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

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

                                    FORM 10-Q

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

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                   For the quarter period ended June 30, 2005

                                       OR

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

                    For the transition period from ___ to ___

                           Commission File No. 0-27654
--------------------------------------------------------------------------------
                   LONG ISLAND PHYSICIAN HOLDINGS CORPORATION
             (Exact name of registrant as specified in its charter)

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

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

       Registrant's telephone number, including area code: (631) 454-1900

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

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

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

Indicate by check mark 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 August 15, 2005 there
were 1,798 shares of Class A common stock and 4,044 shares of Class B common
stock outstanding.

<PAGE>

                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Balance Sheets at June 30, 2005
        (unaudited) and December 31, 2004                                      3
        Consolidated Statements of Operations (unaudited)                      4
        Consolidated Statements of Cash Flows (unaudited)                      5
        Notes to Consolidated Financial Statements (unaudited)               6-9

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                           9-16

Item 3. Quantitative and Qualitative Disclosures about Market Risk            16

Item 4. Controls and Procedures                                               17

PART II OTHER INFORMATION

Item 6. Exhibits                                                              18

SIGNATURES, and CERTIFICATIONS                                             19-24


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                   Long Island Physician Holdings Corporation
                           Consolidated Balance Sheets
                       June 30, 2005 and December 31, 2004

                                                     June 30,      December 31,
                                                       2005            2004
                                                   ------------    ------------
Assets                                              (unaudited)

Cash                                               $  1,278,346    $  1,334,326

Premium receivables
(net of allowances of approximately
$1,400,000 in 2005 and $1,495,000 in 2004)            8,084,709       6,705,130

  Reinsurance recoverables                               81,516         146,547
  Payments in excess of capitation                    1,400,000       1,750,000
  Prepaid expenses and other current assets           2,635,063       2,463,596

                                                   ------------    ------------
    Total current assets                             13,829,634      12,399,599
  Property plant and equipment, net                     289,771         303,061
  Restricted cash and cash investments                5,856,370       5,817,203
  Payments in excess of capitation, net of
    current portion                                  16,257,451      16,710,928

                                                   ------------    ------------
    Total assets                                   $ 35,883,226    $ 35,230,791
                                                   ============    ============
Liabilities and Stockholders' Equity:
  Medical claims payable                           $ 21,417,380    $ 20,476,052
  Public goods payable                                4,406,877       4,725,026
  Unearned premium revenue                            2,245,715       1,885,423
  Accounts payable and accrued expenses               2,272,871       2,546,476
                                                   ------------    ------------

    Total current liabilities                        30,342,843      29,632,977
Note payable and accrued interest                     3,518,251       3,450,673

                                                   ------------    ------------
    Total liabilities                                33,861,094      33,083,650

Minority interest in MDNY Healthcare, Inc.            1,168,771       1,209,364
Stockholders' equity
  Class A common stock, $.001 par value;
    10,000 shares authorized, 1,798 issued
    and outstanding                                           2               2
  Class B common stock, $.001 par value;
    25,000 shares authorized, 4,044 issued
    and outstanding                                           4               4
Additional paid-in capital                           11,478,536      11,478,536
Accumulated deficit                                 (10,540,765)    (10,625,181)
                                                   ------------    ------------

  Total stockholders' equity                            853,361         937,777
                                                   ------------    ------------

  Total liabilities and stockholders' equity       $ 35,883,226    $ 35,230,791
                                                   ============    ============

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


                                       3
<PAGE>

                   Long Island Physician Holdings Corporation
                      Consolidated Statements of Operations
            Three months and Six months Ended June 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                                  Three months ended                       Six months ended
                                                                       June 30,                                June 30,
                                                           --------------------------------        --------------------------------
                                                               2005                2004                2005                2004
                                                           ------------        ------------        ------------        ------------
                                                                     (unaudited)                              (unaudited)
<S>                                                        <C>                 <C>                 <C>                 <C>
Revenue:
  Premiums earned                                          $ 29,464,966        $ 33,612,580        $ 59,352,947        $ 68,691,443
                                                           ------------        ------------        ------------        ------------
Expenses:
  Medical services expense                                   25,418,827          29,229,768          50,601,171          58,996,924
  Commissions expense                                         1,223,896           1,343,810           2,469,093           2,737,116
  General and administrative expenses                         3,119,366           3,312,692           6,427,324           6,784,391
  Depreciation                                                   27,249              25,870              53,381              51,174
                                                           ------------        ------------        ------------        ------------
  Total expenses                                             29,789,338          33,912,140          59,550,969          68,569,605
                                                           ------------        ------------        ------------        ------------
Operating income (loss)                                        (324,372)           (299,560)           (198,022)            121,838
  Investment and other income                                    28,590             (80,773)             77,463              88,556
                                                           ------------        ------------        ------------        ------------
   Income (loss) before income taxes
     and minority interest                                     (295,782)           (380,273)           (120,559)            210,394
Provision for income taxes                                        1,500              31,500               4,450              64,131
Minority interest in (income) loss
  of subsidiary                                                 114,193             133,577              40,593             (34,431)
                                                           ------------        ------------        ------------        ------------
  Net income (loss)                                            (183,089)           (278,196)            (84,416)            111,832
                                                           ============        ============        ============        ============

