans allow members direct access to
specialists without a referral.

      HMO Product premiums accounted for approximately 87%, 79% and 72% of total
premiums earned by MDNY in 2004, 2003 and 2002, respectively.

POS Product

      MDNY's point-of-service product allows members direct access to MDNY's
preferred network and gives members the additional option to select any
physician outside the MDNY preferred network, even without a referral ("POS
Product"). members who choose the POS Product must meet an annual deductible and
pay the appropriate coinsurance amount. POS Products are offered through the
MDFlex and MDFocus programs.

      POS Product premiums accounted for approximately 13%, 21% and 28% of total
premiums earned in 2004, 2003 and 2002, respectively.

Individual Products

      MDNY provides HMO and POS Products to individuals who reside or work in
Nassau or Suffolk County, New York. New York State regulations require HMOs in
the community-rated small group market to offer products with mandated benefits.
Individual members in the small group market have access to MDNY's flex network.
At December 31, 2004 and 2003, MDNY had 483 and 599 individual members,
respectively, who accounted for 2% and 2% of total premiums earned in both 2004
and 2003.

Sole Proprietor Products

      MDNY provides HMO and POS Products to sole proprietors. New York law
requires health insurers that issue coverage through associations to offer the
same coverage to sole proprietors. New York law permits health insurers to
classify sole proprietors in their own community rating category and prohibits
rates for sole proprietor coverage from exceeding 120% of the rates established
for identical coverage issued to a group. MDNY has approval for a 16% rate
differential between sole proprietors and the group rate on its HMO and POS Sole
Proprietor Products, respectively.


                                       7
<PAGE>

      MDNY has contracts with approximately 10 associations for which MDNY
offers both small group and sole proprietor coverage. members who meet
eligibility requirements as sole proprietors have access to products sold
through the association or directly from internal sales representatives. At
December 31, 2004 and 2003, MDNY had approximately 13,900 and 16,200 sole
proprietor members, respectively, who accounted for 37% and 34% of total
premiums earned in 2004 and 2003, respectively.

HNY (Healthy New York) Products

      As required by the Health Care Reform Act 2000 ("HCRA"), MDNY offers two
HMO products that offer a specified benefit package designed by the State of New
York. Healthy New York is a program designed to make reduced cost comprehensive
health insurance available to small businesses (including sole proprietors) that
currently do not provide health insurance to their employees. Qualified
individuals who work for employers that do not provide health insurance may also
purchase these products. Specific participation criteria must be met to purchase
these products. At December 31, 2004 and 2003, MDNY had 1,606 and 496 members,
respectively, who purchased these products, which accounted for 1% and 1% of
total premiums earned in 2004 and 2003, respectively.

Marketing

      MDNY markets its products through a network of general agents and brokers
that market MDNY's products to small-employer groups and associations. MDNY also
maintains an in-house sales force for direct marketing to non-brokered accounts.

Mdny.com

      MDNY's website, www.mdny.com, provides on-line access to MDNY for its
members, brokers, employer groups and providers. During 2004, MDNY members
continued to increase their use of the website.

Competition

      The health care industry, both generally and in the New York metropolitan
area, is characterized by intense competition. MDNY competes with independent
HMOs, such as Health Insurance Plan of New York and United Health Group
(formerly Oxford Health Plans), which have significant enrollment in the New
York metropolitan area. MDNY also competes with HMOs and managed care plans
sponsored by large health insurance companies, such as CIGNA Corporation, Aetna
U.S. Healthcare Inc., United Health Group and Blue Cross/Blue Shield. These
competitors have large enrollment levels in MDNY's service area. These
competitors generally have been in existence for longer periods of time than
MDNY, are better established than MDNY, and have greater financial resources,
management experience and product development programs than MDNY. In addition,
other organizations with resources greater than those of MDNY may enter into
competition with MDNY by providing, for example, alternative healthcare delivery
systems, by offering greater benefits for a smaller premium payment, or by
offering products outside of the scope of MDNY's licensure. Additional
competitors may enter MDNY's markets at any time in the future.

      The Company believes that the network of providers under contract with
MDNY is an important competitive advantage. However, the cost of providing
benefits is in many instances the controlling factor in obtaining and retaining
employer groups, and certain of MDNY's competitors have developed products with
premium rates below MDNY's based upon benefit plan designs that are outside of
the scope of MDNY's licensure. There can be no assurance that MDNY will be able
to compete effectively for the business of employer groups. If MDNY is unable to
attract subscribers for its medical services, it will adversely affect MDNY's
ability to generate revenues, thereby limiting MDNY's ability to make payments
to the IPAs' participating providers.

Government Regulation

      Federal and state laws and regulations impose substantial requirements on
MDNY regarding such matters as licensure, provider networks, medical care
delivery and quality assurance programs, eligibility requirements, geographic
service areas, member rights and responsibilities, approval of contracts with
health care providers (including but not limited to contracts that involve risk
sharing or transfer) and administrative services providers, claims payment
standards (including timeliness and accuracy of payment), minimum coverage
obligations, including mandatory benefits, policy language, mandatory product
offerings, utilization review standards and procedures, including internal and
external member and provider appeals and financial condition, and disclosures to
members and providers. In addition, MDNY is subject to state and federal laws
and regulations relating to financial requirements and regulations relating to
premium rates and rating methodologies, loss ratios, cash reserves, minimum net
worth, permissible investments, corporate governance, participation in certain
state-wide risk spreading pools among insurers, and transactions between
affiliated companies, including dividends. Recently enacted state and federal
laws and regulations impose additional requirements on MDNY relating to security
and confidentiality of health care information. As part of the regulatory
process, MDNY is required to file periodic reports with the relevant state
agencies relating to, among other things, operations, premium rates and covered
benefits, financial condition and marketing practices.


                                       8
<PAGE>

State Regulation

      New York State regulates HMOs pursuant to Article 44 of the Public Health
Law. Subject to Article 44, HMOs are exempt from the New York Insurance Law and
regulations. New York State law requires that MDNY obtain a Certificate of
Authority from NYSDOH in order to operate as an HMO. MDNY obtained a Certificate
of Authority in December 1995.

      As an HMO, MDNY is subject to extensive regulatory requirements imposed by
the State of New York, including requirements governing reporting, quality
assurance, provider contracting, management agreements, financial and solvency
issues, rate-setting, scope of benefits, marketing and related matters. State
regulatory authorities exercise oversight regarding the provider networks,
medical care delivery and quality assurance programs, contract forms and
financial condition of MDNY. State regulations require MDNY to maintain
restricted cash or available cash reserves, a minimum net worth and impose
restrictions on MDNY's ability to make dividend payments, loans or other
transfers. Applicable state statutes and regulations require an HMO to file
periodic reports with the relevant state agencies, and contain requirements
relating to the HMO's operation including its rates and benefits applicable to
its products. MDNY is also subject to periodic examination by the relevant state
regulatory authorities. Applicable federal and state regulations also contain
licensing and other requirements relating to the offering of MDNY's products in
new markets, which may restrict MDNY's ability to expand its business.

      As a New York State certified HMO, MDNY is required to maintain a cash
reserve equal to the greater of 5% of expected annual medical costs or $100,000.
Additionally, MDNY is required to maintain a contingent reserve which must be
increased annually by an amount equal to at least 1% of statutory premiums
earned limited, in total, to a maximum of 5% (7% if out of network coverage is
by the HMO other than Direct POS.) of statutory premiums earned for the most
recent calendar year and which may be offset by the cash reserve. The cash
reserve is calculated at December 31 of each year and is maintained throughout
the following calendar year. MDNY received approval from the NYSID, in November
2004, to report the contingent reserve fund at 5% of the 2003 net premiums
written as MDNY does sell out of network benefit plans other than Direct POS. As
such, MDNY continues to report its contingent reserve at 5% of net premiums for
the year ended December 31, 2004.

      The Department of Health is expected to publish regulations for adoption
during 2005 that will increase the required reserves gradually over the next six
to twelve years to twelve and one half percent of annual premium income. If that
requirement changes it will affect all HMOs and MDNY will be expected to meet
those revised standards. Regulation of financial reserves for HMOs is a frequent
topic of legislative and regulatory scrutiny and proposals for change. It is
possible that the method of measuring MDNY's financial reserves could change and
that could affect the financial condition of the Company and MDNY.

      As a New York State certified HMO, MDNY is subject to the New York Women's
Health and Wellness Act. The Act provides, among other things, that, subject to
certain exceptions (including for certain Religious Employers, as defined in the
Act) all policies issued, renewed, modified or altered on or after January 1,
2003 must provide FDA approved contraceptive drugs and devices as part of
prescription drug coverage through the addition of a rider.

      Certain Federal and New York State laws limit the extent to which
healthcare providers may refer patients to businesses or facilities in which the
health care provider has a financial interest. In pursuing healthcare-related
business opportunities and investments, MDNY is required to limit its ownership,
investment and payment practices and procedures and may be unable to invest in,
contract with, or own certain healthcare entities unless the proposed
arrangement satisfies the terms of applicable Federal and New York State laws.

      MDNY is also affected by certain state regulated risk allocation pools and
state health care public policy initiatives. The risk allocation pools are
designed primarily to spread the claims risk. New York also imposes assessments
that are used to fund the state health and insurance departments and other state
initiatives. Examples of these programs include, but are not limited to: the New
York Market Stabilization Pools, which require insurers participating in the
small group and individual insurance market in New York to contribute certain
amounts to, or receive certain amounts from, the New York Stabilization Pools
based upon certain criteria outlined in the applicable regulations; and the New
York Stop Loss Pools, which provide insurers participating in certain mandated
programs in New York with a limited amount of stop loss insurance for claims
paid under these programs.

      In January 1, 1997, New York State enacted the Health Care Reform Act of
1996 (the "HCRA"), which allows all private healthcare payors to negotiate
payment rates for inpatient hospital services. Prior to enactment of HCRA, only
HMO's could negotiate rates for these services. The enactment of HCRA adversely
affected the ability of HMO's to negotiate rates. Also, beginning in January
1997, MDNY elected to make payments to state funding pools to finance hospital
bad debt and charity care ("BDCC"), graduate medical education ("GME") and other
state programs under the HCRA. Previously, hospital bad debt and charity care
and graduate medical education were financed by surcharges on payments to
hospitals for inpatient services. HCRA, GME and BDCC assessments were
reauthorized effective July 1, 2005 through June 30, 2007.


                                       9
<PAGE>

      The state of the economy has affected individual states' budgets, which
could result in New York attempting to defray these costs through increased
taxes, new taxes, increased assessments and new assessments on the programs in
which MDNY participates such as the New York GME and BDCC programs and other
programs. The New York State 2005-2006 budget may include, among other things, a
premium tax increase or increase in the BDCC assessment, an increase in the GME
assessment, or an increase in the assessment for the NYSID and NYDOH budgets (to
which MDNY may be required to contribute). Although MDNY could attempt to
mitigate or cover its exposure from such proposed increased costs through, among
other things, increases in premiums, there can be no assurance that MDNY will be
able to mitigate or cover all of such costs resulting from the proposed New York
State budget. Although MDNY has attempted to modify its product offerings to
address the changing needs of its membership, there can be no assurance that the
effects of the current downturn in economic conditions will not cause its
existing membership to seek health coverage alternatives that MDNY does not
offer or will not result in significant membership loss, lower average premium
yields or decreased margins on continuing membership.

      During the past several years, New York has enacted significant
legislation relating to managed care plans which contain provisions relating to,
among other things, consumer disclosure, utilization review, removal of
providers from the network, appeals processes for both providers and members,
mandatory benefits and products, including infertility and clinical trials,
state funding pools, prompt payment and provider contract requirements. NYSID
has re-interpreted existing law and regulations to limit the ability to apply
contract exclusions. The impact of this re-interpretation is that additional
claims will be reviewed for demonstration of medical necessity, and more appeals
may be submitted to external review. It is difficult to predict whether
additional regulatory requirements may apply to the operations of HMOs. It
should be assumed, however, that the health care delivery system in New York
State will continue to be subject to a high level of regulatory control, which
may impose additional limitations on the ability of HMOs (including MDNY) to
engage in various financial transactions.

      Effective July 1, 1999, New York enacted a new law establishing a right
for health care consumers to obtain an external review of determinations made by
HMOs and insurers when coverage of health care has been denied on the grounds
that the service is not medically necessary or that such service is experimental
or investigational and establishing standards for the certification of the
external review agents. In addition, the law requires provider contracts to
include an explanation of provider payment methodologies; the time periods for
provider payments; the information to be relied upon to calculate payments and
adjustments; and the process to be employed to resolve disputes concerning
provider payments. In 2004, five claims were submitted and closed for external
review.

      In 1998, New York enacted a law requiring the current Consumer Guide
published by NYSID, which ranks health plans based on the ratio of complaints
found to be valid and the ratio of appeals made through the grievance and
Utilization Review process, including the number of times a health plan reverses
a decision, to also include, effective September 1, 1999, the rate of physician
board certification; provider turnover rates; the percentage of enrollees who
have been seen for ambulatory or preventive care visits during the previous
three years of enrollment; methods used to compensate providers; accreditation
status of plans and indices of quality, including rates of mammography, prostate
and cervical cancer screening, prenatal care, immunization; other information
collected through the Quality Assurance Reporting Requirements; and the results
of a consumer satisfaction survey conducted by MDNY.

      Pursuant to the prompt payment guidelines established under New York law,
HMOs are required to pay providers within 45 calendar days of receipt of
undisputed claims submitted for services provided. In the event a claim is
disputed, the insurer or HMO must notify the provider within 30 calendar days of
receipt and request additional information if necessary. In addition, interest
on late claims and penalties of up to $500 per day per claim may be imposed upon
an HMO that does not comply with the prompt payment guidelines.

      Effective January 1998, New York laws also require coverage of the
following benefits: (i) HMOs are required to cover individuals undergoing
mastectomies for a period to be determined by the attending physicians and the
patient; (ii) out-of-network second opinions for cancer; (iii) all stages of
reconstruction of the breast on which a mastectomy has been performed, and
surgery and reconstruction of the other breast to produce a symmetrical
appearance; and (iv) unlimited chiropractic care rendered in certain
circumstances by a licensed doctor of chiropractics upon referral by a PCP.

      Effective January 1998, coverage for enteral formulas is required for all
plans which provide a pharmacy benefit. The modified food component of this
mandated coverage is capped at $2,500 per member per year.

Federal Regulation

      One of the most significant applicable federal laws is the Health
Maintenance Organization Act of 1973, as amended (the "HMO Act"), and the rules
and regulations promulgated thereunder. The HMO Act governs federally qualified
HMO's, and prescribes the manner in which such HMO's must be organized and
operated. MDNY is a federally qualified HMO.


                                       10
<PAGE>

      The federal Women's Health and Cancer Rights Act of 1998 (the "WHCR Act")
mandates coverage of reconstructive surgery and other treatments associated with
mastectomy. New York State's mastectomy and reconstruction mandates in effect
since January 1, 1998, match or exceed the WHCR Act's requirements with the
exception of the federal requirement for coverage of prostheses in group market
products. The WHCR Act also prohibits the Federal Employees Health Benefits
Program from using federal funds to contract with any health plan that provides
coverage for prescription drugs unless that plan also provides coverage for
contraceptives, including devices.

      The federal Health Insurance Portability and Accountability Act of 1996
("HIPAA") has had a significant effect on MDNY's operations. Regulations
promulgated under HIPAA seek, among other things, to (i) ensure portability of
health insurance to individuals changing jobs or moving to individual coverage
by limiting application of preexisting condition exclusions, (ii) guarantee
availability of health insurance to employees in the small group market, and
(iii) prevent exclusion of individuals from coverage under group plans based on
health status. New York State has a similar law. HIPAA also imposed new
standards of protection against inappropriate use and disclosure of
patient-identifiable health information that are applicable to health plans,
their contracted entities and business associates. The U.S. Department of Health
& Human Services ("DHHS") was directed to develop rules for standardizing
electronic transmission of health care information and to protect its security
and privacy. Under these rules, health plans, clearinghouses and providers will
now be required to (a) comply with a variety of requirements concerning their
use and disclosure of individuals' protected health information, (b) establish
rigorous internal procedures to protect health information and (c) enter into
business associate contracts with those companies to whom protected health
information is disclosed. Violations of these rules will be subject to
significant penalties. The final privacy rules do not provide for complete
federal preemption of state laws, but rather preempt all contrary state laws
unless the state law is more stringent. HIPAA privacy rules could expose MDNY to
additional liability for, among other things, violations by its business
associates. HIPAA's requirements with regard to privacy and confidentiality
became effective as of April 2003. Also as part of HIPAA, DHHS issued final
rules, effective October 2003, standardizing electronic transactions between
health plans, providers and clearinghouses. Health plans, providers and
clearinghouses, including MDNY, are required to conform their electronic and
data processing systems with HIPAA's electronic transaction requirements. MDNY's
incremental costs for HIPAA compliance were $30,000 and $210,000 in 2004 and
2003, respectively, and MDNY believes that it will incur additional costs in
2005 and beyond. However, the Company cannot predict the ultimate impact HIPAA
will have on MDNY's business and results of operations in future periods.

      The Employee Retirement Income Security Act of 1974 ("ERISA") governs
employee welfare plans, including self-funded plans. There have been recent
legislative attempts to limit ERISA's preemptive effect on state laws. If such
limitations are enacted, they might increase MDNY's exposure under state law
claims that relate to self-funded plans administered by MDNY and may permit
greater state regulation of other aspects of those business operations.

      The Mental Health Parity Act of 1996 prohibits group health plans and
health insurance issuers providing mental health benefits from imposing lower
aggregate annual or lifetime dollar-limits on mental health benefits than any
such limits for medical or surgical benefits. These requirements do not apply to
small employers who have no more than 50 employees or to any group health plan
whose costs increase one per cent or more due to the application of these
requirements.

      The Newborns' and Mothers' Health Protection Act of 1996 generally
prohibits group health plans and health insurance issuers from restricting
benefits for a mother's or newborn child's hospital stay in connection with
childbirth to less than 48 hours for vaginal delivery and to less than 96 house
for cesarean section.

Proposed Federal and State Legislation

      State and federal government authorities are continually considering
changes to laws and regulations applicable to MDNY. Over the past several years
there has been significant controversy over allegations that payment for care
has been inappropriately withheld or delayed by health care plans. This has led
to significant public and political support for reform of health care
regulation. The U.S. Congress and New York routinely consider regulation or
legislation relating to mandatory coverage of certain benefits, provider
compensation arrangements, health plan liability in cases when members do not
receive appropriate or timely care, disclosure and composition of physician
networks, health plan solvency standards and procedures dictating health plan
utilization management and claim payment standards, among other matters. In
recent years, bills have been introduced in the legislature in New York,
including some form of the so-called "Any Willing Provider" initiative which
would require HMOs to allow any provider or facility meeting their credentialing
criteria and willing to accept the HMOs reimbursement and conditions of
participation to join their network regardless of geographic need, hospital
admitting privileges and other important factors. Certain of these bills have
also included provisions relating to mandatory disclosure of medical management
policies and physician reimbursement methodologies. Numerous other health care
proposals have been introduced in the U.S. Congress and in the state
legislature. These include provisions which place limitations on premium levels,
impose liability on health plans in cases when members do not receive
appropriate or timely care, increase minimum capital and reserves and other
financial viability requirements, prohibit or limit capitated arrangements or
provider financial incentives, mandate benefits (including coverage of early
intervention services, mandatory length of stay with surgery or emergency room
coverage), define medical necessity and an antitrust exemption to permit
competing health care professionals to bargain collectively with health plans
and other entities.


