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

                                    FORM 10-K


 (Mark  One)

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

                  For the fiscal year ended: December 31, 2004

                                       OR

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

              For the transition period from: _______ to ________.

                          COMMISSION FILE NO. 1-12451

                           NEW YORK HEALTH CARE, INC.
             (Exact name of registrant as specified in its charter)

                New York                            11-2636089
     (State or other jurisdiction of             (I.R.S. Employer
     incorporation or organization)             Identification No.)

1850 McDonald Avenue, Brooklyn, New  York             11223
 (Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code: (718) 375-6700

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

                                              Name of exchange on
     Title of each class                        which registered
     -------------------                      -------------------

                                           Common Stock $.01 par value
Securities registered pursuant
 To section 12(g) of the Act

<PAGE>
     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  (the  "Exchange  Act") during the preceding 12 months (or for such shorter
period  that the registrant was required to file such reports), and (2) has been
subject  to  such  filing  requirements  for  the past 90 days. Yes  X  No
                                                                    ---   ---

     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.  [X]

     Indicate  by  check mark whether the registrant is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).  YES  [ ]   NO  [X]

     The  aggregate  market  value  of  the  registrant's  common  stock held by
non-affiliates  computed by reference to the price at which the common stock was
last  sold,  or the average bid and asked price of such common stock, as of June
30,  2004,  the  last  business  day of the registrant's most recently completed
second  fiscal  quarter  was  approximately  $52,175,000.


     The number of shares outstanding of the registrant's common stock, as of
March 28, 2005: 32,839,138.


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                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


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                           FORWARD-LOOKING STATEMENTS

Certain  information  contained in this report is forward-looking in nature. All
statements  in  this  report, including those made by New York Health Care, Inc.
and  its  subsidiaries ("we", "our", or the "Company"), other than statements of
historical  fact,  are  forward-looking statements.  Examples of forward-looking
statements  include  statements  regarding  the  Company's  future  financial
condition,  operating  results,  business  and  regulatory strategies, projected
costs,  services,  research and development, competitive positions and plans and
objectives  of  management  for  future  operations.  These  forward-looking
statements  are  based on management's estimates, projections and assumptions as
of  the  date  hereof and include the assumptions that underlie such statements.
Forward-looking  statements  may  contain words such as "may," "will," "should,"
"would,"  "expect,"  "plan,"  "anticipate,"  "believe,"  "estimate,"  "predict,"
"potential,"  "continue,"  or  the  negative  of these terms or other comparable
terminology.  Any  expectations  based  on  these forward-looking statements are
subject  to risks and uncertainties and other important factors, including those
discussed  below  and  in  the  following section entitled Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -"Risks
and Uncertainties." Other risks and uncertainties are disclosed in the Company's
prior  SEC  filings.  These  and  many  other factors could affect the Company's
future  financial  operating  results,  and could cause actual results to differ
materially  from  expectations  based on forward-looking statements made in this
report  or  elsewhere  by  the  Company or on its behalf. The Company assumes no
obligation  to  update  such  statements.

The  following  information  should be read in conjunction with the Consolidated
Financial  Statements  and  notes  thereto  included  in this Annual Report. All
references  to  fiscal  year  apply  to  the Company's fiscal year which ends on
December  31,  2004.

RECENT  DEVELOPMENTS:

In  January  2004, the staff of Listing Investigations, a division of the Nasdaq
Stock  Market,  Inc.,  ("Nasdaq"),  notified  the  Company, after requesting and
obtaining  information  and  documents  from the Company, that it had determined
that  the  Company  no longer qualified for listing on the Nasdaq SmallCap Stock
Market  primarily based on public interest concerns and the Company's failure to
timely  hold  its  2002 annual stockholders' meeting in compliance with the NASD
marketplace  rules  for  securities  quoted  on  the  Nasdaq SmallCap Market. In
response, the Company requested a hearing before a Nasdaq Listing Qualifications
Panel  to review the staff's determination. The hearing was held and on April 5,
2004,  the  Company  announced  that the Panel had determined that the Company's
common stock was delisted from Nasdaq, effective with the opening of business on
April  6,  2004.  The  Panel  addressed concerns regarding events related to the
November  2003 indictment of the then President of the Company's subsidiary, the
BioBalance  Corporation  ("BioBalance"),  who was also a director of the Company
and  a  then  consultant to BioBalance, and the Company's failure to timely hold
its  2002 Annual Stockholder's meeting. Subsequently, the Company's common stock
began  trading  on  the  Over-the-Counter  Market  on  the  Pink  Sheets.

On  July  15,  2004,  the Company executed a definitive agreement (the "Purchase
Agreement")  for  the  sale of the assets of its home healthcare business to New
York  Health  Care,  LLC (the "LLC") a company controlled by Messrs. Jerry Braun
("Braun")  and Jacob Rosenberg ("Rosenberg"), who at the time were the Company's
chief  executive  officer  and  chief  operating  officer,  for consideration of


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$2.7  million  in cash, the assumption of all of the liabilities and obligations
with  respect  to  the  home  healthcare business and the forgiveness of certain
future  obligations  that may be due to these individuals pursuant to employment
agreements  each  of  them  has  with  the  Company. The sale was subject to the
satisfaction  of  a  number  of  conditions  including obtaining shareholder and
regulatory approvals. As noted below, certain of the assets that were to be sold
pursuant  to  the Purchase Agreement were sold by the Company to an unaffiliated
entity.  The Company will consider its home health care division as discontinued
operations  if  the  proposed  sale  of  the entire home health care business is
consummated.  We  cannot  assure you that the conditions to the sale of the home
healthcare  business  will  be  satisfied.

On  February  24,  2005,  the  Company  consummated  a  private  offering  (the
"Offering")  which resulted in its issuing an aggregate of 7,899,362 shares (the
"Shares")  of the Company's common stock, par value $0.01 per share (the "Common
Stock"),  and  warrants  to  purchase  3,949,681  shares  of  Common  Stock (the
"Warrants")  to persons who qualify as "accredited investors" within the meaning
of  rule  501  of Regulation D promulgated under the Securities Act of 1933 (the
"Act"). The aggregate purchase price for the Shares and Warrants was $4,897,600.
Each  Warrant is exercisable to purchase one share of the Company's Common Stock
at  an  exercise price of $0.78 per share during the five-year period commencing
on  February  24,  2005.  The  Shares and Warrants were issued to the purchasers
without  registration  under  the  Act,  in  reliance  upon  the exemptions from
registration provided under Section 4(2) of the Act and Regulation D promulgated
thereunder.  In  connection  with the Offering, the Company paid Placement Agent
commissions  of $470,260 and an additional $146,616 to cover non-accountable and
certain  other  expenses of the Placement Agent. In addition, the Company issued
to  the  Placement  Agent  and  its  designees five-year warrants to purchase an
aggregate  of 1,777,356 shares of the Company's Common Stock at $0.62 per share.

