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

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                                   FORM 10-K/A

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

      For the fiscal year ended December 31, 2003

                                       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

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                   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

<PAGE>

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 [X] No [ ]

      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.

      Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date: As of December 31,
2003 there were 1,506 shares of Class A common stock and 4,333 shares of Class B
common stock outstanding.

      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.

      Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for its 2004 Annual Meeting of Shareholders are incorporated by
reference into Part III of this report.


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<PAGE>

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: the inability of
MDNY to meet applicable reserve and statutory net worth requirements; that CHNLI
has notified the Company and MDNY that CHNLI desires to withdraw as an MDNY
shareholder by December 31, 2004; that the Diocese of Rockville Center and the
Hospitals affiliated with CHSLI may elect not to renew their respective
subscriber contracts with MDNY upon expiration thereof effective January 1 2005
and 2006, respectively, in light of MDNY's obligation to comply with the New
York Women's Health and Wellness Act, which obligates MDNY to offer
contraceptive drugs and devices to members, in conflict with the ethical
policies of the Diocese of Rockville Center; 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.

                                     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, 2003, MDNY had approximately 47,000 members
("Members"), comprised of individuals and families, enrolled in its health
maintenance plans and point-of-service plans.


                                       3
<PAGE>

      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 2001 certain other single specialty IPAs
whose providers were also participating providers to Island IPA were dissolved.

Certain Regulatory Matters

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

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

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

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

      In addition, with NYSID's approval, MDNY, Island IPA and the 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"),
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


                                       4
<PAGE>

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 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
$20 million and $25 million as of December 31, 2003 and 2002, 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 $20.0 million and $22.2 million at
December 31, 2003 and 2002, respectively.

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

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

      In accordance with the MDNY Remedial Plan, MDNY engaged an outside
financial adviser to pursue the sale of its business and assets. No such sale is
currently anticipated.

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


                                       5
<PAGE>

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

      As of December 31, 2003 MDNY reported a net operating gain of $1.3 million
and statutory net worth of $6.3 million. The contingent reserve requirement at
December 31, 2003 was $7.7 million. (NYSID reserve requirements are calculated
based upon the greater of the contingent reserve or escrow deposit. The
contingent reserve is calculated by incrementally adding 1% of premiums written
not to exceed 5% (i.e., $7.7 million)). The escrow deposit is calculated as 5%
of the following year's expected medical costs. MDNY's contingent reserve is
currently capped at 5% of current billed premium.

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

      According to the NYSID Final Report, the composition of MDNY's Board of
Directors does not comply with Part 98-1.11(f) of the Administrative Rules and
Regulations of the NYSDOH, which requires that at least 20% of MDNY's directors
must be enrollees of MDNY. The NYSID Final Report recommends that the requisite
number of "enrollee representatives" be elected to MDNY's Board of Directors.
MDNY and its shareholders, LIPH and CHNLI, are in the process of changing the
composition and number of MDNY's Directors so as to include the requisite number
of enrollee representatives and of effecting corresponding amendments to MDNY's
certificate of incorporation and by-laws.

Recent Developments

      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, CHNLI has notified the
Company and MDNY of CHNLI's desire to withdraw as an MDNY shareholder by
December 31, 2004, and that the Diocese and CHSLI, on behalf of the Hospitals,
will not renew their respective current subscriber contracts with MDNY upon
expiration thereof effective January 1, 2005 and 2006, respectively. MDNY
provides health care insurance to the employees of the Diocese of Rockville
Center (the "Diocese") and employees of the Hospitals affiliated with CHSLI. At
December 31, 2003, a total of 13,429 Members in MDNY were enrolled from CHSLI
and the Diocese. Premiums from the Diocese and the Hospitals represented
approximately 27% and 30% of total premiums earned by MDNY during both 2003 and
2002. If MDNY's subscriber contracts with the Diocese and CHSLI were to expire,
the loss of business could have a material adverse effect on MDNY's business and
financial condition.

      During the first quarter of 2004, the Company and MDNY had preliminary
discussions with CHNLI and CHSLI regarding a potential restructuring whereby
CHNLI would exit as an MDNY shareholder and MDNY would act as a third party
administrator of benefits to employees of the Diocese and the Hospitals, which
would become self-insured upon expiration of their


                                       6
<PAGE>

respective subscriber contracts with MDNY. In such event, MDNY would receive a
monthly fee for providing underwriting, medical management, claims processing
and other administrative services to the Diocese and the Hospitals but would not
assume insurance risk for the cost of providing health care benefits to
employees of the Diocese and the Hospitals. There can be no assurance that the
Company and MDNY will be able to effect such a restructuring of CHNLI's status
as a shareholder in MDNY and of MDNY's provision of health care benefits or
administrative services to employees of the Diocese and the Hospitals on terms
acceptable to the Company and MDNY, if at all.

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

Business Strategy

      MDNY is focusing on the following six areas in 2004 to achieve
profitability and enrollment growth:

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

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

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

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

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

      o     Reduced marketing of MDNY's POS products, which have historically
            been unprofitable.

      Effective January 1, 2004, NYSID approved additional 10% and 12% rate
increases for MDNY's HMO and POS sole proprietor products respectively. The
Company anticipates that the increased differential on the sole proprietor POS
Products should help offset historical negative operating results of MDNY's POS
Products.

      While the Company believes that implementation of MDNY's plans will
achieve profitability in 2004, there is no assurance that such actions will
achieve positive results from operations or adequate working capital and equity.


                                       7
<PAGE>

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 Oxford Health Plans, Inc.,
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.

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, 2003, MDNY had 103 full-time employees, including its Chief
Executive Officer, Chief Financial Officer and Chief Medical Officer. MDNY's
operations commenced on January 1, 1996. MDNY provides health care insurance to
its Members for a fixed monthly premium, plus a co-payment, as applicable, by
the Member to a participating physician for each office visit generally, and a
dispensing fee or co-payment to the pharmacy for each prescription filled. The
basic benefits provided within a Member's benefit plan consist of primary and
specialty physician care, inpatient and outpatient hospital services, emergency
and preventive health care, laboratory and radiology services, ambulance
services, eye care, physical and rehabilitative therapy services, chiropractic
services, mental health care, and alcohol and substance abuse counseling. For an
increased monthly premium, Members have the option to receive prescription drugs
and other supplemental benefits through the purchase of benefit plan "riders".
At December 31, 2003, MDNY had approximately 47,000 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,


                                       8
<PAGE>

premium revenue is derived from small groups and sole proprietors enrolling
through associations or, after June 1, 2003, directly. This Member group has
traditionally experienced higher medical loss ratios than the other groups in
MDNY's Member base. Effective January 1, 2003, NYSID approved a 10% rate
increase with respect to HMO sole proprietor products and a 12% differential to
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. Island Behavioral Health Association IPA, Inc., which arranged for the
provision of behavioral health services including psychiatry, became inactive in
2002. 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 2003 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.


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<PAGE>

      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.

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

      MDNY has various multi-year agreements subject to annual price negotiation
with hospitals and hospital systems that are designed to provide predictability
with respect to hospital costs and is currently negotiating with other hospital
and hospital systems for similar multi-year arrangements. Contract pricing with
24 hospitals is subject to renegotiation in 2004. 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, MDNY has the risk that certain hospitals may seek higher rates or seek
to impose limitations on MDNY's utilization management efforts. The Company
cannot guaranty that MDNY will be able to continue to secure multi-year
agreements in the future.