                                       11
<PAGE>

      Congress is also considering proposals relating to health care reform,
including a comprehensive package of requirements on managed care plans called
the Patient Bill of Rights ("PBOR") legislation. These proposals seek to hold
health plans liable for claims regarding health care delivery and accusations of
improper denial of care, among other items. PBOR, if enacted, could expose MDNY
to significant litigation risk. Such litigation could be costly to MDNY and
could have a significant effect on the Company's results of operations. Although
MDNY could attempt to mitigate or cover the effects of such costs through, among
other things, increases in premiums, there can be no assurance that MDNY will be
able to mitigate or cover the costs stemming from such PBOR legislation or the
other costs incurred in connection with complying with such PBOR legislation. In
addition, in 2003 and 2004, Congress considered, but did not adopt legislation
permitting small businesses to pool together as Association health Plans
("AHPs") to purchase or self-fund health care coverage. The legislation provides
AHPs with significant regulatory and rating advantages which would prevail over
state and federal law applicable to most insurers and HMOs, including MDNY. In
his State of the Union address in January 2005, the President again proposed
adoption of legislation authorizing AHPs.

      Recently enacted legislation and the proposed regulatory and legislative
changes described above, if enacted, could increase health care costs and
administrative expenses and otherwise adversely affect the business, results of
operations and financial condition of MDNY and its competitors.

Availability of SEC Reports

      The Company files Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, and amendments to such reports, with the
Securities and Exchange Commission. The Company does not maintain an Internet
web site and therefore does not make such periodic and current reports available
on the Internet. Upon written request, the Company will make available
electronic or paper copies of its filings free of charge as soon as reasonably
practicable after they are filed with the SEC. The SEC maintains an Internet
site (http://www.sec.gov) that contains the Company's reports, proxy and
information statements, and other information filed with the SEC.

Certain Factors Affecting Future Operating Results

      Certain statements in this Annual Report on Form 10-K are forward-looking
statements and are not based on historical facts but are management's
projections or best estimates. Such forward-looking statements include but are
not limited to, statements concerning future or prospective: results of
operations or financial position, liquidity, health care and administrative
costs, premium rates and yields for commercial business, growth and retention of
membership and development of new lines of business, health care benefits,
provider networks, provider utilization rates, medical loss ratio levels, claims
payment, service performance and other operations matters, administrative loss
ratio levels, proposed efforts to control health care and administrative costs,
impact of agreements with health care providers and related organizations of
providers, reinsurance coverage for risk-transfer arrangements, enrollment
levels, government regulation such as HIPAA, PBOR, the impact of new laws and
regulation, the future of the health care industry, and the impact on MDNY of
regulatory investigations and examinations.

      Actual results may differ materially from those expressed or implied by
such forward-looking statements due to risks and uncertainties, including but
not limited to the following: MDNY's ability to continue as a going concern; the
inability of MDNY to meet applicable reserve and statutory net worth
requirements; the expiration on January 1, 2006 of MDNY's subscriber agreements
with the Hospitals affiliated with CHSLI and the resulting loss of business by
MDNY;the uncertainty surrounding the potential obligation from the Market
Stabilization Pool for years subsequent to 2004, which obligations could, have a
material adverse effect on MDNY's business or financial condition; that
increased regulation or modification of existing regulations will increase
health care expenses or require additional or increased levels of statutory
reserve requirements; that increased competition in MDNY's markets or a change
in product mix will unexpectedly reduce premium revenue; and that MDNY will not
be successful in increasing membership growth; that health care costs in any
given period may be greater than expected due to general unanticipated increases
in health care costs, unexpected incidence of major cases, national emergencies,
natural disasters, epidemics, changes in physician practices, and new
technologies.

Item 2. Properties

      The offices of the Company and MDNY are located in premises leased by MDNY
at One Huntington Quadrangle, Suite 4C01, Melville, NY 11747. The lease expires
March 31, 2008. Annual rent is $487,000. The Company believes that such offices
are adequate and suitable for the business of the Company and of MDNY as
currently conducted and as currently proposed to be conducted.


                                       12
<PAGE>

Item 3. Legal Proceedings

      MDNY is party to a number of claims and lawsuits arising out of the normal
course of business. Certain of these actions seek damages in various amounts. In
most cases, such claims are covered by insurance. The Company believes that none
of the claims or pending lawsuits, either individually or in the aggregate, will
have a material adverse effect on the Company's financial position, results of
operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security holders during the fourth
quarter of 2004 through the solicitation of proxies or otherwise.


                                       13
<PAGE>


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

      There is no trading market for the shares of the Company's Common Stock,
as ownership thereof is restricted pursuant to the Company's By-laws to certain
physicians and other medical practitioners resident in and licensed by New York
State with office-based practices on Long Island, New York, and transfer thereof
is restricted pursuant to the Company's By-laws. Under certain circumstances,
the Company has the right, pursuant to the Company's By-laws, but not the
obligation, to purchase stock of the Company which a shareholder desires to
transfer, at a price based on the per share value determined by an independent
certified public accountant.

      The Company has never paid any dividends on its Common Stock, and does not
anticipate that dividends on the Common Stock will be declared and paid at any
time in the foreseeable future. Payment of dividends will be contingent upon the
Company's revenues and earnings, if any, and the capital requirements and
general financial condition of the Company and of its subsidiaries. The payment
of dividends in the future is entirely within the discretion of the Company's
Board of Directors. It is the present intention of the Company's Board of
Directors to retain all earnings, if any, for use in connection with its
business operations. Accordingly, the Board does not anticipate declaring any
dividends in the foreseeable future.

      At December 31, 2004 there were 1,799 shareholders of record of the
Company's Class A Common Stock and 4,042 holders of record of the Company's
Class B Common Stock.

      The Company made no repurchase of any of its securities during the fourth
quarter of 2004.

Item 6. Selected Consolidated Financial Data

      The following selected financial data for each year in the five-year
period ended December 31, 2004 have been derived from the Company's audited
consolidated financial statements. The information below is qualified by
reference to and should be read in conjunction with the audited consolidated
financial statements and related notes, and other financial information included
elsewhere herein. The audit report includes an explanatory paragraph regarding
certain conditions which raise substantial doubt about the Company's ability to
continue as a going concern. See "Consolidated Financial Statements."

Statement of Operations Data:
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                        ---------------------------------------------------------------------
Revenue:                                                   2004           2003           2002           2001           2000
                                                        ---------      ---------      ---------      ---------      ---------
<S>                                                     <C>            <C>            <C>            <C>            <C>
Premiums earned                                         $ 135,209      $ 153,276      $ 158,310      $ 146,505      $ 188,929
                                                        ---------      ---------      ---------      ---------      ---------
Expenses:
IPA medical expenses                                      117,561        131,793        137,161        123,401        152,829
Excess IPA capitation                                          --             --             --             --          6,000
Commission expense                                          5,255          6,245          6,731          5,611          6,412
Reinsurance, net                                             (509)           409            609            300            594
Management fees                                                --             --             --             --         11,264
General and admin expenses                                 14,360         13,528         15,541         20,150          9,771
Depreciation                                                  104            162            337            498            167
                                                        ---------      ---------      ---------      ---------      ---------
         136,771        152,137        160,379        149,960        187,037

Operating income (loss)

Operating income (loss)                                    (1,562)         1,139         (2,069)        (3,455)         1,892
Investment income                                             156            394            676          1,957          2,744
Income (loss) before income taxes/minority interest        (1,406)         1,533         (1,393)        (1,498)         4,636
Provision for income (taxes) benefit                           24            (87)           (46)            --            (91)
Minority interest in (income) loss of subsidiary              474           (436)           475            490         (1,573)
Net income (loss)                                       $    (908)     $   1,010      $    (964)     $  (1,008)     $   2,972
                                                        =========
Basic and diluted income (loss) per share               $    (156)     $     173      $    (165)     $    (173)     $     509
Basic and diluted weighted average shares                   5,842          5,842          5,842          5,842          5,842
</TABLE>

                                       14

<PAGE>

Balance sheet data (in thousands):

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                 -----------------------------------------------------------
                                   2004         2003         2002         2001         2000
                                 -------      -------      -------      -------      -------
<S>                              <C>          <C>          <C>          <C>              <C>
Working capital/(deficiency)     (17,233)     (17,569)     (19,934)     (19,014)         334
Total assets                      35,230       45,367       43,881       45,199       25,279
Long-term debt                     3,450        3,346        3,247        3,135        2,969
Total liabilities                 33,083       41,838       41,798       41,676       20,258
Minority interest                  1,209        1,683        1,247        1,722        2,213
Shareholders' equity                 937        1,846          836        1,801        2,808
</TABLE>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      This Report contains forward-looking statements, within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which reflect
the Company's expectation or belief concerning future events that involve risks
and uncertainties. The actions and performance of the Company could differ
materially from what is contemplated by the forward-looking statements contained
in this Report. Factors that might cause differences from the forward-looking
statements include those referred to or identified in Item 1 above. Reference
should be made to such factors and all forward-looking statements are qualified
in their entirety by the above cautionary statements.

      The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere
herein.

      The Company's financial statements as of December 31, 2004 and for the
year then ended have been prepared assuming that the Company will continue as a
going concern. See Consolidated Financial Statements.


General Overview

      The Company owns 67% percent of the stock in MDNY. The Company is a
holding company whose principal asset is its investment in MDNY and conducts no
operating activities of its own. The Company's administrative, legal, accounting
and insurance costs are funded by MDNY. Total costs funded by MDNY were $292,615
as of December 31, 2004.

      MDNY's principal source of revenue is premiums earned from its HMO and POS
Products. Other revenue consists principally of interest income for 2004.

      MDNY's ability to achieve profitability depends principally on increasing
membership while reducing medical expenses as a percentage of its premium
revenue (the "medical loss ratio" or "MLR") and sufficiently managing
administrative costs. During 2004, MDNY continued to implement programs to
reduce administrative costs but as membership continued to decline, 14% from
2003, certain reductions became more difficult for MDNY to absorb. In addition,
$800,000 of advertising costs incurred in the fourth quarter 2004 contributed to
the increase in administrative costs for 2004.

      The following tables show plan statistics, revenues earned, and certain
other selected information:

                                  2004        2003      inc(dec)     %inc(dec)
                                  ----        ----      ---------     ---------
Enrollment                      40,447       47,029      (6,582)        (14%)
Enrollment (months)            498,214      626,106    (127,892)        (20%)
Premiums                      $135,209     $153,276     (18,067)        (12%)
Medical Expenses
(excl. HCRA surcharge)        $112,331     $127,110     (14,779)        (12%)
HCRA surcharge                $  4,721     $  5,092        (372)          7%
Total Medical-
(includes reinsurance)        $117,052     $132,202     (15,150)        (11%)
Administrative                 $14,360     $ 13,528         832           6%
Commissions                     $5,255     $  6,245        (990)        (16%)

                                  2004         2003      %inc(dec)
                                  ----         ----     ---------
Premium pmpm                   $271.39      $ 244.81        11%
Medical pmpm                   $225.47      $ 203.02        11%
HCRA pmpm                         9.47          8.13        16%
Total medical pmpm             $234.94      $ 211.15        11%
Administrative pmpm             $28.82      $  21.61        33%
Commissions pmpm                $10.55      $   9.97         6%


                                       15
<PAGE>

      MDNY seeks to control medical expenses through arrangements with its
affiliated IPAs and with non-IPA primary care physicians, with certain specialty
providers, and through its quality improvement programs, utilization management
and review of hospital inpatient and outpatient services, and educational
programs on effective managed care for its providers. MDNY's medical loss ratio,
including the HCRA surcharge was 87% and 86%, respectively, for 2004 and 2003.

      During 2004, the Company's working capital deficit decreased by $336,000
from 2003. Negative operating results for the year ended December 31, 2004
contributed to the overall increase in the working capital deficit.

      MDNY has also established a receivable of approximately $1,457,000 at
December 31, 2004 related to certain stop loss pools established by the State of
New York under the Health Care Reform Act of New York. These pools provide a
limited amount of stop loss insurance funds to cover 90% of certain paid claims
for the two New York mandated plans, Direct Pay and Healthy New York. The
regulations governing the stop loss pools were extended by the New York State
legislature until June 30, 2005. While MDNY has established its recoveries under
the Stop Loss Pools based on its interpretations of the regulations, the amounts
recorded related to the Pools may differ materially from the amounts that will
ultimately be paid or received from the Pools based on final reconciliations.


                                       16
<PAGE>


Results of Operations

      The following table provides certain statement of operations data
expressed as a percentage of total premium revenue and other statistical data
for the years indicated:


Statement of Operations Data

                                                 Year ended December 31,
                                             --------------------------------
Revenue:                                         2004       2003        2002
                                                 ----       ----        ----

   Premiums earned                              100.0%     100.0%      100.0%
Expenses:
IPA medical expenses                              86.6      86.0        86.6
Commissions expense                                3.9       4.1         4.2
Reinsurance expense, net                                      --          .4
General and administrative expenses               10.6       8.8         9.8
Depreciation                                        .1        .1          .2
   Total expenses                               (101.2)    (99.3)     (101.3)
   Operating income (loss)                         1.2)       .7        (1.3)
Investment and other income                         .1        .3          .4
Income (loss) before income taxes/
  minority interest                               (1.1)      1.0         (.9)
Provision for income taxes                           -       .05         .03
Minority interest in subsidiary                     .4       (.3)         .3
Net income (loss)                                  (.7)       .7         (.6)

Statistical Data:
     Enrollment                                 40,447    47,029      62,853
     Member months                             498,214   626,106     713,714

*   Medical loss ratio                            86.6%     86.0%       87.0%

**  Administrative loss ratio                     14.6%     13.0%       14.2%

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

*     Medical loss ratio - Medical expense and net reinsurance expense divided
      by total premium revenue.

**    Administrative loss ratio - Commission expense, management fees,
      depreciation expense, and general and administrative expense divided by
      total premium revenue.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      Premiums earned for the year ended December 31, 2004 and 2003 were
approximately $135,209,000 and $153,276,000, respectively. At December 31, 2004,
MDNY's commercial enrollees totaled approximately 40,400, as compared to
approximately 47,000 at December 31, 2003. Premiums received decreased
$18,067,000 or 12% in 2004 compared to 2003 as a result of decreased member
months of 20%, partially offset by increases in premium yields of approximately
11% in 2004 compared with 2003. Overall membership decreased at December 31,
2004 primarily due to the loss of the POS business from the Diocese which
accounted for approximately 2,000 members (and 3,800 members overall). In
addition, MDNY continues to lose membership to other competitors in its service
area who can offer more attractive premium rates either by offering experience
rated products or benefit plans with higher co-pays and deductibles. Currently,
MDNY is licensed under Article 44 of the Public Health Law which prohibits the
plan from offering these types of plans. Effective January 1, 2004 MDNY
increased its HMO and POS rates approximately 12% and 20% respectively further
contributing to the overall decline in enrollment.

      Total expenses for the year ended December 31, 2004 were $136,771,567 as
compared to $152,136,657 for the year ended December 31, 2003. This 10% decrease
in expenses is the result of lower medical expenses consistent with the overall
14% decrease in enrollment partially offset by an increase in overall medical
costs of 11%. In addition, total administrative costs increased 6% from 2003.
MDNY incurred approximately $800,000 of advertising costs in 2004.


                                       17
<PAGE>

      Health care service expense stated as a percentage of premium revenues was
86.6% for 2004 compared with 86.3% for 2003. Total medical expenses for the year
ended December 31, 2004 decreased $15,149,984 or 11% from 2003. This decrease is
primarily the result of the overall 14% decrease in enrollment from 2003
partially offset by an increase in medical costs on a per member per month basis
of 11% over 2003.

--------------------------------------------------------------------------------
Expenses:                   December 31, 2004     December 31, 2003    % change
--------------------------------------------------------------------------------
Medical fee for service
claims                       $112,331,587           $127,109,852          (12%)
--------------------------------------------------------------------------------
HCRA public goods expense    $  4,720,657           $  5,092,376          (7.3%)
--------------------------------------------------------------------------------
Total medical expense        $117,052,244           $132,202,228          (12%)
--------------------------------------------------------------------------------


      Administrative expenses stated as a percentage of premium revenue were
14.6% for 2004 compared with 13% for 2003. This increase was the result of
approximately $800,000 of advertising costs incurred in 2004.

      Net loss for the year ended December 31, 2004 was approximately
$(908,572), compared to a net profit of $1,010,000 for 2003. This negative
result in 2004 is primarily the 14% decline in enrollment in 2004. As membership
continued to decline in 2004 reductions in administrative costs became more
difficult to attain. Advertising costs incurred in the fourth quarter 2004
further contributed to the increase in administrative costs of 6%. The table
below illustrates the membership mix between HMO and POS products at December
31, 2004 compared to 2003. As a result of premium increases of approximately 20%
on POS products together with the loss of 2,000 POS members from the Diocese, a
larger percentage, 92%, of the membership at December 31, 2004 were enrolled in
HMO products.

--------------------------------------------------------------------------------
Product                                 HMO           POS             Total
--------------------------------------------------------------------------------
Membership at Dec 31, 2004             37,355         3,092           40,447
--------------------------------------------------------------------------------
Membership at Dec. 31, 2003            40,357         6,672           47,029
--------------------------------------------------------------------------------
% Membership mix 2004                     92%            8%            100%
--------------------------------------------------------------------------------
% Membership mix 2003                     86%           14%            100%
--------------------------------------------------------------------------------

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Premiums earned for the year ended December 31, 2003 and 2002 were
approximately $153,276,000 and $158,310,000, respectively. At December 31, 2003,
MDNY's commercial enrollees totaled approximately 47,000, as compared to
approximately 62,000 at December 31, 2002. Revenue decreased $5,034,000 or 3.3%
in 2003 compared to 2002 as a result of decreased member months of 12%,
partially offset by increases in premium yields of approximately 10% in 2003
compared with 2002. Overall membership decreased at December 31, 2003 primarily
due to annual premium rate increases of 30% on POS Products and 10% on HMO
Products.

      Total expenses for the year ended December 31, 2003 were $152,136,657 as
compared to $160,379,021 for the year ended December 31, 2002. This 5% decrease
in expenses is the result of lower medical expenses consistent with the overall
25% decrease in enrollment partially offset by an increase in overall medical
costs of 9.2%. In addition, total administrative costs decreased 13% from 2002
consistent with MDNY's continued focus on streamlining administrative functions
as enrollment declined in 2003.

      Health care service expense stated as a percentage of premium revenues was
86% for 2003 compared with 87% for 2002. Total medical expenses for the year
ended December 31, 2003 decreased $5,567,000 or 4% from 2002. This decrease is
primarily the result of the overall 25% decrease in enrollment from 2002. This
decrease in medical expenses was offset by an increase in HCRA public goods
expense for the year ended December 31, 2003 of $688,000 or 15.6% from 2002.
This increase is consistent with percentage increases on 2003 BDCC and GME
assessments imposed by HCRA effective July 1, 2003.


                                       18
<PAGE>


--------------------------------------------------------------------------------
Expenses:                  December 31, 2003  December 31, 2002      % change
--------------------------------------------------------------------------------
Medical fee for service
claims                       $127,109,852       $133,364,255           (5%)
--------------------------------------------------------------------------------
HCRA public goods expense      $5,092,376         $4,404,680          15.6%
--------------------------------------------------------------------------------
Total medical expense        $132,202,228       $137,768,935          (4.0)%
--------------------------------------------------------------------------------


      Administrative expenses stated as a percentage of premium revenue were 13%
for 2003 compared with 14.2% for 2002. This reduction was the result of
continued reductions in staffing throughout 2003 as a result of declining
enrollment and operational efficiencies in 2003, which helped achieve
profitability and offset increases in medical and commission costs.

      Net profit for the year ended December 31, 2003 was approximately
$1,010,000, compared to a net loss of $(964,000) for 2002. This positive result
in 2003 is primarily the result of higher premium yields (10%) over 2003
together with a change in membership mix and reductions in administrative costs
realized in 2003. In 2003, 86% of the membership was comprised of HMO members as
opposed to 77% in 2002. The HMO Products were profitable in 2003 and 2002. See
the table below.