  Basic and diluted income per share                       $     (31.34)       $     (47.64)       $     (14.45)       $      19.15
  Basic and diluted weighted average shares                        5842                5842                5842                5842
</TABLE>

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


                                       4
<PAGE>

                   Long Island Physician Holdings Corporation
                      Consolidated Statements of Cash Flows
                     Six months Ended June 30, 2005 and 2004

                                                         Six months ended
                                                             June 30,
                                                       2005            2004
                                                   ------------    ------------
                                                   (unaudited)     (unaudited)
Cash flows from operating activities:

Net income (loss)                                  $    (84,416)   $    111,832
Adjustment to reconcile net income
to net cash provided by
operating activities:
  Depreciation                                           53,381          51,174
  Minority interest in income (loss)
  of subsidiary                                         (40,593)         34,431
Changes in operating assets and liabilities:
  Due from Catholic Health Services of Long Island                    2,382,027
  Payments in excess of capitation                      803,477         795,563
  Reinsurance recoverable                                65,031         337,525
  Premium receivables                                (1,379,579)      2,362,885
  Prepaid expenses and other current assets            (171,467)        745,402
  Medical claims payable                                941,328      (5,409,191)
  Public goods payable                                 (318,149)        220,004
  Unearned premium revenue                              360,292          65,335
  Accounts payable and accrued expenses
  and accrued interest                                 (206,026)       (456,859)
                                                   ------------    ------------
Net cash provided by operating activities                23,279       1,240,128
                                                   ------------    ------------
Cash flows from investing activities:
Increase in restricted cash and investments             (39,167)       (161,483)
Purchase of property and equipment                      (40,092)        (96,974)
                                                   ------------    ------------
Net cash used in investing activities                   (79,259)       (258,457)
                                                   ------------    ------------
Cash flows from financing activities:
Payments on capital lease obligations                        --          (1,479)
                                                   ------------    ------------
Net cash used in financing activities                        --          (1,479)
                                                   ------------    ------------
Net change in cash and cash equivalents                 (55,980)        980,192
                                                   ------------    ------------
Cash beginning of period                              1,334,326       1,575,080
                                                   ------------    ------------
Cash end of period                                 $  1,278,346    $  2,555,272
                                                   ------------    ------------

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


                                       5
<PAGE>

                   Long Island Physician Holdings Corporation
                   Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION

      Background

      Long Island Physician Holdings Corporation (the "Company" or "LIPH") was
formed in December 1994 in the State of New York as a holding company for
purposes aimed at advancing the delivery of healthcare on Long Island, New York
(Nassau and Suffolk counties). The Company is owned 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. The Company owns
67% of the stock of MDNY. The Company is exclusively a holding company whose
principal asset is its investment in MDNY and conducts no operating activities
of its own. Catholic Healthcare Network of Long Island, Inc. ("CHNLI") owns the
remaining 33% of the stock in MDNY. MDNY commenced operations in 1996. LIPH,
MDNY and CHNLI have entered into a Stock Purchase Agreement dated as of December
31, 2004 (the "Stock Purchase Agreement") pursuant to which LIPH has agreed,
among other things, to purchase CHNLI's stock in MDNY. The Stock Purchase
Agreement remains subject to approval from the Attorney General's office. At
June 30, 2005, MDNY had 33,792 members, comprised of individuals and families,
enrolled in its health maintenance plans and point-of-service plans.

      The interim consolidated financial statements reflect all adjustments,
which, in the opinion of management, are necessary for a fair statement of
financial condition and results of operations for the periods presented. Except
as otherwise disclosed, all such adjustments are of a normal recurring nature.
The interim consolidated financial statements have been compiled without audit.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the full year. These interim consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements included in the Company's 2004 Annual Report on Form 10-K.
The Company's legal and other professional costs are funded by MDNY. Year to
date costs as of June 30, 2005 were $101,322. Total costs incurred by MDNY on
behalf of LIPH were $664,030. These amounts are fully reserved for on MDNY's
financials as of June 30, 2005.