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<PAGE>

MDNY Products

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

      HMO Product

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

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

      HMO Product premiums accounted for approximately 79%, 72% and 68% of total
premiums earned by MDNY in 2003, 2002 and 2001, respectively.

      POS Product

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

      POS Product premiums accounted for approximately 21%, 28% and 32% of total
premiums earned in 2003, 2002 and 2001, 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, 2003 and 2002 MDNY had 599 and 722 individual Members,
respectively, who accounted for 2% of total premiums earned in both 2003 and
2002.

      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


                                       11
<PAGE>

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 10% and 12% rate differential between
sole proprietors and associations on its HMO and POS 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 or directly from internal sales representatives. At
December 31, 2003 and 2002, MDNY had approximately 16,200 and 20,200 sole
proprietor Members, respectively, who accounted for 34% and 37% of total
premiums earned in 2003 and 2002, 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, 2003 and 2002, MDNY had approximately 496 and
196 Members, respectively, who purchased these products, which accounted for
less than 1% and 0.2% of total premiums earned in 2003 and 2002, 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.

      In March 1997, MDNY formed MDNY Preferred Network, Inc. to market PPO
products. to large employer groups and unions that desire to offer medical or
dental benefits on either an insured or self-insured basis to their employees or
members. At December 31, 2003, MDNY Preferred Network, Inc. had no operations or
financial activity.

      Mdnyhealthcare.org

      MDNY's website, www.mdnyhealthcare.org, provides on-line access to MDNY
for its members, brokers, employer groups and providers. During 2003 and 2004,
MDNY Members continued to increase their use of the website.

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, provider contracts (including but not
limited to contracts that involve risk sharing or transfer), certain
administrative services contracts, approval of contracts with health


                                       12
<PAGE>

care providers and administrative services providers, claims payment standards,
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, loss ratios, cash
reserves, minimum net worth, participation in certain state-wide risk spreading
pools among insurers, and transactions between affiliated companies, including
dividends. Recently enacted state and federal laws and regulations impose
additional requirements on MDNY relating to security and confidentiality of
health care information. As part of the regulatory process, MDNY is required to
file periodic reports with the relevant state agencies relating to, among other
things, operations, premium rates and covered benefits, financial condition and
marketing practices.

State Regulation

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

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

      As a New York State certified HMO, MDNY is required to maintain a cash
reserve equal to the greater of 5% of expected annual medical costs or $100,000.
Additionally, MDNY is required to maintain a contingent reserve which must be
increased annually by an amount equal to at least 1% of statutory premiums
earned limited, in total, to a maximum of 5% of statutory premiums earned for
the most recent calendar year and which may be offset by the cash reserve. The
cash reserve is calculated at December 31 of each year and is maintained
throughout the following calendar year.

      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,


                                       13
<PAGE>

modified or altered on or after January 1, 2003 must provide FDA approved
contraceptive drugs and devices as part of prescription drug coverage through
the addition of a rider.

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

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

      In January 1, 1997, New York State enacted the Health Care Reform Act of
1996 (the "HCRA"), which allows all private healthcare payors to negotiate
payment rates for inpatient hospital services. Prior to enactment of HCRA, only
HMO's could negotiate rates for these services. The enactment of HCRA adversely
affected the ability of HMO's to negotiate rates. Also, beginning in January
1997, MDNY elected to make payments to state funding pools to finance hospital
bad debt and charity care ("BDCC"), graduate medical education ("GME") and other
state programs under the HCRA. Previously, hospital bad debt and charity care
and graduate medical education were financed by surcharges on payments to
hospitals for inpatient services. HCRA, GME and BDCC assessments were
reauthorized effective July 1, 2003 through June 30, 2005.

      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 2003-2004 budget includes, among other things, a
premium tax increase of 75%, a 10% increase in the BDCC assessment, an increase
in excess of 5% in the GME assessment, and an approximate 19% increase in the
assessment for the NYSID and NYDOH budgets (to which MDNY is required to
contribute). Although MDNY could attempt to mitigate or cover its exposure from
such 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 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.


                                       14
<PAGE>

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

      Effective July 1, 1999, New York enacted a new law establishing a right
for health care consumers to obtain an external review of determinations made by
HMOs and insurers when coverage of health care has been denied on the grounds
that the service is not medically necessary or that such service is experimental
or investigational and establishing standards for the certification of the
external review agents. In addition, the law requires provider contracts to
include an explanation of provider payment methodologies; the time periods for
provider payments; the information to be relied upon to calculate payments and
adjustments; and the process to be employed to resolve disputes concerning
provider payments. In 2003, five claims were submitted and closed for external
review.

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

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

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


                                       15
<PAGE>


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


                                       16
<PAGE>

compliance were $210,000 in 2003 and MDNY believes that it will incur additional
costs in 2004 and beyond. However, the Company cannot predict the ultimate
impact HIPAA will have on MDNY's business and results of operations in future
periods.

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

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

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

Proposed Federal and State Legislation

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


                                       17
<PAGE>

      Congress is also considering proposals relating to health care reform,
including a comprehensive package of requirements on managed care plans called
the Patient Bill of Rights ("PBOR") legislation. These proposals seek to hold
health plans liable for claims regarding health care delivery and accusations of
improper denial of care, among other items. PBOR, if enacted, could expose MDNY
to significant litigation risk. Such litigation could be costly to the Company
and could have a significant effect on the Company's results of operations.
Although the Company could attempt to mitigate or cover the effects of such
costs through, among other things, increases in premiums, there can be no
assurance that the Company 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, on June 19, 2003, the United
States House of Representatives passed 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 the Company. The United States Senate has
not taken any action on the legislation.

      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 the Company and its competitors.

Availability of SEC Reports

      The Company does not maintain an internet web site and therefore does not
make its 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.

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 $476,000. The Company believes that such offices
are adequate and suitable for the business of the Company and of MDNY as
currently conducted and as currently proposed to be conducted.

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 2003 through the solicitation of proxies or otherwise.


                                       18
<PAGE>

                                     PART II

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

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

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

      At December 31, 2003 there were 1,506 shareholders of record of the
Company's Class A Common Stock and 4,333 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 2003.

Item 6. Selected Consolidated Financial Data

      The following selected financial data for each year in the five-year
period ended December 31, 2003 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.