--------------------------------------------------------------------------------
Product                                 HMO           POS             Total
--------------------------------------------------------------------------------
Membership at Dec 31, 2003             40,357         6,672           47,029
--------------------------------------------------------------------------------
Membership at Dec. 31, 2002            48,083        14,557           62,640
--------------------------------------------------------------------------------
% Membership mix 2003                     86%           14%            100%
--------------------------------------------------------------------------------
% Membership mix 2002                     77%           23%            100%
--------------------------------------------------------------------------------

Liquidity and Capital Resources

      Cash flows provided by (used in) operating activities, investing and
financing activities of $112,878 $(352,155), and (1,479), respectively, in 2004
resulted in an overall decrease in cash and cash equivalents in 2004 of $87,762.
The increase in net cash and cash equivalents is directly related to the timing
of when claims are paid.

The consolidated financial statements of the Company and of MDNY as of December
31, 2004 and for the year then ended have been prepared assuming that the
Company and MDNY will each continue as a going concern.

      The Company had negative working capital of approximately $17,233,378 at
December 31, 2004 compared to a negative working capital of approximately
$17,569,000 at December 31, 2003. The amount of negative working capital
slightly decreased in 2004. MDNY's liquidity is substantially dependent upon its
ability to meet its current obligations. MDNY does not have the ability to
obtain a line of credit with financial institutions as MDNY is only authorized
to borrow 5% of approved assets subject to approval by the NYSID. The Company
anticipates that the 2005 rate increases together with the initiatives described
in Item 1 under the caption "Business Strategy" will produce sufficient cash
flows to meet MDNY's obligations in 2005. There can be no assurance that MDNY
will be able to achieve sufficient cash flows.

      Pursuant to the Recovery and Subordination Agreement, Island IPA, Island
IPA's participating providers and the Hospitals have agreed, among other things,
until the Island Debt is repaid (a), in the event that MDNY becomes insolvent
(pursuant to a court approved order or admits its inability to pay its debts),
to subordinate their rights to payment by MDNY of outstanding claims (including
IBNR) to all other outstanding claims in an amount equal to the amount of the
then outstanding Island Debt (i.e., payments in excess of capitation), and (b)
that, after payment of third party claims, the claims of Island IPA and its
providers will be subordinated to the claims of the Hospitals. The amount of
Island Debt, and the amount of claims subject to potential subordination
pursuant to the Recovery and Subordination Agreement, were approximately $14
million as of December 31, 2004. In the event of any such insolvency of MDNY,
the effect of any such subordination would be to allow MDNY to pay current
obligations that it would otherwise be unable to pay in an amount equal to the
amount so subordinated, and allow MDNY to be sufficiently solvent to continue
for a period of time in excess of one year.


                                       19
<PAGE>

Capital Reserves and Liquidity

      Certain matters relating to MDNY's regulatory status, its compliance with
applicable reserve and statutory net worth requirements and liquidity are
discussed in Item 1 under the captions "Business--Certain Regulatory Matters".

      The continued failure of MDNY to meet reserve requirements or the failure
of MDNY or the IPAs to comply with other existing laws and regulations or a
significant change in such laws or regulations could materially and adversely
affect the operations, financial condition and prospects of the Company, MDNY
and the IPAs.

      The consolidated financial statements of the Company as of December 31,
2004 and for the year then ended have been prepared assuming that the Company
will continue as a going concern.

      MDNY's long term liquidity depends upon its ability to improve its
operations and financial performance in order to meet its financial obligations,
achieve statutory compliance, and achieve profitability. While the Company
believes that implementation of MDNY's plans to achieve profitability will
provide MDNY with the ability to continue as a going concern, there is no
assurance that such actions will achieve positive results from operations or
adequate working capital and equity sufficient to ensure the long-term viability
of MDNY and the Company. Pursuant to the MDNY Remedial Plan, MDNY is evaluating
offers from potential equity investors. However, there can be no assurance that
any such investment will be completed on terms acceptable to MDNY and its
shareholders, if at all.

      MDNY obtained a Section 1307 loan from LIPH, LLC for $1 million in 1997
and another from CHNLI for $1.4 million in 1998. Interest on these loans accrues
at the prime rate and is payable quarterly. See Note 11 to the Consolidated
Financial Statements included elsewhere herein. These loans together with the
accrued interest and certain statutory items brought MDNY's statutory net worth
at December 31, 2004 to $5.0 million compared to the NYSID required net worth of
$6.7 million. (Under Section 1307, the principal and interest are treated as
equity capital for regulatory purposes and are repayable out of free and
divisible surplus, subject to the prior approval of NYSID). See note 16 to the
consolidated financial statements included elsewhere herein.


                                       20
<PAGE>

Contractual Obligations

      MDNY is contractually obligated to make payments as follows:


                                          Payments Due by Period
                             --------------------------------------------------
Contractual Obligations       Total       1 Year      2-3 Years      4-5 Years
-----------------------       -----       ------      ---------      ---------
                                          (Amounts in thousands)

Operating leases             2,105,124     653,085       616,028       836,011
                             ---------     -------       -------       -------
Total                        2,105,124     653,085       616,028       836,011
                             =========     =======       =======       =======

      Operating lease terms generally range from one to ten years with certain
early termination or renewal provisions at MDNY's option.

      MDNY is subject to various contracts with certain health care providers
and facilities for the provision of health care services to its members. Such
contracts involve payments to or from MDNY, generally on a monthly basis, in the
ordinary course of business and are not included in the above table.

Critical Accounting Policies

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company's
management to make a variety of estimates and assumptions. These estimates and
assumptions affect, among other things, the reported amounts of assets and
liabilities, the disclosure of contingent liabilities and the reported amounts
of revenues and expenses. Actual results can differ from the amounts previously
estimated, which were based on the information available at the time the
estimates were made.

      Our estimate of medical costs payable represents managements best estimate
of the Company's liability for unpaid medical costs as of December 31, 2004,
developed using consistently applied actuarial methods. Management believes the
amount of medical costs payable is reasonable and adequate to cover the
Company's liability for unpaid claims as of December 31, 2004; however, actual
claims payments may differ from established estimates.

      The critical accounting policies described below are those that the
Company believes are important to the portrayal of the Company's financial
condition and results, and which require management to make subjective and/or
complex judgments. Critical accounting policies cover matters that are
inherently uncertain because the future resolution of such matters is unknown.
The Company's board of directors has discussed the development and selection of
the critical accounting estimates and related disclosures with MDNY's
management. The Company believes that its critical accounting policies include
revenue recognition (including the estimation of bad debt and retroactivity
reserves) and medical costs payable (including reserves for incurred but not
reported or paid claims).

      A more detailed description of the significant accounting policies used by
the Company in preparing its financial statements is included in Note 2 of the
notes to the consolidated financial statements.

Revenue Recognition

      Commercial membership contracts are generally established on an annual
basis subject to cancellation by the employer group, individual or MDNY upon 30
days' written notice. Premiums are due monthly and are recognized as revenue
during the month in which MDNY is obligated to provide services to subscribers.
Premiums collected in advance of the coverage period are recorded as unearned
revenue. Premiums receivable are presented net of valuation allowances for
estimated uncollectible amounts, based on known activities and balances and on
historical trends.

      MDNY evaluates the collectibility of its premiums receivable based on a
combination of factors. These estimates are based on MDNY's assessment of the
collectibility of specific accounts, the aging of premiums receivable,
historical retroactivity trends, bad-debt write-offs and other known factors. If
economic or industry trends change beyond MDNY's estimates or if there is a
determination in financial condition of a major group or account, increases in
the reserve for uncollectible accounts may result.


                                       21
<PAGE>

Medical costs payable

      MDNY contracts with various health care providers for the provision of
covered medical care services to its members and compensates those providers on
a fee-for-service basis. MDNY also bears the risk of health care expenses for
covered services provided by non-contracted providers to members. Costs of
health care and medical costs payable for health care services provided to
members are estimated by management based on evaluations of providers' claims
submitted and provisions for IBNR.

      MDNY estimates the provision for IBNR using standard actuarial loss
development methodologies applied to loss development data summarized on the
basis of the month services are rendered and the month claims are paid,
processed or received, and considers other items including, without limitation,
historical levels of denied claims, medical cost trends, seasonal patterns and
changes in membership mix. The estimates for submitted claims and IBNR are made
on an accrual basis and adjusted in future periods as necessary. Adjustments to
prior period estimates, if any, are included in the current period.

      Separately identified as public goods payable are estimated liabilities
for New York's Graduate Medical Education (GME) and hospital Bad Debt and
Charity Care (BDCC) programs, which are state health care public policy
initiatives aimed at defraying the costs of other health care providers, such as
hospitals.

      Management believes that the amount of medical costs payable and Public
Goods Payable are adequate to cover MDNY's ultimate liability for unpaid claims
as of December 31, 2004; however, actual claim payments and other items may
differ from established estimates. Assuming a hypothetical 1% difference between
our December 31, 2004 estimates of medical costs payable and actual costs
payable, 2004 earnings from operations would increase or decrease by $204,000
and diluted net earnings per common share would increase or decrease by
approximately $35 per share.

Inflation

      Medical costs have been rising at a higher rate than that for consumer
goods as a whole. The Company believes that MDNY's premium increases, provider
reimbursement arrangements and other cost control measures mitigate, but do not
wholly offset, the effects of medical cost inflation on MDNY's operations.
MDNY's inability to increase premiums could negatively effect MDNY's future
earnings.

Off Balance Sheet Arrangements

      The company does not have any off balance sheet arrangements.

Recent Accounting Pronouncements

      See notes to the consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

      In the normal course of operations, MDNY is exposed to market risks
arising from adverse changes in interest rates primarily through its borrowing
activities and minimally through its short-term investments. Market risk is
defined for these purposes as the potential change in the fair value of debt
instruments resulting from an adverse movement in interest rates. As of December
31, 2004, MDNY's only borrowings were under two promissory notes from LIPH, LLC
and CHNLI, in the original aggregate principal amount of $2.4 million, which
accrue interest at the prime rate. At December 31, 2004, total principal and
interest due LIPH, LLC and CHNLI was approximately $1.4 million and $2.0
million, respectively. A 100 basis point increase in interest rates, applied to
MDNY's borrowings at December 31, 2004, would result in an increase in annual
interest expense and a corresponding reduction in cash flow (were such interest
to be paid) of approximately $24,000. The Company believes that MDNY's exposure
to market risk relating to interest rate risk is not material.

      MDNY has no derivative financial instruments or derivative commodity
instruments, nor does MDNY generally have any financial instruments entered into
for trading or hedging purposes. The Company believes that MDNY's business
operations are not exposed in any material respect to market risk relating to
foreign currency exchange risk or commodity price risk.



Item 8. Financial Statements and Supplemental Data

See Audited Financial Statements commencing on page F1.

Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

Not applicable.


                                       22
<PAGE>


Item 9A. Controls and Procedures

      Based on an evaluation by the Company's President and Chairman of the
Board and its Chief Financial Officer as of the end of the period covered by
this Annual Report, the Company's disclosure controls and procedures, (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), are
effective.

Item 9B. Other Information.

Not applicable.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

      (a) Directors of the Company

      The required information is to be set forth in the Company's Proxy
Statement for the 2005 Annual Meeting of Stockholders ("Proxy Statement") under
the caption "Directors and Executive Officers," which information is hereby
incorporated herein by this reference.

      (b) Executive Officers of the Company

      The required information is to be set forth in the Proxy Statement under
the caption "Directors and Executive Officers," which information is hereby
incorporated herein by this reference.

      (c) Section 16(a) Beneficial Ownership Reporting Compliance

      The required information is to be set forth in the Proxy Statement under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance," which
information is hereby incorporated herein by this reference.

      (d) Code of Ethics

      The required information is to be set forth in the Proxy Statement under
the caption "Code of Ethics," which information is hereby incorporated herein by
this reference.

Item 11. Executive Compensation

Compensation of Executive Officers

      The information required by this Item is to be set forth in the Proxy
Statement under the caption "Directors and Executive Officers--Compensation of
Executive Officers," which information is hereby incorporated herein by this
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

      The information required by this Item is to be set forth in the Proxy
Statement under the caption "Security Ownership of Certain Beneficial Owners and
of Management and Related Stockholder Matters," which information is hereby
incorporated herein by this reference.

Item 13. Certain Relationships and Related Transactions

      The information required by this Item is set forth in the Proxy Statement
under the caption "Certain Relationship and Related Transactions," which
information is hereby incorporated herein by this reference.

Item 14. Principal Accounting Fees and Services

      The required information is to be set forth in the Proxy Statement under
the caption "Independent Auditor Fees," which information is hereby incorporated
herein by this reference.


                                       23
<PAGE>


                                     PART IV

Item 15. Exhibits and Financial Statement Schedules

      (a)   List of Documents Filed as Part of this Report

      1.    Financial Statements: Report of Independent Registered Public
            Accounting Firm; Consolidated Balance Sheets as of December 31, 2004
            and 2003; Consolidated Statements of Operations and Accumulated
            deficit for the years ended December 31, 2004, 2003 and 2002;
            Comprehensive Income (Loss) for the years ended December 31, 2003,
            2002 and 2001; Consolidated Statements of Cash Flows for the years
            ended December 31, 2004, 2003 and 2002; Notes to the Consolidated
            Financial Statements.

      2.    Schedules:

            Schedule II--Valuation and Qualifying Accounts

      3.    Exhibits


Exhibit No. Description
----------  -----------

3.1.1       Certificate of Incorporation of Long Island Physician Holdings
            Corporation ("LIPH") (8)

3.1.2       Certificate of Incorporation of MDNY Healthcare, Inc. ("MDNY") (6)

3.2         By-Laws of LIPH (5)

3.4         By-laws of MDNY (5)

4           Shareholders Agreement dated December 11, 1995 among MDNY, LIPH and
            Catholic Healthcare Network of Long Island, Inc. ("CHNLI") (1)

10.1        Form of Option Agreement between LIPH and each of the directors
            thereof (2)

10.2        Letter dated December 29, 1999 from MDNY to the Superintendent of
            Insurance, State of New York (3)

10.3        Stock Subscription and Purchase Agreement made as of October 11,
            1995 among LIPH, CHNLI and MDNY (4)

10.4        Section 1307 Loan Agreement between MDNY and LIPH, LLC dated July
            __, 1998 as amended (9)

10.5        Section 1307 Loan Agreement between LIPH and CHNLI dated December
            18, 1997 (4)

10.6        Subordinated Note dated December 18, 1997 made by MDNY in favor of
            CHNLI (5)

10.7        Form of IPA Participation Agreement between MDNY and Island Practice
            Association, IPA, Inc. ("Island IPA") (6)

10.8        Reinsurance Agreement between Preferred Life Insurance Company of
            New York and MDNY, January 1, 1999 Renewal (4)

10.9        Reinsurance Agreement between Preferred Life Insurance Company of
            New York and MDNY, for Point of Service Enrollees, January 1, 1999
            Renewal (4)


                                       24
<PAGE>

10.10       Reconciliation Agreement dated as of May __, 2000 among MDNY, Island
            IPA, CHNLI and LIPH (4)

10.11       Agreement dated May 10, 1999 between MDNY and Catholic Health
            Services of Long Island, Inc. ("CHSLI") (5)

10.12       Agreement dated August 13, 1999 between MDNY and CHSLI (4)

10.13       Employment Agreement dated January 1, 2001 between MDNY and Paul T.
            Accardi(5)(8)

10.14       Employment Agreement dated January 1, 2001 between MDNY and Ronald
            R. Perrone(5)(8)

10.15       Recovery and Subordination Agreement dated July 12, 2001 and
            effective January 1, 2002 among MDNY, Island IPA and CHSLI (6)

10.16       Stock Purchase Agreement dated as of December 31, 2004 between Long
            Island Physician Holdings Corporation, MDNY Healthcare, Inc., and
            Catholic Healthcare Network of Long Island, Inc.(7)

21          Subsidiaries of Registrant (1)

31.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
            (9)

31.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
            (9)

32.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(b)
            and Section 1350 of Chapter 63 of Title 18 of the United States Code
            (9)

32.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(b)
            and Section 1350 of Chapter 63 of Title 18 of the United States Code
            (9)

99          Registrants Proxy Statement for the 2005 Annual Meeting (9)


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

(1)   Filed as an Exhibit to the Company's Registration Statement on Form 10-SB,
      File No. 0-27654, and incorporated herein by this reference.

(2)   Filed as an Exhibit to the Company's Registration Statement on Form
      10-SB/A-2, File No. 0-27654, and incorporated herein by this reference.

(3)   Filed as an Exhibit to the Company's Report on Form 8-K dated March 2,
      2000 and incorporated herein by this reference.

(4)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 1999 and incorporated herein by this reference.

(5)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 2000 and incorporated herein by this reference.

(6)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 2002 and incorporated herein by this reference.

(7)   Filed as an Exhibit to the Company's Report on Form 8-K dated February 16,
      2004 and incorporated herein by this reference.

(8)   This Exhibit is a management compensatory plan or arrangement.

(9)   Filed herewith.


                                       25
<PAGE>


                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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.



                                    LONG ISLAND PHYSICIAN HOLDINGS
                                    CORPORATION

                                    By:   /s/ PAUL KOLKER, M.D.
                                    --------------------------------------------
                                    Name:  Paul Kolker, M.D.,
                                    Title: President and Chief Executive Officer

Date: September 9, 2005


      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


Signature                       Title                           Date
---------                       -----                           ----

/s/ Paul Kolker, M.D.           Chairman of the Board,        September 9, 2005
----------------------------    (Principal Executive Officer)
Paul Kolker, M.D.

/s/ Concetta Pryor              Chief Financial Officer       September 9, 2005
----------------------------    (Principal Financial and
Concetta Pryor                  Accounting Officer)


 /s/ Franco Gallo, M.D.         Director                      September 9, 2005
----------------------------
Franco Gallo, M.D.


 /s/ Robert A. Jason, M.D.      Director                      September 9, 2005
----------------------------
Robert A. Jason, M.D.


/s/ Gregory Kalmar, D.D.S.      Director                      September 9, 2005
----------------------------
Gregory Kalmar, D.D.S.


/s/ Amy Koreen, M.D.            Director                      September 9, 2005
----------------------------
Amy Koreen, M.D.


/s/ Rosario Romano, M.D.        Director                      September 9, 2005
----------------------------
Rosario Romano, M.D.


/s/ Gary Wohlberg, M.D.         Director                      September 9, 2005
----------------------------
Gary Wohlberg, M.D.


