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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, 2005

                                      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, 2005 there were 1,798 shares of Class A common stock
and 4,044 shares of Class B common stock outstanding.

      Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for its 2006 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.. At December 31, 2005, MDNY had 32,078 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

      The Company's financial statements have been presented on the basis that
the Company 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 reported a $4.6 million loss in 2005; has a substantial working
capital deficit, has a negative net worth, 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. The Diocese of Rockville
Centre ("Diocese") allowed its subscriber contract with MDNY to expire on
December 31, 2004, resulting in the loss of approximate 3,500 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"), did
not renew the respective Hospital subscriber contracts with MDNY upon expiration
thereof on January 1, 2006, resulting in the loss of approximately 6,000
members.

      Effective January 1, 2005 MDNY entered into a new agreement with a
financial advisor to pursue investors to recapitalize MDNY. MDNY has been in
negotiations with various equity investors to implement the following plans to
improve liquidity and restore profitability to MDNY. These transactions are
summarized below:

      o     With additional capital, MDNY would apply for an Article 42
            (Accident and Health Company) license which would allow MDNY to
            develop new products and benefit plan designs with higher co-pays
            and deductibles to be marketed to its customers. MDNY's competitors
            currently market these products to their customers.

      o     Achieve administrative savings by consolidating certain
            administrative functions including information system platforms.

      o     Management has initiated reductions in operating and medical
            expenses primarily related to staffing, negotiation of certain
            specialty carve out contracts, and renegotiating existing provider
            contracts.

      o     Effective January 1, 2006 Island IPA has agreed to increase the
            amount of withhold to approximately 10% in an effort to accelerate
            payment of its outstanding debt due MDNY as requested by the New
            York State Insurance Department ("NYSID") See "Recent Developments"
            and "Certain Regulatory Matters.".

      While management believes that implementation of these plans would,
together with additional investment capital, achieve profitability and adequate
statutory capital, there is no assurance that any equity investment will be
completed on terms acceptable to MDNY, its shareholders, or NYSID, if at all.



                                       1
<PAGE>

Going Concern Qualification

      The consolidated financial statements of the Company and of MDNY as of
December 31, 2005 and for the year then ended have been prepared assuming that
the Company and MDNY will each continue as a going concern.

Recent Developments

      On September 16, 2005, NYSID advised MDNY that NYSID had determined that
MDNY should have reported approximately $17.6 million of payments in excess of
capitation ("Island Debt") as a non-admitted asset, and that the resulting
reduction in net worth resulted in MDNY having an insolvency in the amount of
$12,666,791 as of June 30, 2005. NYSID directed MDNY to make every effort to
collect, in cash, the outstanding amount of the Island Debt as soon as possible
but no later than December 31, 2005 and requested that MDNY provide a plan, by
September 30, 2005, detailing the steps MDNY would take to collect the
outstanding balance. In November 2005 NYSID reiterated its position that the
Island Debt should be not be reflected as an admitted asset but extended the
payment due date to June 30, 2006.

      MDNY believes that NYSID's letter of September 16, 2005 contradicts
NYSID's letter of March 20, 2002, in which NYSID approved a recovery plan
proposed by MDNY that, among other things, provided for MDNY to reflect in its
financial statements an admitted asset, "Payments in Excess of Capitation," as
well as an offsetting liability "Unpaid Capitation." MDNY continued to withhold
5% of the IPA provider claims in repayment of Island Debt in 2005 In response to
NYSID's concerns, Island IPA agreed to increase the withhold percentage to 10%
effective January 1, 2006. See "Certain Regulatory Matters."

      In a letter dated May 8, 2006, NYSID reiterated its position that the
Island Debt should be reported as a non-admitted asset and further directed MDNY
to file amended statutory reports reflecting this revision. The revised negative
statutory net worth at December 31, 2005 was $14,376,000. MDNY is in the process
of filing amended annual reports for the year ended December 31, 2005.

      In 2006 Island IPA continues to repay the Island Debt at a withhold rate
of 10% of claim payments. As of December 31, 2005, the Company's financial
statements reflect a reserve against payments in excess of Capitation
("Capitation Receivable") of $3,000,000 which represents the difference between
the$17 million owed from Island IPA at December 31, 2005 and the estimated
amount of IPA claims payable by MDNY to Island IPA outstanding at December 31,
2005 of $14 million. $3 million represents the estimated amount of the Island
Debt that would be deemed uncollectible due to the shortfall in outstanding IPA
claims at December 31, 2005. The amount owed from Island IPA is reflected as
Payments in Excess of Capitation on the balance sheets of MDNY and the Company
as of December 31, 2005 and 2004 respectively.

      MDNY is currently in discussions with a potential investor who, in
connection with a proposed investment in MDNY, is working with MDNY, Island IPA
and NYSID to, among other things, determine the ultimate "approved" financial
status of the Island Debt. There can be no assurance that the parties will be
able to complete an agreement on terms acceptable to MDNY, its shareholders, the
investor, or NYSID.


                                       2
<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.

      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.

      The NYSID has not issued a new or revised Regulation 146 with respect to
2005. Therefore, as of December 31, 2005 MDNY has not recorded any impact
related to the stabilization pools.

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, to which
CHNLI and CHSLI are subject. In light of this conflict, the Diocese allowed its
subscriber contract with MDNY to expire on December 31, 2004 resulting in the
loss of approximately 3,800 members. CHSLI, on behalf of the Hospitals, did not
renew the respective Hospital subscriber contracts with MDNY upon expiration
thereof on January 1, 2006. At December 31, 2005, a total of approximately 6,000
members in MDNY were enrolled from CHSLI. Premiums from the Hospitals
represented approximately 20% for 2005 and premiums from the Hospitals and the
Diocese represented 28% of total premiums earned by MDNY during 2004. The
expiration of MDNY's subscriber contracts with the Hospitals on January 1, 2006
and the resulting loss of business 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 so as to allow CHNLI to exit as an MDNY shareholder.
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):


                                       3
<PAGE>

         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 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
State Department of Health ("NYSDOH") (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.

      The Stock Purchase Agreement remains subject to approval by the Attorney
General of the State of New York and the Supreme Court of the State of New York.
If such approval is granted, it is anticipated that the closing under the Stock
Purchase Agreement would occur concurrently with and be contingent on the
closing of an investment in and restructuring of MDNY, and would require the
renegotiation of certain closing conditions under the Stock Purchase Agreement.

Certain Regulatory Matters

Recovery and Subordination Agreement

      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 $14 million as of
December 31, 2005 and 2004, respectively.

      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 $14 million and $18.5 million at
December 31, 2005 and 2004, 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." As discussed above, in September 2005 NYSID reversed
its position regarding admissibility of the Island Debt.


                                       4
<PAGE>

Statutory Reserve Requirements

      NYSDOH and the NYSID require MDNY to maintain reserves in the form of an
escrow deposit and statutory net worth.

      In June 2005, NYSDOH adopted revised regulations regarding the amount HMOs
and certain other health care organizations must maintain as the contingent
reserve fund. Prior to 2005 the contingent reserve was capped at 5% annually.
Effective December 2005 the amount is capped at 5% of premium for fiscal years
2005 and 2006 and then increases 1% per year over the next eight years to twelve
and one half percent of the HMO's annual premium income. The increase in
reserves is effective for the calendar year 2006. The contingent reserve
requirement is deemed to be met if the statutory net worth of the HMO equals or
exceeds the contingent reserve requirement.

      MDNY for calendar year 2005 and 2004 reported its contingent reserve at 5%
of net premiums which totaled $5.8 and $6.7 million respectively. As a result of
the Island Debt being reported as a non admitted asset for statutory purposes,
negative statutory net assets of MDNY were $14.4 million at December 31, 2005
compared to positive statutory net assets of $5.4 million at December 31, 2004.
MDNY is deficient in maintaining the required contingent reserve fund by $20.2
and $1.3 million as of December 31, 2005 and December 31, 2004 respectively.

      In addition, effective March 2006, NYSDOH now requires certain Managed
Care Organizations to establish a trust agreement with a bank insured by the
FDIC. The trust must be funded by an amount equal to the escrow deposit and must
be on deposit with the trust by March 31, 2006. Prior to establishment of the
trust the agreement must be approved by the NYSID. As of December 31, 2005 the
escrow deposit was calculated at 5% of MDNY's projected 2005 medical expenses of
$102 million or $5.1 million. MDNY had approximately $5.9 million in cash and
cash equivalents set aside to fund the escrow deposit. MDNY's trust agreement
was approved on May 26, 2006.

      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.

      Meeting the reserve requirements is a condition for continued licensure
and that MDNY's failure to meet the contingent reserve fund requirement could
cause the NYSID or NYSDOH to require more frequent reporting and, if necessary,
require MDNY to develop for approval a corrective action plan to cure the
impairment. However, should NYSID or NYSDOH determine that MDNY is insolvent;
they could issue a Notice of Termination and direct MDNY to perform an orderly
shutdown.

Other Regulatory Matters

      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 the second quarter 2005, the NYSID conducted a market conduct audit for
fiscal years 2002 through 2004 with a primary audit focus on year ended 2004.
Summary of preliminary financial and operational findings were reviewed with
MDNY in November 2005. There were no significant findings that would impact the
results for 2005. The final report has not been released to MDNY.