                                       19
<PAGE>

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

<TABLE>
<CAPTION>

                                                                       Year ended December 31,
                                                     -------------------------------------------------------------
Revenue:                                                2003         2002         2001         2000        1999
                                                        ----         ----         ----         ----        ----
<S>                                                  <C>          <C>          <C>          <C>          <C>
Premiums earned                                      $ 153,276    $ 158,310    $ 146,505    $ 188,929    $ 146,339
                                                     ---------    ---------    ---------    ---------    ---------
Expenses:
IPA medical expenses                                   131,793      137,161      123,401      152,829      117,682
Excess IPA capitation                                       --           --           --        6,000           --
Commission expense                                       6,245        6,731        5,611        6,412        4,149
Reinsurance, net                                           409          609          300          594          500
Management fees                                             --           --           --       11,264       19,430
General and admin expenses                              13,528       15,541       20,150        9,771        6,121
Depreciation                                               162          337          498          167           --
                                                     ---------    ---------    ---------    ---------    ---------
Total expenses                                         152,137      160,379      149,960      187,037      147,882
                                                     ---------    ---------    ---------    ---------    ---------
Operating income (loss)                                  1,139       (2,069)      (3,455)       1,892       (1,543)
Investment income                                          394          676        1,957        2,744          404
Income (loss) before income taxes/minority interest      1,533       (1,393)      (1,498)       4,636       (1,139)
Provision for income taxes                                 (87)         (46)          --          (91)          --
Minority interest in (income) loss of subsidiary          (436)         475          490       (1,573)         337
Net income (loss)                                    $   1,010    $    (964)   $  (1,008)   $   2,972    $    (802)
                                                     =========    =========    =========    =========    =========
Basic and diluted income (loss) per share            $     173    $    (165)   $    (173)   $     509    $    (137)
Basic and diluted weighted average shares                5,839        5,839        5,839        5,839        5,839
</TABLE>


Balance sheet data (in thousands):
<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                       ----------------------------------------------------------
                                                         2003         2002         2001         2000         1999
                                                         ----         ----         ----         ----         ----
<S>                                                    <C>          <C>          <C>              <C>       <C>
Working capital/(deficiency)                           (16,951)     (19,934)     (19,014)         334       (2,397)
Total assets                                            45,994       43,881       45,199       25,279       20,573
Long-term debt                                           3,346        3,247        3,135        2,969        2,746
Total liabilities                                       42,465       41,798       41,676       20,258       20,286
Minority interest                                        1,683        1,247        1,722        2,213          640
Shareholders' equity/(Deficiency in assets)              1,846          836        1,801        2,808         (353)
</TABLE>


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

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

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


                                       20
<PAGE>

of its own. The Company's administrative, legal, accounting and insurance costs
are funded by MDNY. Total costs funded by MDNY were $219,171 as of December 31,
2003.

      MDNY's principal source of revenue is premiums earned from its HMO and POS
Products. Other revenue consists principally of interest income for 2003.

      MDNY's ability to achieve profitability depends principally on reducing
its medical expenses as a percentage of its premium revenue (the "medical loss
ratio" or "MLR") and sufficiently reducing its administrative costs. During
2003, MDNY continued to implement programs to reduce administrative costs.
Although MDNY was able to reduce its administrative costs by $2 million from
2002, these costs, stated on a per member per month ("pmpm") basis, remained
approximately $21 pmpm at December 31, 2003 and 2002, respectively. This was
primarily due to MDNY's overall 25% drop in enrollment. Results for 2003 were
positively affected by NYSID's approval of a 10% sole proprietor differential in
premium yields in June 2003, together with a loss of members subscribing for POS
Products, which historically had negative operating results. Premium yields were
sufficient to offset the increase in HCRA surcharges (31% on a pmpm basis) and
fee for service medical expenses (8.5% on a pmpm basis) in 2003 from 2002 and
achieve a profit of $1.3 million for 2003.

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

                                   2003       2002       %inc(dec)     %inc(dec)
                                   ----       ----       ---------     ---------
Enrollment                        47,029      62,640     (15,611)        (25%)
Enrollment (months)              626,106     712,660     (86,554)        (12%)
Premiums                        $153,276    $158,310      (5,034)       (3.2%)
Medical Expenses
(excl. HCRA surcharge)          $127,110    $133,365      (6,255)         (5%)
HCRA surcharge                  $  5,092    $  4,405         687          16%
Total Medical                   $132,202    $137,770       5,566        (4.0%)
Administrative                  $ 13,528    $ 15,541      (2,013)        (13)%
Commissions                     $  6,245    $  6,731        (486)         (7)%


                                       21
<PAGE>

                                   2003       2002       %inc(dec)
                                   ----       ----       ---------
Premium pmpm                    $ 244.81    $ 222.14        10%
Medical pmpm                    $ 203.02    $ 187.14       8.5%
HCRA pmpm                           8.13        6.18      31.6%
Total medical pmpm              $ 211.15    $ 193.32       9.2%
Administrative pmpm             $  21.61    $  21.81       (.9%)
Commissions pmpm                $   9.97    $   9.45       5.5%

      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 86% and 87%, respectively, for 2003 and 2002.

      During 2003, MDNY's working capital deficit decreased by $2.9 million from
2002 as Island IPA continued to pay the IPA Withhold to MDNY under the Recovery
and Subordination Agreement, thereby reducing the Island Debt. See
"Business-Certain Regulatory Matters" in Item 1 above. Positive operating
results for the year ended December 31, 2003 further contributed to the overall
decrease in the working capital deficit.

      The New York State Insurance Department has created Market Stabilization
Pools (the "New York Stabilization Pool") for the small group and individual
insurance markets. This pool operates on a calendar year basis. According to
state regulations, certain insurers participating in the small group and/or
individual markets will be required to make payments to the New York
Stabilization Pool, and other insurers will receive payments from the New York
Stabilization Pool. For the years 1999 and prior, two separate pools operated.
Demographic data submitted by insurers was used to determine payments to and
payments from one pool. Data related to the incidence of certain specified
medical conditions was used to determine payments to and/ or from another pool.
For the years subsequent to 1999, a single pool operates based on the experience
of each insurer with respect to specified medical conditions. At December 31,
2003, MDNY had recorded a receivable of approximately $618,000 associated with
the demographic pools for years 1998 and 1999. At December 31, 2003, MDNY had
not established reserves or receivables as a result of the new methodology
effective for fiscal years ended 1999-2003. Regional factors published by the
NYSID have not been released to indicate whether MDNY would be a payor or payee
based upon the revised methodology and submissions. Based upon the uncertainty
at December 31, 2003, the Company is not able to quantify this contingency.

      MDNY has also established a receivable of approximately $833,400 at
December 31, 2003 related to certain stop loss pools (together with the New York
Stabilization Pool, the "Pools") established by the State of New York under the
Health Care Reform Act of New York which provides a limited amount of stop loss
insurance funds to cover 90% of certain paid claims for certain New York
Mandated Plans and for the Healthy New York Plan. The regulations


                                       22
<PAGE>

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 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. There can be no assurance that
MDNY will receive additional funds in the future related to the Pools.


                                       23
<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:                                       2003         2002         2001
                                               ----         ----         ----

   Premiums earned                            100.0%       100.0%       100.0%
Expenses:
IPA medical expenses                           86.0         86.6         84.2
Commissions expense                             4.1          4.2          3.8
Reinsurance expense, net                         --           .4           .2
General and administrative expenses             8.8          9.8         13.7
Depreciation                                     .1           .2           .3
   Total expenses                             (99.3)      (101.3)      (102.4)
   Operating income (loss)                       .7         (1.3)        (2.4)
Investment and other income                      .3           .4          1.3
Income (loss) before income taxes/
  minority interest                             1.0          (.9)        (1.0)
Provision for income taxes                      .05          .03           --
Minority interest in subsidiary                 (.3)          .3           .3
Net income (loss)                                .7          (.6)         (.7)

Statistical Data:
     Enrollment                              47,029       62,853       55,361
     Member months                          626,106      713,714      695,596
*    Medical loss ratio                        86.0%        87.0%        84.4%
**   Administrative loss ratio                 13.0%        14.2%        17.7%
--------------------------------------------------------------------------------

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

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

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

      Premiums earned for the year ended December 31, 2003 and 2002 were
approximately $153,276,000 and $158,310,000, respectively. At December 31, 2003,
MDNY's commercial enrollees totaled approximately 47,000, as compared to
approximately 62,000 at December 31, 2002. Revenue decreased $5,316,000 or 3.3%
in 2003 compared to 2002 as a result of decreased member months of 12% partially
offset by increases in premium yields of approximately 10%


                                       24
<PAGE>

in 2003 compared with 2002. Overall membership decreased at December 31, 2003
primarily due to annual premium rate increases of 30% on POS Products and 10% on
HMO Products.