                                       26


                                  EXHIBIT INDEX

Exhibit No. Description
----------  -----------

3.1.1       Certificate of Incorporation of Long Island Physician Holdings
            Corporation ("LIPH") (8)

3.1.2       Certificate of Incorporation of MDNY Healthcare, Inc. ("MDNY") (6)

3.2         By-Laws of LIPH (5)

3.4         By-laws of MDNY (5)

4           Shareholders Agreement dated December 11, 1995 among MDNY, LIPH and
            Catholic Healthcare Network of Long Island, Inc. ("CHNLI") (1)

10.1        Form of Option Agreement between LIPH and each of the directors
            thereof (2)

10.2        Letter dated December 29, 1999 from MDNY to the Superintendent of
            Insurance, State of New York (3)

10.3        Stock Subscription and Purchase Agreement made as of October 11,
            1995 among LIPH, CHNLI and MDNY (4)

10.4        Section 1307 Loan Agreement between MDNY and LIPH, LLC dated July
            __, 1998, as amended (9)

10.5        Section 1307 Loan Agreement between LIPH and CHNLI dated December
            18, 1997 (4)

10.6        Subordinated Note dated December 18, 1997 made by MDNY in favor of
            CHNLI (4)

10.7        Form of IPA Participation Agreement between MDNY and Island Practice
            Association, IPA, Inc. ("Island IPA") (6)

10.8        Reinsurance Agreement between Preferred Life Insurance Company of
            New York and MDNY, January 1, 1999 Renewal (4)

10.9        Reinsurance Agreement between Preferred Life Insurance Company of
            New York and MDNY, for Point of Service Enrollees, January 1, 1999
            Renewal (4)

10.10       Reconciliation Agreement dated as of May __, 2000 among MDNY, Island
            IPA, CHNLI and LIPH (4)

10.11       Agreement dated May 10, 1999 between MDNY and Catholic Health
            Services of Long Island, Inc. ("CHSLI") (5)

10.12       Agreement dated August 13, 1999 between MDNY and CHSLI (4)

10.13       Employment Agreement dated January 1, 2001 between MDNY and Paul T.
            Accardi(5)(8)

10.14       Employment Agreement dated January 1, 2001 between MDNY and Ronald
            R. Perrone(5)(8)


                                       27
<PAGE>

10.15       Recovery and Subordination Agreement dated July 12, 2001 and
            effective January 1, 2002 among MDNY, Island IPA and CHSLI (6)

10.16       Stock Purchase Agreement dated as of December 31, 2004 between Long
            Island Physician Holdings Corporation, MDNY Healthcare, Inc., and
            Catholic Healthcare Network of Long Island, Inc.(7)

21          Subsidiaries of Registrant (1)

31.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
            (9)

31.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
            (9)

32.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(b)
            and Section 1350 of Chapter 63 of Title 18 of the United States Code
            (9)

32.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(b)
            and Section 1350 of Chapter 63 of Title 18 of the United States Code
            (9)

99          Registrants Proxy Statement for the 2005 Annual Meeting (9)


(1)   Filed as an Exhibit to the Company's Registration Statement on Form 10-SB,
      File No. 0-27654, and incorporated herein by this reference.

(2)   Filed as an Exhibit to the Company's Registration Statement on Form
      10-SB/A-2, File No. 0-27654, and incorporated herein by this reference.

(3)   Filed as an Exhibit to the Company's Report on Form 8-K dated March 2,
      2000 and incorporated herein by this reference.

(4)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 1999 and incorporated herein by this reference.

(5)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 2000 and incorporated herein by this reference.

(6)   Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
      year ended December 31, 2002 and incorporated herein by this reference.

(7)   Filed as an Exhibit to the Company's Report on Form 8-K dated February 16,
      2004 and incorporated herein by this reference.

(8)   This Exhibit is a management compensatory plan or arrangement.

(9)   Filed herewith.


                                       28


<PAGE>

Long Island Physician
Holdings Corporation

Consolidated Financial Stateents
December 31, 2004 and 2003


<PAGE>

Long Island Physician Holdings Corporation
Index
December 31, 2004 and 2003
--------------------------------------------------------------------------------

                                                                         Page(s)
Report of Independent Registered Public Accounting Firm.................     1
Consolidated Financial Statements
Consolidated Balance Sheets ...........................................      2
Consolidated Statements of Operations and Accumulated Deficit .........      3
Consolidated Statements of Comprehensive Income (Loss) ................      4
Consolidated Statements of Cash Flows .................................      5
Notes to Consolidated Financial Statements ............................   6-18
Schedule of Valuation and Qualifying Accounts..........................     19


<PAGE>


             Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
of Long Island Physician Holdings Corporation

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Long
Island Physician Holdings Corporation (the "Company") and its subsidiary at
December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has a substantial working capital deficit, has
incurred cumulative losses since inception and has experienced a continued
decline in enrollment. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


/s/PRICEWATERHOUSECOOPERS LLP
New York, New York
July 13, 2005


                                      F-1
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Balance Sheets
December 31, 2004 and 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   2004              2003
<S>                                                            <C>               <C>
Assets
Cash and cash equivalents                                      $  1,334,326      $  1,575,080
Premium receivables, net of allowances
  of approximately $1,495,000 in 2004 and $959,000 in 2003        6,705,130        12,544,775
Reinsurance recoverables                                            146,547           450,549
Payments in excess of capitation                                  1,750,000         2,074,163
Prepaid expenses and other current assets                         2,463,596         1,895,814
Due from Catholic Health Services of Long Island                         --         2,382,027
                                                               ------------      ------------
        Total current assets                                     12,399,599        20,922,408
Property, plant and equipment, net                                  303,061           272,134
Restricted cash and cash equivalents                              5,817,203         5,600,790
Payments in excess of capitation, net of current portion         16,710,928        17,953,057
Other assets                                                             --           618,625
                                                               ------------      ------------
          Total assets                                         $ 35,230,791      $ 45,367,014
                                                               ============      ============
Liabilities and Stockholders' Equity
Medical claims payable                                         $ 20,476,052      $ 26,914,532
Public goods payable                                              4,725,026         6,779,734
Unearned premium revenue                                          1,885,423         1,862,367
Accounts payable and accrued expenses                             2,546,476         2,933,560
Current portion of capital lease obligations                             --             1,479
                                                               ------------      ------------
          Total current liabilities                              29,632,977        38,491,672
Related party note payable and accrued interest                   3,450,673         3,346,059
                                                               ------------      ------------
          Total liabilities                                      33,083,650        41,837,731
                                                               ------------      ------------
Minority interest in MDNY Healthcare, Inc.                        1,209,364         1,682,934
                                                               ------------      ------------
Stockholders' equity
  Class A common stock, $.001 par value; 10,000 shares
   authorized, 1,798 issued and outstanding                               2                 2
  Class B common stock, $.001 par value; 25,000 shares
   authorized, 4,044 issued and outstanding                               4                 4
  Additional paid-in capital                                     11,478,536        11,478,536
  Accumulated deficit                                           (10,540,765)       (9,632,193)
                                                               ------------      ------------
          Total stockholders' equity                                937,777         1,846,349
                                                               ------------      ------------
          Total liabilities and stockholders' equity           $ 35,230,791      $ 45,367,014
                                                               ============      ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-2
<PAGE>


Long Island Physician Holdings Corporation
Consolidated Statements of Operations and Accumulated Deficit
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          2004               2003               2002
<S>                                                  <C>                <C>                <C>
Revenue
Premiums earned                                      $ 135,209,066      $ 153,275,616      $ 158,310,155
                                                     -------------      -------------      -------------
        Total revenue                                  135,209,066        153,275,616        158,310,155
                                                     -------------      -------------      -------------
Expenses
Medical services expense                               117,052,244        132,202,229        137,768,935
Commissions expense                                      5,255,153          6,244,726          6,731,587
General and administrative expenses                     14,359,353         13,527,932         15,540,781
Depreciation                                               104,815            161,770            337,718
                                                     -------------      -------------      -------------
        Total expenses                                 136,771,565        152,136,657        160,379,021
                                                     -------------      -------------      -------------
        Operating income (loss)                         (1,562,499)         1,138,959         (2,068,866)
Investment and other income                                156,458            394,409            675,923
                                                     -------------      -------------      -------------
        Income (loss) before income taxes
          and minority interest                         (1,406,041)         1,533,368         (1,392,943)
Provision for income (taxes) benefit                        23,898            (87,737)           (46,725)
Minority interest in (income) loss of subsidiary           473,571           (435,619)           475,090
                                                     -------------      -------------      -------------
        Net income (loss)                                 (908,572)         1,010,012           (964,578)

Accumulated deficit
Beginning of year                                       (9,632,193)       (10,642,205)        (9,677,627)
                                                     -------------      -------------      -------------
End of year                                          $ (10,540,765)     $  (9,632,193)     $ (10,642,205)
                                                     =============      =============      =============

Basic and diluted income (loss) per share            $        (156)      $        173      $        (165)
Basic and diluted weighted average shares                    5,842              5,842              5,842
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-3
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

                                       2004           2003            2002

Net (loss) income                  $ (908,572)     $1,010,012     $ (964,578)
                                   ----------      ----------     ----------
    Comprehensive income (loss)    $ (908,572)     $1,010,012     $ (964,578)
                                   ==========      ==========     ==========



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-4
<PAGE>


Long Island Physician Holdings Corporation
Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    2004             2003             2002
<S>                                                             <C>              <C>              <C>
Cash flows from operating activities
Net income (loss)                                               $  (908,572)     $ 1,010,012      $  (964,578)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation                                                        104,813          161,770          337,718
Write-off of stabilization pool receivables                         618,625               --               --
Minority interest in income (loss) of subsidiary                   (473,571)         435,619         (475,090)
Changes in operating assets and liabilities:
Premium receivables, net                                          5,839,645       (3,845,437)       1,309,179
Reinsurance recoverables                                            304,002          184,871          420,058
Payments in excess of capitation                                  1,566,292        2,187,889               --
Prepaid expenses and other current assets                          (567,781)         690,967         (954,269)
Due from Catholic Health Services of Long Island                  2,382,027               --               --
Medical claims payable                                           (6,438,480)      (2,052,489)      (1,305,311)
Public goods payable                                             (2,054,708)       1,412,584        2,712,535
Unearned premium revenue                                             23,056          (92,813)       1,239,902
Accounts payable and accrued expenses                              (387,084)         686,908       (1,428,699)
Accrued interest payable                                            104,614           98,909               --
                                                                -----------      -----------      -----------
Net cash provided by operating activities                           112,878          878,790          891,445
                                                                -----------      -----------      -----------
Cash flows from investing activities
Purchase of property, plant, and equipment                         (135,740)         (41,659)         (39,592)
Decrease (increase) in restricted cash and cash equivalents        (216,413)          56,345       (2,059,510)
                                                                -----------      -----------      -----------
Net cash provided by (used in) investing activities                (352,153)          14,686       (2,099,102)
                                                                -----------      -----------      -----------
Cash flows from financing activities
Payments on capital lease obligations                                (1,479)         (12,845)         (55,984)
                                                                -----------      -----------      -----------
Net cash used in financing activities                                (1,479)         (12,845)         (55,984)
                                                                -----------      -----------      -----------
Increase (decrease) in cash and cash equivalents                   (240,754)         880,631       (1,263,641)
Cash and cash equivalents
Beginning of year                                                 1,575,080          694,449        1,958,090
                                                                -----------      -----------      -----------
End of year                                                     $ 1,334,326      $ 1,575,080      $   694,449
                                                                ===========      ===========      ===========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-5
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

1.    Organization

      Long Island Physician Holdings Corporation (the "Company" or "LIPH Corp")
      was incorporated on October 11, 1994 in the State of New York as a holding
      company for purposes to advance the delivery of healthcare on Long Island,
      New York (Queens, Nassau and Suffolk Counties). The Company is controlled
      by individual physicians residing in New York State. The accompanying
      consolidated financial statements include the activity of the Company and
      its majority owned subsidiary, MDNY Healthcare, Inc. ("MDNY"), a health
      maintenance organization. Catholic Health Network of Long Island ("CHNLI")
      is the minority owner of MDNY.

      The majority of healthcare services are provided by Catholic Health
      Services of Long Island ("CHSLI"), an affiliate of CHNLI, and physicians
      who are members of affiliated independent practice associations ("IPAs").
      Island Professional Association IPA, Inc. ("Island IPA") is the primary
      affiliated IPA, and is owned by Long Island Physician Holdings, LLC
      ("LIPH, LLC"). Island IPA participating providers who hold membership
      interests in LIPH, LLC also own shares in LIPH, Corp (see note 8).

2.    Summary of Significant Accounting Policies

      Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
      and its majority-owned subsidiary, MDNY. Intercompany balances and
      activities have been eliminated in consolidation. Minority interest
      represents the proportionate share of the equity in the subsidiary that is
      attributable to the minority owner.

      Basis of Presentation

      The accompanying consolidated financial statements have been prepared on
      the accrual method of accounting in conformity with accounting principles
      generally accepted in the United States.

      Cash and Cash Equivalents

      The Company considers all highly liquid investments with original maturity
      of three months or less when purchased to be cash equivalents. Included in
      cash and cash equivalents are amounts on deposit at one financial
      institution in excess of $100,000, which is the maximum insured by the
      Federal Deposit Insurance Company. Management believes that the
      institutions are viable entities and no risk of loss exists. The Company
      routinely invests its restricted funds in money market accounts. These
      funds generally invest in highly liquid securities.

      Medical Services Expense

      Medical services expense, as recorded in the consolidated statements of
      operations and accumulated deficit, includes the cost of inpatient
      hospitalization and outpatient medical services provided or contracted for
      and are accrued in the period they are incurred. The costs of claims
      incurred but not reported are estimated based on historical data, current
      enrollment statistics, patient census data and other information. Such
      estimates and the resulting reserves are continually reviewed and updated,
      and any adjustments resulting therefrom are reflected in earnings
      currently. Amounts owed to Island IPA participating providers, CHS
      hospitals and all other providers of medical services are recorded as
      medical claims payable in the consolidated balance sheets. Medical
      services expense relating to CHS and Island IPA were approximately $55
      million, $64 million and $81 million for the years ended December 31,
      2004, 2003 and 2002, respectively.



                                      F-6
<PAGE>


Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      Property, Plant and Equipment

      Property, plant and equipment, including leasehold improvements, are
      recorded at cost. Depreciation is provided on the straight-line method
      over the estimated useful lives of the assets, which range from 3 to 10
      years. Equipment recorded under capital leases is amortized on the
      straight-line method over the shorter of the lease term or the estimated
      useful life of the equipment. When assets are retired or otherwise
      disposed of, the cost and the related depreciation are reversed from the
      account and any gain or loss is reflected in the consolidated statement of
      operations and accumulated deficit. Repairs and maintenance expenditures
      are expensed as incurred.

      Premium Revenue

      Commercial membership contracts are written on an annual basis subject to
      cancellation by the employer group upon thirty days written notice.
      Premiums are due monthly and are recognized as revenue during the period
      in which the Company is obligated to provide services to subscribers.
      Premiums collected in advance are deferred and recorded as unearned
      premium revenue in the consolidated balance sheets.

      Reinsurance

      Reinsurance premiums are reported as medical services expense, and
      reinsurance recoveries, when collection is deemed probable, are reported
      as a reduction of medical services expense in the consolidated statements
      of operations and accumulated deficit.

      Income Taxes

      Under the balance sheet-based liability method specified by Statement of
      Financial Accounting Standards No. 109, "Accounting for Income Taxes",
      ("SFAS 109"), deferred income taxes recorded by the Company reflect the
      net effects of temporary differences between the carrying amount of assets
      and liabilities for financial reporting purposes and the amounts used for
      income tax purposes.

      As of December 31, 2004 and 2003, the Company's net operating income
      (loss) for tax purposes differs from the income (loss) for financial
      reporting purposes primarily as a result of the timing of bad debt
      write-offs, accrued interest and depreciation expense. The Company has
      recorded a full valuation allowance against the potential future benefit
      of such net deferred tax assets to the amount expected to be realized.

      Use of Estimates

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. The most
      significant estimates relate to allowances for uncollectible accounts,
      medical claims payable and receivables and payables recorded relating to
      New York public goods and stabilization pools. Actual results could differ
      from those estimates.

      Segment Reporting

      The Company currently operates in one reportable business segment. All of
      the Company's services are provided within the United States, and all of
      the Company's assets are located within the United States of America.



                                      F-7
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      Reclassifications

      Certain reclassifications have been made to amounts previously reported to
      conform to current year's presentation. Such reclassifications had no
      effect on changes in stockholders' equity.

      Stock-based Compensation Plan

      SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as
      amended by SFAS No. 148, "Accounting for Stock-Based Compensation -
      Transition and Disclosure and amendment of FASB Statement No. 123" ("SFAS
      148") encourages, but does not require, companies to record compensation
      cost for stock-based compensation plans at fair value. In addition, SFAS
      148 provides alternative methods of transition for a voluntary change to
      the fair value based method of accounting for stock-based employee
      compensations, and amends the disclosure requirements of SFAS 123 to
      require prominent disclosures in financial statements about the method of
      accounting for stock-based employee compensation and the effect of the
      methods used on reported results.

      The Company has chosen to adopt only the disclosure provisions of SFAS No.
      148 and continues to account for stock-based compensation using the
      intrinsic value method prescribed in Accounting Principles Board Opinion
      No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related
      interpretations. The Company's stock option plan is described in note 17.

      Recent Accounting Pronouncements

      In December 2004, the FASB issued Statement of Financial Accounting
      Standards No. 132 (revised 2004), Share-Based Payment (FAS No. 123(R)),
      which amends FASB Statement Nos. 13 and 95. FAS No.123(R) requires all
      companies to measure compensation expense for all share-based payments
      (including employee stock options) at fair value and recognize the expense
      over the related service period. Additionally, excess tax benefits, as
      defined in FAS No. 123 (R), will be recognized as an addition to paid-in
      capital and will be reclassified from operating cash flows to financing
      cash flows in the Consolidated Statements of Cash Flows. FAS No. 123 (R)
      will be effective for the third quarter of 2005. All options outstanding
      at December 31, 2004 expired July 1, 2005 and no additional options were
      issued.

3.    Going Concern

      The Company's financial statements have been presented on the basis that
      it will continue as a going concern, which contemplates the realization of
      assets and the satisfaction of liabilities in the normal course of
      business. The Company has a substantial working capital deficit, has
      incurred cumulative losses since inception, and has experienced a
      continued decline in enrollment. Furthermore, the Company has utilized
      substantially all of the cash raised in its initial equity infusion in
      funding its operations and currently does not meet its New York State
      contingent reserve funding requirement. Also, CHSLI and the Diocese of
      Rockville Centre notified the company that they will not renew their
      current subscriber contracts with MDNY upon expiration thereof effective
      January 1, 2006 and 2005 respectively.

      The Company is in the process of negotiating certain transactions and has
      implemented certain plans in order to provide liquidity to the Company and
      achieve profitability. A summary of these transactions and plans is as
      follows:



                                      F-8
<PAGE>


Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      o     Effective January 1, 2005, the New York State Insurance Department
            approved additional premium rate increases.

      o     Management has initiated efforts to reduce operating and medical
            expenses primarily relating to staffing reductions and renegotiation
            of provider contracts.

      o     Applying for an Article 42 (accident and health company) license to
            allow MDNY to develop new products and benefit plan designs and
            match increased cost sharing provisions that certain of MDNY's
            competitors have marketed to their customers.

      o     Achieving administrative efficiencies by, among other things,
            increased use of automation and electronic transmission.

      o     Expanding into other markets to increase name recognition and
            promote enrollment growth.

      o     Seeking investment from third parties.

      While management believes that implementation of its plans to achieve
      profitability will provide them with the ability to continue as a going
      concern, there is no assurance that such actions will achieve positive
      results from operations or adequate working capital and equity.

4.    Recovery and Subordination Agreement

      In 2000 and prior years, the Company had various risk-sharing
      participation arrangements with affiliated IPAs in which the Company was
      obligated to pay the IPAs a percentage of commercial and Medicare
      premiums, net of provision for uncollectible accounts and commission
      expenses ("Capitated Arrangement"). These related IPAs were responsible
      for all healthcare service reimbursements to its members and other
      non-member third-party providers with whom the Company had contracted.

      Effective January 1, 2001, the Company entered into a new financial
      arrangement with affiliated IPAs. Under this arrangement, IPA
      participating physicians are reimbursed on a fee for service basis for
      covered services, as defined in the applicable subscriber agreement.
      Furthermore, during 2001, as part of the agreement between the Company and
      the IPAs, the Company agreed to assume responsibility for payments related
      to the New York State Public Goods Pools (see note 11). Since the Company
      agreed to assume responsibility for medical services provided to its
      members, it therefore bears full risk under this financial arrangement.

      On July 31, 2002, NYSID issued its Report on Examination of MDNY
      Healthcare, Inc. as of June 30, 2000 dated April 2, 2001 and revised July
      31, 2002 (the "Final Report"). The Final Report states, among other
      things, that, based on the execution of a Recovery and Subordination
      Agreement between the Company and the NYSID, the NYSID permitted a
      receivable to be recognized from Island IPA as an admitted asset for
      medical claims paid by MDNY in excess of the negotiated Capitated
      Arrangement ("Payments in Excess of Capitation"). MDNY agreed to enter
      into non-risk contracts with the IPA's and the examination insolvency was
      eliminated.