      Earnings 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 June 30, 2005 and December 31, 2004, the Company had outstanding stock
options to purchase 1,041 shares of Class B common stock that were not included
in the computation of diluted EPS because the exercise price was greater than
the average market price of common shares.

      New Accounting Standards

In December 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary
Assets" ("SFAS No. 153"), an amendment of Accounting Principles Board ("APB")
Opinion No. 29, which differed from the International Accounting Standards
Board's ("IASB") method of accounting for exchanges of similar productive
assets. SFAS No. 153 replaces the exception from fair value measurement in APB
No. 29, with a general exception from fair value measurement for exchanges of
non-monetary assets that do not have commercial substance. The statement is to
be applied prospectively and is effective for non-monetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. The Company does not
believe that SFAS No. 153 will have a material impact on its results of
operations or cash flows.

      In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47 clarifies that
conditional obligations meet the definition of an asset retirement obligation in
SFAS 143, "Accounting for Asset Retirement Obligations", and therefore should be
recognized if their fair value is reasonably estimable. FIN 47 is effective for
fiscal years ending after December 15, 2005. We do not expect the provisions of
FIN 47 to have a material impact on our consolidated financial statements.

      In May 2005, the FASB issued SFAS No. 154, " Accounting Changes and Error
Corrections" ("SFAS No. 154"), a replacement of APB Opinion No. 20 and FASB
Statement No. 3, which changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS No. 154 applies to all
voluntary changes in accounting principle. It also applies to changes required
by an accounting pronouncement in the unusual instance that the pronouncement
does not include specific transition provisions. Opinion 20 previously required
that most voluntary changes in accounting principle be recognized by including
in net income of the period of the change the cumulative effect of changing to
the new accounting principle. SFAS No. 154 requires retrospective application to
prior periods' financial statements of changes in accounting


                                       6
<PAGE>

principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS No. 154 also requires that
a change in depreciation, amortization, or depletion method for long-lived,
nonfinancial assets be accounted for as a change in accounting estimate effected
by a change in accounting principle. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005.

      In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123 (R)), which
amends FASB Statement Nos. 13 and 95. FAS No. 123 (R) requires all companies
to measure compensation expense for all share-based payments (including employee
stock options) at fair value and recognize the expense over the related service
period. Additionally, excess tax benefits, as defined in FAS No. 123 (R), will
be recognized as an addition to paid-in capital and will be reclassified from
operating cash flows to financing cash flows in the Consolidated Statements of
Cash Flows. FAS No. 123 (R) will be effective for the first quarter of 2006.
All options outstanding at December 31, 2004 expired July 1, 2005 and no
additional options were issued.

Going Concern

      The Company's financial statements have been presented on the basis that
it will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has a substantial working capital deficit, and has incurred cumulative
losses since inception and continues to decline in enrollment. Furthermore as a
result of the New York Women's Health and Wellness Act, MDNY is obligated to
provide contraceptive drugs and devices to its members which is in conflict with
the ethical policies of the Diocese of Rockville Centre (the "Diocese"), to
which CHNLI and CHSLI are subject. Therefore the Company, MDNY and CHNLI
executed the Stock Purchase Agreement so as to allow CHNLI to exit as an MDNY
shareholder. The Diocese allowed its subscriber contract with MDNY to expire on
December 31, 2004 resulting in the loss of approximately 3,800 members. Catholic
Health Services of Long Island,Inc. ("CHSLI"), an affiliate of CHNLI, on behalf
of five catholic hospitals that act as providers to MDNY (the "Hospitals"), will
not renew the respective Hospital subscriber contracts with MDNY upon expiration
thereof on January 1, 2006. MDNY will continue to provide health care insurance
to the employees of the Hospitals through 2005. At June 30, 2005 and December
31, 2004 CHSLI had 6,477 and 7,450 members enrolled in MDNY. Premiums from the
Hospitals account for 20% of total premiums earned by MDNY during 2005. The
expiration of these contracts with the Hospitals on January 1, 2006 and the
resulting loss of business will have a material adverse affect on MDNY's
financial condition.

Potential Obligations with Respect to New York Market Stabilization Pools

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

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

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


                                       7
<PAGE>

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

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

         1999     $2,593,889

         2000     $4,511,036

         2001     $4,913,465

         2002     $5,073,270

         2003     $5,612,751

         2004     $4,807,861

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

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

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

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

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

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

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

      There can be no assurance that NYSID will determine that MDNY does not
have significant payment obligations to the Stabilization Pools with respect to
2005 and subsequent years. Any definitive determination by NYSID that MDNY has


                                       8
<PAGE>

significant payment obligations with respect to the Stabilization Pools for such
years would have a material adverse effect on the business and financial
condition and operations of MDNY and the Company.