The  net  proceeds  from  the  Offering  are  being used to support BioBalance's
operations  including  research  and  development,  clinical  trials and working
capital.  In  addition,  a  $1.7 million loan from the Company to BioBalance was
repaid  from  the  proceeds  of  the  Offering.

In  connection  with  the consummation of the Offering, Braun and Rosenberg , at
the  request  of  the  Placement  Agent  resigned  irrevocably  as directors and
executive  officers  of  the  Company.  In connection with Braun and Rosenberg's
agreement  with  the  Placement Agent, in order to secure the obligations of the
Company  and  its subsidiary, NYHC Newco Paxxon, Inc. to (i) consummate the sale
of all the assets relating to the Company's home healthcare business (the "Asset
Sale")  to  the  LLC, pursuant to the terms of the Purchase Agreement or (ii) to
comply  with  any  future payment obligations the Company to Braun and Rosenberg
under  their  respective  employment  agreements  with  the Company, the Company
entered  into  an  agreement  (the  "Security Agreement"), on February 24, 2005,
which  granted  Messrs. Braun and Rosenberg a security interest in the assets of
the Company's home healthcare business being conducted in the states of New York
and  New  Jersey  and  provided for the deposit of up to $3.55 million in a cash
collateral  account  (collectively,  the  "Collateral").  None  of the assets of
BioBalance  will  be  used  as  Collateral.

The  Security  Agreement  provides that Messrs. Braun and Rosenberg will receive
all  or  a  portion  of the Collateral (and any additional amounts that they are
entitled  to  under  their  employment


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<PAGE>
agreements and the Security Agreement) if prior to the consummation of the Asset
Sale:  (i)  the  Company  breaches  the Purchase Agreement and the breach is not
cured  within  any applicable cure period or waived by Braun and Rosenberg, (ii)
there  are  changes  in  the composition of a majority of the Company's Board of
directors  (other  than  the  resignations  of  Messrs. Braun and Rosenberg or a
reduction  in  the  number  of Board members resulting from death, disability or
resignation  of  a member or the additions of directors that have been expressly
approved in writing by Braun and Rosenberg), (iii) an event occurs that would be
considered  "good reason" for the resignation of Braun and Rosenberg under their
employment  agreements  with  the  Company  or  would be considered a "change of
control"  under  those  employment  agreements,  or (iv) the Asset Sale has been
terminated or abandoned for any reason prior to December 31, 2005 (other than as
a  result  of  a breach of the Purchase Agreement by, or a failure to act by the
LLC  or  Braun  or  Rosenberg).

At  the  close  of  business  on  February 24, 2005: (i) Mr. Braun resigned as a
director and as the Company's Chief Executive Officer and President and (ii) Mr.
Rosenberg  resigned  as  a  director  and as the Company's Vice President, Chief
Operating  Officer,  Chief  Financial  Officer,  Chief  Accounting  Officer  and
Secretary. Mr. Braun continues to be employed by the Company as the President of
its  home  healthcare division and Mr. Rosenberg continues to be employed by the
Company  as  the Vice President of the Company's home healthcare division. Other
than  their  ceasing to be officers of the Company, and the resulting changes in
their  duties  and responsibilities, their respective employment agreements with
the  Company  remain  in  effect.  In addition, Messrs. Braun and Rosenberg have
board  observer  rights  with  respect to the Company's board of directors until
such  time  as  the  Asset  Sale  is consummated. Pursuant to the terms of their
respective  employment  agreements,  as  a result of their resignations from the
Company's  Board of Directors, on February 24, 2005, each of Braun and Rosenberg
received  ten  year  stock options ("Options") to purchase 500,000 shares of the
Company's  common stock at an exercise price of $0.85 per share, pursuant to the
Company's  Performance  Incentive  Plan.

As  of  the  close of business on February 24, 2005, Mr. Dennis O'Donnell became
the Company's Chief Executive Officer and Secretary. Mr. O'Donnell also retained
his  position as the Chief Executive Officer and a director of BioBalance and as
a  director  of  the  Company.  His  annual  salary  was increased by $25,000 to
$225,000.

On  March  23,  2005,  the  security  interest  that was granted pursuant to the
Security  Agreement  was  terminated and Messrs. Braun and Rosenberg agreed that
the Company could enter into an agreement with a third party for the sale of the
New Jersey portion of the Company's home health care  operations under specified
conditions  without  being  in  breach  of  the  Purchase  Agreement.

On April 11, 2005, the Company entered into an  agreement to sell the New Jersey
portion  of  the  Company's  home  health care operations (the "NJ Business") to
Accredited  Health Services, Inc. ("Accredited Health") a subsidiary of National
Home  Health  Care  Corp. ("National") for $3.0 million.  In addition to Messrs.
Braun  and  Rosenberg,  the LLC also consented to the sale of the NJ Business to
Accredited  and  agreed  that  such  sale  would  not  result in a breach of the
Purchase  Agreement.

Pursuant  to the terms of the definitive agreement funding of the purchase price
was  received by the Company upon execution of the agreement, with the exception
of  $150,000  (the  "Escrow  Funds"), which was placed in escrow to cover actual
losses,  if  any,  incurred  by  Accredited for which the Company is required to
indemnify  Accredited  pursuant  to  the  definitive  agreement. If no claims by
Accredited for indemnification by the company are made, the Escrow Funds will be
released  to  the  Company  90  days after the formal closing of the transaction
which  will  occur  within  45  days of the signing of the definitive agreement,
subject  only  to  an  orderly  transition  of  the  business.


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<PAGE>
                                     PART I

ITEM 1.   BUSINESS

OVERVIEW

     We  are  engaged  in two industry segments, the delivery of home healthcare
services  (sometimes  referred  to as the "home healthcare business") and, since
our  acquisition  of BioBalance in a merger transaction in January 2003 (treated
for  accounting  purposes  as  a  reverse  acquisition of us by BioBalance), the
development  and  planned  manufacturing  and  marketing  of  proprietary
biotherapeutic  agents  for  the treatment of gastrointestinal ("GI") disorders.
BioBalance  is  our wholly-owned subsidiary. For accounting purposes, BioBalance
is  considered  to  be  the  "accounting  acquirer"  in  the  transaction.

     For  more  information  as  to the financial performance of our home health
care  and  BioBalance  business  segments,  see  Part  II, Item 7, "Management's
Discussion  and  Analysis  of Financial Condition and Results of Operations" and
Note 14 of Notes to Consolidated Financial Statements included elsewhere in this
report.

     The  Company is a New York corporation incorporated in 1983.  Our principal
executive  office  is located at 1850 McDonald Avenue, Brooklyn, New York 11223,
telephone  718-375-6700.

HISTORY, DEVELOPMENT AND OVERVIEW OF THE COMPANY

     The  Company  was initially organized to act as a licensed home health care
agency  engaged  primarily  in  supplying  the services of paraprofessionals who
provide  a  broad  range  of  health  care support services to patients in their
homes.