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

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

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

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

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


                                       25
<PAGE>

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

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Premiums earned for the year ended December 31, 2002 and 2001 were
approximately $158,310,000 and $146,505,000, respectively. At December 31, 2002,
MDNY's commercial enrollees totaled approximately 62,000 as compared to
approximately 55,000 at December 31, 2001. Revenue increased $10.5 million or
7.1% in 2002 compared to 2001 as a result of increased member months and premium
rates in 2002 compared with 2001. Total member months for 2002 increased
approximately 7,118 or 14.3% from 2001. The remaining increase in premium
revenue was a result of premium rate increases during 2001.

      Total expenses for the year ended December 31, 2002 were $160,379,021 as
compared to $149,960,087 for the year ended December 31, 2001. This 7% increase
in expenses is the result of higher than anticipated medical costs and
commissions as the membership growth in 2002 primarily consisted of sole
proprietors. Prior to June 2002, this Member group was prohibited from directly
enrolling for health insurance with MDNY and was required to enroll through
associations.

      Health care service expense stated as a percentage of premium revenues was
87.0% for 2002 compared with 84.4% for 2001. Medical expenses paid to the IPAs
on a fee for service basis increased approximately 11.1%. This increase is
consistent with the overall increase in sole proprietor business. The medical
loss ratio was 87.0% for 2002.

      Administrative expenses stated as a percentage of premium revenue was
14.2% for 2002 compared with 17.7% for 2001. This reduction was the result of
reductions in staffing realized in the first quarter of 2002 together with
operational efficiencies focused on by the Company throughout 2002 to help
offset increasing medical and commission costs.

      Net loss for the year ended December 31, 2002 was $964,000 compared to a
net loss of $1,008,000 for 2001. This loss is primarily the result of higher
than anticipated medical and commission costs realized in 2002.

Liquidity and Capital Resources

      Cash flows provided by (used in) operating activities, investing and
financing activities of $878,790, $14,686, and $(12,845), respectively in 2003
resulted in an overall increase in cash


                                       26
<PAGE>

and cash equivalents in 2003 of $880,631. The increase in net cash and cash
equivalents is directly related to the timing of when claims are paid.

      The Company had negative working capital of approximately $16,951,000 at
December 31, 2003 compared to a negative working capital of approximately
$19,934,000 at December 31, 2002. The amount of negative working capital
decreased in 2003 as Island IPA continued to pay the IPA Withhold to MDNY under
the Recovery and Subordination Agreement thereby reducing the Island Debt.
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 2003
rate increases together with the initiatives described above under the caption
"Business--Business Strategy" will produce sufficient cash flows to meet its
obligations in 2004. There can be no assurance that the Company will be able to
achieve sufficient cash flows.

      Pursuant to the Recovery and Subordination Agreement, Island IPA, Island
IPA's participating providers and the Hospitals have agreed, among other things,
until the Island Debt is repaid (a), in the event that MDNY becomes insolvent
(pursuant to a court approved order or admits its inability to pay its debts),
to subordinate their rights to payment by MDNY of outstanding claims (including
IBNR) to all other outstanding claims in an amount equal to the amount of the
then outstanding Island Debt (i.e., payments in excess of capitation), and (b)
that, after payment of third party claims, the claims of Island IPA and its
providers will be subordinated to the claims of the Hospitals. The amount of
Island Debt, and the amount of claims subject to potential subordination
pursuant to the Recovery and Subordination Agreement, were approximately $20
million as of December 31, 2003. In the event of any such insolvency of MDNY,
the effect of any such subordination would be to allow MDNY to pay current
obligations that it would otherwise be unable to pay in an amount equal to the
amount so subordinated, and allow MDNY to be sufficiently solvent to continue
for a period of time in excess of one year.

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 above under the captions "Business--Certain Regulatory Matters" and
"--Recent Developments."

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

      The consolidated financial statements of the Company as of December 31,
2003 and for the year then ended have been prepared assuming that the Company
will continue as a going concern.

      MDNY's long term liquidity depends upon its ability to improve its
operations and financial performance in order to meet its financial obligations,
achieve statutory compliance,


                                       27
<PAGE>

and achieve profitability. While the Company believes that implementation of
MDNY's plans to achieve profitability will provide MDNY with the ability to
continue as a going concern, there is no assurance that such actions will
achieve positive results from operations or adequate working capital and equity
sufficient to ensure the long-term viability of MDNY and the Company. Pursuant
to the MDNY Remedial Plan, MDNY is actively pursuing the sale of its business
and assets. However, there can be no assurance that any such sale will be
completed on terms acceptable to MDNY, if at all, and there was no sale that the
Company considered probable at December 31, 2003.

      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 7 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, 2003 to $6.3 million compared to the NYSID required net worth of
$7.7 million. (Under Section 1307, the principal and interest are treated as
equity capital for regulatory purposes and are repayable out of free and
divisible surplus, subject to the prior approval of NYSID).

Contractual Obligations

      MDNY is contractually obligated to make payments as follows:

<TABLE>
<CAPTION>
                                                    Payments Due by Period
                             ------------------------------------------------------------------
Contractual Obligations        Total       1 Year      2-3 Years      4-5 Years   After 5 Years
-----------------------        -----       ------      ---------      ---------   -------------
                                                    (Amounts in thousands)
<S>                          <C>           <C>           <C>           <C>             <C>
Operating leases             1,793,236     403,487       840,130       549,619         0
Obligations under capital
lease agreement              1,479         1,479         0             0               0
                             ---------     -------       -------       -------         --------
Total                        1,794,715     404,966       840,130       549,619         0
                             =========     =======       =======       =======         ========
</TABLE>

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

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

Critical Accounting Policies

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company's
management to make a variety of estimates and assumptions. These estimates and
assumptions affect, among other things, the reported amounts of assets and
liabilities, the disclosure of contingent liabilities and the reported amounts


                                       28
<PAGE>

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.

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

Revenue Recognition

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

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

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. These estimates are reviewed by MDNY's external
auditors and state regulatory authorities on a periodic basis. 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.


                                       29
<PAGE>

      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, 2003; however, actual claim payments and other items may
differ from established estimates.

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.

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, 2003, 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, 2003, total principal and
interest due LIPH, LLC and CHNLI was approximately $1.36 million and $1.98
million, respectively. A 100 basis point increase in interest rates, applied to
MDNY's borrowings at December 31, 2003, 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 "Index to Financial Statements and Schedules."

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

      Not applicable.


                                       30
<PAGE>

Item 9A. Controls and Procedures

      (a) 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 15d-14(c) under the Securities Exchange Act of 1934, as amended, are
effective for gathering, analyzing and disclosing information contained in the
Company's periodic reports provided to the Securities and Exchange Commission.