      NYSID has not issued a new or revised Regulation 146 with respect to years
subsequent to 2004. Therefore as of June 30, 2005, the Company has not recorded
any impact related to the stabilization pools.

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

Management continues to work on efforts to reduce operating and medical expenses
primarily relating to staffing reductions and renegotiation of provider
contracts. However, without the investment of sufficient additional capital to
enable MDNY to compete effectively, it is uncertain whether MDNY's business and
financial condition will improve.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Results of Operations

Company Overview

      Long Island Physician Holdings Corporation (the "Company" or "LIPH") is a
New York corporation formed in December 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 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. As of December 31, 2004 membership was approximately 40,447.
At June 30, 2005, MDNY had approximately 33,792 members ("Members"), comprised
of individuals and families, enrolled in its health maintenance plans and
point-of-service plans.

      The Company is affiliated with LIPH, LLC (the "LLC"), a New York limited
liability company formed in December 1996. Upon the formation of the LLC, the
shareholders of the Company owned all of the membership interests in the LLC.
The assets of the LLC consist of the stock in three independent practice
associations, Island Practice Association, I.P.A., 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.

      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"), growing enrollment and effectively managing its administrative
costs. During 2005, enrollment continued to decline. This was primarily the
result of the loss of the Diocese membership, totaling 3,800 effective December
31, 2004. As a result of the continued enrollment decline, MDNY continued to
implement programs to reduce administrative costs. For the six months ended June
30, 2005, the Company reported a loss of $84,416. This loss was primarily
attributable to the Company's inability to reduce administrative costs
sufficient enough to meet the decline in enrollment. The administrative loss
ratio (ALR) as of June 30, 2005 was 15.1% compared to 13.9% as of June 30, 2004.
As of June 30, 2005 and 2004 enrollment was 33,792 and 41,788 respectively.

MDNY's negative working capital deficit decreased from approximately $17.2 at
December 31, 2004 to approximately $16.5 and June 30, 2005. This decrease is
primarily the result of the increase in premiums receivables due from the five
Catholic hospitals(CHSLI).

Recent Developments

      As a condition to continued licensure by the New York State Insurance
Department ("NYSID"), MDNY must maintain certain required reserves described
below to protect its subscribers in the event MDNY is unable to meet its
obligations.


                                       9
<PAGE>

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 $5,856,000 and
$5,817,000 of money market funds on deposit in escrow as of June 30, 2005 and
December 31, 2004, respectively. These funds are included in the consolidated
balance sheets as restricted cash and cash equivalents. The Company met the
escrow deposit requirement of $5.1 million at December 31, 2004, calculated as
5% of an approximate $102 million in projected medical expenditures for 2005.

Contingent Reserve Requirement

      In June 2005, the Department of Health adopted revised regulations
regarding the amount HMO's and certain other health care organizations must
maintain as the contingent reserve fund. That amount has increased from 5%
annually to gradually increasing 1% over the next eight years to twelve and one
half percent of the HMO's annual premium income. The new revision is effective
for the calendar year 2006. The contingent reserve requirement shall be deemed
to have been met if the statutory net worth of the Company equals or exceeds the
contingent reserve requirement. The Company for calendar year 2004 reported its
contingent reserve at 5% of net premiums which totaled $6.7 million. As
statutory net assets of MDNY were $4.9 million and $5.4 million at June 30, 2005
and December 31, 2004 respectively, MDNY is deficient in maintaining the
required contingent reserve fund by $1.8 million and $1.3 million as of June 30,
2005 and December 31, 2004 respectively.

      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.

      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 and Religious Directives for Catholic
Health Care Services of the United State Conference of Catholic Bishops, to
which CHNLI, Catholic Health Services of Long Island ("CHSLI"), on behalf of
five Catholic hospitals that act as providers to MDNY (the "Hospitals"), and the
Diocese of Rockville Center (the "Diocese") are subject.

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

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

               Percentage of Sale Proceeds                 Year
               ---------------------------                 ----

               33.3%                                       2005

               25.0%                                       2006

               20.0%                                       2007

               15.0%                                       2008


                                       10
<PAGE>

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

      Upon closing of the purchase of the Class B shares, the Certificate of
Incorporation and By-laws of MDNY and the composition of MDNY's Board of
Directors will be modified to reflect, among other things, that CHNLI is no
longer a shareholder in MDNY and the composition and number of MDNY's Directors
will be changed to include the requisite number of enrollee representatives.
Approval from the Attorney General of the State of New York and the Supreme
Court of the State of New York is still pending to satisfy the conditions for
closing the agreement.