     Our home healthcare business operates in all five boroughs of New York City
and  the  counties  of  Nassau, Westchester, Rockland, Orange, Dutchess, Ulster,
Putnam and Sullivan, in the State of New York. Our home healthcare business also
operates  in Jersey City, Edison, Whiting, Toms River, East Orange and Paterson,
New  Jersey  under  the  name  Helping  Hands  Healthcare.  Our  home healthcare
services  are  supplied  principally  pursuant  to  contracts  with  healthcare
institutions  and  governmental  agencies, such as various county departments of
social  services,  the  New York City Human Resources Administration, New Jersey
Medicaid and Beth Abraham Long-Term Home Health Services and Kingsbridge Medical
Center.  We  will  cease  our  home  health  care  operations in New Jersey upon
consummation  of  our  sale  of  the  NJ Business to Accredited Health, which is
scheduled  to  occur  on  or  before  May  28,  2005.

     Our  primary  objective,  in  our  health  care business, is to enhance our
position  in the home health care market by increasing the promotion of our full
service  and  specialty  health  care  capabilities


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to  existing  and  new  referral  sources;  as  well  as maintaining our regular
training and testing programs, and recruitment activities. See "Home Health Care
Business"

     BioBalance  is  a  development  stage  specialty  pharmaceutical  company
incorporated  in  Delaware in May 2001. BioBalance is focused on the development
of  patented  biotherapeutic  agents  for  gastrointestinal  (GI) disorders with
significant  unmet  needs.  BioBalance  has  pioneered  the development of these
agents  based  on  what  BioBalance  believes  to  be  outstanding science and a
pharmaceutical  development  approach  (e.g.  randomized,  double  blind,
placebo-controlled clinical trials in FDA-approved centers). BioBalance has not,
to date, generated any revenues, other than income from short-term investment of
such  proceeds.

     We  believe  that products developed from BioBalance's core technology will
restore  the microbial balance in the GI tract by displacing pathogenic bacteria
and  preventing  their  re-colonization.  For  example,  recent clinical studies
independently  conducted  by Dr. Mark Pimentel at Cedars-Sinai Medical Center in
California  have linked the overgrowth of pathogenic bacteria to Irritable Bowel
Syndrome  (IBS)  symptoms.  The  Company believes that these studies support the
rationale for the Company's potential products to address a potential root cause
of  GI disease, while also providing symptom relief. As such, it could represent
a  major  shift  in  the  treatment  of  many  GI  disorders.

CORPORATE STRATEGY

     We  intend  to  actively  pursue  BioBalance's business plan of developing,
manufacturing and marketing its initial product PROBACTRIX(R) and other products
in its pipeline for treating gastrointestinal disorders while divesting our home
health  care  business.  In  furtherance of these goals, as noted above, in July
2004,  the Company executed the Purchase Agreement for the sale of the assets of
its  home  health  care business to the LLC for consideration of $2.7 million in
cash,  the  assumption of all of the liabilities and obligations with respect to
the  home health care business and the forgiveness of certain future obligations
that may be due to Braun and Rosenberg pursuant to employment agreements each of
them  has with the Company. The proposed sale was subject to the satisfaction of
a number of conditions including obtaining shareholder and regulatory approvals.
Since the execution of the Purchase Agreement National made an unsolicited offer
to  the  Company for the NJ Business which resulted in the Company entering into
an  agreement on April 11, 2005 to sell the NJ Business to Accredited Health for
$3  million  with a formal closing of this sale to occur within 45 days. Messrs.
Braun  and  Rosenberg  and  the  LLC consented to the sale of the NJ Business to
Accredited  Health. The Company has commenced negotiations with Messrs.Braun and
Rosenberg  to  sell  them  the remaining assets of the home health care business
which  were  used  in connection with the operations of that business in various
locations  in  the  State  of  New York (the "New York Assets"). There can be no
assurance  that an agreement to sell the remaining portion of the Company's home
health  care business to Messrs. Braun and Rosenberg will be entered into or, if
it  is,  that  any transaction called for by such agreement will be consummated.
Any  sale  of  the  New  York  Assets  to the LLC, Messrs. Braun or Rosenberg or
otherwise  will  be  subject  to  the  receipt of any applicable shareholder and
regulatory  approvals  for  the  sale  of  the New York Assets. Therefore, while
BioBalance  does  not  expect  to  have  access  to  the  financial or operating
resources  of  the  Company's  home  health  care  business,  it  has received a
substantial  portion of the funds from the sale of the NJ Business to Accredited
and  currently expects to seek additional funding in the future from the sale of
equity,  debt  or  convertible  securities  of  the  Company.


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BIOBALANCE BUSINESS

OVERVIEW

     Our  BioBalance  subsidiary  is  a development-stage company focused on the
development  of  novel  treatments  for various GI disorders that we believe are
poorly addressed by current therapies.  These include pouchitis, irritable bowel
syndrome  ("IBS"),  Crohn's  disease, ulcerative colitis, and diarrhea caused by
antibiotics,  chemotherapy  and  travel.  We  believe that our initial potential
product,  PROBACTRIX,  a probiotic (a bacterial culture that supports a good and
healthy  balance  of  microorganisms)  can reduce symptoms of pouchitis, IBS and
other  GI  disorders.  We  have  developed patented biotherapeutic agents for GI
disorders based on outstanding science and a pharmaceutical development approach
(e.g.  randomized,  double  blind,  placebo-controlled  clinical  trials).

     Our current efforts consist of developing clinically validated products for
GI  diseases  and  conditions where current therapies are inadequate or may have
significant  side  effects.  Unlike conventional treatments, we believe that our
core  technology  restores  the  microbial balance in the GI tract by displacing
pathogenic  bacteria  and  preventing  their  re-establishment.  Clinical trials
conducted  independently  at  the Cedars-Sinai Medical Center in California have
linked  the  overgrowth  of  pathogenic bacteria to IBS symptoms.  Therefore, we
believe  that  our  products  may  address  an  underlying root cause of many GI
disorders  in  addition  to  providing  symptom relief with no demonstrated side
effects.

     Our  initial  potential  product is PROBACTRIX, a proprietary, live, single
strain  (M17)  of  E.coli  bacteria, which we plan to develop as a treatment for
pouchitis, IBS and a variety of other GI disorders.  Prior clinical studies have
confirmed  that  this  product  can  reduce  the  symptoms  of  IBS and other GI
disorders  and,  therefore,  is  able to improve the quality of life of patients
using  the  product  to  treat  these  disorders.