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, 2005, MDNY had 80 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


                                       5
<PAGE>

the option to receive prescription drugs and other supplemental benefits through
the purchase of benefit plan "riders". At December 31, 2005, MDNY had 32,708
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, 2005, 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 2005 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
20 hospitals was renegotiated in 2005, and contract pricing with 23 hospitals is
subject to renegotiation in 2006. 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 (which includes HNY, Sole Proprietor and Individual plans)

      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 89%, 87%, and 79% of
total premiums earned by MDNY in 2005, 2004 and 2003, respectively.

POS Product (which includes Sole Proprietor and Individual plans)

      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 11%, 13%, and 21% of
total premiums earned in 2005, 2004 and 2003, 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, 2005 and 2004, MDNY had 143 and 483 individual members,
respectively, who accounted for 2% and 2% of total premiums earned in both 2005
and 2004.

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.

      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


                                       7
<PAGE>

or directly from internal sales representatives. At December 31, 2005 and 2004,
MDNY had approximately 11,000 and 13,900 sole proprietor members, respectively,
who accounted for 39% and 37% of total premiums earned in 2005 and 2004,
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, 2005 and 2004, MDNY had 1,688 and 1,606 members,
respectively, who purchased these products, which accounted for 3% and 1% of
total premiums earned in 2005 and 2004, 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 2005, 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


                                       8
<PAGE>

agencies relating to, among other things, operations, premium rates and covered
benefits, financial condition and marketing practices.

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 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 could be 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 of which have
not been revised or implemented since 2004; The New York Direct Pay and Healthy
New York Stop Loss Pools, provide insurers participating in these programs a
limited amount of stop loss insurance for claims paid between certain
thresholds.

      In January 1, 1997, New York State enacted the Health Care Reform Act of
2000 (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.

      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,


                                       9
<PAGE>

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 2005, 10 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.

      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"), generally requires carriers that write small business in any market to
accept for coverage any small employer group applying for a basic and standard
plan of benefits. HIPAA also mandates guaranteed renewal of health care coverage
for most employer groups, subject to certain defined exceptions, and provides
for specified employer notice periods in connection with product and market
withdrawals. The law further limits exclusions based on preexisting conditions
for individuals covered under group policies to the extent the individuals had
prior creditable coverage within a specified time frame. HIPAA is structured as
a "floor" requirement, allowing states latitude to enact more stringent rules
governing each of these restrictions. For example, certain states have modified
HIPAA's small group definition (2-50 employees) to include groups of one. New
York State has a similar law.


                                       10
<PAGE>

HIPAA Administrative Simplification; Gramm-Leach-Bliley Act

      The regulations under the administrative simplification section of HIPAA
also impose a number of additional obligations on issuers of health insurance
coverage and health benefit plan sponsors. The law authorizes the United States
Department of Health and Human Services ("HHS") to issue standards for
administrative simplification, as well as privacy and security of medical
records and other individually identifiable health information ("Administrative
Simplification"). Administrative Simplification requirements apply to
self-funded group health plans, health insurers and HMOs, health care
clearinghouses and health care providers who transmit health information
electronically ("Covered Entities"). Regulations adopted to implement
Administrative Simplification also require that business associates acting for
or on behalf of these Covered Entities be contractually obligated to meet HIPAA
standards. The Administrative Simplification regulations establish significant
criminal penalties and civil sanctions for noncompliance.

      Although Administrative Simplification was intended ultimately to reduce
administrative expenses and burdens faced within the health care industry, the
law has required significant and, in some cases, costly changes in business
practices and operations. We expect that we will incur additional expenses to
comply with these regulations in future periods.

      HHS has released rules mandating the use of new standard formats with
respect to certain health care transactions (e.g., health care claims
information, plan eligibility, referral certification and authorization, claims
status, plan enrollment and disenrollment, payment and remittance advice, plan
premium payments and coordination of benefits). HHS also has published rules
requiring the use of standardized code sets and unique identifiers for employers
and providers. We have met all applicable requirements to date. We are required
to comply with the provider identifier rules by May 2007.

      HHS also sets standards relating to the privacy of individually
identifiable health information. In general, these regulations restrict the use
and disclosure of medical records and other individually identifiable health
information held by health plans and other affected entities in any form,
whether communicated electronically, on paper or orally, subject only to limited
exceptions. In addition, the regulations provide patients new rights to
understand and control how their health information is used. These regulations
do not preempt more stringent state laws and regulations that may apply to us.
HHS has also published security regulations designed to protect member health
information from unauthorized use or disclosure. We are required to comply with
these security regulations.

      In addition, provisions of the Gramm-Leach-Bliley Act generally require
insurers to provide customers with notice regarding how their personal health
and financial information is used and the opportunity to "opt out" of certain
disclosures before the insurer shares non-public personal information with a
non-affiliated third party. Like HIPAA, this law sets a "floor" standard,
allowing states to adopt more stringent requirements governing privacy
protection. The Gramm-Leach-Bliley Act also gives banks and other financial
institutions the ability to affiliate with insurance companies, which may lead
to new competitors in the insurance and health benefits fields.

      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


                                       11
<PAGE>

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.

      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
ability of MDNY to obtain additional capital from potential investors; 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 2005, 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.


                                       12
<PAGE>

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 $485,872. 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.

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 2005 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 practitioner's 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, 2005 there were 1,798 shareholders of record of the
Company's Class A Common Stock and 4,044 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 2005.

Item 6. Selected Consolidated Financial Data

      The following selected financial data for each year in the five-year
period ended December 31, 2005 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:                                                             2005          2004          2003          2002          2001
                                                                  ---------     ---------     ---------     ---------     ---------
<S>                                                               <C>           <C>           <C>           <C>           <C>
Premiums earned                                                   $ 116,556     $ 135,209     $ 153,276     $ 158,310     $ 146,505
                                                                  ---------     ---------     ---------     ---------     ---------
Expenses:
IPA medical expenses                                                101,890       117,561       131,793       137,161       123,401

Commission expense                                                    4,873         5,255         6,245         6,731         5,611
Reinsurance, net                                                       (132)         (509)          409           609           300
Management fees                                                          --            --            --            --            --
General and admin expenses                                           12,766        14,360        13,528        15,541        20,150
Capitation Receivable Reserve                                         3,000            --            --            --            --
Depreciation                                                            113           104           162           337           498
                                                                  ---------     ---------     ---------     ---------     ---------
Total expenses                                                      122,510       136,771       152,137       160,379       149,960

Operating income (loss)                                              (5,954)       (1,562)        1,139        (2,069)       (3,455)
Investment income                                                       174           156           394           676         1,957
Income (loss) before income taxes/minority interest                  (5,780)       (1,406)        1,533        (1,393)       (1,498)
Provision for income (taxes) benefit                                      2            24           (87)          (46)           --
Minority interest in (income) loss of subsidiary                      1,209           474          (436)          475           490
Net income (loss)                                                 $  (4,573)    $    (908)    $   1,010     $    (964)    $  (1,008)

Basic and diluted income (loss) per share                         $    (783)    $    (156)    $     173     $    (165)    $    (173)
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,
                                                                  -----------------------------------------------------------------
                                                                     2005          2004          2003          2002          2001
                                                                  ---------     ---------     ---------     ---------     ---------
<S>                                                                 <C>           <C>           <C>           <C>           <C>
Working capital/(deficiency)                                        (17,720)      (17,233)      (17,569)      (19,934)      (19,014)
Total assets                                                         31,508        35,230        45,367        43,881        45,199
Long-term debt                                                        3,599         3,450         3,346         3,247         3,135
Total liabilities                                                    35,143        33,083        41,838        41,798        41,676
Minority interest                                                        --         1,209         1,683         1,247         1,722
Shareholders' equity                                                 (3,635)          937         1,846           836         1,801
</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, 2005 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 $686,642
as of December 31, 2005.

      MDNY's principal source of revenue is premiums earned from its HMO and POS
Products. Other revenue consists principally of interest income for 2005.

      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 2005, MDNY continued to implement programs to
reduce administrative costs but as membership continued to decline to 32,708
from 40,447 in 2004, certain reductions became more difficult for MDNY to
absorb. As a result, the administrative loss ratio increased to 15.3% in 2005
from 14.6% in 2004. As of December 31, 2005, the medical loss ratio for 2005
increased to 87.3% compared to 86.6% in 2004. In addition, net loss was
negatively impacted by a $3,000,000 reserve against the Capitation Receivable
recorded against the Island Debt. Likewise, operating losses resulted in the
Company absorbing an additional $686,000 as a result of the negative minority
interest balance. These factors contributed to the overall operating loss of
$4,573,000 reported in 2005.

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

                                      2005       2004     inc(dec)     %inc(dec)
                                    --------   --------   --------     --------
Enrollment                            32,708     40,447     (7,739)        (19%)
Enrollment (months)                  400,947    498,214    (97,267)        (20%)
Premiums                            $116,556   $135,209    (18,653)        (14%)
Medical Expenses
(excl HCRA surcharge)               $ 97,772   $112,331    (14,559)        (13%)
HCRA surcharge                      $  3,986   $  4,721       (735)        (16%)
Total Medical-
(includes reinsurance)              $101,758   $117,052    (15,294)        (13%)
Administrative                      $ 12,766   $ 14,359     (1,593)        (11%)
Capitation Receivable Reserve          3,000         --      3,000          --
Commissions                         $  4,873   $  5,255       (382)         (7%)


                                       15
<PAGE>

                                               2005         2004    %inc(dec)
                                             --------     --------  ---------
Premium pmpm                                 $290.70      $271.39       7%
Medical pmpm                                 $243.85      $225.47       8%
HCRA pmpm                                       9.94         9.47       5%
Total medical pmpm                           $253.80      $234.94       8%
Administrative pmpm                          $ 31.86      $ 28.82      11%
Capitation Receivable Reserve pmpm           $  7.48           --      --
Commissions pmpm                             $ 12.15      $ 10.55      15%


      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 87.3% and 86.6%, respectively, for 2005 and
2004.