      The Company was delinquent in filing its Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, failed to file an Annual Report on Form
10-K for the fiscal year ended December 31, 2001 and was delinquent in filing
its Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The
Company failed to file Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 2001 and for the quarters ended March 31,
June 30 and September 30, 2002. The Company was delinquent in filing its
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 2002. The Company failed to hold an Annual Meeting of Shareholders
in 2002 or 2003. The Company also failed to make, or was delinquent in making,
certain filings with respect to periods ending prior to December 31, 2000.

      (b) Subsequent to the Evaluation Date referred to in paragraph 4 of the
Certifications of the Company's principal executive officer and its principal
financial officer included in this report, the Company has not made any change
to its internal controls referred to in paragraph 5 of the Certifications and
there has been no change in other factors that could significantly affect these
controls.

                                    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 2004 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.


                                       31
<PAGE>

(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.

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

I.    List of Documents Filed as Part of this Report

      A.    Financial Statements: Independent Auditors' Report; Consolidated
            Balance Sheets as of December 31, 2003 and 2002; Consolidated
            Statements of Operations for the years ended December 31, 2003, 2002
            and 2001; Comprehensive Income (Loss) for the years ended December
            31, 2003, 2002 and 2001; Consolidated Statements of Cash Flows for
            the years ended December 31, 2003, 2002 and 2001; Notes to the
            Consolidated Financial Statements.

      B.    Schedules:

            Schedule II--Valuation and Qualifying Accounts


                                       32
<PAGE>

II.   Reports on Form 8-K

      No reports on Form 8-K were filed with respect to the last quarter of
2003.

III.  Exhibits

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

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

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

3.2         By-Laws of LIPH (5)

3.4         By-laws of MDNY (5)

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

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

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

10.3        Stock Subscription and Purchase Agreement made as of October 11,
            1995 among LIPH, CHNLI and MDNY (4) 10.4 Section 1307 Loan Agreement
            between MDNY and LIPH, LLC dated July __, 1998, as amended (4)

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

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

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

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

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

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


                                       33
<PAGE>

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

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

10.13       Employment Agreement dated January 1, 2001 between MDNY and Paul T.
            Accardi(5)(7)

10.14       Employment Agreement dated January 1, 2001 between MDNY and Ronald
            R. Perrone(5)(7)

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

21          Subsidiaries of Registrant (1)

31.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
            (8)

31.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
            (8)

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
            (8)

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
            (8)

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

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

(8)   Filed herewith.


                                       34
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    LONG ISLAND PHYSICIAN HOLDINGS
                                    CORPORATION

                                    By:   /s/ PAUL KOLKER, M.D.
                                    --------------------------------------------
                                    Name:  Paul Kolker, M.D.,
                                    Title: President and Chief Executive Officer
Date: April 14, 2004

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

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

/s/ Paul Kolker, M.D.             Chairman of the Board,          April 14, 2004
----------------------------      (Principal Executive Officer)
Paul Kolker, M.D.

/s/ Concetta Pryor                Chief Financial Officer         April 14, 2004
----------------------------      (Principal Financial and
Concetta Pryor                    Accounting Officer)

/s/ William Brennan, D.C.         Director                        April 14, 2004
----------------------------
William Brennan, D.C.

                                  Director                        April __, 2004
----------------------------
Salvatore J. Caravella, M.D.

                                  Director                        April __, 2004
----------------------------
Franco Gallo, M.D.

                                  Director                        April __, 2004
----------------------------
Robert A. Jason, M.D.

/s/ Gregory Kalmar, D.D.S.        Director                        April 14, 2004
----------------------------
Gregory Kalmar, D.D.S.


                                       35
<PAGE>

                                  Director                        April __, 2004
----------------------------
Amy Koreen, M.D.

/s/ Ronald Perrone, M.D.          Director                        April 14, 2004
----------------------------
Ronald Perrone, M.D.

/s/ Rosario Romano, M.D.          Director                        April 14, 2004
----------------------------
Rosario Romano, M.D.

/s/ Robert Sarnataro, M.D.        Director                        April 14, 2004
----------------------------
Robert Sarnataro, M.D.

/s/ Gary Wohlberg, M.D.           Director                        April 14, 2004
----------------------------
Gary Wohlberg, M.D.


                                       36
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Financial Statements
December 31, 2003 and 2002

<PAGE>

Long Island Physician Holdings Corporation
Index
December 31, 2003 and 2002
--------------------------------------------------------------------------------

                                                                         Page(s)

Report of Independent Auditors.................................................1

Consolidated Financial Statements

Consolidated Balance Sheets....................................................2

Consolidated Statements of Operations and Accumulated Deficit..................3

Consolidated Statements of Comprehensive Income (Loss).........................4

Consolidated Statements of Cash Flows..........................................5

Notes to Consolidated Financial Statements..................................6-16

Schedule of Valuation and Qualifying Accounts.................................17

<PAGE>

                         Report of Independent Auditors

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

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and accumulated deficit, comprehensive
income (loss) and cash flows present fairly, in all material respects, the
financial position of Long Island Physician Holdings Corporation (the "Company")
and its subsidiary at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the accompanying
financial statement schedule of valuation and qualifying accounts 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 auditing
standards generally accepted in the United States of America, which 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.


PRICEWATERHOUSECOOPERS LLP
New York, New York
March 30, 2004

<PAGE>

Long Island Physician Holdings Corporation
Consolidated Balance Sheets
December 31, 2003 and 2002
--------------------------------------------------------------------------------

                                                       2003           2002
                                                       ----           ----
Assets,
Cash and cash equivalents                          $ 1,575,080    $    694,449
Premium receivables, net of allowances
  of approximately $959,000 in 2003 and
  $961,000 in 2002                                  12,544,775       8,699,338
Reinsurance recoverables                               450,549         635,42O
Payments in excess of capitation                     2,O74,163       2,999,251
Prepaid expenses and other current assets            3,142,168       3,205,406
Due from Catholic Health Services of Long Island     2,382,027       2,382,027
                                                   -----------    ------------
    Total current assets                            22,168,762      18,615,891
                                                   ===========    ============
Property, plant and equipment, net                     272,134         392,245
Restricted cash and cash equivalents                 5,600,790       5,657,135
Payments in excess of capitation, net of
  current portion                                   17,953,057     19,215,858]
                                                   -----------    ------------
    Total assets                                   $45,994,743    $ 43,881,129
                                                   ===========    ============
Liabilities and Stockholders' Equity
Medical claims payable                             $27,542,261    $ 28,967,021
Public goods payable                                 6,779,734       5,367,150
Unearned premium revenue                             1,862,367       1,955,180
Accounts payable and accrued expenses                2,933,560       2,246,652
Current portion of capital lease obligations             1,479          14,324
                                                   -----------    ------------
    Total current liabilities                       39,119,401      38,550,327
                                                   ===========    ============
Note payable and accrued interest                    3,346,059       3,247,150
    Total liabilities                               42,465,460      41,797,477
Minority interest in MDNY Healthcare, Inc.           1,682,934       1,247,315
Stockholders equity
    Class A common stock, $.001 par Value;
      10,000 shares authorized, 1,506 issued
      and outstanding                                        2               2
    Class B common stock, $.001 par value;
      25,000 shares authorized, 4,333
      and outstanding
 Additional paid-in capital                         11,478,536     111,478,536
 Accumulated deficit                                (9,632,193)    (10,642,205)
    Total stockholders' equity                       1,846,349         836,337
                                                   -----------    ------------
    Total liabilities and stockholders' equity     $45,994,743    $ 43,881,129
                                                   ===========    ============