We  are pursuing an accelerated regulatory approval for the use of PROBACTRIX in
the  U.S.  and  Europe by filing an Investigational New Drug ("IND") application
with  the  U.S.  Food  and  Drug  Administration  ("FDA")  and  with  comparable
regulatory  agencies  in  Europe  and  seeking "orphan drug" designation for the
prevention  and/or  treatment  of  pouchitis.  Pouchitis  is  a  non-specific
inflammation  of  the ileal reservoir, which can be a long-term problem for some
patients.  This  usually  occurs  during  the  first  two  years  after  bowel
reconstruction  due  to  ulcerative colitis. Most pouchitis sufferers experience
symptoms  including  steadily increasing stool frequency that may be accompanied
by  incontinence,  bleeding,  fever and/or a feeling of urgency. We believe that
current  treatments  (including  antibiotics) are often ineffective in relieving
symptoms. "Orphan drug" refers to a product that treats a rare disease affecting
fewer  than a specified number of persons (200,000 in the U.S.). Current federal
laws  require  that  a  drug be the subject of an approved marketing application
before it is transported or distributed across state lines. Because a sponsor of
a  drug  will  probably  want  to  ship  the  investigational  drug  to clinical
investigations  in  many  states,  it  must  seek  an  exemption from that legal
requirement.  The IND is the means through which the sponsor technically obtains
this  exemption  from FDA. FDA approval of an IND permits the sponsor to conduct
clinical trials in the humans. We submitted the IND to the FDA at year-end 2004.
On  February  2,  2005, we were notified by the FDA that the IND was on clinical
hold  and  that comments would be sent to us within 30 days. Comments on the IND
were  received  on  March  4,  2005. BioBalance has reviewed the comments and is
currently  working  to resolve all of the issues raised by the FDA. We expect to
have  a  response prepared and sent back to the FDA during the second quarter of
2005.  Although  we  believe  that  we  can adequately address all of the issues
raised  by the FDA, we can give no assurance that the FDA will agree with all of
our  responses  to  the  issues  raised or give us clearance to proceed with the
clinical  trials.


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     Our  core  intellectual property, including rights to two patented Bacillus
strains,  B.  subtilis  and  B. licheniformis, is protected by patents that have
been  filed  in  the US and certain foreign countries.  The patented formulation
used  for  PROBACTRIXconsists  of a proprietary strain of non-pathogenic E.coli,
derived  from  an  organism  that  was  originally  isolated from the intestinal
mircoflora  of  a healthy volunteer in a liquid formulation.  The technology and
the  processes comprise conditions that preserve M-17 E.coli in the biologically
active  form.  Patents  have  been filed by BioBalance for technology that could
extend  the  product's  shelf  life for two years or longer at room temperature.
In  addition,  we  received  approval  of  the  registration  of PROBACTRIX as a
registered  trademark  in  the  U.S.  on  March  1,  2005.

     We have sub-contracted with a third-party for the manufacture of sufficient
quantities  of  PROBACTRIX  in the U.S. to satisfy our clinical trial needs.  We
have  successfully  transferred  the  manufacturing  process  of PROBACTRIX from
Israel  to the University of Minnesota Biotech Center and, after confirming that
several  batches  met  specifications,  again  have transferred the process to a
commercial  pilot-scale production facility in Minnesota.  We are working with a
third-party  manufacturer  (Benchmark  Biolabs  Inc.)  to transfer production of
PROBACTRIX  to  their  facility  in  Lincoln,  Nebraska  for  manufacturing  of
PROBACTRIX  for  the  FDA-sanctioned  clinical  trials.

REGULATORY  STRATEGY

     Our  regulatory  strategy  involves  pursuing  an  accelerated approval for
PROBACTRIX  in  the  U.S.  and  Europe  by filing an IND application and seeking
orphan drug designation for the prevention and/or treatment of pouchitis.  There
are currently no approved treatments for pouchitis.  Additional clinical studies
can  subsequently be conducted to determine whether there is support for broader
usage.

     BioBalance  originally  planned  to  pursue  marketing  of  PROBACTRIX as a
medical  food for IBS, given limited resources and the significant time required
for  prescription  drug  development.  Industry  studies  indicate that it takes
approximately  7-13 years for the average prescription drug to progress from the
IND  filing  to  market  introduction.  However,  following  discussions  with
regulatory consultants and potential pharmaceutical licensees, it was determined
that  a  shorter pathway to drug development through filing an IND for an orphan
drug indication would be the most economically attractive course.  This involved
addressing  pouchitis,  a  narrowly  focused  indication  with unmet therapeutic
needs,  rather  than  IBS.  Pouchitis also offered the potential for orphan drug
designation  and  expedited  FDA  approval.  We  believe,  although  there is no
assurance,  that  we  can  achieve FDA approval for PROBACTRIX as a prescription
drug  to  treat  pouchitis  in  approximately  48  months  after  IND  approval.

     We  plan to conduct double blind, placebo controlled studies if we obtain a
FDA  endorsement  of  the  clinical development plan via an approved IND for the
pouchitis  indication.  The  first step would involve a safety/efficacy study in
the  target  population.  This  study  would  likely  be  followed  with  a


                                        9
<PAGE>
pivotal  Phase III trial in approximately 75-100 pouchitis patients. The product
could  be  approved for marketing in the U.S. by 2009 or earlier with fast track
designation  although  no  assurance  can  be  given  as  to  any approval date.

     Despite  the  longer  time-to-market, we believe that the prescription drug
route  is  vastly  more attractive than the medical food route for the following
reasons:

     -    prescription  drugs  are  priced  significantly  higher  than
          non-prescription  products;

     -    gross  margins  are typically 90% on prescription drugs versus 60%-70%
          for  non-prescription  products;

     -    prescription  drugs  are reimbursable by health insurance plans, while
          non-prescription  products  such  as  medical  foods  are  generally
          non-reimbursable;  and

     -    there  is a greater likelihood of establishing a marketing partnership
          or  licensing  agreement  with  a  major  pharmaceutical  company  if
          PROBACTRIX  were marketed as a prescription drug rather than a medical
          food.

     A  prescription  drug  can  be  assigned  orphan drug status by the FDA and
European  regulatory authorities if the indication addresses a target population
of  less  than 200,000 sufferers in the U.S. or less than 5 sufferers per 10,000
persons in Europe. There is a separate Office of Orphan Drug Product Development
at  the  FDA  designed  to  help  facilitate  rapid  approval  of  orphan  drug
applications.  Once  approved,  orphan drugs are given seven year exclusivity in
the  U.S.  and  ten  years  of  exclusivity  in  Europe.  Additional benefits of
receiving  orphan drug status in the U.S. include study design assistance, a 50%
reduction in the filing cost of the NDA/BLA and may also include partial funding
of  clinical  costs  by  the  FDA. The NDA/BLA is the vehicle through which drug
sponsors formally propose that the FDA approve a new pharmaceutical for sale and
marketing  in the U.S. The NDA/BLA requests permission from FDA to market a drug
in  the  U.S.  In  Europe,  a  drug product is filed with the European Medicines
Agency  (EMEA)  for  marketing throughout the European Commission area. The EMEA
has  a  Committee  for  Orphan  Medicinal  Products  (COMP)  whereby  drugs  are
designated  "orphan  drug"  status  for  the  European  Union.