      As of December 31, 2005, the Company's working capital deficit increased
to $17.7 million from $17.2 million 2004. Negative operating results for the
year ended December 31, 2005 contributed to the overall increase in the working
capital deficit.

      MDNY has also established a receivable of approximately $2.4 million at
December 31, 2005 related to certain stop loss pools established by the State of
New York under the Health Care Reform Act of New York for years 2004 and 2005.
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:                                      2005         2004          2003
                                            ---------    ---------     ---------
   Premiums earned                            100.0        100.0%        100.0%
Expenses:
IPA medical expenses                           87.3         86.6          86.3
Commissions expense                             4.2          3.9           4.1
General and administrative expenses            11.0         10.6           8.8
Capitation Receivable Reserve                   2.6           --            --
Depreciation                                     .1           .1            .1
   Total expenses                            (105.1)      (101.2)        (99.3)
   Operating income (loss)                     (5.1)        (1.2)           .7
Investment and other income                      .1           .1            .3
Income (loss) before income taxes/
  minority interest                            (5.0)        (1.1)          1.0
Provision for income taxes                       --           --            .1
Minority interest in subsidiary                 1.0           .4           (.3)
Net income (loss)                              (3.9)         (.7)           .7

Statistical Data:
     Enrollment                               32,708       40,447        47,029
     Member months                           400,947      498,214       626,106
*   Medical loss ratio                         87.3%        86.6%         86.3%
**  Administrative loss ratio                  15.3%        14.6%         13.0%



*     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 (excludes Capitation Receivable Reserve).

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

      Premiums earned for the year ended December 31, 2005 and 2004 were
approximately $116,556,000 and $135,209,000, respectively. At December 31, 2005,
MDNY's commercial enrollees totaled approximately 32,708, as compared to
approximately 40,447 at December 31, 2004. Premiums received decreased
$18,653,000 or 14% in 2005 compared to 2004 as a result of decreased member
months of 20%, partially offset by increases in premium yields of approximately
10% in 2005 compared with 2004. Overall membership decreased in 2005 primarily
due to the loss the Diocese membership in January 2005 which accounted for
approximately 3,800 members 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, 2005 MDNY increased its HMO and POS rates approximately 7%
and 10% respectively further contributing to the overall decline in enrollment.

      Total expenses for the year ended December 31, 2005 were approximately
$122,510, 000, as compared to $136,772,000 for the year ended December 31, 2004.
This 10% decrease in expenses is the result of lower medical expenses consistent
with the overall 20% decrease in enrollment offset by an increase in overall
medical costs of 13% together with the Capitation Receivable Reserve of
$3,000,000 recorded against the Island Debt as of December 31, 2005.

      Health care service expense stated as a percentage of premium revenues was
87.3% for 2005 compared with 86.6% for 2004. Total medical expenses for the year
ended December 31, 2005 decreased approximately $15,294,000 or 13% from


                                       17
<PAGE>

2004. This decrease is primarily the result of the overall 19% decrease in
enrollment from 2004 partially offset by an increase in medical costs on a per
member per month basis (pmpm) from $235 pmpm in 2004 to $254 pmpm in 2005; an 8%
increase.

--------------------------------------------------------------------------------
Expenses:                   December 31, 2005     December 31, 2004    % change
--------------------------------------------------------------------------------
Medical fee for service
claims                       $ 97,772,006           $112,331,587          (13%)
--------------------------------------------------------------------------------
HCRA public goods expense    $  3,986,462           $  4,720,657          (16%)
--------------------------------------------------------------------------------
Total medical expense        $101,758,468           $117,052,244          (13%)
--------------------------------------------------------------------------------

      Total administrative costs for 2005 and 2004 were approximately
$12,766,000 and $14,359,000 respectively. This 11% decrease is the result of
administrative staffing reductions in 2005 as a result of the decline in
enrollment. Administrative expenses stated as a percentage of premium revenue
were 11.0% for 2005 compared with 10.6% for 2004.

      Total Capitation Receivable Reserve for 2005 of $3,000,000 represents the
difference in the amount owed from Island IPA to MDNY at December 31, 2005 of
$17 million compared to the estimated amount of IPA claims owed by MDNY to
Island IPA outstanding at December 31, 2005 of $14 million. $3 million
represents the estimated amount of the Island Debt that would be deemed
uncollectible due to the shortfall in outstanding IPA claims at December 31,
2005. The Island Debt is reflected as Payments in Excess of Capitation on the
balance sheets as of December 31, 2005 and 2004 respectively.

      Total commissions were approximately $4.9 million and $5.3 million for
2005 and 2004 respectively. This 7% decrease is the result of the 19% decline in
enrollment from 2004 to 2005. Commissions as a percent of premium increased to
4.2% as of December 31, 2005 from 3.9% as of December 31, 2004. The loss of the
Diocese membership effective January 1, 2005 resulted in, a higher proportion of
the premium remaining in the plan to be generated through general agents,
brokers, and associations. The percentage of premium generated through brokers
and general agents was approximately 80% as of December 31, 2005 compared to 72%
at December 31, 2004.

      Net loss for the year ended December 31, 2005 was approximately
$4,573,000, compared to a net loss of $909,000 for 2004. This negative result in
2005 is primarily the result of the $3 million reserve for Capitation Receivable
Reserve recorded against the Island Debt in 2005. Likewise, 2005 operating
losses resulted in the Company absorbing an additional $686,000 as a result of
the negative minority interest balance. Further contributing to the overall loss
reported in 2005 was the 19% decline in enrollment in 2005. MDNY continued to
implement programs to reduce administrative costs as membership continued to
decline to 32,708 from 40,447 in 2004, but certain reductions became more
difficult for MDNY to absorb. As a result, the administrative loss ratio
increased to 15.3% in 2005 from 14.6% in 2004. In addition, the medical loss
ratio for 2005 increased to 87.3% compared to 86.6% in 2004. These factors
contributed to the overall loss reported in 2005.

      The table below illustrates the membership mix between HMO and POS
products at December 31, 2005 compared to 2004. The membership at December 31,
2005 and 2004 is primarily in HMO products.

--------------------------------------------------------------------------------
Product                                  HMO           POS             Total
--------------------------------------------------------------------------------
Membership at Dec 31, 2005             30,628         2,080           32,708
--------------------------------------------------------------------------------
Membership at Dec. 31, 2004            37,355         3,092           40,447
--------------------------------------------------------------------------------
% Membership mix 2005                      94%            6%             100%
--------------------------------------------------------------------------------
% Membership mix 2004                      92%            8%             100%
--------------------------------------------------------------------------------


                                       18
<PAGE>

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 continued to lose membership to other competitors in its service
area who offered more attractive premium rates either by offering experience
rated products or benefit plans with higher co-pays and deductibles. MDNY is
licensed under Article 44 of the Public Health Law which prohibits MDNY 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 $136,771,565 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.

      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%
--------------------------------------------------------------------------------


                                       19
<PAGE>

Liquidity and Capital Resources

      Cash flows provided by operating activities and used in investing
activities of approximately $987,000 and $(180,000), respectively, in 2005
resulted in an overall increase in cash and cash equivalents in 2005 of
$808,000. 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, 2005 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 $17,720,000 at
December 31, 2005 compared to a negative working capital of approximately
$17,233,000 at December 31, 2004. The amount of negative working capital
increased in 2005 as a result of operating losses in 2005. 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 2006 rate increases together with
the initiatives described in Item 1 under the caption "Business Strategy" and
additional investment will produce sufficient cash flows to meet MDNY's
obligations in 2006. There can be no assurance that MDNY will be able to achieve
sufficient cash flows.

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.

      Meeting the reserve requirements is a condition for continued licensure
and that MDNY's failure to meet the contingent reserve fund requirement could
cause the NYSID or DOH to require more frequent reporting and, if necessary,
require MDNY to develop for approval a corrective action plan to cure the
impairment. However, should NYSID and DOH determine that MDNY is insolvent; they
could issue a Notice of Termination and direct MDNY to perform an orderly
shutdown.

      The consolidated financial statements of the Company as of December 31,
2005 and for the year then ended have been prepared assuming that the Company
will continue as a going concern.

      In addition to MDNY's need for additional capital, MDNY is evaluating
offers from potential investors. However, there can be no assurance that any
such investment will be completed on terms acceptable to MDNY, its shareholders,
or NYSID. 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, together
with additional investment capital, 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. .

      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 10 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, 2005 to $2.6 million compared to the NYSID required net worth of
$5.8 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 10 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      1-3 Years      4-5 Years
-----------------------        -----       ------      ---------      ---------
                                           (Amounts in thousands)

Operating leases             1,609,775     636,002       876,024       97,749

                             ---------     -------       -------       -------
Total                        1,609,775     636,002       876,024       97,749


      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. In
addition, MDNY has notes payable to its owner CHNLI and affiliate LIPH, LLC
totaling $3.6 million at December 31, 2005. These note payables are considered
Surplus notes and as such repayment of the principal and accrued interest shall
be made only out of the free and divisible surplus of the MDNY and all amounts
to be paid are subject to prior approval from NYSID.

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 management's best
estimate of the Company's liability for unpaid medical costs as of December 31,
2005, 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, 2005; 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 Capitation Receivable Reserve
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.