      The Company recognized an initial receivable of approximately $23.2
      million, which represented actual claims paid in 2001 to Island IPA
      participating providers with dates of service prior to January 1, 2001.
      Subsequent to the initial recognition, the receivable has been adjusted
      for



                                      F-9
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      additional claims paid after 2001, and reduced by a 5% withhold of
      payments as stipulated in the Recovery and Subordination Agreement. The
      net amount due from Island IPA, which is classified in the balance sheet
      as payments in excess of capitation, was approximately $18.5 million and
      $20.0 million as of December 31, 2004 and 2003, respectively.

      In accordance with the Recovery and Subordination Agreement:

      o     Island IPA for itself and on behalf of each of its participating
            physicians and CHS and its hospital affiliates (collectively the
            "Subordinating Parties") agree to subordinate their rights to
            payment of outstanding claims, including claims incurred but not
            reported ("IBNR"), owed by MDNY to all other creditors in the event
            of MDNY's insolvency. The aggregate amounts owed to these
            Subordinating Parties in the form of medical claims payable as of
            December 31, 2004 and 2003 were approximately $14 million and $20
            million, respectively.

      o     Effective January 1, 2002, Island IPA began retaining a
            non-distributable withhold in the amount of 5% of payments to
            participating providers and has remitted the entire amount of the
            withhold to the Company. During 2004 and 2003, the amount remitted
            to the Company reduced the payments in excess of capitation
            receivable by approximately $1.5 million and $2.2 million,
            respectively.

      o     Also effective January 1, 2002, the Company is obligated to make
            payment to Island IPA for unrestricted access to its network of
            participating providers in amount equal to $1.50 per member per
            month ("network access fee"). The amounts owed by the Company to
            Island IPA for the network access fee were to be used to reduce the
            payments in excess of capitation. However, because
            MDNY reported a loss, continues to be deficient in meeting its
            required contingent reserves, and continues to fund the IPA's
            administrative costs, Island IPA agreed to waive the network
            access fee for years 2004 and prior.

      o     Island IPA is obligated to pay the Company a portion of all income
            it receives from sources other than the Company. Such payments would
            be in an amount equal to gross collections minus operational and
            administrative expenses ("net revenue") received by Island IPA from
            such sources. Since the effective date of the agreement, Island IPA
            has not received any income from other sources, and therefore, the
            Company has not received any such payments as of December 31, 2003.

      o     The withhold remittances, net revenue remittances, and network
            access fees described above will remain in effect until such time as
            the repayment of the debt to the Company has been fully satisfied.

      The Company had a negative working capital of approximately $17.2 million
      and $17.5 million at December 31, 2004 and 2003, respectively. In
      accordance with the Recovery and Subordination Agreement, if MDNY admits
      its inability to pay its debts at any point in time, Island IPA's
      participating providers and CHSLI have agreed to the subordination of the
      portion of outstanding medical claim obligations they are owed, up to the
      amount these providers owe as payments in excess of capitation (see note
      4). This amount of potential subordination was approximately $14 million
      and $20 million as of December 31, 2004 and 2003, respectively.


                                      F-10
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

5.    NYSID Reserve Requirements

      As a condition of continued licensure by NYSID, the Company must maintain
      certain reserve requirements to protect its subscribers in the event the
      Company is unable to meet its obligations.

      Escrow Deposit Reserve Requirement

      In accordance with the NYSID regulations, the Company is required to
      maintain certain amounts on deposit in an escrow account for the
      protection of enrollees, equal to 5% of projected medical expenditures of
      the following year or $100,000, whichever is greater. The Company had
      approximately $5,817,000 and $5,601,000 of money market funds on deposit
      in escrow as of December 31, 2004 and 2003, respectively. These funds are
      included in the consolidated balance sheets as restricted cash and cash
      equivalents. The Company met the escrow deposit requirement of $5.1
      million at December 31, 2004, calculated as 5% of an approximate $102
      million in projected medical expenditures for 2005.

      Contingent Reserve Requirement

      The Company is required to maintain a contingent reserve fund which should
      be increased in an amount equal to 1% of net premium revenue at year end
      but not to exceed 5% ( 7% if out of network coverage is written by the
      company other than Direct Point Of Service of net premium revenue reported
      for the year). This contingent reserve requirement shall be deemed to have
      been met if the statutory net worth of the Company equals or exceeds the
      contingent reserve requirement. According to New York Codes of Rules and
      Regulations, if the contingent reserve fund is less than the escrow
      deposit account, the escrow deposit account may be used to offset the
      contingent reserve fund.

      The Company received approval from the NYSID in November 2004, to report
      the contingent reserve at 5% of the 2003 net premium written as the
      Company does sell out of network benefit plans other than Direct Point Of
      Service. As such, the Company continues to report its contingent reserve
      at 5% of net Premiums for the year ended December 31, 2004.

      At December 31, 2004, the contingent reserve fund requirement was greater
      than the escrow deposit account. As statutory net assets of the Company
      were $5.4 million, the Company did not meet the contingent reserve fund
      requirement of $6.7 million at December 31, 2004.

6.    Concentration of Credit Risk

      The mix of receivables from related parties and others at December 31,
      2004 and 2003, are as follows:

                                                    2004          2003

Related parties                                        41%          50%
Other                                                  59           50
                                                 --------     --------
                                                      100%         100%
                                                 ========     ========


                                      F-11
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

7.    Related Parties

      The Company had the following material transactions with related parties:

      Catholic Health Services of Long Island ("CHSLI") and the Diocese of
      Rockville Centre ("Diocese")

      The Company also provides health care services for employees of CHSLI and
      its affiliated entity, the Diocese. The premiums from these services are
      included in premiums earned in the consolidated statements of operations
      and accumulated deficit, and outstanding receivables for these services
      are part of premiums receivable in the consolidated balance sheets. CHSLI
      and Diocese premiums represented approximately 28% of total premiums
      earned by the Company during 2004 and 27% and 30% during 2003 and 2002,
      respectively. In addition, CHSLI premium receivables outstanding as of
      December 31, 2004, 2003 and 2002 were approximately $3.3 million, $6.5
      million and $3.0 million, respectively. There were no outstanding premium
      receivables due from the Diocese at December 31, 2004 and 2003.

      MDNY is subject to the New York Women's Health and Wellness Act, which, as
      of January 1, 2003, obligates MDNY to provide contraceptive drugs and
      devices to its members, in conflict with the ethical policies of the
      Diocese to which CHNLI and CHSLI are subject. In light of this conflict,
      the Diocese withdrew its membership as of January 1, 2005 and CHNLI
      entered into stock purchase agreements with MDNY and LIPH, Inc. to
      effectuate CHNLI's desire to withdraw as a MDNY shareholder (see note
      #17). CHSLI notified MDNY that they will not renew their current
      subscriber contract effective January 1, 2006.

8.    Reinsurance

      The Company entered into a stop-loss insurance agreement with an insurance
      company to limit its losses on individual claims. In 2004, 2003 and 2002,
      under the terms of this agreement, a portion of paid claims in excess of
      $100,000 for hospital services were reimbursed to the Company.

      Reinsurance premiums of approximately $352,000 in 2004, $528,000 in 2003
      and $948,000 in 2002 are included in medical services expense on the
      consolidated statements of operations and accumulated deficit. Any
      reinsurance recoveries are also included in medical services expense.

      Reinsurance recoverables at December 31, 2004 and 2003 were approximately
      $146,000 and $451,000, respectively, of which $146,000 and $289,000 were
      related to the years ended December 31, 2004 and 2003, respectively.


                                      F-12
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

9.    Property, Plant and Equipment

      The major components of property, plant and equipment as of December 31,
      2004 and 2003 are as follows:

                                                     2004           2003

      Equipment                                  $  337,050     $  337,050
      Furniture and fixtures                        536,917        535,197
      Leasehold improvements                        484,207        484,207
      Computer equipment and software             2,808,135      2,674,115
                                                 ----------     ----------
                                                  4,166,309      4,030,569
      Less accumulated depreciation               3,863,248      3,758,435
                                                 ----------     ----------
           Property, plant and equipment, net    $  303,061     $  272,134
                                                 ==========     ==========

10.   Related Party Notes Payable

      During 1998, with the approval of the NYSID, the Company obtained a loan
      from LIPH, LLC. The outstanding balance, including accrued interest, was
      approximately $1,406,000 and $1,363,000 at December 31, 2004 and 2003,
      respectively. Interest on this amount accrues at the prime rate (5.25% at
      December 31, 2004) and is payable quarterly commencing October 1, 1998.
      The entire principal balance plus any accrued interest was originally due
      on July 1, 1999, but is subject to prior approval by the NYSID.

      In April 1999, the Company and LIPH, LLC amended the note agreement to
      provide LIPH, LLC with the unilateral right to convert the note to an
      equity investment in MDNY. In August 1999, MDNY's Board authorized the
      conversion of the outstanding balance of the LIPH, LLC note to shares of
      common stock in MDNY. The outstanding balance has not yet been converted,
      nor have additional shares been issued, as the Company has not yet
      received approval from the NYSID. Interest expense for the year ended
      December 31, 2004 was $43,000.

      During 1997, with the approval of the NYSID, the Company obtained a loan
      from CHS. The outstanding balance, including accrued interest, was
      approximately $2,044,000 and $1,983,000 at December 31, 2004 and 2003,
      respectively. Interest on this amount accrues at the prime rate (5.25% at
      December 31, 2004) and is payable quarterly commencing April 1, 1998. The
      entire principal balance under the note plus any accrued interest is due
      in full upon approval by the NYSID. Interest expense for the year ended
      December 31, 2004 was $61,000.

      Repayment of the principal and payment of accrued interest on the note
      shall be made only out of the free and divisible surplus of the Company
      and all amounts to be paid or repaid are subject to the prior approval of
      the NYSID.


                                      F-13
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

11.   Medical Claims Payable

                                                        Years Ended
                                                        December 31,
                                             ---------------------------------
                                                  2004                2003

      Balance at January 1                   $  26,914,532       $  28,967,021
      Incurred related to
       Current year                            112,638,503         127,083,497
       Prior years                                 (32,090)           (838,973)
                                             -------------       -------------
             Total incurred                    112,606,413         126,244,524
                                             -------------       -------------
      Paid related to
       Current year                             90,384,257          98,833,772
       Prior years                              26,589,559          27,613,218
       Withhold paid                             2,071,077           1,850,023
                                             -------------       -------------
             Total paid                        119,044,893         128,297,013
                                             -------------       -------------
      Balance at December 31                 $  20,476,052       $  26,914,532
                                             =============       =============


      The Company recognizes changes in accounting estimates for claims incurred
      but unpaid as more experience is acquired or as additional information is
      obtained. During 2004 and 2003, adjustments to prior year estimates
      resulted in an increase to gain from operations of $32,090 and $838,973,
      respectively.

12.   Commitments and Contingencies

      Public Goods Pool

      The Company makes payments to New York State funding pools to finance
      hospital bad debt and charity care ("BDCC"), graduate medical education
      ("GME") and other state programs under the Health Care Reform Act of 1996
      ("HCRA"). Outstanding liabilities related to the pools are included within
      public goods payable on the consolidated balance sheets. Expenses related
      to these pools were approximately $4.7 million, $4.4 million and $4.1
      million for the years ended December 31, 2004, 2003 and 2002,
      respectively, and are included within medical services expense on the
      consolidated statements of operations.

      Other Programs

      Under HCRA, New York State provides a limited amount of stop loss
      insurance funding to cover 90% of certain paid claims for specified New
      York Mandated Plans and for the Healthy New York Plan. The Company has
      recorded a receivable of approximately $1,457,000 and $883,000 at December
      31, 2004 and 2003, respectively, which is included in prepaid expenses and
      other current assets on the consolidated balance sheets. Additionally, New
      York State imposes assessments that are used to fund the state health and
      insurance departments and other state initiatives.

      Stabilization Pools [Regulation 146]

      Insurers who participate in the small group and individual insurance
      market in New York are required to contribute certain amounts to the New
      York Stabilization Pools, while others receive certain amounts from the
      New York Stabilization Pools, based upon the criteria outlined in the
      applicable regulations. These pools are designed to spread claims risk
      between insurers who participate in this market. For the years ended
      December 31, 1999 and prior, two separate pools


                                      F-14
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      were in operation; one determined by demographic data and the other
      determined by the incidence of certain specified medical conditions. For
      years subsequent to 1999, a single pool operates based on the experience
      of each insurer with respect to specified medical conditions. Although
      there are no liabilities due under the pools for the year ended 1999-2004
      (see Note 16), the NYSID will continue to evaluate potential pool
      liabilities for years subsequent to 2004.

      Lease Commitments

      Future minimum rental expense commitments to be paid under operating
      leases, for office space and other facilities, are as follows for each of
      the next five years and in aggregate:

      Year                                                        Amount

      2005                                                      $  653,085
      2006                                                         616,028
      2007                                                         624,025
      2008                                                         211,986
                                                                ----------
                                                                $2,105,124
                                                                ==========

      Litigation

      The Company is involved in litigation arising in the course of business.
      Management estimates that these matters will be resolved without material
      adverse effect on the Company's future financial position or results from
      operations.

13.   Income Taxes

      The components of the income tax (benefit) expense are as follows:

                                           2004        2003      2002
      Current
      Federal                           $(28,821)    $ 21,522   $    --
      State                                4,923       66,215    46,725
                                        --------     --------   -------
           Total                        $(23,898)    $ 87,737   $46,725
                                        ========     ========   =======

      The differences between the provision for federal income taxes and the
      expected income taxes computed using statutory income tax rates are as
      follows:

<TABLE>
<CAPTION>

                                                        2004           2003           2002
<S>                                                <C>            <C>            <C>
Federal income tax expense at statutory rate       $(478,052)     $ 478,650      $(473,600)
State income taxes, net of federal tax benefit        (3,200)        43,702         30,839
Change in valuation allowance                        594,049       (612,270)       553,186
Permanent differences                                 13,246         82,643         52,982
Other                                               (156,341)        95,012       (116,682)
                                                   ---------      ---------      ---------
Total income tax benefit expense                   $ (23,898)     $  87,737      $  46,725
                                                   =========      =========      =========
</TABLE>


                                      F-15
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

      Significant components of the Company's deferred tax liabilities and
      assets as of December 31, were as follows:

                                    2004             2003             2002

Defered tax assets
Fixed assets                 $   (58,658)     $    10,165      $    60,401
Receivables                      597,490          383,305          384,021
Accrued interest                 419,847          378,043          338,519
Net operating losses           3,870,565        2,916,189        3,535,797
Tax credit carry forward         117,505          117,182               --
Other                              4,695           15,954          114,370
Valuation allowance           (4,951,444)      (3,820,838)      (4,443,108)
                             -----------      -----------      -----------
Net deferred tax asset       $        --      $        --      $        --
                             ===========      ===========      ===========

      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of assets and liabilities and their respective tax bases.
      As of December 31, 2004, 2003, and 2002, the Company has determined that
      it is more likely than not that the future tax benefit of the deferred tax
      assets will not be realized. As such, a valuation allowance has been
      recorded against the full value of the net deferred tax asset.

      The company does not file consolidated tax returns with MDNY, therefore,
      as of December 31, 2004, 2003, and 2002, the Company has a net operating
      loss carryforward for federal income tax purposes of $1.5 million, $1.3
      million, and $1.2 million respectively. At December 31, 2004, 2003, and
      2002, the Company's net operating loss carryforward for state purposes was
      $1.2 million, $.9 million, and $.8 million respectively.

      As of December 31, 2004, 2003, and 2002, MDNY has a net operating loss
      Carry forward for Federal income tax purposes of approximately $8.5
      million, $7.5 million, and $8.9 million respectively, which will begin to
      expire in 2011. At December 31, 2004, 2003 and 2002, MDNY's net operating
      loss carry forward for state purposes was approximately $8.3 million, $7.3
      million and $8.7million respectively.

14.   Stockholders' Equity

      During 1995, the Company offered its shares through a private placement
      offering to various office based physicians, psychologists, podiatrists
      and dentists practicing on Long Island, New York (Queens, Nassau and
      Suffolk Counties, New York).

      Shares of Class A and Class B common stock were offered to physicians
      based on their specialties at a price of $2,000 per share. The Class A
      common stock is voting stock and has been offered only to primary care
      physicians, specialty care physicians, anesthesiologists and oral
      surgeons. The Class B common stock is non-voting stock. Holders of Class B
      common stock are not entitled to vote their shares of Class B common stock
      at meetings of the Company's stockholders, except as provided by the
      Business Corporation Law of the State of New York with respect to certain
      extraordinary corporate transactions.

      During 1996, the Company issued 39 Class A shares and 63 Class B shares
      for $204,000. The Company reserved for issuance upon exercise of
      "non-qualified" stock options that number of shares of Class B common
      stock equal to no more than fifteen (15%) of the total number of shares
      currently outstanding. The Company has issued to certain organizers 1,041
      options to purchase shares of Class B common stock at $2,000 per share,
      exercisable at any time after July 1, 1998. The options are
      non-transferable and expired on July 1, 2005.

      In June 2004, the company, offered certain non-physicians the opportunity
      to exchange one share of Class B stock for one share of Class A voting
      stock. As a result f the exchange, at December 31, 2004 there were 1798
      shares of Class A common stock and 4,044 shares of Class B common stock
      outstanding.


                                      F-16
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

15.   MDNY Healthcare, Inc.

      At December 31, 2003, the Company holds 907 shares of MDNY's $.001 par
      value Class A common stock, for which it paid $9,070,000. CHNLI holds the
      remaining 451 shares of MDNY's $.001 par value Class B common stock, for
      which it paid $4,510,000. CHNLI's ownership interest in MDNY is reflected
      as minority interest in the accompanying consolidated financial
      statements.

      The holders of Class A common stock, voting as a class, shall elect ten
      directors by the affirmative vote of the majority of the issued and
      outstanding Class A common stock entitled to vote thereon. The holders of
      Class B common stock, voting as a class, shall elect four directors by the
      affirmative vote of the majority of the issued and outstanding Class B
      common stock entitled to vote thereon. The holders of Class A and Class B
      common stock, voting together, shall elect four directors by the
      affirmative vote of the majority of the issue and outstanding Class A and
      Class B common stock entitled to vote thereon.

      CHNLI shall have the following additional rights:

      o     CHNLI, being the owner of 100% of MDNY's Class B common stock, shall
            have the right to nominate and elect four members of the MDNY board
            of directors, and have representation on certain key committees of
            the MDNY board.

      o     A supermajority voting is included in the MDNY by-laws with respect
            to (i) the selection and inclusion of network hospitals, (ii)
            amendment, modification or change to the MDNY by-laws, (iii) any
            modification or change to risk pool funding methodologies, (iv) the
            issuance of additional shares of MDNY stock, and (v) the transfer by
            either CHNLI or the Company of any MDNY stock held by either entity.
            The separate and affirmative vote of (1) at least a majority of the
            CHNLI elected directors and (2) at least a majority of the
            non-CHNLI-appointed directors shall be required to effect any of the
            foregoing actions of the MDNY board.

16.   Basic and Diluted Income (Loss) Per Share

      Basic and diluted income (loss) per share is based on the number of shares
      of Class A common stock and Class B common stock outstanding during the
      period. At December 31, 2004 and 2003, the Company had outstanding stock
      options to purchase 1,041 shares of Class B common stock that were not
      included in the computation of diluted EPS because the exercise price was
      greater than the average market price of common shares.

17.   Subsequent Events

      Stock Purchase Agreement

      MDNY, LIPH, Inc. and CHNLI entered into a Stock Purchase Agreement dated
      December 31, 2004. Pursuant to the Stock Purchase Agreement, LIPH will
      purchase from CHNLI all shares of Class B common stock of MDNY owned by
      CHNLI for a payment of $10. CHNLI will contribute to the capital of MDNY,
      and for cancellation, the Subordinated Note, together with accrued
      interest, dated December 18, 1997 (see Note 10). Upon the closing of such
      purchase, LIPH will be the sole stockholder of MDNY.