      On October 6, 2004, the Diocese notified MDNY that the Diocese will not
renew its subscriber contract with MDNY upon expiration thereof effective
January 1, 2005 and that the Diocese had chosen another entity to act as its
third party administrator to administer the Diocesan lives on a self insured
basis after January 1, 2005. The Diocese had approximately 3800 members as of
December 31, 2004 and represented approximately 10% of MDNY's premiums for 2004.
..In addition, MDNY also provides health care insurance to the employees of the
Hospitals affiliated with CHSLI. t CHSLI, on behalf of the Hospitals, will not
renew their current subscriber contract with MDNY upon expiration thereof
effective January 1, 2006. CHSLI and the Hospitals have 6477 members as of June
30, 2005 and represent approximately 20% of MDNY's premiums for 2005. The loss
of the CHSLI business will have a material adverse effect on MDNY's business and
financial condition.

      The Company has incurred a loss through June 30, 2005 totaling $84,416.
This loss was primarily attributable to the Company's inability to reduce
administrative costs sufficient enough to meet the decline in enrollment. The
administrative loss ratio (ALR) as of June 30, 2005 was 15.1% compared to 13.9%
as of June 30, 2004. The Company continues to lose enrollment. Enrollment as of
June 30, 2005 was 33,792 down 20% from 40,447 at December 31, 2004. The Company
believes that the decline in enrollment is largely attributable to the fact that
MDNY lacks the resources and capacity to compete with larger, better capitalized
competitors and that MDNY's Article 44 HMO license restricts MDNY from offering
innovative, competitive products. In order to offer competitive products, the
Company believes that MDNY would need to obtain an Article 42 license, which
would require additional capital to meet Article 42 reserve requirements.
Financial advisors and potential investors have informed MDNY that any
investment by a third party in MDNY might require a significant restructuring of
MDNY including CHNLI's prior withdrawal as an MDNY shareholder and might entail
the reduction of LIPH's equity interest in MDNY to a minority position. Without
the investment of sufficient additional capital to enable MDNY to compete
effectively, the Company believes that MDNY's business and financial condition
is unlikely to improve. MDNY has engaged a financial advisor to assist in
effecting an investment in or acquisition of MDNY that would result in the
adequate capitalization of MDNY and the possible reduction of LIPH's equity
interest in MDNY to a minority position. Certain transactions are currently
under consideration but there can be no assurance that the Company and MDNY will
be able to effect any such transaction on terms satisfactory to the Company, if
at all.

      MDNY continues to analyze potential reductions in administrative costs
and, other ways 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. There is no assurance that
such actions will achieve positive results from operations or adequate working
capital and equity.

Recovery and Subordination Agreement

      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


                                       11
<PAGE>

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.

      With NYSID's approval, MDNY, Island IPA and CHSLI, entered into a Recovery
and Subordination Agreement (the "Recovery and Subordination Agreement"), dated
July 12, 2001 and effective January 1, 2002. The Recovery and Subordination
Agreement provides, among other things, as follows: (i) Island IPA is required
to pay the Island Debt pursuant to a Repayment Plan whereby Island IPA is
obligated to withhold, and remit to MDNY, 5% of all payments due to Island IPA
participating providers (the "IPA Withhold"), MDNY will make claims payments to
Island IPA or its participating providers on a fee-for-service basis, MDNY is
required to pay Island IPA a $1.50 per member per month network access fee, and
Island IPA is required to pay to MDNY the net revenue it receives from sources
other than MDNY; (ii) until the Island Debt is repaid, Island IPA, Island IPA's
participating providers and the Hospitals agreed (a), in the event that MDNY
becomes insolvent (pursuant to a court approved order or admits its inability to
pay its debts), to subordinate their rights to payment by MDNY of outstanding
claims (including IBNR) to all other outstanding claims in an amount equal to
the amount of the then outstanding Island Debt, and (b) that, after payment of
third party claims, the claims of Island IPA and its providers will be
subordinated to the claims of the Hospitals; and (iii) the amount of the Island
Debt outstanding from time to time will be carried on the financial statements
of MDNY as an admitted asset. The aggregate amount owed by MDNY to the
subordinating parties in the form of medical claims payable was approximately
$14.8 million and $18.5 million as of June 30, 2005 and December 2004,
respectively.

      MDNY recognized an initial receivable of approximately $23.2 million,
which represented actual claims paid in 2001 to Island IPA participating
providers with dates of service prior to January 1, 2001. As of June 30, 2005
and December 31, 2004, the Island Debt was $17.6 million and $18.4 million
respectively. The $800,000 reduction of the Island Debt since December 31, 2004
is the result of the IPA Withhold paid for the six months ended June 30, 2005.
As of June 30, 2005 and December 31, 2004, no payment by MDNY to Island IPA for
network access fees has been made or will be required to be made to Island IPA.
In addition, Island IPA has not received any income from other sources as of
June 30, 2005 and December 31, 2004 respectively.