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


                                       2
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Statements of Operations and Accumulated Deficit
Years Ended December 31, 2003, 2002 and 2001
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                        2003           2002             2001
                                                        ----           ----             ----
<S>                                                <C>             <C>             <C>
Revenue
Premiums earned                                    $153,276,616    $158,310,155    $ 146,505,139
       Total revenue                                153,275,616     158,310,155      146,505,139
Expenses
Medical services expense                            132,202,229     137,768,935      123,701,510
Commissions expense                                   6,244,726       6,731,587        5,610,672
General and administrative expenses                  13,527,932      15,540,781       20,150,287
Depreciation                                            161,770         337,718          497,618
                                                   ------------    ------------    -------------
       Total expenses                               152,136,657     160,379,021      149,960,087
                                                   ============    ============    =============
       Operating income (loss)                        1,138,959      (2,068,866)      (3,454,948)
Investment and other income                             394,409         675,923        1,956,680
       Income (loss) before income taxes
         and minority interest                        1,533,368      (1,392,943)      (1,498,268)
Provision for income taxes                              (87,737)        (46,725)              --
Minority interest in (income) loss of subsidiary       (435,619)        475,090          490,229
       Net income (loss)                              1,010,012        (964,578)      (1,008,039)
Accumulated deficit
Beginning of year                                   (10,642,205)     (9,677,627)      (8,669,588)
                                                   ------------    ------------    -------------
End of year                                        $ (9,632,193)   $(10,642,205)   $  (9,677,627)
                                                   ============    ============    =============
Basic and diluted income (loss) per share                   173            (165)            (173)
Basic and diluted weighted average shares                 5,839           5,839            5,839
</TABLE>

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


                                       3
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31, 2003, 2002 and 2001
--------------------------------------------------------------------------------

                                         2003           2002           2001
                                         ----           ----           ----

Net income (loss)                  $  1,010,012    $   (964,578)   $ (1,008,039)
Change in unrealized gain on
  securities                                 --              --             705
    Comprehensive income (loss)    $  1,010,012    $   (964,578)   $ (1,007,334)
                                   ============    ============    ============

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


                                       4
<PAGE>

Long Island Physician Holdings Corporation
Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         2003           2002           2001
                                                                         ----           ----           ----
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities
Net income (loss)                                                    $ 1,010,012    $  (964,578)   $(1,008,039)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
      Depreciation                                                       161,770        337,718        497,618
      Minority interest in income (loss) of subsidiary                   435,619       (475,090)      (490,229)
      Changes in operating assets and liabilities:
        Premium receivables, net                                      (3,845,437)     1,309,179        629,958
        Reinsurance recoverables                                         184,871        420,058        327,398
        Prepaid expenses and other current assets                         63,238       (954,269)      (829,113)
        Due to/from independent practice associations (IPAs)
           and medical claims payable                                    763,129     (1,305,311)    (5,268,570)
        Public goods payable                                           1,412,584      2,712,535      2,654,615
        Unearned premium revenue                                         (92,813)     1,239,902       (270,874)
        Accounts payable and accrued expenses                            785,817     (1,428,699)     1,124,309
                                                                     -----------    -----------    -----------
           Net cash provided by (used in) operating activities           878,790        891,445     (2,632,927)
                                                                     -----------    -----------    -----------
Cash flows from investing activities
Purchase of property, plant, and equipment                               (41,659)       (39,592)       (20,760)
Decrease (increase) in restricted cash and cash equivalents]              56,345     (2,059,510)       574,242
                                                                     -----------    -----------    -----------
           Net cash provided by (used in) investing activities            14,686     (2,099,102)       553,482
                                                                     -----------    -----------    -----------
Cash flows from financing activities
Payments on capital lease obligations                                    (12,845)       (55,984)       (77,677)
                                                                     -----------    -----------    -----------
           Net cash used in financing activities                         (12,845)       (55,984)       (77,677)
                                                                     -----------    -----------    -----------
           Increase (decrease) in cash and cash equivalents              880,631     (1,263,641)    (2,157,122)
Cash and cash equivalents
Beginning of year                                                        694,449      1,958,090      4,115,212
                                                                     -----------    -----------    -----------
End of year                                                          $ 1,575,080        694,449      1,958,090
                                                                     ===========    ===========    ===========
</TABLE>

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


                                       5
<PAGE>

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

1.    Organization

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

      The majority of healthcare services are provided by Catholic Health
      Services of Long Island ("CHSLI"), an affiliate of CHNLI, and physicians
      who are members of affiliated independent practice associations ("IPAs").
      Island Professional Association IPA, Inc. ("Island IPA") is the primary
      affiliated IPA, and is owned by Long Island Physician Holdings, LLC
      ("LIPH, LLC"). Island IPA participating providers who hold membership
      interests in LIPH, LLC also own shares in LIPH, Corp (see note 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 two financial
      institutions in excess of $100,000, which is the maximum insured by the
      Federal Deposit Insurance Company. Management believes that the
      institutions are viable entities and no risk of loss exists. The Company
      routinely invests its restricted funds in money market accounts. These
      funds generally invest in highly liquid securities.

      Medical Services Expense

      Medical services expense, as recorded in the consolidated statements of
      operations and accumulated deficit, includes the cost of inpatient
      hospitalization and outpatient medical services provided or contracted for
      and are accrued in the period they are incurred. The costs of claims
      incurred but not reported are estimated based on historical data, current
      enrollment statistics, patient census data and other information. Such
      estimates and the resulting reserves are continually reviewed and updated,
      and any adjustments resulting therefrom are reflected in earnings
      currently. Amounts owed to Island IPA participating providers, CHS
      hospitals and all other providers of medical services are recorded as
      medical claims payable in the consolidated balance sheets. Medical
      services expense relating to CHS and Island IPA were approximately $85
      million, $81 million and $77 million for the years ended December 31,
      2003, 2002 and 2001, respectively.


                                       6
<PAGE>

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

      Property, Plant and Equipment

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

      Premium Revenue

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

      Reinsurance

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

      Income Taxes

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

      As of December 31, 2003 and 2002, the Company's net operating income
      (loss) for tax purposes will differ from the income (loss) for financial
      reporting purposes primarily as a result of the timing of bad debt
      write-offs, accrued interest and depreciation expense. The Company has
      recorded a full valuation allowance against the potential future benefit
      of such net deferred tax assets to the amount expected to be realized.

      Use of Estimates

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

      Segment Reporting

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


                                       7
<PAGE>

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

      Reclassifications

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

      Stock-based Compensation Plan

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

      The Company has chosen to adopt only the disclosure provisions of SFAS No.
      148 and continues to account for stock-based compensation using the
      intrinsic value method prescribed in Accounting Principles Board Opinion
      No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related
      interpretations. The Company's stock option plan is described in note 13.

      Recent Accounting Pronouncements

      In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, including indirect
      Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires a
      guarantor to recognize a liability, at the inception of the guarantee, for
      the fair value of obligations it has undertaken in issuing the guarantee
      and also include more detailed disclosures with respect to guarantees. FIN
      45 is effective on a prospective basis for guarantees issued or modified
      starting January 1, 2003 and requires the additional disclosures in the
      financial statements effective for the period ended December 31, 2002. The
      Company has adopted the initial recognition and initial measurement
      provisions of FIN 45 effective January 1, 2003.