                                       21
<PAGE>

      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.

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, 2005; however, actual claim payments and other items may
differ from established estimates. Assuming a hypothetical 1% difference between
our December 31, 2005 estimates of medical costs payable and actual costs
payable, 2005 earnings from operations would increase or decrease by $272,000
and diluted net earnings per common share would increase or decrease by
approximately $47 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

      In December 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary
Assets" ("SFAS No. 153"), an amendment of Accounting Principles Board ("APB")
Opinion No. 29. In March 2005, the FASB issued Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations" ("FIN 47"). In May
2005, the FASB issued SFAS No. 154, " Accounting Changes and Error Corrections"
("SFAS No. 154"), a replacement of APB Opinion No. 20 and FASB Statement No. 3.


      In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision
of SFAS No. 123. SFAS No. 123(R) supersedes APB Opinion No. 25, and amends SFAS
No. 95, "Statement of Cash Flows." Generally, the approach in SFAS No. 123(R) is
similar to the approach described in SFAS No. 123. However, SFAS No. 123(R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative.


      In April 2005, the Securities and Exchange Commission issued a rule that
amends the compliance date for SFAS No. 123(R). The rule allows the Company to
delay the implementation of SFAS No. 123(R) until January 1, 2006. The Company
has not issued any share based payments to employees, including stock options,
to its employees.


                                       22
<PAGE>

      As permitted by SFAS No. 123, the Company accounted for share-based
payments to employees using APB No. 25's intrinsic value method through December
31, 2005 and, as such, has recognized no compensation cost for employee stock
options. Accordingly, the adoption of SFAS No. 123(R)'s fair value method will
have no effect on its results of operations.

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, 2005, 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, 2005, total principal and
interest due LIPH, LLC and CHNLI was approximately $1.5 million and $2.1
million, respectively. A 100 basis point increase in interest rates, applied to
MDNY's borrowings at December 31, 2005, 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

On November 8, 2005 we filed with the Commission a Current Report on Form 8-K
dated November 1, 2005, disclosing under "Item 8.01 - Other Events," disclosing
our dismissal of the prior audit firm, PriceWaterhouseCoopers LLP. and the
engagement of our new auditor, Holtz Rubenstein Reminick LLP. The dismissal was
not the result of any disagreement(s) with the prior audit firm.

Item 9A. Controls and Procedures

      The Company's management, including the principal executive officer and
principal financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting (as defined in Rule 13a-15(f) under the U.S. Securities
Exchange Act of 1934) is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.

      Internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
Company's assets; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that the Company's
receipts and expenditures are being made only in accordance with authorizations
of the Company's management and directors; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company's assets that could have a material effect on the
financial statements.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies and procedures may deteriorate


                                       23
<PAGE>

      There have been no changes in our internal controls over financial
reporting that occurred during the fourth quarter of 2005 that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.

      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 2006 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.


                                       24
<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, 2005
            and 2004; Consolidated Statements of Operations and Accumulated
            deficit for the years ended December 31, 2005, 2004 and 2003;
            Consolidated Statements of Cash Flows for the years ended December
            31, 2005, 2004 and 2003; 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        Letter dated December 29, 1999 from MDNY to the Superintendent of
            Insurance, State of New York (3)

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

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

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

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

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

10.7        Reinsurance agreement between Allianz Life Insurance Company of New
            York and MDNY, January 1, 2006-17055-036 Renewal (9)

10.8        Reinsurance agreement between Allianz Life Insurance Company of New
            York and MDNY, Excess Coverage-17055-066 January 1, 2006 (9)

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

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


                                       25
<PAGE>

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

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

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

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

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

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

10.17       Stock Purchase Agreement dated as of December 31, 2005 between Long
            Island Physician Holdings Corporation, MDNY Healthcare, Inc., and
            Catholic Healthcare Network of Long Island, Inc.(7)

10.18       Severance Agreement dated May__, 2004, between Concetta Pryor and
            MDNY Healthcare, Inc. (8)(9)

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 2006 Annual Meeting (9)



                                   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: _____________________


                                       26
<PAGE>

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

                                  Chairman of the Board,        ________________
----------------------------      (Principal Executive Officer)
/s/Paul Kolker, MD


                                  Chief Financial Officer       ________________
----------------------------      (Principal Financial and
/s/Concetta Pryor                    Accounting Officer)


                                                                ________________
----------------------------      Director
/s/William Brennan, DC


                                                                ________________
----------------------------      Director
/s/Salvatore Caravella, MD


                                                                ________________
----------------------------      Director
/s/Amy Koreen, MD


                                                                ________________
----------------------------      Director
/s/Ronald Perrone, MD


                                                                ________________
----------------------------      Director
/s/Rosario Romano, MD


----------------------------                                    ________________
/s/Gary Wohlberg, MD              Director


                                       27
<PAGE>

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

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

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

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

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

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

10.7        Reinsurance agreement between Allianz Life Insurance Company of New
            York and MDNY, January 1, 2006- 17055-036 Renewal (9)

10.8        Reinsurance agreement between Allianz Life Insurance Company of New
            York and MDNY, Excess Coverage- 17055-066 January 1, 2006 (9)

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

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

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

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

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

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

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


                                       28
<PAGE>

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

10.17       Stock Purchase Agreement dated as of December 31, 2005 between Long
            Island Physician Holdings Corporation, MDNY Healthcare, Inc., and
            Catholic Healthcare Network of Long Island, Inc.(7)

10.18       Severance Agreement dated May__, 2004, between Concetta Pryor and
            MDNY Healthcare, Inc. (8)(9)

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 2006 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.


                                       29
<PAGE>

                Long Island Physician Holdings Corporation Index

                           December 31, 2005 and 2004

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

                                                                         Page(s)
Report of Independent Registered Public Accounting Firm ...............    F1
Report of the Prior year Independent Registered Public
  Accounting Firm .....................................................    F2
Consolidated Financial Statements .....................................
Consolidated Balance Sheets ...........................................    F3
Consolidated Statements of Operations and Accumulated Deficit .........    F4
Consolidated Statements of Cash Flows .................................    F5
Notes to Consolidated Financial Statements ............................  F6-F20
Schedule of Valuation and Qualifying Accounts .........................    F21


<PAGE>

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Long Island Physician Holdings Corporation
Melville, New York

We have audited the accompanying consolidated balance sheet of Long Island
Physician Holdings Corporation (the "Company") and its subsidiary as of December
31, 2005 and the related consolidated statements of operations and accumulated
deficit and cash flows for the year then ended. Our audit also included the
financial statement schedule for the year ended December 31, 2005 listed in the
accompanying index of this Form 10-K. These consolidated financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audit.

We conducted our audit 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Long Island
Physician Holdings Corporation and its subsidiary as of December 31, 2005 and
the results of their operations and their cash flows for the year ended December
31, 2005 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement
schedule for the year ended December 31, 2005, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

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. Management's plans in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Holtz Rubenstein Reminick LLP
Melville, New York
May 9, 2006


                                      F1
<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 balance sheet and related consolidated
statements of operations and accumulated deficit and cash flows present fairly,
in all material respects, the financial position of Long Island Physician
Holdings Corporation and its subsidiary (the "Company") at December 31, 2004,
and the results of their operations for each of the two years in the period
ended 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


                                      F2
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Balance Sheets
Years Ended December 31, 2005, and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                       2005            2004
<S>                                                <C>             <C>
Assets

Cash and cash equivalents                          $  2,141,929    $  1,334,326
Premium receivables, net of allowances
  of approximately $1,295,000 in 2005
  and $1,495,000 in 2004                              5,280,579       6,705,130
Reinsurance recoverables                                317,413         146,547
Payments in excess of capitation                      2,500,000       1,750,000
Prepaid expenses and other current assets             3,583,882       2,463,596
                                                   ------------    ------------
        Total current assets                         13,823,803      12,399,599
Property, plant and equipment, net                      275,447         303,061
Restricted cash and cash equivalents                  5,911,795       5,817,203
Payments in excess of capitation,
  net of allowances of $3,000,000 in 2005            11,497,164      16,710,928

                                                   ------------    ------------
          Total assets                             $ 31,508,209    $ 35,230,791
                                                   ============    ============
Liabilities and Stockholders' Equity

Medical claims payable                             $ 22,416,881    $ 20,476,052
Public goods payable                                  4,746,035       4,725,026
Unearned premium revenue                              1,885,792       1,885,423
Accounts payable and accrued expenses                 2,495,243       2,546,476
                                                   ------------    ------------
          Total current liabilities                  31,543,951      29,632,977
Related party notes payable and accrued interest      3,599,259       3,450,673
                                                   ------------    ------------
          Total liabilities                          35,143,210      33,083,650

------------------------------------------
Minority interest in MDNY Healthcare, Inc.                 --         1,209,364
                                                   ------------    ------------
Stockholders' (deficiency) 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                               (15,113,543)    (10,540,765)
                                                   ------------    ------------
          Total stockholders' (deficiency) equity    (3,635,001)        937,777
                                                   ------------    ------------
         Total liabilities and stockholders'       $ 31,508,209    $ 35,230,791
          (deficiency) equity                      ============    ============
</TABLE>

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


                                      F3
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Statements of Operations and Accumulated Deficit
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                      2005             2004             2003
<S>                             <C>                <C>                <C>
Revenue

Premiums earned                  $ 116,555,735    $ 135,209,066    $ 153,275,616
                                 -------------    -------------    -------------
        Total revenue              116,555,735      135,209,066      153,275,616
                                 -------------    -------------    -------------
Expenses

Medical services expense           101,758,468      117,052,244      132,202,229
Commissions expense                  4,872,603        5,255,153        6,244,726
General and administrative
      expenses                      12,766,310       14,359,353       13,527,932
Capitation receivable reserve        3,000,000             --               --
Depreciation                           112,739          104,815          161,770
                                 -------------    -------------    -------------
        Total expenses             122,510,120      136,771,565      152,136,657
                                 -------------    -------------    -------------
        Operating income (loss)     (5,954,385)      (1,562,499)       1,138,959
Investment and other income            173,772          156,458          394,409
                                 -------------    -------------    -------------
        Income (loss) before
           income taxes and
           minority interest        (5,780,613)      (1,406,041)       1,533,368
Provision for income (taxes)
        benefit                         (1,529)          23,898          (87,737)
Minority interest in (income)
        loss of subsidiary           1,209,364          473,571         (435,619)
                                 -------------    -------------    -------------
        Net income (loss)           (4,572,778)        (908,572)       1,010,012

Accumulated deficit

Beginning of year                  (10,540,765)      (9,632,193)     (10,642,205)
                                 -------------    -------------    -------------

End of year                      $ (15,113,543)   $ (10,540,765)   $  (9,632,193)
                                 =============    =============    =============

Basic and diluted income
        (loss) per share         $        (783)   $        (156)   $         173
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.