      On July 30, 2002, NYSID issued its Report on Examination of The MDNY
Healthcare, Inc. as of June 30, 2000 dated April 2, 2001 and revised July 30,
2002 (the "NYSID 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."

      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 New York State Department of Health ("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. LIPH and CHNLI have
approved amendments to MDNY's certificate of incorporation and bylaws that
reduce the number of MDNY's board of directors from MDNY from 18 to 12. It is
anticipated that in the event LIPH purchases CHNLI's stock in MDNY, the
composition of MDNY's board of directors would be changed to comply with the 20%
enrollee representation requirement.


                                       12
<PAGE>

      The following table provides certain statement of operations data
expressed as a percentage of total revenue and other statistical data for the
six month period ended June 30, 2005 and 2004:

                                                         2005            2004
                                                        -------         -------
Revenues:
Premiums earned                                           100.0%          100.0%

Expenses:
                                                        -------         -------
IPA Medical claims expense                                 85.2            85.9
Commissions expense                                         4.2             4.0
General and administrative expenses                        10.8             9.8
Depreciation                                                 .1              .1
                                                        -------         -------
  Total expenses                                          100.3            99.8
  Operating  income                                         (.3)             .2
Investment and other income                                  .1              .1
Net income before income taxes minority interest            (.2)             .3
                                                        -------         -------
Provision for income tax expense                             --              .1
Minority interest in income of subsidiary                    .1            (0.1)
                                                        -------         -------
Net  income                                                 (.1)%            .1%
                                                        -------         -------
Statistical data:
  Enrollment (HMO and POS)                               33,792          41,788
  HMO enrollment                                         31,494          38,217
  POS enrollment                                          2,298           3,571
  Member months                                         204,829         254,607
  *Medical loss ratio                                      85.2            85.9
  **Administrative loss ratio                              15.1            13.9

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

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

Comparison of three months ended June 30, 2005 and 2004

      Revenues for the three months ended June 30, 2005 were $29,464,966 down
12% from $33,612,580 during the same period in the prior year. Enrollment
totaled 33,792 at June 30, 2005 down 19% from 41,788 at June 30, 2004. Premium
revenues decreased $4,147,614 as a result of the decline in enrollment offset by
premium rate increases in 2005. Premium yields for the second quarter increased
8% to $290.37 on a pmpm (per member per month) basis from $269.03 compared to
the second quarter 2004.

      Total expenses for the quarter ended June 30, 2005 were $29,789,338 down
12% from $33,912,140 for the same period in the prior year. This decrease in
expenses is the result of declines in medical costs associated with the decline
in enrollment. Medical claim expense as a percent of premium revenues was 86.3%
for the second quarter 2005 compared to 87% for the second quarter 2004. Medical
costs stated on a pmpm basis increased to $250.50 for the second quarter 2005
from $233.95 during the same period in the prior year, a 7% increase. This
increase in pmpm medical costs is the result of higher medical costs.

      Commissions as a percent of premium was approximately 4.2% for the second
quarter 2005 compared to 4% for the quarter ended June 30, 2004. The loss of the
Diocese membership effective January 1, 2005 resulted in, a higher proportion of
the premium remaining in the plan to be generated through general agents,
brokers, and associations. The percentage of


                                       13
<PAGE>

premium generated through brokers and general agents was approximately 80% as of
June 30, 2005 compared to 72% at June 30, 2004.

      Total general administrative costs decreased 6% to $3,119,366 for the
quarter ended June 30, 2005 compared to $3,312,692 for the second quarter of
2004. Although total general and administrative costs decreased, general and
administrative costs stated as a percent of premium increased to 10.6% for the
second quarter 2005 compared to 9.9% for the second quarter 2004. This increase
is primarily the result of a continued decline in enrollment.

      Net loss for the second quarter of 2005 totaled $183,089 compared with a
net loss of $278,196 for the second quarter 2004. This loss is the result of
increasing administrative and commission costs as a percent of premium (ALR). As
enrollment continues to decline the ability to reduce administrative and
commission costs has becomes increasingly difficult for the Company.

Comparison of six months ended June 30, 2005 and 2004

      Revenues for the six months ended June 30, 2005 were $59,352,947, down 14%
from $68,691,443 during the same period in the prior year. Enrollment totaled
33,792 at June 30, 2005 down 19% from 41,788 at June 30, 2004. Premium revenues
decreased $9,338,496 as a result of the decline in enrollment offset by premium
rate increases. Premium yields as of June 30, 2005 increased 7.4% to $289.77 on
a pmpm (per member per month) basis from $269.79 compared to the same time
period in 2004.