      Additional consideration, defined as a percentage of proceeds, will be
      given to CHNLI in the event the Company is sold prior to December 31,
      2008. Certain conditions to closing are in the process of being completed
      which include approval from certain regulatory authorities including the
      NYSID, (which was granted to MDNY in March 2005), the New York Department
      of Health, (which was granted in August 2005) the Attorney General of the
      State of New York and the Supreme Court of the State of New York.


                                      F-17
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------


      Stabilization Pools

      On July 13, 2005, MDNY was notified by the NYSID that there will be no
      liabilities imposed on the Company for payments to the SMC pools
      established under Regulation 146 for years 1999 through 2004. In addition,
      any monies previously due the Company for years prior to 1999 will not be
      paid to the Company. As of December 31, 2004, $618,625 of receivables due
      from the stabilization pools for years 1999 and 1998 were written off and
      included in medical expenses.


                                      F-18
<PAGE>

      Schedule of Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                                 Provision
                                                               for Doubtful
                                                 Balance at    Accounts and                        Balance at
                                                  Beginning       Billing                             End
                 Description                      of Period     Adjustments       Deductions       of Period
<S>                                             <C>              <C>              <C>              <C>
      Year ended December 31, 2004
      Allowance for doubtful accounts and
       billing adjustments                      $  959,226       $3,653,405       $3,117,404       $1,495,227

      Year ended December 31, 2003
      Allowance for doubtful accounts and
       billing adjustments                         961,019        3,743,879        3,745,672          959,226

      Year ended December 31, 2002
      Allowance for doubtful accounts
       and billing adjustments                   1,549,253        1,937,953        2,526,187          961,019
</TABLE>


                                      F-19
<PAGE>

<PAGE>

                            SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
                                (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ]    Preliminary Proxy Statement
[ ]    Confidential, for Use of the Commission Only (as permitted by
       Rule 14a-6(e)(2))
[X]    Definitive Proxy Statement
[ ]    Definitive Additional Materials
[ ]    Soliciting Material Pursuant to Section 240.14a-12

                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION
                (Name of Registrant as Specified in Its Charter)


--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] No fee required.
[ ] Fee computed on table below per Exchange Rules 14a-6(i)(4) and 0-11.

    1) Title of each class of securities to which transaction applies:

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

    2) Aggregate number of securities to which transaction applies:

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

    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
       filing fee is calculated and state how it was determined):

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

    4) Proposed maximum aggregate value of transaction:
                                                       -------------------------

    5) Total fee paid:
                      ----------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
    Rule 0-11(a)(2) and identify the filing for which the offsetting fee
    was paid previously. Identify the previous filing by registration
    statement number, or the Form or Schedule and the date of its filing.

    1)Amount Previously Paid:
                             ---------------------------------------------------

    2)Form, Schedule or Registration Statement No.:
                                                   -----------------------------

    3)Filing Party:
                   -------------------------------------------------------------

    4)Date Filed:
                 ---------------------------------------------------------------

<PAGE>

                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                         To be Held on November 1, 2005

Dear Fellow Shareholder:

         The Annual Meeting of the Shareholders of Long Island Physician
Holdings Corporation, a New York corporation (the "Company"), will be held at
the Huntington Hilton Hotel, 598 Broadhollow Road, Melville, New York 11747, on
November, , 2005, at 6:00 p.m. (the "Meeting"), for the following purposes, as
more fully described in the accompanying Proxy Statement:

         1.    To elect four Class A directors.

         2.    To ratify the appointment of PricewaterhouseCoopers LLP as the
               Company's auditors for the 2005 fiscal year.

         3.    To transact such other business as may properly come before the
               Meeting or any adjournments thereof.

         Only shareholders of record at the close of business on September 20,
2005 are entitled to notice and to vote at the Meeting or any adjournment
thereof.

         We hope that all shareholders who can conveniently do so will attend
the Meeting. Shareholders who do not expect to be able to attend the Meeting are
requested to fill in, date and sign the enclosed proxy and promptly return the
same in the stamped, self-addressed envelope enclosed for your convenience.
Shareholders who are present at the Meeting may withdraw their proxies and vote
in person, if they so desire.

             THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION
                 OF EACH OF ITS NOMINEES FOR DIRECTOR AND "FOR"
            APPROVAL OF EACH OF THE OTHER PROPOSALS DESCRIBED ABOVE.

September 23, 2005                    By Order of the Board of Directors,

                                      Paul Kolker, M.D, President

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING WHETHER OR NOT
YOU ARE PERSONALLY ABLE TO ATTEND. YOU ARE URGED TO COMPLETE, SIGN AND MAIL THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE.
<PAGE>

                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION

                            One Huntington Quadrangle
                            Melville, New York 11747

                         -------------------------------
                                 PROXY STATEMENT
                         -------------------------------

                       For Annual Meeting of Shareholders
                         To Be Held on November 1, 2005

Information Concerning the Solicitation

         This Proxy Statement is furnished to the holders of Class A Common
Stock, par value $.001 (the "Class A Stock"), the only class of voting stock of
Long Island Physician Holdings Corporation, a New York corporation (the
"Company"), in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual Meeting of Shareholders
of the Company to be held at 6:00 p.m., Tuesday, November 1, 2005 at the
Huntington Hilton Hotel, 598 Broadhollow Road, Melville, New York, and at any
adjournment thereof (the "Meeting"), pursuant to the accompanying Notice of
Annual Meeting of Shareholders.

         This Proxy Statement and the form of Proxy were first mailed to the
shareholders on or about September 23, 2005. Only shareholders of record at the
close of business on September 20, 2005 (the "Record Date") are entitled to
notice of the Meeting and only holders of record of the Class A Stock on that
date are entitled to vote at the Meeting. The outstanding voting securities of
the Company on the Record Date consisted of 1,798 shares of Class A Stock.

         On all matters requiring a vote by holders of the Class A Stock, each
share of Class A Stock entitles the holder of record to one vote. The holders of
a majority of the outstanding shares of Class A Stock, present in person or by
proxy, will constitute a quorum. Directors shall be elected by a plurality of
the votes cast at the Meeting.

         The Company's Class A Stock is not listed on any exchange, quoted on
any market or otherwise publicly traded and is subject to certain restrictions
on ownership and transfer pursuant to the Company's By-laws.

HOLDERS OF CLASS A STOCK MUST VOTE THEIR SHARES ON THE ENCLOSED PROXY CARD.


                                       1
<PAGE>

                                VOTING OF PROXIES

         Shares represented by Proxies, in the accompanying form of Proxy Cards,
which are properly executed, duly returned and not revoked, will be voted in
accordance with the instructions contained therein. If no specification is
indicated on the Proxy, the shares represented thereby will, unless otherwise
directed by the shareholder, be voted (i) for the election as Class A directors
of the four persons who have been nominated by the Board of Directors; (ii) for
approval of PriceWaterhouseCoopers LLP as the Company's auditors for the 2005
fiscal year; and (iii) on any other matter that may properly be brought before
the Meeting in accordance with the judgment of the person or persons voting the
Proxy. The execution of a Proxy will not affect a shareholder's right to attend
the Meeting and vote in person.

         Under the rules of the Securities and Exchange Commission, boxes and a
designated blank space are provided on the form of proxy for stockholders to
mark if they wish to vote in favor of or withhold authority to vote for one or
more of the Company's nominees for director. New York law and the Company's
By-laws require the presence of a quorum for the Meeting, defined as the
presence of stockholders entitled to cast at least a majority of the votes that
all stockholders are entitled to cast at the Meeting. Votes withheld from
director nominees and abstentions will be counted in determining whether a
quorum has been reached.

         Assuming a quorum has been reached, a determination must be made as to
the results of the vote on each matter submitted for stockholder approval.
Director nominees must receive a plurality of the votes cast at the Meeting,
which means that a vote withheld from a particular nominee or nominees will not
affect the outcome of the election of directors.

         Any Proxy executed and returned by a shareholder may be revoked at any
time thereafter if written notice of revocation is given to the Secretary of the
Company prior to the vote to be taken at the Meeting, or by execution of a
subsequent Proxy which is presented at the Meeting, or if the shareholder
attends the Meeting and votes by ballot, except as to any matter or matters upon
which a vote shall have been cast pursuant to the authority conferred by such
Proxy prior to such revocation.

         The cost of solicitation of the Proxies being solicited on behalf of
the Board of Directors will be borne by the Company. In addition to use of the
mails, proxy solicitation may be made by telephone, telecopy, electronic mail
and personal interview by officers, directors and employees of the Company. The
Company will bear all costs in connection with the solicitation by the Board of
Directors of proxies of the Meeting. Officers and employees of the Company who
solicit Proxies will receive no extra compensation for such solicitation.


                                       2
<PAGE>

                                   Proposal 1

                              ELECTION OF DIRECTORS

         The Company's By-laws provide for a staggered term Board of Directors
by the classification of the Board of Directors into three classes of four
directors each (Class A, Class B and Class C). In August 2001, the Company's
By-laws were amended to, among other things, reduce the number of directors from
40 to 12, appoint 12 continuing directors to serve as Class A, Class B and Class
C directors for an initial term expiring on the 2002, 2003 and 2004 Annual
Meetings, respectively, and provide that, upon the expiration of the initial
term of each Class of directors, such Class would have a term of three years, or
until a Director's successor shall be duly elected and qualified. The Company
failed to hold an Annual Meeting in 2002 and 2003 and failed to obtain a quorum
at the Annual Meeting in 2004. The initial term (and three year extension
through the 2005 Annual Meeting) of the Class A directors has expired.

         The nominees for Class A directors have been nominated to remain in
office until their term expires at the 2008 Annual Meeting of shareholders, and
until their successors have been elected and qualified. Proxies will not be
voted for a greater number of persons than the number of nominees named below.

         The nominees listed below are all currently directors of the Company.
The Board is not aware of any reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, the shares represented by all valid
Proxies will be voted for the election of such other person as the Board may
recommend.

         Unless otherwise specified, all Proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the expiration of the terms for which they are elected and until their
successors shall be duly elected and qualified. Management has no reason to
believe that any of the nominees will be unable or unwilling to serve as a
director, if elected. Should any of the nominees not remain a candidate for
election at the date of the Meeting, the Proxies will be voted in favor of those
nominees who remain candidates and may be voted for substitute nominees selected
by the Board of Directors.

         The names of the nominees and certain information received from them
are set forth in the following table, including their principal occupations, for
at least the last five years, and the names of any other companies whose
securities are publicly held and of which they presently serve as directors.

 THE BOARD OF DIRECTORS DEEMS THE ELECTION OF EACH OF THE BOARD'S NOMINEES TO BE
          IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
              RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE

                                       3
<PAGE>

                        DIRECTORS AND EXECUTIVE OFFICERS

Information Relating to Nominees for Election as Class A Directors

         Information relating to the nominees for election as Class A directors
with a term expiring upon the 2008 Annual Meeting is set forth below:

         WILLIAM BRENNAN, D.C., 54, conducts a family chiropractic practice in
Seaford, New York, a practice he has conducted for 21 years. Dr. Brennan is also
a partner in Preferred Chiropractic, IPA, LLC and Alternative Care Solutions,
IPA, LLC. Dr. Brennan has been President of both those companies and Chairman of
the Chiropractic Network of MDNY. Dr. Brennan has been a director of the Company
since April 1995.

         ROBERT A. JASON, M.D., 46, conducts a medical practice in gynecology in
Great Neck, New York, a practice he has conducted since 1986. Dr. Jason has been
a director of the Company since April 1995.

         ROBERT SARNATARO, M.D., 50, conducts a medical practice in internal
medicine in Flushing, New York, a practice he has conducted since 1985. Dr.
Sarnataro has been a director of the Company since April 1995.

         GARY WOHLBERG, M.D., 49, conducts a medical practice in pulmonology in
Bay Shore, New York, a practice he has conducted since 1986. Dr. Wohlberg has
been a director of the Company since its inception.

Information Relating to Class B Directors

         Information relating to the Class B directors with a term expiring upon
the 2006 Annual Meeting is set forth below:

         GREGORY KALMAR, D.D.S., 57, conducts a practice in family and cosmetic
dentistry in Huntington, New York, a practice he has conducted since 1974. From
1982, Dr. Kalmar has also been an attending dentist at Nassau County Medical
Center, East Meadow, New York. Dr. Kalmar has been a director of the Company
since August 1996.

         AMY KOREEN, M.D., 42, conducts a medical practice in psychiatry in
Huntington, New York, a practice she has conducted since 1994. Prior to that
time, Dr. Koreen completed a fellowship in biological psychiatry and
neuropsychopharmacology at Long Island Jewish Medical Center. Dr. Koreen has
been a director of the Company since its inception and Secretary since December
2001.

         RONALD R. PERRONE, M.D., 56, conducts a medical practice in
anesthesiology in Melville, New York, a practice he has conducted since 1989.
Dr. Perrone has been Chief Medical Officer of MDNY since 1999 and was Medical
Director of MDNY from 1995 until 1999. Dr. Perrone has been a director of the
Company since its inception.

         MICHAEL POLCINO, M.D. 56, has been a board certified Ob/Gyn primary
care physician since 1984. Dr. Polcino has served as chairman of MDNY's
Credentialing Committee and as an expert consultant to MDNY. Dr. Polcino is a
clinical assistant professor at New York College of Osteopathic Medicine. Dr.
Polcino received his medical degree from SUNY, Downstate Medical Center in 1977.

Information Relating to Class C Directors

         Information relating to Class C directors with a term expiring upon the
2007 Annual Meeting is set forth below:

         SALVATORE J. CARAVELLA, M.D., 49, has conducted a medical practice in
pediatrics in Huntington, New York since 1988. Dr. Caravella has been a director
of the Company since its inception.

                                       4
<PAGE>

         FRANCO GALLO, M.D., 42, conducts a medical practice in gastroenterology
and hepatology with Gastroenterology Associates of Suffolk, P.C., in Port
Jefferson and Smithtown, New York, a practice he has conducted since July 1994.
Dr. Gallo is also a clinical instructor in the Department of Medicine, Division
of Gastroenterology and Hepatology at Stony Brook University Medical Center. Dr.
Gallo has been a director of the Company since its inception and has been Vice
President since December 2001.

         PAUL KOLKER, M.D., 68, conducts a medical practice in thoracic and
cardiovascular surgery in Roslyn, New York, a practice he has conducted since
1969. Dr. Kolker has been a director of the Company and its Treasurer since its
inception. Dr. Kolker became President and Chairman of the Company in June 2002.

         ROSARIO ROMANO, M.D., 56, conducts a medical practice in internal
medicine in Port Jefferson, New York, a practice he has conducted since 1980.
Dr. Romano has been a director of the Company since its inception.

Executive Officers

         Officers are elected at each Annual Meeting of the Board of Directors
and serve at the discretion of the Company's Board of Directors. There are no
family relationships between any director or officer of the Company. The
following table sets forth as of the date hereof the names and ages of all
officers of the Company and all positions and offices they hold with the
Company. The principal employment for at least the last five years for each of
the Company's officers (other than Concetta Pryor, Marci Haas and Paul Accardi)
is described above.

                  Name                    Age  Position with the Company

         Paul Kolker, M.D..............   68   President, Treasurer and Chairman
                                                of the Board
         Paul Accardi..................   49   Executive Vice President, CEO,
                                                COO of MDNY
         Concetta Pryor................   36   CFO; CFO and VP-Finance of MDNY
         Ronald R. Perrone, M.D........   56   Medical Director of MDNY
         Marci Haas....................   43   COO of MDNY
         Amy Koreen, M.D...............   42   Secretary and Director
         Franco Gallo, M.D.............   42   Vice President and Director

         PAUL ACCARDI, 49, served as Chief Operating Officer and Chief Financial
Officer of MDNY Healthcare, Inc., the Company's majority-owned HMO subsidiary
("MDNY"), from 1997 until 2000. Mr. Accardi became Chief Executive Officer of
MDNY in January 2001. Mr. Accardi was appointed as Executive Vice President of
the Company in November 2003.

         CONCETTA PRYOR, 36, was appointed Chief Financial Officer of the
Company in November 2003. Ms. Pryor has been the Director--Finance of MDNY since
1997. Ms. Pryor was the Director of Finance and Reimbursement for North General
Hospital, New York, New York from 1993 to 1997. Ms. Pryor is a certified public
accountant.

         MARCI HAAS, 43, became Chief Operating Officer of MDNY Healthcare, Inc.
in September 2003. Prior to that, Ms. Haas served as the Vice President of
Operations of MDNY Healthcare, Inc from October 2000 until September 2003 and
the Vice President of Network Services from February 1997 until October 2000.

         There are no employment agreements or any termination of employment or
change-in-control arrangements between the Company and any of its executive
officers or between MDNY and any of its executive officers other than Paul
Accardi and Ronald R. Perrone, M.D.

Meetings, Committees, Directors' Fees

         The Company's Board of Directors held seven meetings during the year
ended December 31, 2004 ("Fiscal 2004"). From time to time, the members of the
Board of Directors and its Committees may also act by unanimous consent. The
Company believes that all of the directors attended more than 75% of the
aggregate number of meetings of the Board of Directors and Committees on which
he or she served during Fiscal 2004.

                                       5
<PAGE>

         The Company has no formal policy with respect to Board members'
attendance at annual meetings of Shareholders, although all Board members are
encouraged to attend annual meetings.

         The Company does not have a Compensation Committee or Audit Committee
or committees performing similar functions. The Board of Directors has
determined that the Company does not have an "audit committee financial expert"
serving on the Board of Directors.

         In May 2001, the Board of Directors created an Executive Committee
having all the authority of the full Board, except as to certain matters
specified by New York law. The Executive Committee consists of Salvatore
Caravella, M.D., Paul Kolker, M.D., Ronald Perrone, M.D., Rosario Romano, M.D.
and Amy Koreen, M.D. The Executive Committee did not meet during Fiscal 2004.

         The MDNY board of directors has created a Compensation Committee, an
Operations Committee, a Hospital Selection Committee and a Medical Delivery
Committee. See "Certain Relationships and Related Transactions."

         The Company did not pay any compensation to its directors in Fiscal
2004, except that the Company pays each director a fee equal to $200 per meeting
attended for serving as a director.

Nominating Procedures; Shareholder Recommendations

         The Company's By-laws provide for the Board of Directors to maintain a
standing Nominating Committee, consisting of five shareholders of whom not more
than three may be directors. The purpose of the committee is to nominate members
for the Board of Directors and its committees. The Nominating Committee will
consider nominees recommended in writing by shareholders, if such nominees would
be qualified to serve as directors pursuant to the Company's By-laws. The
Nominating Committee has no charter. The Nominating Committee did not meet
during Fiscal 2004. All seats on the Nominating Committee are currently vacant,
and the full Board of Directors performs the function of the Nominating
Committee, which the Board of Directors believes is an appropriate function in
light of the size of the Board and the familiarity of each director with the
background and qualifications of each nominee. Certain directors (including Drs.
Kolker, Caravella, Romano, Jason and Perrone may be deemed not to be
"independent" within the meaning of Section 803 of the Amex Company Guide by
virtue of their receipt of compensation from or respective positions with MDNY.

         In considering an incumbent director whose term of office is to expire,
the Board of Directors reviews the director's overall service during the
person's term, the number of meetings attended, level of participation and
quality of performance. When identifying and evaluating nominees for new
directors, the Board of Directors meets to discuss and consider such candidates'
qualifications and then chooses a candidate by majority vote.

         The Board of Directors will consider in good faith qualified director
candidates who are recommended by shareholders. To be considered for nomination
the Board of Directors at the next annual meeting of shareholders, the Board
must receive shareholder recommendations at least 120 calendar days before the
anniversary date of the Company's proxy statement for the previous year's annual
meeting. To recommend a candidate, a shareholder should send the candidate's
name, age, credentials (including principal occupation and employment), contact
information and the candidate's consent to be considered to the Chairman of the
Board in care of the Company at its principal executive office address. The
shareholder should also provide the shareholder's contact information, describe
the shareholder's relationship with the candidate, and include a statement as to
the number of shares and the class of Company common stock owned by the
shareholder and the length of time such shares have been owned.