     Longer term, we are currently considering expanding the label indication of
PROBACTRIX  to  include  a  number  of  additional GI indications, including the
prevention or treatment of antibiotic-associated diarrhea (AAD).  Recent medical
research indicates that antibiotics significantly alter intestinal microflora, a
key  factor  in  causing  diarrhea,  for up to three months following treatment,
however,  we  currently  have  not  yet formulated any plans with respect to the
expansion  of  the  label  indications  of  PROBACTRIX.  We  plan  to  explore
regulatory approval for a veterinary formulation of PROBACTRIX as an animal feed
additive  to  replace  antibiotics.  The issue of using antibiotics as an animal
feed  additive  has  generated significant attention as governments and consumer
groups  have  called  for the reduction or elimination of unnecessary antibiotic
use  in  farm  animals.  McDonalds,  the  world's  largest  purchaser  of animal
products,  announced  that  its  suppliers  must  phase out inappropriate use of
antibiotics  on  farm animals by the end of 2004.  It is known that repeated use
of  antibiotics can cause farm animals to become weak and retarded.  We believe,
although  there  is no assurance, that PROBACTRIX has a particularly high safety
and efficacy profile in many different kinds of animals.  We can not assure that
we  will  ever  market  Probactrix  as  an  animal  feed.


                                       10
<PAGE>
PRODUCTS

     PROBACTRIX

     Our  initial  product,  PROBACTRIX, is a non-pathogenic probiotic, which we
believe addresses the root cause of many GI disorders, including pouchitis, IBS,
IBD and diarrhea, by inhibiting the growth of pathogenic bacteria and preventing
their  re-colonization.  Clinical studies in over 14,000 patients have confirmed
that  this  product  can  reduce  the  symptoms  of  various  GI  disorders.

     This  product  was  approved  as  a biological agent for the treatment of a
broad  range  of  GI  disorders  and  diarrheas in Russia in May 1998, as a food
supplement for human use by the Ministry of Health of Israel in May 1998 and for
use  as  animal food by the Ministry of Agriculture of Israel in September 1998.
In  August 2000, Tetra-Pharm, an Israeli pharmaceutical company, agreed to cease
manufacture  and  sale  of the product in conjunction with its agreement to sell
all  rights relating to the product to BioBalance. Since then, production of the
formula  has  been  limited  to  supplying  hospitals  and  universities  where
BioBalance  is  conducting  further  research.

     The  basic  active  component  in  PROBACTRIX  is  a  selective  strain  of
non-pathogenic  E.coli bacteria, which is contained in a pleasant tasting liquid
suspension.  This  bacterium  is  a  commonly represented species in the healthy
microflora  of  humans  and  animals.  It  has  been used for the preparation of
Colibacterin,  Bificon and other medicines and food supplements outside the U.S.

     The  research on PROBACTRIX originated in Russia from studies by Dr. Nellie
Kelner-Padalka,  a  pediatrician and our scientific founder. These studies found
liquid  food  supplements  containing  E.coli  M-17  to be effective in treating
intestinal  infections of various origins. However, shelf life was short and the
product  had  a  strong odor that made it difficult for some patients to ingest.
Dr.  Kelner-Padalka  later  brought  her  studies  to  Israel  where  several
technologies were used to expand the shelf life and improve the smell and taste.

     As  part  of  the  regulatory approval process of E. coli M-17 in Russia, a
scientific  panel  determined  the  product's  mechanism  of action included the
following:

     -    Rapid  suppression  of  pathogenic microorganisms and their repulsion.

     -    Restoration  of  the  normalization of the body's immune system due to
          increased  synthesis  of  immunoglobulin, interferon and activation of
          macrophages.

     -    Stimulation  of  the  enzyme  complex  (protease,  amylase, lipase and
          cellulase),  which  helps  to  improve  digestion.

     -    Binding,  neutralizing  and  withdrawing  toxic  substances (including
          heavy  metals)  from  the  body.

     -    Improvement  of  the  absorption  of selected micronutrients including
          B-complex  vitamins  and  essential  amino  acids.

     The  patented  formulation  used  for  PROBACTRIX consists of a proprietary
strain  of  non-pathogenic  E.coli, derived from an organism that was originally
isolated  from  the  intestinal  microflora


                                       11
<PAGE>
of  healthy  volunteers, which is preserved in a liquid extract formulation. The
technology  and  the processes comprise conditions that preserve M-17 E. coli in
the  biologically  active form. Additional patents have been filed by BioBalance
for  technology  that  could  extend  the  product's shelf life for two years or
longer  at  room  temperature.

NEXGEN PRODUCT PLATFORM

     We  have  acquired  the  rights  to  several  strains of Bacillus that have
exhibited anti-inflammatory, anti-bacterial and anti-viral properties, which may
be  effective in treating a variety of GI diseases. We refer to these strains of
Bacillius  as  our  NexGen  Product  Platform.  We  believe Bacillus strains are
therapeutically  effective  against rotavirus and campylobacter pathogens, which
are  the leading causes of infectious diarrhea. We believe this technology could
also  be  effective  in  treating  ulcerative  colitis.  There was a predecessor
product  (called  Biosporin),  based on the Bacillus strains acquired, which was
approved  in  Russia. Currently we have not yet formalized any plan with respect
to  the development of our NexGen product platform and no assurance can be given
that  we  will  ever  commercially  market  any  product related to this product
platform.

PRIOR CLINICAL STUDIES

     The  active  ingredient  in  PROBACTRIX  has  undergone safety and efficacy
testing  by more than 14,000 patients in controlled trials as well as case study
reports and has shown safety and efficacy in adults and children as young as six
months  old.  The  product  has  been  shown  effective  in  a broad range of GI
diseases  and  conditions  including  IBS,  IBD,  pouchitis,  Crohn's  disease,
ulcerative  colitis and diarrhea caused by antibiotics, chemotherapy and travel.

     Two  clinical  studies  recently  conducted  at Cedars-Sinai Medical Center
showed  the  link  between  IBS symptoms and pathogenic bacteria and support the
rationale  for  the  use  of  PROBACTRIX  as  an  effective  treatment  for IBS.

     Clinical  studies conducted in Israel indicate that PROBACTRIX is effective
at  addressing  various  GI  symptoms  in  both male and female patients with no
apparent  side  effects.  Patients  typically  reported  a  marked  reduction in
abdominal  symptoms.  Most  recently,  two  pilot studies have been completed in
Israel  with  the  current  formulation.  The  first  was  an  open  label study
conducted  on  63 patients with IBS, which were unresponsive to other therapies,
and  20  patients with Crohn's disease.  After four to six weeks of therapy, 52%
of  the  IBS  patients  had  an  excellent  response, 35% and 30% of the Crohn's
disease  patients  had  an  excellent and partial response, respectively, and no
adverse  events  were  observed.