      Total expenses for the six months ended June 30, 2005 were $59,550,969
down 13% from $68,569,605 for the same period in the prior year. This decrease
in expenses is the result of enrollment declines realized during the first six
months of 2005. The ALR (including commissions) for the six months ended June
30, 2005 and 2004 was 15.08% and 13.9% respectively.

      Medical claim expense as a percent of premium revenues was 85.2% for the
six months ended 2005 compared to 85.9% for the same time period in 2004.
Medical costs stated on a pmpm basis increased to $247.04 as of June 30, 2005
from $231.72 during the same period in the prior year; a 6.6% increase.

      Commissions as a percent of premium remained at approximately 4.2% as of
June 30, 2005 and 4.0% at June 30, 2004 respectively. The loss of the Diocese
membership effective January 1, 2005 resulted in, a higher proportion of the
premium remaining in the plan to be generated through general agents, brokers,
and associations. The percentage of premium generated through brokers and
general agents was approximately 80% as of June 30, 2005 compared to 72% at June
30, 2004.

      Total general and administrative costs for the six months ended decreased
5% to $6,427,324 compared to $6,784,391 for the same time period in 2004.
Although total general and administrative costs decreased, general and
administrative costs stated as a percent of premium increased to 10.8% for the
second quarter 2005 compared to 9.8% for the second quarter 2004. This increase
is primarily the result of a continued decline in enrollment through the second
quarter 2005.

      Net loss for the six months ended 2005 totaled $84,416 compared with a net
income of $111,832 for the six months ended 2004. This loss is the result of
increasing administrative and commission costs as a percent of premium (ALR). As
enrollment continues to decline the ability to reduce administrative and
commission costs has becomes increasingly difficult for the Company.

      Liquidity and Capital Resources

      Cash and cash equivalents as of June 30, 2005 decreased to $1,278,346 from
$1,334,326 at December 31, 2004. The decrease is directly related to the timing
of the receipt of premium payments and the processing of claim payments.

      MDNY had a negative working capital of $16.5 million at June 30, 2005
compared to a negative working capital of $17.2 million at December 31, 2004.
This decrease in negative working capital is related to the increase in premium
for CHSLI.

      There can be no assurance that the 2005 rate increases together with the
other operating initiatives will produce sufficient cash flows to meet MDNY's
obligations.


                                       14
<PAGE>

Capital Reserves and Liquidity

      Certain matters relating to MDNY's regulatory status, its compliance with
applicable reserve and statutory net worth requirements and liquidity are
discussed above under the caption - "Recent Developments."

      The continued 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, MDNY
and the IPAs.

      Meeting the reserve requirements is a condition for continued licensure
and that MDNY's failure to meet the contingent reserve fund requirement could
cause the NYSID or DOH to require more frequent reporting and, if necessary,
require MDNY to develop for approval a corrective action plan to cure the
impairment. However, should NYSID and DOH determine that MDNY is insolvent; they
could issue a Notice of Termination and direct MDNY to perform an orderly
shutdown. The NYSID has not issued any such notice to MDNY.

      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. These loans together with the
accrued interest brought MDNY's June 30, 2005 statutory net worth to $4.9
million compared to the NYSID required net worth of $6.7 million. (Under Section
1307, the principal and interest are treated as equity capital for regulatory
purposes and are repayable out of free and divisible surplus, subject to the
prior approval of NYSID).

Critical Accounting Policies and Estimates

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company to make
estimates and assumptions and select accounting policies that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

      The Company's revenues primarily recognized during the period in which
MDNY is obligated to provide services to subscribers. Premiums collected are in
advance are deferred and recorded as unearned premium revenue in the balance
sheet. Due to the nature of MDNY's business, several of the Company's accounting
policies, primarily relating to costs of claims incurred but not reported and
allowance for doubtful accounts associated with premium and reinsurance
receivables, involve significant estimates and judgments. These accounting
policies have been described in our 2004 Annual Report on Form 10-K.

Factors Affecting Future Results

      Health Insurance Portability and Accountability Act of 1996

      The Secretary of the Department of Health and Human Services, or HHS, has
issued final regulations under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"), designed to improve the efficiency and
effectiveness of the health care system by facilitating the electronic exchange
of information in certain financial and administrative transactions while
protecting the privacy and security of the information exchanged. Three
principal groups of regulations have been issued: privacy regulations, security
regulations, and standards for electronic transactions.

      MDNY implemented the HIPAA privacy regulations by April 2003, as required,
and is evaluating the costs of upgrading its systems and procedures to fully
comply with the security regulations by the compliance deadline of April 20,
2005.