Shareholder Communications With The Board Of Directors

                                       6
<PAGE>

         Although the Company does not have a formal procedure for shareholder
communication with the Board, the Company's Board of Directors has always been,
and will remain, open to communications from the Company's shareholders. In
general, members of the Board and executive officers are accessible by mail in
care of the Company. Any matter intended for the Board, or for any individual
member or members of the Board, should be directed to the Company's Secretary
with a request to forward the communication to the intended recipient. In the
alternative, shareholders can direct correspondence to the Board to the
attention of the Chairman of the Board, in care of the Company at the Company's
principal executive office address. The Company will forward all such
communications to the intended recipient in a timely manner.

Compensation of Executive Officers

       The following table sets forth information concerning the compensation
for services to the Company during each of the fiscal years ended December 31,
2004, 2003 and 2002 for Paul Kolker, M.D., the Company's President and Chairman
of the Board, and each other executive officer of the Company (including MDNY)
whose annual salary and bonus compensation with respect to the 2004 calendar
year exceeded $100,000 (the "Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                        Long Term
                                                       Annual Compensation             Compensation
                                                       -------------------             ------------
                                                                                        Securities
                                                                         Other Annual   Underlying      All Other
Name                              Year        Salary         Bonus       Compensation     Options      Compensation***
------                            ----        ------         -----       ------------   ----------     ---------------
<S>                               <C>        <C>            <C>             <C>            <C>            <C>
Paul Kolker, M.D.                 2004       $      0       $     0         $    0          0             $109,038
*President and Chairman           2003       $      0       $     0         $    0          0             $      0
                                  2002       $      0       $     0         $    0          0             $      0

Concetta Pryor                    2004       $267,100^^     $ 5,000         $    0         --             $  5,400
**Chief Financial Officer         2003       $250,970       $    --         $    0         --             $  1,350
                                  2002       $     --       $    --         $    0         --             $     --
--                $  --

Paul Accardi                      2004       $360,000       $10,000         $    0          0             $  6,000
Executive Vice President,         2003       $360,000       $60,000         $    0          0             $  6,000
     CEO, MDNY                    2002       $360,000       $10,000         $    0          0             $  6,000

Ronald R. Perrone                 2004       $290,000       $10,000         $    0          0             $  6,000
Medical Director, MDNY            2003       $290,000       $50,000         $    0          0             $  6,000
                                  2002       $290,000       $10,000         $    0          0             $  6,000
Marci Haas
COO, MDNY                         2004       $203,675^^     $ 5,000         $    0                        $  5,400
                                  2003       $191,085       $               $    0                        $  1,350
                                  2002       $     --       $    --         $   --         --             $     --
</TABLE>

--------------------------------------------------------------------------------
           MDNY pays all compensation to the Named Executive Officers.

*   Dr. Kolker became President and Chairman of the Board in June 2002. Payments
disclosed under "All Other Compensation" represents $5,000 per month commencing
September 2004 payable by MDNY in consideration of Dr. Kolker's participation in
negotiations regarding certain potential strategic transactions and certain
potential transactions among MDNY, its shareholders and certain related parties,
and payment in October 2004 by MDNY of $3,871.24 per month retroactive to June
2002 (the month Dr. Kolker became President and Chairman of the Company) by
means of a lump sum payment in the aggregate amount of $89,038 in consideration
of Dr. Kolker's participation from and after June 2002 in negotiations regarding
such transactions. See "Certain Relationships and Related Transactions."
**  Ms. Pryor was appointed Chief Financial Officer of the Company in September
2003. Salary includes $25,000 in compensation paid in consideration of her
services as the Company's CFO .

                                       7
<PAGE>

*** Represents automobile allowance payable pursuant to the Executive's
Employment Agreement.
^^  Salary includes $27,100 and $28,675 in compensation to Ms. Pryor and Ms.
Haas, respectively, as part of MDNY's Employee Incentive program.


Compensation Committee Interlocks and Insider Participation

         Five directors of the Company (Drs. Caravella, Gallo, Kolker, Koreen
and Jason) serve as directors of MDNY. Dr. Kolker is President and Chairman of
the Board of the Company. Drs. Gallo and Koreen are Vice President and Secretary
of the Company, respectively. Drs. Caravella, Jason and Koreen are,
respectively, President, Vice President and Secretary of MDNY. Dr. Perrone, a
director of the Company, is the Chief Medical Officer of MDNY. No executive
officer of the Company serves as a member of the Board of Directors of any
entity not affiliated with the Company that has one or more members serving as a
member of the Company's Board of Directors. Certain of the directors have
participated in certain transactions with the Company and its subsidiaries and
affiliates. See "Certain Relationships and Related Transactions."

Report of Board of Directors as to Compensation

         The Company does not have a compensation committee or other Board
committee performing equivalent functions. MDNY has a compensation committee
comprised of four directors on MDNY's Board The MDNY Compensation Committee met
in January 2005 to determine the annual bonus amounts for the executive officers
of MDNY. In October 2004, the Board of Directors of both MDNY and the Company
approved the payment to Dr. Kolker of $5,000 per month commencing September 2004
payable by MDNY in consideration of Dr. Kolker's participation in negotiations
regarding certain potential strategic transactions and certain potential
transactions among MDNY, its shareholders and certain related parties, and the
payment by MDNY of $3,871.24 per month retroactive to June 2002 (the month Dr.
Kolker became President and Chairman of the Company) by means of a lump sum
payment in the aggregate amount of $89,038 in consideration of Dr. Kolker's
participation from and after June 2002 in negotiations regarding such
transactions. The Board's approval of these payments to Dr. Kolker was not
linked to the performance of the Company or MDNY but were based on Dr. Kolker's
efforts and success in connection with such negotiations and on the fact that
MDNY made similar payments to David Weissberg, M.D., Dr. Kolker's predecessor as
the Company's Chairman and President. In addition, commencing with September
2004, the MDNY Compensation Committee and the Company's Board of Directors
approved an increase in compensation to each of Salvatore Caravella, M.D., the
President and a Director of MDNY, and Rosario Romano, M.D., President of Island
IPA and a Director of LIPH, to $5,000 per month in consideration of their
respective participation in reviewing, with other officers and employees, MDNY's
utilization management, credentialing and operations processes. Paul Accardi,
the Company's Executive Vice President and Chief Executive Officer of MDNY,
determines performance targets and criteria in his discretion applicable to MDNY
employees participating in MDNY's company-wide Employee Incentive Program.
Concetta Pryor, Chief Financial Officer of the Company and of MDNY, and Marcia
Hass, MDNY's Chief Operating Officer, each participate in such program. See
"Certain Relationships and Related Transactions."

         William Brennan, D.C.
         Salvatore J. Caravella, M.D.
         Franco Gallo, M.D.
         Robert A. Jason, M.D.
         Gregory Kalmar, D.D.S.
         Paul Kolker, M.D.
         Amy Koreen, M.D.
         Ronald R. Perrone, M.D.
         Michael Polcino, M.D.
         Rosario Romano, M.D.
         Robert Sarnataro, M.D.
         Gary Wohlberg, M.D.

                                       8
<PAGE>

Code of Ethics

         The Company is a holding company that conducts no operations and whose
sole asset is its ownership of 67% of the stock of MDNY. The Company has not
adopted a Code of Ethics. The Company's Board has requested that the Board of
MDNY consider adopting a Code of Ethics.

Employment Agreements

         As of January 1, 2001, MDNY entered into Employment Agreements with
each of Paul Accardi and Ronald R. Perrone (the "Executives"), which provide for
Mr. Accardi to serve as MDNY's Chief Executive Officer and Dr. Perrone to serve
as MDNY's Chief Medical Officer, respectively. Dr. Perrone is permitted to
maintain a limited independent medical practice.

         The initial term of each Employment Agreement expired on December 31,
2003. The term of each Agreement is subject to automatic renewal on a
year-to-year basis, unless either party gives at least 90 days prior written
notice of termination. The Employment Agreements for Mr. Accardi and Dr. Perrone
provide for a base salary of $360,000 and $290,000, respectively, which is
subject to annual increase in the discretion of MDNY's Board of Directors. The
Executives also participate in MDNY's annual incentive program, with an initial
target incentive opportunity of 30% of base salary. Except as described below
with respect to salary continuation, the amount and nature of the Executives'
participation in the annual incentive program is within MDNY's sole discretion.
The Executives are eligible to participate in any profit-sharing, retirement or
other benefit plans and any health, life, accident or disability insurance plans
or programs to the same extent as other similarly situated key employees of
MDNY. The Executives receive the health, life and disability benefits provided
for the executive officers of MDNY and other fringe benefits, if any, provided
to executive officers of MDNY that may be authorized from time to time by MDNY's
Board of Directors. Each Executive receives a monthly automobile allowance of
$500 for the use of an automobile used in connection with business matters.

         Each Employment Agreement provides that if there is a Change of Control
(as defined) and there is a Termination of Employment during the term of the
Agreement solely due to MDNY's termination of an Executive's employment other
than as expressly permitted by the Agreement, MDNY must continue to pay the
Executive's base salary in effect on the date of such termination and an annual
adjustment payment equal to the greater of (1) the annual incentive paid to him
for the previous year, and (2) 200% of the annual base salary in effect at the
time of such Termination of Employment (an "Adjustment Payment"), subject to all
required withholding taxes, for a period commencing on the date of such
Termination of Employment and ending on the date which is the day before the
second anniversary of such date. MDNY must pay the Executive the Adjustment
Payments within 45 days after the first and second anniversaries of the date of
the Termination of Employment. The Employment Agreements define "Termination of
Employment" to mean the termination of the Executives' employment by MDNY for
any reason other than any of the following: death; permanent disability (as
defined); voluntary termination of employment; or termination of employment by
MDNY for cause (as defined). Voluntary termination of employment is deemed a
"Termination of Employment" if the voluntary termination occurs as a result of
any of the following: (i) the assignment to the Executive of any duties
inconsistent in any respect with his position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities, or any
action by MDNY which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose isolated, insubstantial and
inadvertent actions not taken in bad faith which are remedied by MDNY promptly
after receipt of notice thereof given by the Executive; MDNY requiring the
Executive to be based at an office or location greater than 50 miles from MDNY's
current offices; or any purported termination by MDNY of the Executive's
employment other than as expressly permitted by the Agreement. The Agreements
provide that, in the event of a Termination of Employment that is not in
connection with a Change of Control, the Executive will continue to receive his
base salary, in effect on the date of the Termination of Employment, and will
receive an Adjustment Payment, subject to all required withholding taxes, for
the period commencing on the date that his employment is terminated and ending
on the day before the first anniversary thereof. This Adjustment Payment is due
within 45 days after the first anniversary of the Termination of Employment. For
a period of one year after the termination of the Executive's employment by MDNY
for whatever reason, each Employment Agreement imposes certain non-competition
and non-solicitation obligations regarding MDNY and its customers, suppliers,
service providers and employees.

                                       9
<PAGE>

Options Granted in Last Fiscal Year

         None of the Named Executive Officers nor any of the other executive
officers of the Company were granted any option by the Company during Fiscal
2004.

Aggregated Options Exercised in Last Fiscal Year and Fiscal Year End Option
Values

         The following table sets forth information with respect to option
exercises during the year ended December 31, 2004 and the number and value of
options outstanding at December 31, 2004 held by the Named Executive Officers.
All such options expired unexercised on July 1, 2005. All such options were
exercisable for shares of the Company's non-voting Class B Common Stock, $.001
par value ("Class B Stock").

<TABLE>
<CAPTION>
                                                     Number of Shares
                                                     Underlying
                                                     Unexercised
                  Shares                             Options at
                  Acquired                           December 31, 2004          Value of Unexercised
                  On                Value            Exercisable("E")/          In-the-Money Options at
Name              Exercise          Realized         Unexcercisable("U")        December 31, 2004(1)
----              --------          --------         -------------------        --------------------
<S>                  <C>              <C>              <C>                        <C>
Paul Kolker          0                $0               18(E)/0(U)                 $0(E)/$0(U)
Paul Accardi         0                $0                0(E)/0(U)                 $0(E)/$0(U)
Ronald Perrone       0                $0               18(E)/0(U)                 $0(E)/$0(U)
Concetta Pryor       0                $0                0(E)/0(U)                 $0(E)/$0(U)
</TABLE>


(1)      Value as of December 31, 2004 is based upon restrictions on ownership
         and transfer applicable to the Company's stock and the absence of a
         market therefor.

                                       10
<PAGE>

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of August 1, 2005,
regarding the beneficial ownership of the Common Stock of the Company of (a)
each person known by the Company to own more than five percent of the Company's
outstanding Class A Stock or its Class B Stock, (b) each director and officer of
the Company and (c) all officers and directors of the Company as a group. Except
as otherwise indicated, the named owner has sole voting and investment power of
the shares listed.

<TABLE>
<CAPTION>
                                        Amount and Nature
                                    of Beneficial Ownership(1)           Percent of Class (1)
Beneficial Owner(2)                 Class A          Class B           Class A          Class B
-------------------                 -------          -------           -------          -------
<S>                                   <C>               <C>               <C>             <C>
Paul A. Accardi                        0                  0               0                  0
William Brennan, D.C.                  1                  3               *                  *
Salvatore J. Caravella, M.D.           1                  2               *                  *
Franco Gallo, M.D.                     1                  2               *                  *
Robert A. Jason, M.D. (3)              1                502               *               12.4
Gregory Kalmar, D.D.S.                 1                  0               *                  *
Paul Kolker, M.D.(3)                   1                502               *               12.4
Amy Koreen, M.D.                       1                  2               *                  *
LIPH Bridge Partners, Inc.             0                500               0               12.4
Michael Polcino, M.D.                  1                  2               *                  *
Ronald R. Perrone, M.D.(3)             1                502               *               12.4
Concetta Pryor                         0                  0               0                  0
Rosario Romano, M.D.                   1                 13               *                  *
Robert Sarnataro, M.D.                 1                  4               *                  *
Gary Wohlberg, M.D.                    1                  2               *                  *
All officers and directors
as a group (14 persons)               12                536(3)            *               13.3(3)
</TABLE>

-----------------------
*Represents less than 1%.

(1)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission ("SEC") and generally includes
      voting or investment power with respect to securities. In accordance
      with SEC rules, shares which may be acquired upon exercise of stock
      options which are currently exercisable or which become exercisable
      within 60 days after the date of the information in the table are
      deemed to be beneficially owned by the optionee. Except as indicated by
      footnote, and subject to community property laws where applicable, to
      the Company's knowledge, the persons or entities named in the table
      above are believed to have sole voting and investment power with
      respect to all shares of Common Stock shown as beneficially owned by
      them. For purposes of calculating the percentage or outstanding shares
      held by each person named above, any shares which such person has the
      right to acquire within 60 days after the date of the information in
      the table are deemed to be outstanding, but not for the purpose of
      calculating the percentage ownership of any other person.

(2)   The address of such persons is c/o the Company, One Huntington Quadrangle,
      Suite 4C-01, Melville, N.Y. 11747.

(3)   Includes 500 shares of the Company's Class B Stock beneficially owned by
      LIPH Bridge Partners, Inc., of which Drs. Kolker, Perrone and Jason are
      shareholders and directors.

         There is no trading market for the shares of the Company's Common
Stock, as ownership thereof is restricted pursuant to the Company's By-laws to
certain physicians and other medical practitioners resident in and licensed by
New York State with office-based practices on Long Island, New York, and
transfer thereof is also restricted pursuant to the Company's By-laws. Under
certain circumstances, the Company has the right, pursuant to the Company's
By-laws, but not the obligation, to purchase stock of the Company which a
shareholder desires to transfer, at a price based on the per share value
determined by an independent certified public accountant.

                                       11
<PAGE>

         There are no arrangements, known to the Company, the operation of which
may at a subsequent date result in a change in control of the Company.

Securities Authorized for Issuance under Equity Compensation Plans

       The Company does not maintain any compensation plan (including any
individual compensation arrangements), approved by security holders or not,
under which equity securities of the Company are authorized for issuance.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than 10% of a
registered class of the Company's equity securities ("Principal Owners") to file
with the Securities and Exchange Commission initial reports of ownership and
reports of any subsequent changes in ownership of Common Stock and other equity
securities of the Company. Specific due dates for these reports have been
established and the Company is required to disclose any failure to file by these
dates. The Company believes that none of the Company's directors, executive
officers or Principal Owners has filed an initial Form 3 or a Form 5 with
respect to any year, and none of the Company's directors, executive officers or
Principal Owners has made written representations to the Company that no such
reports were required with regard to Fiscal 2004. Ownership and transfer of the
Company's stock is restricted by the Company's By-laws, and the Company believes
that none of the Company's directors, executive officers and Principal Owners
had any transactions in Company stock reportable during Fiscal 2004 or any prior
year (other than the year with respect to which each director, executive officer
and Principal Owner became obligated to file a Form 3) and that none of such
persons were required to comply with Section 16(a) filing requirements by filing
a Form 5 or otherwise with respect to Fiscal 2003 or any prior year (other than
the year with respect to which each director, executive officer and Principal
Owner was obligated to file a Form 3).

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships and Related Transactions

       The Company was formed in 1994 and is owned by physicians residing and
practicing in New York State. The Company conducts no operating activities of
its own. The Company's principal asset is 67% of the stock in MDNY Healthcare,
Inc. ("MDNY"), an independent practice association-model health maintenance
organization, that currently operates in Nassau and Suffolk counties, New York.
Catholic Healthcare Network of Long Island, Inc. ("CHNLI") owns the remaining
33% of the stock in MDNY. CHNLI is a New York not-for-profit corporation whose
members are officials of the Diocese of Rockville Centre (the "Diocese") in Long
Island, New York, who are generally officers of or are otherwise affiliated with
hospitals that belong to the Catholic Health Services of Long Island, Inc.
("CHSLI") system.

          The Company is affiliated with LIPH, LLC (the "LLC"), a New York
limited liability company formed in December 1996. Upon the formation of the
LLC, the shareholders of the Company owned all of the membership interests in
the LLC. The assets of the LLC consist of the stock in three independent
practice associations, Island Practice Association, IPA, Inc. ("Island IPA"),
Island Behavioral Health Association IPA, Inc. (currently inactive) and Island
Dental Professional Association IPA, Inc. (the "IPAs"). Thus, the IPAs are
indirectly owned or controlled by the shareholders of the Company. MDNY has
entered into various contractual arrangements (the "Professional Services
Agreements") with the IPAs to arrange for the provision of applicable health
care and administrative services to the members of MDNY. All directors of the
Company are also Managers of the LLC.

         During 1995, the Company offered and sold shares of its common stock in
a private placement to physicians, psychologists, podiatrists and dentists
practicing on Long Island, New York (i.e., Queens, Nassau and Suffolk Counties).
The Company offered shares of its Class A and Class B Stock to physicians based
on their service specialty at a price of $2,000 per share. The Class A Stock is
voting stock, and was initially offered only to primary care physicians,
specialty care physicians, anesthesiologists and oral surgeons. No stockholder
may own more than one share of Class A Stock. Holders of Class B Stock are not
entitled to vote their shares of Class B Stock at meetings of the Company's
stockholders, except as provided by New York law. During 1996, the Company
issued additional shares of its Class A Stock and Class B Stock. In order to
encourage greater participation in the Company on the part of certain qualified
psychologists, general dentists, specialty dentists (with the exception of oral
and maxillofacial surgeons), podiatrists and chiropractors who were not
initially permitted to own Class A Stock, the By-laws were amended in 1997 to
allow such practitioners to own one share of Class A Stock. The By-laws were
amended in August 2001 to provide that such practitioners may not as a group
hold more than two seats on the Company's Board of Directors (subject to
adjustment as provided therein). Each such Class B shareholder will be offered
the opportunity to exchange one share of Class B Stock for one share of Class A
Stock. A total of 483 shares of Class B Stock were exchanged for Class A Stock.