                                      F4
<PAGE>
Long Island Physician Holdings Corporation
Consolidated Statements of Cash Flows
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               2005            2004           2003
<S>                                      <C>              <C>              <C>
Cash flows from operating activities
Net income (loss)                           $(4,572,778)   $  (908,572)   $ 1,010,012
Adjustments to reconcile net income
(loss) to net cash provided by
(operating activities
  Depreciation                                  112,739        104,813        161,770
  Write-off of stabilization pool                  --          618,625           --
         receivables

  Capititation Reserve                        3,000,000           --             --
  Minority interest in income
         (loss) of subsidiary                (1,209,364)      (473,571)       435,619
 Changes in operating assets
   and liabilities:
   Premium receivables, net                   1,424,551      5,839,645     (3,845,437)
   Reinsurance recoverables                    (170,866)       304,002        184,871
   Payments in excess of capitation           1,463,764      1,566,292      2,187,889
   Prepaid expenses and other
         current assets                      (1,120,286)      (567,781)       690,967
   Due from Catholic Health Services
         of Long Island                            --        2,382,027           --
   Medical claims payable                     1,940,829     (6,438,480)    (2,052,489)
   Public goods payable                          21,009     (2,054,708)     1,412,584
   Unearned premium revenue                         369         23,056        (92,813)
   Accounts payable and accrued expenses        (51,233)      (387,084)       686,908
   Accrued interest payable                     148,586        104,614         98,909
                                            -----------    -----------    -----------
     Net cash provided by
         operating activities                   987,320        112,878        878,790
                                            -----------    -----------    -----------
Cash flows from investing activities
Purchase of property, plant and equipment       (85,125)      (135,740)       (41,659)
Decrease (increase) in restricted
         cash and cash equivalents              (94,592)      (216,413)        56,345
                                            -----------    -----------    -----------
     Net cash (used in) provided by
      investing activities                     (179,717)      (352,153)        14,686
                                            -----------    -----------    -----------
Cash flows from financing activities
Payments on capital lease obligations              --           (1,479)       (12,845)
                                            -----------    -----------    -----------
     Net cash used in financing
         activities                                --           (1,479)       (12,845)
                                            -----------    -----------    -----------
     Increase (decrease) in cash
         and cash equivalents                   807,603       (240,754)       880,631
Cash and cash equivalents
Beginning of year                             1,334,326      1,575,080        694,449
                                            ===========    ===========    ===========
End of year                                 $ 2,141,929    $ 1,334,326      1,575,080
                                            ===========    ===========    ===========
</TABLE>

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


                                       F5
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

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 7).

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, 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 there from are reflected in earnings currently.


                                       F6
<PAGE>


Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

      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 $44 million, $55 million and $64
      million for the years ended December 31, 2005, 2004 and 2003,
      respectively.

      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.

      Advertising Costs

      Advertising costs are charged to operations when the advertising first
      takes place. Included in general and administrative expenses are
      advertising costs approximating $130,000, $672,000, and $ 12,000 for the
      years ended December 31, 2005, 2004, and 2003, respectively.

      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, 2005 and 2004, 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.


                                       F7
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

      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.

      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 15.

      Recent Accounting Pronouncements

      In December 2004, the FASB issued Statement of Financial Accounting
      Standards No. 123 (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 first quarter of 2006. All options outstanding
      at December 31, 2004 expired July 1, 2005 and no additional options were
      issued.



                                       F8
<PAGE>

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 a
      negative net worth, 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. In addition, CHSLI
      and the Diocese of Rockville Centre terminated their respective subscriber
      contracts effective January 1, 2006 and 2005 respectively.

      Effective January 1,2005 MDNY entered into an agreement with a financial
      advisor to pursue investors to recapitalize MDNY. MDNY has been in
      negotiations with various equity investors to implement the following
      plans to improve liquidity and restore profitability to MDNY. A summary of
      these transactions are outlined below:

      - With additional capital, the Company would apply for an Article 42
      (Accident and Health Company) license which would allow MDNY to develop
      new products and benefit plan designs with higher co-pays and deductibles
      to be marketed to its customers. MDNY's competitors currently market these
      products to their customers.

      - Achieve administrative savings by consolidating certain administrative
      functions including information system platforms.

      - Management has initiated reductions in operating and medical expenses
      primarily related to staffing, negotiation of certain specialty carve out
      contracts, and renegotiating existing provider contracts.

      -Effective January 1, 2006 Island IPA has agreed to increase the amount of
      withhold to approximately 10% in an effort to accelerate payment of their
      outstanding debt due MDNY as requested by the NYSID.

      While management believes that implementation of these plans will achieve
      profitability and adequate statutory capital, there is no assurance that
      any equity investment will be completed on terms acceptable to MDNY, its
      shareholders, or NYSID, if at all.

4.    Recovery and Subordination Agreement

      In 2000 and prior years, MDNY had various risk-sharing participation
      arrangements with affiliated IPAs in which MDNY 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 MDNY had contracted.


                                       F9
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

      Effective January 1, 2001, MDNY 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 MDNY and the IPAs, MDNY agreed to assume
      responsibility for payments related to the New York State Public Goods
      Pools (see note 12). Since MDNY 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 MDNY 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 IPAs and the examination insolvency was eliminated.

      MDNY 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 additional
      claims paid after 2001, and reduced by a 5% withhold of payments as
      stipulated in the Recovery and Subordination Agreement. As of December 31,
      2005 the amount of claims due to Island IPA and CHSLI was approximately
      $14 million. MDNY recorded a bad debt reserve of $3 million against the
      IPA note of $17 million to reflect this shortfall in estimated amount of
      IPA claims outstanding at December 31, 2005. The net amount due from
      Island IPA, which is classified in the balance sheet as payments in excess
      of capitation, was approximately $14 million, net of an allowance of
      $3,000,000 and $18.5 million as of December 31, 2005 and 2004,
      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, 2005 and 2004 were approximately $14 million and $14
            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 MDNY. During 2005 and 2004, the amount remitted to MDNY
            reduced the payments in excess of capitation receivable by
            approximately $1.5 million and $1.5 million respectively.


                                      F10
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

      o     Also effective January 1, 2002, MDNY 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 MDNY 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 IPAs administrative costs, Island IPA agreed to waive
            the network access fee for years 2005 and prior.

      o     Island IPA is obligated to pay MDNY a portion of all income it
            receives from sources other than MDNY. 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, 2005.

      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 MDNY has been fully satisfied.

            MDNY had a negative working capital of approximately $17.7 million
            and $17.2 million at December 31, 2005 and 2004, respectively. In
            accordance with the Recovery and Subordination Agreement, if MDNY
            admits its inability to pay its debts at any point in time or NYSID
            determines MDNY is insolvent, Island IPAs participating providers
            and CHSLI have agreed to the subordination of the portion of
            outstanding medical claim obligations they are owed, up to amount
            these providers owe as payments in excess of capitation. This amount
            of potential subordination was approximately $14 million and $14
            million as of December 31, 2005 and 2004, respectively.

      On September 16, 2005, NYSID advised MDNY that NYSID had determined that
      MDNY should have reported the IPA receivable as a non-admitted asset for
      statutory purposes, and that the resulting reduction in net worth results
      in MDNY having an insolvency in the amount of $12,666,791 as of June 30,
      2005. NYSID had directed MDNY to make every effort to collect, in cash,
      the outstanding amount currently due from Island IPA as soon as possible
      but no later than December 31, 2005 and requested that MDNY provide a
      detailed plan, by September 30, 2005, detailing the steps MDNY will take
      to collect the outstanding balance. In November 2005 NYSID reiterated its
      position that the receivable should be not be reflected as an admitted
      asset but extended the payment due date to June 30, 2006.

      MDNY believes that NYSID's letter of September 16, 2005 contradicts
      NYSID's letter of March 20, 2002, in which NYSID approved a recovery plan
      proposed by MDNY that, among other things, provided for MDNY to reflect in
      its financial statements an admitted asset, "Payments in Excess of
      Capitation," as well as an offsetting liability "Unpaid Capitation." MDNY
      continued to withhold 5% of the IPA provider claims as repayment of the
      note in 2005.