     An  open-label  trial,  examining the impact of PROBACTRIX on patients with
Crohn's  disease, reported that three of the eight patients experienced a marked
reduction in abdominal symptoms, two dropped out, two experienced no improvement
and  one  experienced  a  worsening  of  symptoms.

     A  randomized, double blind pilot study conducted by Tiomny, et al. in 2003
reported  that  PROBACTRIX  relieved major symptoms of IBS with no side effects.
This  study  involved  20  patients,  who  were  experiencing severe symptoms of
diarrhea  and constipation with a mean duration of eight years. Eight of the ten
patients  in  the placebo group withdrew from the study due to lack of response.
All ten patients in the treatment group completed the study. The treatment group
experienced  significant improvement in IBS symptom relief with no apparent side
effects.


                                       12
<PAGE>
CURRENT STUDIES

     We conducted a high-dose safety trial on PROBACTRIX to verify the excellent
safety  results  found  in  prior  studies and to support Phase I status for the
prescription  drug  effort.  Phase  I  studies  focus on the safety of a drug or
biological  agent,  and  are  typically conducted in healthy adult volunteers at
relatively  high  doses.  This study was completed in the third quarter of 2004.
In  addition,  we  have  recently begun a randomized, multi-center double blind,
placebo-controlled,  clinical  trial  in approximately 200 IBS patients to study
the  effectiveness of PROBACTRIX as a medical food. Sites for this study include
Cornell  Medical  Center  in  New  York City, St. Michael's Hospital in Toronto,
Canada,  Bikur Cholim Hospital in Jerusalem, Israel, and Sourasky Medical Center
in  Tel  Aviv,  Israel.

VETERINARY  APPLICATION

     BioBalance  or  its predecessors has conducted numerous clinical studies in
farm  animals  to support the use of PROBACTRIX as a veterinary feed additive to
replace  antibiotics.  BioBalance  believes that enough safety and efficacy data
may  already  be  accumulated  to  present  an  attractive case for licensing to
appropriate  corporate  partners. BioBalance believes that a new and potentially
safer  anti-diarrheal  veterinary  product,  such  as  PROBACTRIX,  could  be
particularly  successful.  Veterinary experts believe that repeated applications
of antibiotics often leave animals weak and growth retarded. BioBalance believes
that  PROBACTRIX  has  a  particularly  high safety and efficacy profile in many
different  kinds  of  animals.  There  are  numerous  probiotic  products in the
veterinary  market  but lack of well-designed scientific studies. Significantly,
PROBACTRIX  has  been  studied  for  its use in preventing bacterial diarrhea in
piglets  and  as  a replacement for gentamycin and Advocin, which are most often
used  to treat diarrhea in these animals. No assurance can be given that we will
ever  market  Probactrix  as  a  veterinary  feed  additive.

MANUFACTURING

     BioBalance  has  successfully  transferred  the  manufacturing  process  of
PROBACTRIX  from  Israel to the University of Minnesota Biotech Center, enabling
sufficient  quantities  of  PROBACTRIX  to  be produced in the U.S. for clinical
trials  under  contract  manufacture.  BioBalance  has not yet selected contract
manufacturers  for  production  of  commercial quantities of PROBACTRIX, but may
rely  on  a  marketing partner to oversee the product's manufacture. The process
for  growing  E. coli and formulating the bacteria into a probiotic agent is not
complicated  but  requires  specialized  fermentation  facilities maintained and
operated under FDA laboratory and manufacturing requirements a prescription drug
product.  BioBalance  has  contracted  with  a  third-party  manufacturer and is
currently  working  to  transfer  the  manufacturing  technology  to  their
state-of-the-art  facility.

INTELLECTUAL  PROPERTY

     BioBalance  uses  a combination of patents, trademarks and trade secrets to
protect  its  core  technology,  which  is proprietary and protected by 34 filed
patents  in the U.S. and  certain foreign countries. In the U.S., BioBalance has
filed  applications  for  16  patents covering applications of its PROBACTRIX(R)
technology,  of  which  14  have been issued.  The patent expiration dates range
from  2020  to 2023.  It has also filed patent applications covering application
of  its  core  technology  in Japan, European, Korea, Canada, Australia, Mexico,
Brazil,  Poland,  Russia  and  New  Zealand.  BioBalance  is  also  aggressively
pursuing  additional  patent  applications  relating  to its core technology. On
March  1,


                                       13
<PAGE>
2005, it received notification that PROBACTRIX has been approved as a registered
trademark  in  the  U.S.

     In  August  2003,  BioBalance  acquired  the  GI  rights  to  a  line  of
biotherapeutic agents (NexGen Platform). The purchase includes the rights to two
patented  strains  of Bacillus (B. subtilis and B. licheniformis) for $3,850,000
which  included  a  one-time  cash payment of $250,000 and one million shares of
Common  Stock of the Company valued at $3,600,000. See "NexGen Product Platform"
above.  BioBalance  is  also  looking  to obtain rights for other agents showing
promise  in treating various GI diseases. At December 31, 2004 it was determined
that  the investment in the NexGen Product Platform was impaired and as a result
of  the impairment analysis a total of $1,740,326 was during the fourth quarter.
The  impairment  is due to a number of factors including the acceleration of the
Company's efforts to obtain regulatory approvals and take other action necessary
to  market  PROBACTRIX  as  a  prescription  product,  overall  limited  funding
available  to  the  Company to develop the NexGen Product Platform and available
management  time. While BioBalance believes that the NexGen Platform is a viable
technology  that  can  be  commercialized, any steps the Company may take in the
future  in  furthermore  of  such  commercialization will continue to be delayed
until  the  above  mentioned  factors  are  resolved.



BIOBALANCE  EMPLOYEES

     At  March  31,  2005, BioBalance had two full time employees and outsourced
most of its clinical and regulatory needs through consultants.  While BioBalance
has no definitive plans with respect to the size of its workforce or persons who
will fill specific positions, BioBalance plans to evaluate its needs relative to
research  and  development,  product manufacturing and marketing and finance and
administration in light of then current alliances and partnerships and will seek
to  hire  personnel  based  on  that  evaluation.


HOME  HEALTH  CARE  BUSINESS

OVERVIEW
     We  provide a broad range of home health and personal care support services
in  capacities  ranging  from  companions to live-ins, including assistance with
personal hygiene, dressing and feeding, meal preparation, light housekeeping and
shopping and, to a limited extent, physical therapy and standard skilled nursing
services  such  as  the  changing of dressings, injections and administration of
medications.

     Our  services  are  provided  principally by our staff of professionals and
paraprofessionals  (some  are bilingual), who provide personal care to patients,
and,  to  a  lesser extent, by our staff of skilled nurses. Approximately 99% of
our  home  health  revenues  in  2004  were  attributable  to  services  by  our
paraprofessional  staff.