      In January 2003, FASB issued FASB Interpretation No. 46, "Consolidation of
      Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"),
      as revised in December 2003 ("FIN 46R"). The primary objective of FIN 46
      is to provide guidance on the identification of, and financial reporting
      for, entities over which control is achieved through means other than
      voting rights; such entities are known as variable-interest entities
      ("VIEs"). Although the FASB's initial focus was on special-purpose
      entities ("SPEs"), the final guidance applies to a wide range of entities.
      FIN 46 has far-reaching effects and applies to new entities that are
      created after the effective date, as well as to existing entities.
      Guidance under FIN 46 will provide for the determination of (1) whether
      consolidation is required under the "controlling financial interest" model
      of Accounting Research Bulletin No. 51 "Consolidated Financial
      Statements," ("ARB 51"), or other existing authoritative guidance, or
      alternatively, (2) whether the variable-interest model under FIN 46 should
      be used to account for existing and new entities. The adoption of this
      standard is not expected to have a material impact on the Company's
      consolidated financial statements.

3.    Recovery and Subordination Agreement

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


                                       8
<PAGE>

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

      reimbursements to its members and other non-member third-party providers
      with whom the Company had contracted.

      During 2000, the New York State Insurance Department ("NYSID") performed
      its first financial audit of MDNY and its affiliated IPA's as of June 30,
      2000. On May 10, 2001, the Company received from NYSID a Draft Report on
      Examination of MDNY as of June 30, 2000 (the "Draft Report"). The Draft
      Report stated, among other things, NYSID's determinations that, as of June
      30, 2000, MDNY was insolvent in the amount of approximately $4.3 million
      and that MDNY's required contingency reserves were impaired in the amount
      of approximately $12.2 million. These determinations resulted from NYSID's
      position that MDNY should have reported certain obligations of the IPAs in
      MDNY's financial statements.

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

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

      The Company recognized an initial receivable of approximately $23.2
      million, which represented actual claims paid in 2001 to Island IPA
      participating providers with dates of service prior to January 1, 2001.
      Subsequent to the initial recognition, the receivable has been adjusted
      for additional claims paid after 2001, and reduced by a 5% withhold of
      payments as stipulated in the Recovery and Subordination Agreement. The
      net amount due from Island IPA, which is classified in the balance sheet
      as payments in excess of capitation, was approximately $20.0 million and
      $22.2 million as of December 31, 2003 and 2002, 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, 2003 and 2002 were approximately $20 million and $25
            million, respectively.

      o     Effective January 1, 2002, Island IPA began retaining a
            non-distributable withhold in the amount of 5% of payments to
            participating providers and has remitted the entire amount of the
            withhold to the Company. During 2003 and 2002, the amount remitted
            to the Company


                                       9
<PAGE>

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

      reduced the payments in excess of capitation receivable by approximately
      $2.2 million and $2.1 million, respectively.

      o     Also effective January 1, 2002, the Company is obligated to make
            payment to Island IPA for unrestricted access to its network of
            participating providers in amount equal to $1.50 per member per
            month ("network access fee"). The amounts owed by the Company to
            Island IPA for the network access fee are to be used to reduce the
            payments in excess of capitation. As of December 31, 2003, no
            payment has been made or will be required to be made to Island IPA
            for network access fees relating to 2003 or prior.

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

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

4.    Financial Condition

      The Company had a negative working capital of approximately $17 million
      and $20 million at December 31, 2003 and 2002, respectively. In accordance
      with the Recovery and Subordination Agreement, if MDNY admits its
      inability to pay its debts at any point in time, Island IPA's
      participating providers and CHSLI have agreed to the subordination of the
      portion of outstanding medical claim obligations they are owed, up to the
      amount these providers owe as payments in excess of capitation (see note
      4). This amount of potential subordination was approximately $20 million
      and $25 million as of December 31, 2003 and 2002, respectively.

5.    NYSID Reserve Requirements

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

      Escrow Deposit Reserve Requirement

      In accordance with the NYSID regulations, the Company is required to
      maintain certain amounts on deposit in an escrow account for the
      protection of enrollees, equal to 5% of projected medical expenditures of
      the following year or $100,000, whichever is greater. The Company had
      approximately $5,601,000 and $5,657,000 of money market funds on deposit
      in escrow as of December 31, 2003 and 2002, respectively. These funds are
      included in the consolidated balance sheets as restricted cash and cash
      equivalents. The Company did not meet the escrow deposit requirement of
      $5.8 million at December 31, 2003, calculated as 5% of an approximate $116
      million in projected medical expenditures.

      Contingent Reserve Requirement

      The Company is required to maintain a contingent reserve fund which should
      be increased in an amount equal to 1% of net premium revenue at year end
      but not to exceed 5% of net premium


                                       10
<PAGE>

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

      revenue reported for the year. This contingent reserve requirement shall
      be deemed to have been met if the statutory net worth of the Company
      equals or exceeds the contingent reserve requirement. According to New
      York Codes of Rules and Regulations, if the contingent reserve fund is
      less than the escrow deposit account, the escrow deposit account may be
      used to offset the contingent reserve fund.

      At December 31, 2003, the contingent reserve fund requirement was greater
      than the escrow deposit account. As statutory net assets of the Company
      were $6.3 million, the Company did not meet the contingent reserve fund
      requirement of $7.7 million at December 31, 2003.

      In April 2003, the NYSID accepted a remedial plan submitted by MDNY which
      detailed MDNY's plans to remedy the statutory reserve impairment.
      Subsequent to the acceptance of the remedial plan, the NYSID directed MDNY
      to take appropriate action to achieve net worth of at least $7 million. As
      part of their directive, the NYSID required MDNY to provide monthly
      financial statements, and continues to monitor MDNY's financial
      performance.

6.    Concentration of Credit Risk

      The mix of receivables from related parties and others at December 31,
      2003 and 2002, are as follows:

                                                    2003          2002
                                                    ----          ----
Related parties                                     50%            30%
Other                                               50             70
                                                    ---           ---
                                                    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 and
      its affiliated entity, the Diocese. The premiums from these services are
      included in premiums earned in the consolidated statements of operations
      and accumulated deficit, and outstanding receivables for these services
      are part of premiums receivable in the consolidated balance sheets. CHSLI
      and Diocese premiums represented approximately 27% of total premiums
      earned by the Company during 2003 and 30% during 2002 and 2001. In
      addition, CHSLI premium receivables outstanding as of December 31, 2003,
      2002 and 2001 were approximately $6.5 million, $3.0 million and $5.4
      million, respectively. There were no outstanding premium receivables due
      from the Diocese at December 31, 2003 and 2002.

      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,
      CHNLI has notified the Company of CHNLI's desire to withdraw as a MDNY
      shareholder, and the Diocese and CHSLI have notified the Company that they
      will not renew their current subscriber contracts with MDNY upon
      expiration thereof effective January 1, 2005 and


                                       11
<PAGE>

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

      2006, respectively. CHSLI and CHNLI have notified the Company that a
      restructuring plan would be considered whereby CHNLI would exit as a
      shareholder and CHSLI and the Diocese would enter into a self-insured
      contract with the Company, whereby the Company would act as a third party
      administrator of the health benefits of the each entity's respective
      employees.