                                       12
<PAGE>

         The Company issued to certain organizers non-qualified options to
purchase up to an aggregate of 1,115 shares of Class B Stock at $2,000 per share
exercisable at any time after July 1, 1998, subject to acceleration in the event
of certain transactions. 616 of such options were granted to certain directors
of the Company. Shares underlying such options represent 15% of the total number
of the Company's shares outstanding on the date of grant. All such options
expired unexercised on July 1, 2005. A Stock Subscription and Purchase Agreement
dated December 11, 1995 among the Company, CHNLI and MDNY sets forth certain
provisions relating, among other things to the operation and development of the
business of MDNY and the IPAs.

         MDNY's Certificate of Incorporation, as amended, provides for six
directors ("Class A Directors") to be elected by the holders of the Class A
Common Stock (i.e., the Company) voting separately as a class; three directors
("Class B Directors") elected by the holders of the Class B Common Stock (i.e.,
CHNLI) voting separately as a class; three directors elected by the holders of
both the Class A Common Stock and the Class B Common Stock voting together as a
class; and class voting by MDNY's Class A and B stockholders voting separately
to approve the sale, lease, exchange or other disposition of all or
substantially all of MDNY's assets. MDNY's Certificate of Incorporation also
requires the approval of a majority of MDNY's Class A Directors voting
separately, a majority of MDNY's Class B Directors voting separately, and a
majority of MDNY's Class A and Class B Directors voting together, to authorize
certain action by MDNY, including: the selection or termination of hospitals
which are participating providers; amending MDNY's Certificate of Incorporation
or By-laws; changing the methodology for funding hospital risk pools; issuing
additional stock; the sale, lease, exchange or other disposition of all or
substantially all of MDNY's assets; merger or consolidation; dissolution;
entering a new line of business; borrowing or making other financial
arrangements, including any contracts, in excess of $1 million. If any of these
matters "adversely effect" the providers of services in any county, the vote of
the Class A and Class B Directors must be unanimous.

         MDNY's By-laws, as amended, provide that MDNY"s board of directors
shall consist of 12 members, comprised of the following: (i) six Class A
Directors; (ii) three Class B Director; and (iii) three members elected by the
holders of both the Class A Common Stock and the Class B Common Stock voting
together as a class, all of whom shall be representatives of enrollees of the
health maintenance organization operated by MDNY. The MDNY By-laws provide that
the MDNY board of directors may create: (i) an Operations Committee comprised of
three Class A Directors and two Class B Directors and up to three other
individuals as appointed by the board; (ii) a Hospital Selection Committee,
comprised of three Class A Directors and three Class B Directors; and (iii) a
Medical Delivery Committee comprised of four Class A Directors and two Class B
Directors.

         According to the New York State Insurance Department ("NSYID") Report
on Examination of The MDNY Healthcare, Inc. as of June 30, 2000 dated April 2,
2001 and revised July 31, 2002 (the "NYSID Final Report"), the composition of
MDNY's Board of Directors does not comply with Part 98-1.11(f) of the
Administrative Rules and Regulations of the New York State Department of Health,
which requires that at least 20% of MDNY's directors must be enrollees of MDNY.
The NYSID Final Report recommends that the requisite number of "enrollee
representatives" be elected to MDNY's Board of Directors.

                                       13
<PAGE>

         The Company, CHNLI and MDNY are party to a Shareholders Agreement dated
December 11, 1995, which provides, among other things, for certain restrictions
on the transfer of stock in MDNY, including certain rights of first refusal in
connection with any such proposed transfer or deemed transfer.

         Five directors of the Company (Drs. Caravella, Gallo, Kolker, Koreen
and Jason) serve as directors of MDNY. Drs. Caravella, Jason and Koreen are,
respectively, President, Vice President and Secretary of MDNY. Dr. Perrone, a
director of the Company, is the Chief Medical Officer of MDNY. Six directors of
the Company (Drs. Caravella, Gallo, Jason, Perrone, Romano and Wohlberg) serve
as directors of Island IPA, of which Dr. Romano is also President. One director
of the Company (Dr. Kalmar) serves as President and a director of Island Dental
Professional Association IPA, Inc. One director of the Company (Dr. Koreen)
serves as a director of Island Behavioral Health Association IPA, Inc. Each of
such directors of the Company earned fees for medical services rendered as a
participating provider to one of the IPAs during 2004. Concetta Pryor, the
Company's Chief Financial Officer, is also the Chief Financial Officer and
Vice-President-Finance of MDNY. Paul Accardi, the Company's Executive Vice
President is also the Chief Executive Officer of MDNY.

         With respect to years prior to 2001, MDNY was contractually obligated
to pay a capitated amount to Island IPA for covered services provided by
participating providers. Through 2001, however, MDNY continued to pay medical
claims to Island IPA relating to claims with dates of service prior to January
1, 2001 in excess of capitated amounts for years prior to 2001. These payments
resulted in medical claim obligations due by Island IPA to providers of
approximately $22.2 million, reflected in MDNY's financial statements as
payments in excess of capitation as of December 31, 2002 (the "Island Debt").

         With NYSID's approval, MDNY, Island IPA and CHSLI, on behalf of five
catholic hospitals that act as providers to MDNY (the "Hospitals"), entered into
a Recovery and Subordination Agreement (the "Recovery and Subordination
Agreement"), dated July 12, 2001 and effective January 1, 2002. The Recovery and
Subordination Agreement provides, among other things, as follows: (i) Island IPA
is required to pay the Island Debt pursuant to a Repayment Plan whereby Island
IPA is obligated to withhold, and remit to MDNY, 5% of all payments due to
Island IPA participating providers (the "IPA Withhold"), MDNY will make claims
payments to Island IPA or its participating providers on a fee-for-service
basis, Island IPA is required to pay MDNY a $1.50 per member per month network
access fee, and Island IPA is required to pay to MDNY the net revenue it
receives from sources other than MDNY; (ii) until the Island Debt is repaid,
Island IPA, Island IPA's participating providers and the Hospitals agree (a), in
the event that MDNY becomes insolvent (pursuant to a court approved order or
admits its inability to pay its debts), to subordinate their rights to payment
by MDNY of outstanding claims (including IBNR) to all other outstanding claims
in an amount equal to the amount of the then outstanding Island Debt, and (b)
that, after payment of third party claims, the claims of Island IPA and its
providers will be subordinated to the claims of the Hospitals; and (iii) the
amount of the Island Debt outstanding from time to time will be carried on the
financial statements of MDNY as an admitted asset. The aggregate amount owed by
MDNY to the subordinating parties in the form of medical claims payable, and the
amount of the Island Debt, was approximately $14 million as of December 31,
2004.

         In 1997, with the approval of NYSID, MDNY obtained a loan from CHNLI
that has a balance at December 31, 2003 of approximately $1.98 million
(including accrued interest). Interest under this note accrues at the prime rate
and is payable quarterly commencing April 1, 1998. The entire principal balance
plus accrued interest is due in full subject to prior approval by NYSID.

         In 1998, with the approval of NYSID, MDNY obtained a $1 million loan
from LIPH, LLC that has a balance as of December 31, 2004 of approximately $1.4
million (including accrued interest). Interest under this note accrues at the
prime rate and is payable quarterly commencing October 1, 1998. The entire
principal balance plus accrued interest was due on July 1, 1999, but payment is
subject to prior approval by the NYSID. In April 1999, MDNY and LIPH, LLC
amended the loan agreement to provide LIPH, LLC with the right to convert the
note into equity in MDNY, and, in August 1999, MDNY's Board authorized the
conversion of the outstanding balance of the LIPH, LLC note into shares of MDNY
common stock. The note has not been converted as MDNY has not received approval
from NYSID for the conversion. Repayment of the principal and payment of accrued
interest on the LIPH, LLC note and the CHSLI note may be made only out of the
free and divisible surplus of MDNY and all payments are subject to NYSID
approval.

                                       14
<PAGE>

         MDNY is subject to the New York Women's Health and Wellness Act, which,
as of January 1, 2003, obligates MDNY to provide contraceptive drugs and devices
to its members, in conflict with the ethical policies of the Diocese, to which
CHNLI and CHSLI are subject. In light of this conflict, the Diocese allowed its
subscriber contract with MDNY to expire on January 1, 2005. CHSLI, on behalf of
the Hospitals, has also notified MDNY that CHSLI will not renew the Hospitals'
respective subscriber contracts with MDNY upon expiration thereof effective
January 1, 2006. MDNY provides health care insurance to employees of the
Hospitals affiliated with CHSLI. At December 31, 2004, a total of 7,450 Members
in MDNY were enrolled from CHSLI. Premiums from the Diocese and the Hospitals
represented approximately 28% and 27% and 30% of total premiums earned by MDNY
during both 2004 and 2003. It is anticipated that the loss of business upon the
expiration of MDNY's subscriber contracts with the Hospitals will have a
material adverse effect on MDNY's business and financial condition.

         The Company, MDNY and CHNLI have entered into a Stock Purchase
Agreement dated as of December 31, 2004. Pursuant to the Stock Purchase
Agreement, the Company will purchase from CHNLI all shares of Class B common
stock of MDNY owned by CHNLI, and CHNLI will contribute to the capital of MDNY,
and for cancellation, a Subordinated Note dated December 18, 1997 made by MDNY
in favor of CHNLI in the original principal amount of $1.4 million, together
with all interest accrued thereon (the "Section 1307 Contribution"). Upon the
closing of such purchase, the Company will be the sole stockholder of MDNY.

         In consideration of the sale, assignment and transfer of the Class B
Shares and of the Section 1307 Contribution, the Company will pay CHNLI a
closing payment of $10.00. As additional consideration, the Company will pay to
CHNLI the percentage specified below of the net amount of cash and the fair
market value of all securities and other property paid by an acquiror and
received by LIPH in respect of its equity interest in MDNY upon any sale to a
third party by LIPH of its stock in MDNY or of all or substantially all of
MDNY's business (through a sale of stock or assets, or a merger, consolidation
or similar transaction) that is consummated prior to December 31 of the year
specified below (or with respect to calendar year 2008, certain transactions
consummated after December 31, 2008), but not to exceed $4.5 million in the
aggregate (the amount of CHNLI's equity investment in MDNY):

                  Percentage of Sale Proceeds                 Year
                  ---------------------------                 ----
                  33.3%                                       2005
                  25.0%                                       2006
                  20.0%                                       2007
                  15.0%                                       2008

         Conditions to closing under the Stock Purchase Agreement include: (i)
the termination of the Shareholders Agreement and the Stock Subscription and
Purchase Agreement, each dated as of October 11, 1995, between the Company, MDNY
and CHNLI, as amended, (ii) execution and delivery of mutual releases by CHNLI,
the Diocese and CHSLI, on the one hand, and MDNY and the Company, on the other
hand, from all claims arising through the closing date, except for claims
arising under the Agreement and certain other agreements in effect among the
releasing parties as of the closing date, (iii) resignation of the four MDNY
directors designated by CHNLI, as directors and officers of MDNY, (iv) payment
in full of all premiums then payable under the MDNY Group Applications effective
as of December 31, 2002 between MDNY and each of the Diocese and CHSLI, as agent
for five affiliated Catholic Hospitals ("Hospitals"); (v) no premiums under such
Group Applications being more than 30 days past due; (vi) execution and delivery
of an agreement whereby the Hospitals and certain related Catholic nursing homes
agree to pay the same penalties and interest on past due premiums and other
amounts payable by them to MDNY as those applicable under current regulations to
late payments due from MDNY to the Hospitals; (viii) consent by each of NYSID
(which granted consent in March 2005), the New York Department of Health (which
was granted in August 2005), the Attorney General of the State of New York and
the Supreme Court of the State of New York to the Agreement and the transactions
contemplated thereby; and (ix) payment in full of all payments due and owing by
MDNY to the Hospitals for services rendered to the extent required by the
provider agreements between MDNY and the Hospitals, and no such payments, with
respect to clean claims, being more than 45 days past due.

                                       15
<PAGE>

         Upon closing of the purchase of the Class B shares, the Certificate of
Incorporation and By-laws of MDNY, and the composition of MDNY's Board of
Directors, will be modified to reflect, among other things, that CHNLI is no
longer a shareholder in MDNY and the composition and number of MDNY's Directors
will be changed to include the requisite number of enrollee representatives.

         As a result of incurring deficits of approximately $2.4 million in
hospital risk pools during 1997 and 1998 relating to risk sharing agreements
between MDNY and CHSLI, MDNY and CHSLI entered into agreements dated May 10,
1999 and August 13, 1999 whereby CHSLI agreed to pay MDNY $2.4 million by
December 31, 2003. CHSLI paid such amount to MDNY on March 30, 2004.

         Commencing with September 2004, the MDNY Compensation Committee and the
Company's Board of Directors approved an increase in compensation to each of
Salvatore Caravella, M.D., the President and a Director of MDNY, and Rosario
Romano, M.D., President of Island IPA and a Director of LIPH, to $5,000 per
month in consideration of their respective participation in reviewing, with
other officers and employees, MDNY's utilization management, credentialing and
operations processes.

         Commencing with September 2004, MDNY pays to Paul Kolker, M.D., a
Director of MDNY and President and Chairman of the Board of the Company, $5,000
per month in consideration of Dr. Kolker's participation in negotiations
regarding potential strategic transactions by MDNY (including without
limitation, equity investments in MDNY by third parties, the disposition of the
assets or stock of MDNY and related commercial transactions (collectively,
"Strategic Transactions")), as well as negotiations among MDNY, the Company,
CHNLI, the Diocese and CHSLI regarding CHNLI's withdrawal as a shareholder in
MDNY and MDNY's contractual relationships with CHSLI and the Diocese
(collectively "Shareholder Transactions"). In October 2004, MDNY paid to Dr.
Kolker the sum of $3,871.24 per month retroactive to June 2002 (the month Dr.
Kolker became President and Chairman of the Company) by means of a lump sum
payment in the aggregate amount of $89,038 in consideration of Dr. Kolker's
participation from and after June 2002 in negotiations regarding potential
Strategic Transactions and Shareholder Transactions.

Independent Auditor Fees

         Audit Fees. Aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP ("PC") for the audit of the Company's annual
consolidated financial statements and the review of the quarterly consolidated
financial statements included in the Company's Forms 10-Q for 2004 were
approximately $54,000 and $25,000, respectively. Audit fees billed for the audit
of MDNY for 2004 and 2003 were $200,000 and $205,000 respectively.

         Audit-Related Fees. Aggregate fees billed for assurance and related
services rendered by PC that are reasonably related to the performance of the
audit of the Company's financial statements (and not reported under the caption
"Audit Fees" above) for 2004 and 2003 were $0 and $0, respectively.

         Tax Fees. Aggregate fees billed for professional services rendered by
PC for tax compliance, tax advice and tax planning for 2004 and 2003 were $0 and
$0, respectively.

         All Other Fees. The aggregate fees billed for all other services
rendered by PC in 2004 and 2003 for all other services not described under the
foregoing captions "Audit Fees," "Audit-Related Fees" and "Tax Fees," were $0
and $113,300, respectively. All such fees in 2003 were for consulting services
related to MDNY's compliance with HIPAA.

         Pre-Approval Policies and Procedures. The Board of Directors has not
adopted a formal policy and procedures with respect to the pre-approval of
auditing and non-auditing services provided to the Company by the independent
accountants and fees for such services. During the year, the Company's Chief
Financial Officer and its Executive Vice President monitor fees paid to the
independent accountants for audit and non-audit services.

                                       16
<PAGE>

         The percentage of hours expended on PWC's engagement to audit the
Company's financial statements for 2004 that were attributed to work performed
by persons other than PWC's full-time, permanent employees was less than 50%.

                                   Proposal 2

 PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP AS THE
                  COMPANY'S AUDITORS FOR THE 2005 FISCAL YEAR

         The accounting firm PricewaterhouseCoopers LLP ("PC") is presently
serving as the Company's independent auditors. PC also served as the Company's
independent auditors during the fiscal year ended December 31, 2004. The Board
of Directors believes it is desirable and in the best interests of the Company
to continue engagement of PC. A representative of PC will be present at the
Meeting to make a statement if he or she desires and to respond to appropriate
questions presented at the Meeting.

      THE BOARD OF DIRECTORS DEEMS THE APPOINTMENT OF PWC AS THE COMPANY'S
        AUDITORS FOR THE 2005 FISCAL YEAR TO BE IN THE BEST INTERESTS OF
          THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE "FOR"
                  THE RATIFICATION OF SUCH APPOINTMENT OF PWC

                                  OTHER MATTERS

Annual Report on Form 10-K

         All shareholders of record on the Record Date have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2004. The Annual Report does not
form part of these proxy materials for the solicitation of proxies. The exhibits
thereto are available from the Company without charge upon written request of a
shareholder to the Secretary of the Company. Copies of such materials are also
available online through the Securities and Exchange Commission at www.sec.gov.

Shareholder Proposals for 2006 Annual Meeting

         In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next Annual Meeting of Shareholders of the
Company, shareholder proposals for such meeting should be sent to the Secretary
of the Company at 275 Broadhollow Road, Melville, New York 11747 and must be
received by the Company no later than December 31, 2006 and must comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934.

Matters Not Determined at the Time of Solicitation

         As of the date of this Proxy Statement, the Company knows of no matters
other than those set forth herein that will be presented for consideration at
the Meeting. If any other matter or matters are properly brought before the
Meeting or any adjournment thereof, the persons named in the accompanying Proxy
will have discretionary authority to vote, or otherwise act, with respect to
such matters in accordance with their judgment.

         The Board of Directors of the Company would appreciate the prompt
return of the enclosed Proxy, signed and dated. You may revoke your Proxy by
giving written notice to the Company prior to the Meeting, or by execution of a
subsequent proxy which is presented to the Meeting, or you may vote by ballot if
you are present at the Meeting.

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                             TO VOTE CLASS A SHARES

                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION
                            One Huntington Quadrangle
                            Melville, New York 11747

                   PROXY--SOLICITED BY THE BOARD OF DIRECTORS

The undersigned holder of Class A Common Stock of Long Island Physician Holdings
Corporation ("Company") hereby appoints Dr. Paul Kolker and Concetta Pryor and
each or either of them, the proxy or proxies of the undersigned, with full power
of substitution, to vote as specified on this proxy form all shares of class a
common stock of said company which the undersigned is entitled to vote at the
annual meeting of shareholders of the company, to be held on November 1, 2005
(the "Meeting") and at all adjournments of such meeting, with all powers the
undersigned would possess if personally present.

This Proxy will be voted as specified. If no specification is made, the Proxy
will be voted "For" each of the nominees for Class A director named in Proposal
1, and as to any other matters as may properly come before the meeting, this
Proxy will be voted in the discretion and in the best judgment of the Proxies.
This Proxy may be revoked at any time prior to the voting thereof.

PROPOSAL 1: To elect the following persons as Class A directors for a term
expiring with the 2008 Annual Meeting: William Brennan, M.D., Robert A. Jason,
M.D, Robert Sarnataro, M.D, Gary Wohlberg, M.D.

                              FOR [ ] WITHHOLD [ ]

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE OR MORE INDIVIDUAL
NOMINEE(S), WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)


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

PROPOSAL 2: Proposal to approve the appointment of PricewaterhouseCoopers LLP as
the Company's auditors for the 2005 fiscal year.

                         FOR [ ] AGAINST [ ] ABSTAIN [ ]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE FOR DIRECTOR NAMED
IN PROPOSAL 1 AND "FOR" PROPOSAL 2.

Dated: __________, 2005


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

                                               Signature or Signatures

Executors, administrators, trustees, guardians, attorneys and agents should give
their full titles and submit evidence of appointment unless previously furnished
to the Company or its transfer agent.



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