We  are  approved  by  New  York State Department of Health for the training and
certification  of Home Health Aides and Personal Care Aides. In addition, we are
approved  by  the New Jersey Board of Nursing for the training of Certified Home
Health  Aides  in  the  State of New Jersey. In order to provide a qualified and
reliable staff, we continuously recruit, train, provide continuing education for
and  offer  benefits  and  other  programs  to encourage retention of our staff.
Recruiting  is  conducted  primarily  through  advertising,  direct contact with
community  groups  and  employment  programs,  and  the use of benefits programs
designed  to  encourage  new  employee  referrals  by  existing  employees.


                                       14
<PAGE>
     On  April 11, 2005 we entered into an agreement to sell our home healthcare
operations in the State of New Jersey to Accredited. Closing of this transaction
will  occur  on  or  prior  to  May  28,  2005.  See  -  Recent  Developments.

Organization and Operations

     We  operate  24  hours  a  day, seven days a week, to receive referrals and
coordinate services with physicians, case managers, patients and their families.
Services  are provided through 11 principal and branch offices and 2 recruitment
and  training  offices.  Each  office  is  typically  staffed  with  an
administrator/branch manager, director of nursing, nursing supervisor, home care
coordinators,  clerical  staff  and  nursing  services  staff.

     Our  principal  office retains all functions necessary to ensure quality of
patient  care  and  to maximize financial efficiency.  Services performed at the
principal  office  include  billing and collection, quality assurance, financial
and  accounting  functions,  policy and procedure development, system design and
development,  corporate  development  and marketing.  We use financial reporting
systems  through  which  we  monitor  data  for  each  branch  office, including
collections, revenues and staffing.  Our systems also provide monthly, financial
comparisons  to  prior  periods  and  comparisons  among  our  branch  offices.

Referral Sources

     We  obtain  patients primarily through contracts, referrals from hospitals,
community-based  health  care  institutions  and  social  service agencies, case
management  and insurance companies.  Referrals from these sources accounted for
substantially  all  of  our net revenues in 2004.  We generally conduct business
with  most  of  our institutional referral sources under one-year contracts that
fix  the  rates and terms of all referrals but do not require that any referrals
be  made.  Under  these contracts, the referral sources refer patients to us and
we bill the referral sources for services provided to patients. Approximately 98
such  contracts  were  in  effect  and  active  as  of  December  31,  2004.

     One  or  more referring institutions have accounted for more than 5% of our
net  revenues  during our last fiscal year, as set forth in the following table:

<TABLE>
<CAPTION>
         Referring Institution               Percentage of Net Revenues 2004
-------------------------------------------  --------------------------------
<S>                                          <C>
New York City Medicaid (HRA)                             43.4%
New Jersey Medical Assistance Program                    10.4%
Beth Abraham Long Term Home Health Program                6.4%
</TABLE>

     Overall,  our 10 largest referring institutions accounted for approximately
80.8%  of  net  revenues  for  2004.


                                       15
<PAGE>
     "Days Sales Outstanding" ("DSO") is a measure of the average number of days
required  for  the  Company  to collect accounts receivable, calculated from the
date services are billed. For the year ended December 31, 2004 the Company's DSO
were  74.

Reimbursement

     We  are  reimbursed for services, primarily by referring institutions, such
as  health  care institutions and social service agencies, which in turn receive
their  reimbursement  from  Medicaid,  Medicare  and,  to  a much lesser extent,
through  direct  payments  by  insurance companies and private payers.  New York
State  and  New  Jersey  Medicaid  programs constitute our largest reimbursement
sources, when including both direct Medicaid reimbursement and indirect Medicaid
payments  through  many  of our referring institutions.  For 2004, payments from
referring  institutions that receive direct payments from Medicare and Medicaid,
together  with  direct  reimbursement  to  us  from  Medicaid,  accounted  for
approximately 99% of net revenues.  Direct reimbursements from private insurers,
prepaid  health  plans,  patients  and  other  private  sources  accounted  for
approximately  1%  of  net  revenue  for  2004.

     The  New  York  State  Department  of  Health,  in  conjunction  with local
Departments  of  Social  Services,  sets annual reimbursement rates for patients
covered  by  Medicaid.  These  rates  are  generally  established  on  a
county-by-county  basis,  using  a complex reimbursement formula applied to cost
reports  filed  by  providers.

     Third party payers, including Medicaid, Medicare and private insurers, have
taken  extensive  steps  to  contain  or reduce the costs of health care.  These
steps  include  reduced  reimbursement  rates,  increased  utilization review of
services  and  negotiated  prospective  or  discounted pricing and adoption of a
competitive  bid approach to service contracts.  Home-based healthcare, which is
generally  less  costly  to  third  party  payers  than hospital-based care, has
benefited  from  many  of  these  cost  containment  measures.

     We  negotiate  contracts  on  the  basis  of  services  to  be provided, in
connection  with  contracts  either  currently  in  effect with us or with other
agencies.  Prevailing  market  conditions  are  such  that,  despite  escalating
operating  expenses, reduced contract rates are regularly negotiated as a result
of  internal budget restraints and reductions mandated by managed care contracts
between  our  clients  and HMO's and other third party administrators.  While we
anticipate  that this trend is likely to continue for the foreseeable future, we
do  not expect the impact on the Company to be significant, since we believe our
rates  are  competitive. Accordingly, we expect to be subject to only minor rate
reductions.  However, as expenditures in the home health care market continue to
grow,  initiatives  aimed  at  reducing  the  costs  of  health care delivery at
non-hospital  sites  are  increasing.  A  significant  change  in  coverage or a
reduction in payment rates by third party payers, particularly by New York State
Medicaid,  would  have  a  material  adverse  effect  upon  our home health care
business.

Performance Improvement

     We  believe  that our reputation for quality patient care has been and will
continue  to  be  a  significant  factor  in  our  success. To this end, we have
established  a  performance  improvement


                                       16
<PAGE>
management  program,  including a performance improvement program to ensure that
our service standards are implemented and that the objectives of those standards
are  met.

     We  believe  that  we have developed and implemented service standards that
comply  with or exceed the service standards required by the Joint Commission on
Accreditation  of  Healthcare Organizations ("JCAHO"). In November 2003, the New
York  offices  of  the  Company  received  full  accreditation  from  the  Joint
Commission  for  the  next  three years (expiring in November 2006). We have not
sought JCAHO accreditation for our New Jersey offices because such accreditation
is  not required by any of the contracts in that state. An adverse determination
by  JCAHO  regarding  our home health care operations or any branch office could
adversely  affect  our  reputation  and  competitive  position.

Sales and Marketing

     Messrs.  Braun  and  Rosenberg,  officers of  our health care division, are
principally  responsible  for  the  marketing  of  our  services.  Each
administrator/branch  manager  is  also  responsible for sales activities in the
branch  office's  local  market area.  We attempt to cultivate strong, long-term
relationships  with  referral sources through high quality service and education
of local health care personnel about the appropriate role of home health care in
the  clinical  management  of  patients.