                                      F11
<PAGE>
Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

      In a letter dated May 8, 2006, NYSID reiterated its position that the IPA
      note should be reported as a non-admitted asset and further directed the
      Company to file amended statutory reports reflecting this revision. The
      revised negative statutory net worth at December 31, 2005 was $14,376,000.

      Effective January 1, 2006, the IPA agreed to increase the withhold payment
      amount to approximately 10% to accelerate payment of the debt owed to
      MDNY. The estimated amount of IPA claims that would be offset against the
      IPA note at December 31, 2005 was approximately $14,000,000 therefore the
      Company's balance sheets reflect the Payments in Excess of Capitation at
      December 31, 2005 at $14,000,000; $17,000,000 net of a bad debt allowance
      of $3,000,000.

      In addition, MDNY is currently in discussions with a potential investor
      who, in connection with an investment into MDNY, is working with MDNY,
      Island IPA and NYSID to, among other things, determine the ultimate
      approved status of the note from the Island IPA. There can be no assurance
      that the parties will be able to complete an agreement on terms acceptable
      to MDNY, its shareholders, NYSID, or the investor.

5.    NYSID Reserve Requirements

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

      Escrow Deposit Reserve Requirement

      Effective March, 2006, MDNY is required to establish an escrow account
      with a custodian in the form of a trust. This minimum funding is equal to
      5% of projected medical expenditures of the following year or $100,000,
      whichever is greater. At December 31, 2005 and 2004 the minimum escrow
      deposit requirement was $5.1 million. MDNY had approximately $5,911,795
      and $5,817,000 of money market funds on deposit in escrow as of December
      31, 2005 and 2004, respectively. These funds are included in the balance
      sheets as restricted cash and cash equivalents.

      Contingent Reserve Requirement

      In June 2005, the Department of Health adopted revised regulations
      regarding the amount HMOs and certain other health care organizations must
      maintain as the contingent reserve fund. That amount has increased from 5%
      annually to increasing 1% per year over the next eight years to a maximum
      of twelve and one half percent of the HMO's annual premium income. The new
      revision is effective for the calendar year 2006. The contingent reserve
      requirement shall be deemed to have been met if the statutory net worth of
      MDNY equals or exceeds the contingent reserve requirement.

      MDNY for calendar year 2005 and 2004 reported its contingent reserve at 5%
      of net premiums which totaled $5.8 and $6.7 million respectively. As a
      result of the IPA note being reported as a non-admitted asset for
      statutory purposes, MDNY's statutory negative net worth was $14.4 million
      at December 31, 2005 compared to a positive net worth of $5.4 million
      December 31, 2004. MDNY is deficient in maintaining the required
      contingent reserve fund by $20.2 and $1.3 million as of December 31, 2005
      and December 31, 2004 respectively.


                                      F12
<PAGE>
Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

6.    Concentration of Credit Risk

      The mix of receivables from related parties and others at December 31,
      2005 and 2004, are as follows:

                                                2005          2004

      Related parties                              43%          41%
      Other                                        57           59
                                              --------     --------
                                                  100%         100%
                                              ========     ========

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. 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 represented approximately 20% of
      total premiums earned by the Company during 2005 and 28% and 27% during
      2004 and 2003, respectively. In addition, CHSLI premium receivables
      outstanding as of December 31, 2005, 2004 and 2003 were approximately $2.3
      million, $3.3 million and $6.5 million, respectively. There were no
      outstanding premium receivables due from the Diocese at December 31, 2005
      and 2004.

      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 did not renew their current subscriber contract effective
      January 1, 2006.

8.    Reinsurance

      The Company entered into stop loss agreements with an insurance company to
      limit losses on individual claims. In 2005, the terms of the agreements a
      percentage of certain hospital claims in excess of $150,000 and total
      individual aggregate claims in excess of $1,000,000 are reimbursed to the
      Company. In 2004 and 2003 the Company, a percentage of hospital claims in
      excess of $100,000 were reimbursed to the Company.

      Reinsurance premiums of approximately $318,000 in 2005, $352,000 in 2004
      and $528,000 in 2003 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, 2005 and 2004 were approximately
      $317,000 and $146,000, respectively.


                                      F13
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

9.    Property, Plant and Equipment

      The major components of property, plant and equipment as of December 31,
      2005 and 2004 are as follows:

                                                    2005           2004

      Equipment                                  $  337,050     $  337,050
      Furniture and fixtures                        536,917        536,917
      Leasehold improvements                        484,207        484,207
      Computer equipment and software             2,893,261      2,808,135
                                                 ----------     ----------
                                                  4,251,435      4,166,309
      Less accumulated depreciation               3,975,988      3,863,248
                                                 ----------     ----------
           Property, plant and equipment, net    $  275,447     $  303,061
                                                 ==========     ==========

10.   Related Party Notes Payable

      During 1998, with the approval of the NYSID, MDNY obtained a loan from
      LIPH, LLC. The outstanding balance, including accrued interest, was
      approximately $1,469,000 and $1,406,000 at December 31, 2005 and 2004,
      respectively. Interest on this amount accrues at the prime rate (7.25% at
      December 31, 2005) 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, MDNY 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 MDNY has not yet received approval from
      the NYSID. Interest expense for the year ended December 31, 2005 was
      $62,000.

      During 1997, with the approval of the NYSID, MDNY obtained a loan from
      CHS. The outstanding balance, including accrued interest, was
      approximately $2,131,000 and $2,044,000 at December 31, 2005 and 2004,
      respectively. Interest on this amount accrues at the prime rate (7.25% at
      December 31, 2005) 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, 2005 was $87,000.

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


                                      F14
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

11.   Medical Claims Payable

                                                          December 31,
                                               ---------------------------------
                                                    2005               2004

Balance at January 1                           $  20,476,052      $  26,914,532
Reported medical costs
 Current year                                     99,105,388        112,638,503
 Prior year development                           (1,333,380)           (32,090)
                                               -------------      -------------
       Total reported medical costs               97,772,008        112,606,413
                                               -------------      -------------
Claim Payments
 Current year                                     76,387,747         90,384,257
 Prior years                                      17,969,777         26,589,559
 Withhold paid                                     1,473,655          2,071,077
                                               -------------      -------------
       Total claims paid                          95,831,179        119,044,893
                                               -------------      -------------
Balance at December 31                         $  22,416,881         20,476,052

         Supplemental Information:
            Prior year development (1)               1.2%               .02%
            Current year paid percent (2)            77.1%              80.2%
            Current year withhold percent (3)        1.5%               1.8%

(1)   Prior year reported medical costs in the current year as a percentage of
      prior year reported medical costs.

(2)   Current year claim payments as a percentage of current year reported
      medical costs.

(3)   Current year withhold payments as a percentage of current year reported
      medical costs.

      MDNY recognizes changes in accounting estimates for claims incurred but
      unpaid as more experience is acquired or as additional information is
      obtained. Negative amounts noted as "prior year" during 2005 and 2004, are
      favorable adjustments for claim estimates being settled for amounts less
      than originally anticipated.

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 million, $4.7 million and $4.4
      million for the years ended December 31, 2005, 2004 and 2003,
      respectively, and are included within medical services expense on the
      consolidated statements of operations.


                                      F15
<PAGE>

Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

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 $2,356,000 and $1,457,000 at
      December 31, 2005 and 2004, 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 were in operation; one
      determined by demographic data and the other determined by the incidence
      of certain specified medical conditions. For years 1999-2004, a single
      pool operated based on the experience of each insurer with respect to
      specified medical conditions. On July 13, 2005, the Insurance department
      relieved the Company of liabilities for years 1999-2004. The Insurance
      Department has not issued a new or revised Regulation 146 with respect to
      years subsequent to 2004. Therefore, as of December 31, 2005 the Company
      has not recorded any impact related to the stabilization pools.

      Lease Commitments

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

      Year                                                          Amount

      2006                                                       $  636,002
      2007                                                          644,017
      2008                                                          232,007
      2009                                                           57,536
      2010                                                           40,213
                                                                 ----------
                                                                 $1,609,775
                                                                 ==========

      Employment Agreements

      MDNY currently has employment agreements with two key executives. These
      agreements were for an initial term of three years which expired on
      December 31, 2003. The agreements automatically renew on a year to year
      basis unless either party gives 90 days prior written notice not to renew.
      These agreements contain certain provisions for standard benefits
      including a change of control provision. If the Company has a change of
      control and the key executives are notified of a termination of employment
      other than as expressly permitted by the agreement, MDNY would be
      responsible for 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.

      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.


                                      F16
<PAGE>
Long Island Physician Holdings Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------

13.   Income Taxes

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

                                         2005            2004             2003
      Current
      Federal                          $   --          $(28,821)        $ 21,522
      State                               1,529           4,923           66,215
                                       --------        --------         --------
           Total                       $  1,529        $(23,898)        $ 87,737
                                       ========        ========         ========

      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>
                                                     2005           2004           2003

<S>                                              <C>            <C>            <C>
Federal income tax expense at statutory rate     $(1,965,406)   $  (478,052)   $   478,650
State income taxes, net of federal tax benefit      (166,136)         3,200         43,702
Change in valuation allowance                      2,472,540        594,049       (612,270)
   Permanent differences                               6,775         13,246         82,643
   Other                                            (346,244)      (156,341)        95,012
                                                 -----------    -----------    -----------
            Total income tax (benefit) expense   $     1,529    $   (23,898)        87,737
                                                 ===========    ===========    ===========
</TABLE>


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

                                          2005           2004           2003

      Deferred tax assets
      Fixed assets                    $   (65,649)   $   (58,658)   $    10,165
      Receivables                       1,716,184        597,490        383,305
      Accrued interest                    479,221        419,847        378,043
      Net operating losses              5,171,192      3,870,565      2,916,189
      Tax credit carry forward            117,505        117,505        117,182
      Other                                 5,531          4,695         15,954
      Valuation allowance              (7,423,984)    (4,951,444)    (3,820,838)
                                      -----------    -----------    -----------
      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, 2005, 2004, and 2003, 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, 2005, 2004, and 2003, the Company has a net operating
      loss carryforward for federal income tax purposes of $1.7 million, $1.5
      million, and $1.3 million respectively. At December 31, 2005, 2004, and
      2003, the Company's net operating loss carryforward for state purposes was
      $1.4 million, $1.2 million, and $.9 million respectively.