      As a result of incurring deficits of approximately $2.4 million in
      hospital risk pools during 1997 and 1998 relating to risk sharing
      agreements between the Company and CHS, a receivable from CHS of
      approximately $2.3 million was recorded in the consolidated balance sheets
      at December 31, 2003 and 2002. The receivable was due December 31, 2003
      (see note 16).

8.    Reinsurance

      The Company entered into a stop-loss insurance agreement with an insurance
      company to limit its losses on individual claims. In 2003, 2002 and 2001,
      under the terms of this agreement, a portion of paid claims in excess of
      $100,000 for hospital services were reimbursed to the Company. Effective
      January 1, 2001, the Company cancelled the portion of the stop-loss
      agreement relating to claims for physician services.

      Reinsurance premiums of approximately $528,000 in 2003, $948,000 in 2002
      and $609,000 in 2001 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, 2003 and 2002 were approximately
      $451,000 and $635,000, respectively, of which $289,000 and $349,000 were
      related to the years ended December 31, 2003 and 2002, respectively.

9.    Property, Plant and Equipment

      The major components of property, plant and equipment as of December 31,
      2003 and 2002 are as follows:

                                                         2003            2002
                                                      ----------      ----------
Equipment                                             $  337,050      $  324,000
Furniture and fixtures                                   535,197         535,197
Leasehold improvements                                   484,207         484,207
Computer equipment and software                        2,674,115       2,645,505
                                                      ----------      ----------
                                                       4,030,569       3,988,909
                                                      ----------      ----------
Less accumulated depreciation                          3,758,435       3,596,664
                                                      ----------      ----------
     Property, plant and equipment, net               $  272,134      $  392,245
                                                      ==========      ==========

10.   Notes Payable

      During 1998, with the approval of the NYSID, the Company obtained a loan
      from LIPH, LLC. The outstanding balance, including accrued interest, was
      approximately $1,363,000 and $1,322,000 at December 31, 2003 and 2002,
      respectively. Interest on this amount accrues at the prime rate (4.00% at
      December 31, 2003) and is payable quarterly commencing October 1, 1998.
      The entire


                                       12
<PAGE>

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

      principal balance plus any accrued interest was originally due on July 1,
      1999, but is subject to prior approval by the NYSID.

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

      During 1997, with the approval of the NYSID, the Company obtained a loan
      from CHS. The outstanding balance, including accrued interest, was
      approximately $1,983,000 and $1,925,000 at December 31, 2003 and 2002,
      respectively. Interest on this amount accrues at the prime rate 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.

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

11.   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 $4.4 million, $4.1 million, and $4
      million for the years ended December 31, 2003, 2002 and 2001,
      respectively, and are included within medical services expense on the
      consolidated statements of operations and accumulated deficit.

      Stabilization Pools

      The Company is also affected by certain state regulated risk allocation
      pools, which are designed primarily to spread claims risk between
      insurers. Certain insurers participating 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. 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 subsequent to 1999, a single pool operates
      based on the experience of each insurer with respect to specified medical
      conditions.

      The Company has recorded a receivable of approximately $618,000 at
      December 31, 2003 and 2002, relating to the demographic pool for the years
      1998 and 1999, which is included in prepaid expenses and other current
      assets on the consolidated balance sheets. The Company has not established
      reserves or receivables for the years 1999 through 2003, as regional
      factors published by the NYSID have not been released to indicate whether
      the Company would be a payer or a recipient based upon the revised
      methodology and submissions for each of these years.


                                       13
<PAGE>

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

      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 $883,000 and $981,000 at December
      31, 2003 and 2002, 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.

      Lease Commitments

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

Year                                                              Amount
----                                                              ------
2004                                                            $  403,487
2005                                                               414,430
2006                                                               425,700
2007                                                               437,305
2008                                                               112,314
                                                                ----------
                                                                $1,793,236
                                                                ==========

      Litigation

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

12.   Income Taxes

      The components of the income tax expense are as follows:


                                                  2003                2002
                                                 -------            -------
Current
Federal                                          $21,522            $    --
State                                             66,215             46,725
Deferred                                              --                 --
State                                                 --                 --
                                                 -------            -------
            Total                                $87,737            $46,725
                                                 =======            =======


                                       14
<PAGE>

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

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

                                                       2003          2002
                                                   -----------    -----------
Federal income tax expense at
  statutory rate                                   $   478,650    $  (473,600)
State income taxes, net of federal tax benefit          43,702         30,839
Change in valuation allowance                         (612,270)       553,186
Permanent differences                                   82,643         52,982
Other                                                   95,012       (116,682)
                                                   -----------    -----------
      Total income tax expense                     $    87,737    $    46,725
                                                   ===========    ===========

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

                                                       2003          2002
                                                   -----------    -----------
Deferred tax assets
Fixed assets                                       $    68,823    $   119,058
Receivables                                            383,305        384,021
Accrued interest                                       378,043        338,519
                                                    29,161,189      3,535,797
Net operating losses
Other                                                  133 136        114,370
Valuation allowance                                 (3,879,496)    (4,491,765)
                                                   -----------    -----------
      Net deferred tax asset                                --             --
                                                   ===========    ===========

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

      As of December 31, 2003 and 2002, the Company has a net operating loss
      carryforward for Federal income tax purposes of approximately $7.3 million
      and $9 million, respectively, which will begin to expire in 2011.

13.   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.


                                       15
<PAGE>

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

      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 expire on July 1, 2005. At December 31, 2003, no
      options have been exercised.

14.   MDNY Healthcare, Inc.

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

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

      CHNLI shall have the following additional rights:

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

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

15.   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, 2003 and 2002, 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.

16.   Subsequent Event

      On March 30, 2004 the CHSLI receivable of $2.4 million was received in
      full.


                                       16
<PAGE>

Long Island Physician Holdings Corporation
Schedule of Valuation and Qualifying Accounts
December 31, 2003, 2002 and 2001
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Provision
                                                    for Doubtful
                                       Balance at   Accounts and                 Balance at
                                       Beginning       Billing                     End
            Description                of Period     Adjustments   Deductions    of Period
            -----------                ---------     -----------   ----------    ---------
<S>                                   <C>            <C>           <C>          <C>
Year ended December 31, 2003
Allowance for doubtful accounts
  and billing adjustments             $  961,019     $3,743,879    $3,745,672   $  959,226

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

Year ended December3l, 2001
Allowance for doubtful
  and billing adjustments              1,725,894      5,261,91O     5,438,551    1,549,253
</TABLE>


                                       17
<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        Form of Option Agreement between LIPH and each of the directors
            thereof (2)

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

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

10.4        Section 1307 Loan Agreement between MDNY and LIPH, LLC dated July
            __, 1998, as amended (4)

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

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

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

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

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

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

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

<PAGE>

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

10.13       Employment Agreement dated January 1, 2001 between MDNY and Paul T.
            Accardi(5)(7)

10.14       Employment Agreement dated January 1, 2001 between MDNY and Ronald
            R. Perrone(5)(7)

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

21          Subsidiaries of Registrant (1)

31.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
            (8)

31.2        Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
            (8)

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
            (8)

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
            (8)

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

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

(8)   Filed herewith.