      The HIPAA regulations on electronic transactions, which the Company refers
to as the transaction standards, establish uniform standards for electronic
transactions and code sets, including the electronic transactions and code sets
used for claims, remittance advices, enrollment and eligibility. The transaction
standards became effective in October 2002, although covered entities were
eligible to obtain a one-year extension if approved through an application to
the Secretary of HHS. MDNY received this one-year extension through October 16,
2003 from HHS.

      HHS issued Guidance on July 24, 2003 that it will not penalize a covered
entity for post-implementation date transactions that are not fully compliant
with the transactions standards, if the covered entity can demonstrate its good
faith efforts to comply with the standards. HHS' stated purpose for this
flexible enforcement position was to "permit health plans to mitigate unintended
adverse effects on covered entities' cash flow and business operations during
the transition to the standards, as well as on the availability and quality of
patient care."

      There is a divergence of interpretation as to how the new transaction
standards are to be implemented and as a result, MDNY could face increased costs
and complexity, and a temporary disruption in MDNY's business processes. MDNY is


                                       15
<PAGE>

continuing to make good faith efforts to comply with the standards. At this
time, the Company cannot estimate the potential impact of implementing (or
failing to implement) the HIPAA transaction standards on cash flows and results
of operations.

      Impact of New Accounting Standards

      In December 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary
Assets" ("SFAS No. 153"), an amendment of Accounting Principles Board ("APB")
Opinion No. 29. In March 2005, the FASB issued Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations" ("FIN 47"). In May
2005, the FASB issued SFAS No. 154, " Accounting Changes and Error Corrections"
("SFAS No. 154"), a replacement of APB Opinion No. 20 and FASB Statement No. 3.
The impact of the above referenced accounting standards is discussed in Note 1
to the interim consolidated financial statements.

      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 affect MDNY's future
earnings.

      Certain Factors Affecting Future Operating Results

      Certain statements in this Report on Form 10-Q 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 continued
inability of MDNY to meet applicable reserve and statutory net worth
requirements; that the Hospitals affiliated with CHSLI will not renew their
subscriber contract with MDNY effective January 1, 2006, in light of MDNY's
obligation to comply with the New York Women's Health and Wellness Act, in light
of such conflict; increased regulation or modification of existing regulations
which will increase health care expenses or require additional or increased
levels of statutory reserve requirements; increased competition in MDNY's
markets or a change in product mix will reduce premium revenue; MDNY will
continue to lose members; the Company and MDNY will not be successful in
obtaining additional capital necessary for MDNY to compete effectively; 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.

      See also the matters referred to throughout Item 1 of the Company's Annual
Report on Form 10K for the fiscal year ended December 31, 2004.

Item 3. Quantitative and Qualitative Disclosures 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 June 30,
2005, MDNY's only borrowings were under two promissory notes from LIPH, LLC and
CHNLI, in the original aggregate principal amount of $2.4 million, which accrue
interest at the prime rate. At June 30, 2005, total principal and interest due
LIPH, LLC and CHNLI was approximately $1.4 million and $2.1 million,
respectively. A 100 basis point increase in interest rates, applied to MDNY's
borrowings at June 30, 2005, would result in an increase in annual interest
expense and a corresponding reduction in cash flow (were such interest to be
paid) of approximately $24,000. The Company believes that MDNY's exposure to
market risk relating to interest rate risk is not material.

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


                                       16
<PAGE>

Item 4. Controls and Procedures

      Based upon an evaluation under the supervision and with the participation
of the Company's President and Chairman of the Board and its Chief Financial
Officer of the effectiveness of the design and operation of the Company's
disclosure controls and procedures, as of the end of the period covered by this
report, they have concluded that the Company's disclosure controls and
procedures, as defined under rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended, are effective for gathering, analyzing and
disclosing information in the Company is required to disclose in its periodic
reports filed under such Act.

      In light of the continued uncertainty between January 2005 and July 13,
2005 regarding MDNY's potential obligations to the Stabilization Pools and the
related regulatory and financial statement disclosure implications, LIPH was
unable to complete its Annual Report on Form 10-K for the year ended December
31, 2004 prior to the scheduled filing date. This uncertainty together with the
termination of the Company's auditor in November 2005 resulted in the Company
being unable to complete its Reports on From 10-Q for the quarters ended, March
31, June 30 and September 30 prior to the scheduled filing dates. There has been
no significant change in the Company's internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company's internal controls over financial reporting.


                                       17
<PAGE>

PART II - OTHER INFORMATION

Item 6.   (a) Exhibits. The following exhibits to this report are being filed
          with this report.

          31.1    Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification

          31.2    Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification

          32.1    Chief Executive Officer Section 1350 Certification

          32.2    Chief Financial Officer Section 1350 Certification


                                       18
<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: _______________________


                                       19