                                      F17
<PAGE>

      As of December 31, 2005, 2004, and 2003, MDNY has a net operating loss
      Carry forward for Federal income tax purposes of approximately $11.4
      million, $8.5 million, and $7.5 million respectively, which will begin to
      expire in 2011. At December 31, 2005, 2004 and 2003, MDNY's net operating
      loss carry forward for state purposes was approximately $11.2 million,
      $8.3 million and $7.3 million respectively.

14.   Quarterly Financial Data (Unaudited)

      The following is a summary of The Company's unaudited quarterly results of
      operations( in thousands, except per share data) for the years ended
      December 31, 2005 and 2004.

                                                Quarters Ended
                              March 31,   June 30,     Sept 30,     Dec 31,
                              2005        2005         2005         2005

Operating revenues            29,888      29,465       28,739       28,464
Operating expenses            29,762      29,789       30,418       32,541
Earnings(loss)                   175        (296)      (1,605)      (4,055)
    Before taxes

Net Income (loss)                 99        (183)      (1,083)      (3,407)
Basic/diluted earnings
    (loss)per share          $ 16.95     $(31.32)     $(185.2)     $  (583)

                                                Quarters Ended
                              March 31,   June 30,     Sept 30,     December 31,
                              2004        2004         2004         2004

Operating revenues            35,079      33,613       33,349       33,169
Operating expenses            34,657      33,912       34,568       33,605
Earnings(loss)                   591        (381)      (1,183)        (405)
 Before taxes

Net Income (loss)                390        (278)        (811)        (208)
Basic/diluted earnings
    (loss)per share          $ 66.79     $(47.61)    $(138.89)     $(35.62)

15.   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.


                                      F18
<PAGE>

      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 of the exchange, at December 31, 2005 there were 1,798
      shares of Class A common stock and 4,044 shares of Class B common stock
      outstanding.

16.   MDNY Healthcare, Inc.

      At December 31, 2005, 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.


                                      F19
<PAGE>


17.   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. CHNLI is waiting for approval from the Attorney General of the State
      of New York and the Supreme Court of the State of New York in order to
      sign final closing documents.

18.   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, 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. These options expired on July
      1, 2005. No additional options were issued in 2005(see note 15).


                                      F20
<PAGE>

Schedule of Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                              Provision
                                              for Doubtful
                                  Balance at  Accounts and                Balance at
                                  Beginning   Billing       (Recoveries)  End
Description                       of Period   Adjustments   Deductions    Period
<S>                               <C>         <C>           <C>           <C>

Year ended December 31, 2005
Allowance for doubtful accounts
and billing adjustments           $1,495,227   $  239,325   $  (38,876)   $1,294,778

Year ended December 31, 2004
Allowance for doubtful accounts
And billing adjustments              959,226      647,241     (111,240)    1,495,227

Year ended December 31, 2003
Allowance for doubtful accounts
and billing adjustments              961,019       29,075      (27,284)      959,226

</TABLE>


                                      F21

<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 July 25 2006

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 July
25, 2006, at 6:00 p.m. (the "Meeting"), for the following purposes, as more
fully described in the accompanying Proxy Statement:

      1.    To ratify the term of four holdover Class A directors.

      2.    To elect four Class B directors.

      3.    To ratify the appointment of Holtz Rubenstein Reminick LLP as the
            Company's auditors for the 2006 fiscal year.

      4.    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 June 13,*2006 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.

June 30, 2006        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 July 25, 2006

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., July 25, 2006 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 June 30, 2006. Only shareholders of record at the close
of business on June 13, 2006 (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 1,799 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.

<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) to ratify the appointment of the four
persons nominated by the Board of Directors who have held over as Class A
directors since the expiration of their term at the 2005 Annual Meeting; (ii)
for the election as Class B directors of the four persons who have been
nominated by the Board of Directors; (iii) for approval of Holtz Rubenstein
Reminick LLP as the Company's auditors for the 2006 fiscal year; and (iv) 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 Meetings in 2004 and 2005. The initial term (and three year
extension through the 2005 Annual Meeting) of the Class A directors expired at
the 2005 Annual Meeting, and the initial term (and three year extension through
the 2006 Annual Meeting) of the Class B directors has expired.

      The holdover 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. The nominees for Class B
directors have been nominated to remain in office until their term expires at
the 2009 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 Holdover Nominees for Election as Class A Directors

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

      WILLIAM BRENNAN, D.C., 55, conducted a family chiropractic practice in
Seaford, New York, for 26 years. Dr. Brennan has since retired from his practice
and is also the Chairman of the Chiropractic Network of MDNY. Dr. Brennan has
been a director of the Company since April 1995.

      ROBERT A. JASON, M.D., 47, 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., 51, 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., 50, 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 Nominees for Election as Class B Directors

      Dr. Ashkin was appointed by the Board to fill the vacancy of the
resignation of Dr. Gregory Kalmar who resigned from the Board in December 2005
Information relating to the Class B directors with a term expiring upon the 2009
Annual Meeting is set forth below:

      Jeffery R. Ashkin, MD, 63. is board certified in Internal Medicine and
Gastroenterology and has been a practicing physician in Bay Shore, NY for more
than 20 years. Dr. Ashkin is a graduate of George Washington University school
of Medicine, Residency trained at GW University Hospital, and fellowship trained
in Gastroenterology at The Hospital of The University of Pennsylvania. Dr.
Ashkin has served on the MDNY Board of Directors, The Medical Delivery
Committee, and the Pharmacy and Therapeutics Committees.

      AMY KOREEN, M.D., 43, 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., 57, 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. 57, 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., 50, 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., 43, 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., 69, 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., 57, 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 and Paul Accardi) is described above.

Name                       Age   Position with the Company
----                       ---   -------------------------
Paul Kolker, M.D.......... 69    President, Treasurer and Chairman of the Board
Paul Accardi.............. 50    Executive Vice President, CEO, COO of MDNY
Concetta Pryor............ 37    CFO; CFO and VP-Finance of MDNY
Ronald R. Perrone, M.D.... 57    Medical Director of MDNY
Amy Koreen, M.D........... 43    Secretary and Director
Franco Gallo, M.D......... 43    Vice President and Director

      PAUL ACCARDI, 50, 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, 37, 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.

      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 a Ronald R. Perrone, M.D. and Concetta Pryor.

Meetings, Committees, Directors' Fees

      The Company's Board of Directors held 3 meetings during the year ended
December 31, 2005 ("Fiscal 2005"). 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 2005.

      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.


                                       5
<PAGE>

      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 2005.

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

      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 2005. 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

      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.


                                       6
<PAGE>

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, 2005,
2004 and 2003 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 2005 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                        2005   $      0     $      0     $      0              0         $*60,000*
*President and Chairman                 2004   $      0     $      0     $      0              0         $*109,038*
                                        2003   $      0     $      0     $      0              0         $      0

Concetta Pryor                          2005   $270,723     $      0     $     --             --         $  4,950
  Chief Financial Officer               2004   $267,100     $  5,000     $     --             --         $  5,400
                                        2003   $250,970**   $     --     $     --             --         $  1,350

Paul Accardi                            2005   $360,000     $      0            0                        $  6,000
  Executive Vice President,             2004   $360,000     $ 10,000     $      0              0         $  6,000
     CEO, MDNY                          2003   $360,000     $ 60,000     $      0              0         $  6,000

Ronald R. Perrone                       2005   $290,000            $     $      0              0         $  6,000
***Medical Director, MDNY               2004   $290,000     $ 10,000     $      0              0         $  6,000
                                        2003   $290,000     $ 50,000     $      0              0         $  6,000

Marci Hass                              2005   $209,036     $      0            0                        $  5,400
  COO, MDNY                             2004   $203,675     $  5,000     $      0              0         $  5,400
                                        2003   $191,085     $ 50,000     $      0              0         $  1,350

James Fricchione                        2005   $135,906     $      0            0              0                0
Executive Vice President, Sales, MDNY
</TABLE>

--------------------------------------------------------------------------------
*     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. Represents compensation paid directly by MDNY to Ms. Pryor
      with respect to Fiscal 2003.

***   Represents compensation paid directly by MDNY.

****  Represents automobile allowance payable pursuant to the Executive's
      Employment Agreement except Dr. Kolker. ^ Mr. Fricchomine commenced
      employment with the Company in March 2005.


                                       7
<PAGE>

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

      Neither the Company nor MDNY has a Compensation Committee or other Board
Committee performing equivalent functions. Compensation for the MDNY's
executives, including the Named Executive Officers, is determined by the Board
of Directors of MDNY as a whole. During Fiscal 2005, the five directors of the
Company (Drs. Caravella, Gallo, Kolker, Koreen and Jason) who also serve as
directors of MDNY participated in deliberations regarding compensation of Paul
Accardi, Concetta Pryor and Dr. Perrone, including the amount and nature of
their participation in MDNY's annual incentive program, which is within the
discretion of the MDNY Board." In October 2004, the Board of Directors 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. See "Certain Relationships and Related
Transactions."

         William Brennan, D.C.
         Salvatore J. Caravella, M.D.
         Franco Gallo, M.D.
         Robert A. Jason, M.D.
         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.

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 and Severance Agreements


                                       8
<PAGE>

      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>

      In May 2004, MDNY entered into a Severance Agreement with Concetta Pryor,
Chief Financial Officer of the Company and of MDNY. The Agreement provides that
Ms. Pryor will receive no severance if her employment terminates due to Cause
(as defined) or death. If her employment terminates due to permanent disability
(as defined) she will receive salary through the end of the month in which she
becomes permanently disabled. If Ms. Pryor's employment terminates other than
for permanent disability, cause or death, then, regardless whether termination
results from a Change of Control (as defined), Ms. Pryor will continue to
receive her base salary, payable bi-weekly, in effect on the termination date,
subject to all withholding taxes, for nine months after termination. In
addition, Ms. Pryor will receive an adjustment payment equal to the quarterly
average of the preceding nine months of performance incentive payments to be
paid in intervals at the end of each quarter starting three months after
termination.

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
2005.

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, 2005 and the number and value of
options outstanding at December 31, 2005 held by the Named Executive Officers.

                                    Number of Shares
                                    Underlying
                                    Unexercised
               Shares               Options at
               Acquired             December 31, 2005    Value of Unexercised
               On        Value      Exercisable("E")/    In-the-Money Options at
Name           Exercise  Realized   Unexcercisable("U")  December 31, 2005(1)
----           --------  --------   -------------------  --------------------
Paul Kolker     0         $0         0(E)/0(U)           $0(E)/$0(U)
Paul Accardi    0         $0         0(E)/0(U)           $0(E)/$0(U)
Ronald Perrone  0         $0         0(E)/0(U)           $0(E)/$0(U)
Concetta Pryor  0         $0         0(E)/0(U)           $0(E)/$0(U)


----------
(1)   Value as of December 31, 2005 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 June 9, 2006 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.

                                 Amount and Nature
                             of Beneficial Ownership(1)   Percent of Class (1)
                             --------------------------   --------------------
Beneficial Owner(2)          Class A           Class B    Class A      Class B
-------------------          -------           -------    -------      -------
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
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)        11                 536(3)     *           13.3(3)

----------
*     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 2005. 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 2005 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 2005 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

      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.. At December 31, 2005, MDNY had 32,078 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.

      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


                                       12
<PAGE>

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)..

      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. The Corporation and CHNLI, as MDNY's
shareholders, have approved amendments to MDNY's Certificate of Incorporation
and by-laws that would change the composition and number of MDNY's Directors so
as to include the requisite number of enrollee representatives.


                                       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. 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
2005. 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 $14million net of an allowance of
$3,000,000 as of December 31, 2005. The IPA Withhold was increased to 10%
effective January 1, 2006.

      In 1997, with the approval of NYSID, MDNY obtained a loan from CHNLI that
has a balance at December 31, 2005 of approximately $2.1million (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, 2005 of approximately
$1.5million (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


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<PAGE>

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.

      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 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"), did
not renew the respective Hospital subscriber contracts with MDNY upon expiration
thereof on January 1, 2006. At December 31, 2005, a total of 6,135 members in
MDNY were enrolled from CHSLI. Premiums from the Hospitals represented
approximately 20% for 2005 and premiums from the Hospitals and the Diocese
represented 28% of total premiums earned by MDNY during 2004. The expiration of
MDNY's subscriber contracts with the Hospitals on January 1, 2006 and the
resulting loss of business will have a material adverse effect on MDNY's
business and financial

      The Company, MDNY and CHNLI entered into a Stock Purchase Agreement dated
as of December 31, 2004 so as to allow CHNLI to exit as an MDNY shareholder.
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

      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


                                       15
<PAGE>

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, 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.

      The Stock Purchase Agreement remains subject to approval by the Attorney
General of the State of New York and the Supreme Court of the State of New
York.. If such approval is granted, it is anticipated that the closing under the
Stock Purchase Agreement would occur concurrently with and be contingent on the
closing of an investment in and restructuring of MDNY, and would require the
renegotiation of certain closing conditions under the Stock Purchase Agreement.

      Commencing with September 2004, MDNY pays 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, $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 in January 2001, the MDNY Board approved compensation to Dr.
Koreen for behavioral health consulting services. Dr. Koreen was paid an annual
salary of $52,250 and $52,400 for the year ended 2005 and 2004 respectively.

      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

      On November 1, 2005, the Company and MDNY dismissed the prior audit firm,
PriceWaterhouseCoopers LLP ("PWC") and effective for the audit of Fiscal 2005
engaged the new audit firm, Holtz Rubenstein Reminick LLP ("HRR").

      Audit Fees. Aggregate fees billed for for the audit of the Company's, and
its majority owned subsidiary MDNY, annual consolidated financial


                                       16
<PAGE>

statements and the review of the quarterly consolidated financial statements
included in the Company's Forms 10-Qrendered by HRR for 2005 and PWC for 2004
were approximately $225,000 and $254,0000, respectively.

      Audit-Related Fees. Aggregate fees billed for assurance and related
services rendered by HHR 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 2005 was $6,000 Tax Fees. Aggregate fees billed for
professional services for tax compliance, tax advice and tax planning rendered
by HHR in 2005 and PWC in 2004 were $0 and $0, respectively.

      All Other Fees. The aggregate fees billed for all other services not
described under the foregoing captions "Audit Fees," "Audit-Related Fees" and
"Tax Fees," rendered by HHR for 2005 and PWC for 2004 were $0 and $113,300,
respectively.

      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.

Independent Public Accountants

      (a) (i) On November 1, 2005, the Company dismissed PricewaterhouseCoopers
LLP ("PwC"), as the Company's independent registered public accounting firm.

      (ii) PwC's report on the consolidated financial statements of the Company
as of December 31, 2004 and for the year then ended contained an explanatory
paragraph expressing substantial doubt about the Company's ability to continue
as a going concern. Except as noted in the immediately previous sentence, the
reports of PwC on the consolidated financial statements of the Company as of and
for the fiscal years ended December 31, 2004 and 2003 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle.

      (iii) The change in accountants was approved by the Company's Board of
Directors.

      (iv) During the Company's two most recent fiscal years ended December 31,
2004 and 2003, and through November 1, 2005, there were no disagreements with
PwC on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement(s), if not
resolved to the satisfaction of PwC, would have caused PwC to make reference
thereto in PwC's reports on the consolidated financial statements for such
years.

      (v) During the Company's two most recent fiscal years ended December 31,
2004 and 2003 and through November 1, 2005, there were no "reportable events" of
the kind listed in Item 304(a)(1)(iv) of Regulation S-K.

      (vi) The Company requested that PwC furnish the Registrant with a letter
addressed to the Securities and Exchange Commission stating whether or not PwC
agrees with the above statements. PwC's letter is filed as an exhibit to
Company's Report on Form 8-K/A dated January 4, 2006.

      (b) Effective November 1, 2005, the Company engaged Holtz Rubenstein
Reminick LLP ("HRR") to be the Company's independent registered public
accounting firm. During the fiscal years ended December 31, 2004 and 2003 and
through November 1, 2005, the Company did not consult with HRR regarding either
(i) the application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report was provided to
the Company or oral advice was provided that HRR concluded was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(v) of
Regulation S-K and the


                                       17
<PAGE>

related instructions to Item 304 of Regulation S-K, or a reportable event, as
that term is defined in Item 304(a)(1)(v) of Regulation S-K.

      (c) On November 1, 2005, MDNY also dismissed PwC as MDNY's independent
registered public accounting firm, and engaged HRR as MDNY's independent
registered public accounting firm.


                                       18
<PAGE>

                                   Proposal 3

 PROPOSAL TO RATIFY THE APPOINTMENT OF HOLTZ RUBENSTEIN REMINICK LLP AS THE
                  COMPANY'S AUDITORS FOR THE 2006 FISCAL YEAR

      The accounting firm Holtz Rubenstein Reminick LLP ("HRR") is presently
serving as the Company's independent auditors. HRR was engaged as the Company's
independent auditors during the fiscal year ended December 31, 2005. The Board
of Directors believes it is desirable and in the best interests of the Company
to continue engagement of HRR. A representative of HRR 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 HRR AS
              THE COMPANY'S AUDITORS FOR THE 2006 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 HRR

                                  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, 2005. 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 2007 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, 2007 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.


                                       19
<PAGE>

                             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 July 252006 (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 holdover directors 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: To elect the following persons as Class B directors for a term
expiring with the 2009 Annual Meeting: Jeffrey Ashkin, MD., Amy Koreen, M.D.,
Ronald R. Perrone, M.D., and Michael Polcino, 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 3: Proposal to approve the appointment of Holtz Rubenstein Reminick LLP
as the Company's auditors for the 2006 fiscal year.

                         FOR [ ] AGAINST [ ] ABSTAIN [ ]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE FOR DIRECTOR NAMED
IN PROPOSAL 1 AND PROPOSAL 2 AND "FOR" PROPOSAL 3.

Dated: __________, 2006

                                                _____________________________
                                                   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.


                                       20