Government Regulation

     The  federal government and the States of New York and New Jersey, where we
operate,  regulate  various  aspects of our business.  Changes in the law or new
interpretations  of  existing  laws  can  have  a  material  adverse  effect  on
permissible  activities of the Company, the relative costs associated with doing
business  and  the  amount  of reimbursement by government and other third-party
payers.

     We  are licensed by New York State as a home care services agency. New York
State  law  requires  approval  by  the  New  York  State  Public Health Council
("Council")  of  any  change  in  "the  controlling  person" of an operator of a
licensed  home care services agency ("LHCSA").  Control of an entity is presumed
to  exist if any person owns, controls or holds the power to vote 10% or more of
the  voting securities of the LHCSA.  A person seeking approval as a controlling
person of a LHCSA, or of an entity that is the operator of a LHCSA, must file an
application  for  Council  approval  prior  to  becoming  a  controlling person.

     We  are  subject to federal and state laws prohibiting payments for patient
referrals  and regulating reimbursement procedures and practices under Medicare,
Medicaid  and  state  programs.  The  federal  Medicare and Medicaid legislation
contains anti-kickback provisions, which prohibit any remuneration in return for
the  referral  of  Medicare  and  Medicaid  patients.  Courts  have,  to  date,
interpreted  these  anti-kickbacks  laws  to apply to a broad range of financial
relationships.  Violations  of these provisions may result in civil and criminal
penalties,  including fines of up to $15,000 for each separate service billed to
Medicare  in  violation  of  the  anti-kickback  provisions,  exclusion  from
participation  in  the  Medicare  and state health programs such as Medicaid and
imprisonment  for  up  to  five  years.


                                       17
<PAGE>
     Our  healthcare  operations  potentially  subject  us  to  the Medicare and
Medicaid  anti-kickback provisions of the Social Security Act.  These provisions
are  broadly  worded  and  often  vague,  and the future interpretation of these
provisions  and  their applicability to our operations cannot be fully predicted
with  certainty.  Any  such  non-compliance  or  violation could have a material
adverse  effect  on  our  home  health  care  business.

     Various federal and state laws regulate the relationship among providers of
healthcare  services,  including employment or service contracts, and investment
relationships.  These laws include the broadly worded fraud and abuse provisions
of  the  Social  Security  Act  that are applicable to the Medicare and Medicaid
programs,  which  prohibit  various  transactions involving Medicare or Medicaid
covered  patients  or  services.  Among  other things, these provisions restrict
referrals  for certain designated health services by physicians to entities with
which  the physician or the physician's immediate family member has a "financial
relationship"  and  the  receipt  of remuneration by anyone in return for, or to
induce,  the  referral  of  a  patient  for  treatment  or purchasing or leasing
equipment  or  services  that  are paid for, in whole or in part, by Medicare or
Medicaid.  Violations  of  these  provisions  may  result  in  civil or criminal
penalties for individuals or entities and/or exclusion from participation in the
Medicare  and  Medicaid programs.  The future interpretation of these provisions
and  their  applicability  to  our  operations  cannot  be  fully predicted with
certainty.

     New  York  and  New  Jersey  also have statutes and regulations prohibiting
payments  for  patient  referrals and other types of financial arrangements with
health  care  providers  that,  while  similar  in  many respects to the federal
legislation,  vary  from  state  to state, are often vague and have infrequently
been  interpreted  by  courts or regulatory agencies. Sanctions for violation of
these  state  restrictions  may include loss of licensure and civil and criminal
penalties.

     We believe that our operations, in general, comply in all material respects
with  applicable  federal and state anti-kickback laws, and that we will be able
to  arrange our future business relationships so as to comply with the fraud and
abuse  provisions.

     Management  believes  that the trend of federal and state legislation is to
subject the home health care and nursing services industry to greater regulation
and  enforcement  activity,  particularly  in  connection  with  third-party
reimbursement  and  arrangements designed to induce or encourage the referral of
patients  to  a  particular  provider  of  medical  services.  We  attempt to be
responsive  to  such  regulatory  climate.  However, we are unable to accurately
predict  the  effect,  if  any,  of  such  increased  regulatory  or enforcement
activities  on  our  future  results  of  operations.

     In  addition,  we  are  subject  to  laws  and  regulations which relate to
business  corporations in general, including antitrust laws, occupational health
and  safety  laws,  and environmental laws (which relate, among other things, to
the  disposal,  transportation  and handling of hazardous and infectious wastes)
and  federal and state securities laws, including the Sarbanes-Oxley Act of 2002
and  the  rules and regulations thereunder (relating to corporate governance and
the quality of disclosure by public companies).  To date, none of these laws and
regulations  has  had a material adverse effect on our home health care business
or  the  competitive  position  of  such  business  or  required  any  material
expenditures  by  us. We cannot assure that we will not be adversely effected by
such  laws  and  regulations  in  the  future.


                                       18
<PAGE>
     We  cannot  accurately  predict what additional legislation, if any, may be
enacted  in  the  future  relating  to our business or the health care industry,
including  third-party  reimbursement,  or  what effect any such legislation may
have  on  us.

     We  have  never  been denied any home health care license we have sought to
obtain.  We  believe  that  our  home  health  care  operations  are in material
compliance  with  all  applicable  state  and  federal regulations and licensing
requirements.



Competition

     The  home  health  care  market  is  highly  fragmented  and  significant
competitors are often localized in particular geographical markets.  Our largest
competitors  include  Premiere Health Services, National Home Health Care Corp.,
Patient Care, Inc., and Personal Touch Home Care Services, Inc.  The home health
care business is marked by low entry costs so that given the increasing level of
demand  for nursing services, significant additional competition can be expected
to develop in the future.  Some of the companies with which we presently compete
in  home  health  care  have substantially greater financial and human resources
than  we  do.  We  also compete with many other small temporary medical staffing
agencies.

     We  believe  that  the  principal  competitive  factors in our industry are
quality  of  care,  including  responsiveness  of  services  and  quality  of
professional  personnel;  breadth  of  therapies  and  nursing services offered;
successful  referrals  from  referring Government agencies, hospitals and health
maintenance  organizations;  general  reputation with physicians, other referral
sources  and  potential  patients;  and  price.  We believe that our competitive
strengths  have  been  the  quality,  responsiveness, flexibility and breadth of
services and staff we offer, and to some extent our competitive pricing, as well
as  our  reputation  with  referral  sources  and  patients.

     The  United  States  health  care  industry  generally  faces a shortage of
qualified  personnel.  Accordingly, we experience intense competition from other
companies  in  recruiting  health  care  personnel  for  our  home  health  care
operations.  Our  success  to date has depended, to a significant degree, on our
ability  to  recruit  and  retain  qualified health care personnel.  Most of the
registered  and  licensed nurses and health care paraprofessionals who we employ
are  also  registered with, and may accept placements from time to time through,
our competitors.  We believe we are able to compete successfully for nursing and
paraprofessional  personnel  by  aggressive  recruitment  through  newspaper
advertisements,  work  fairs/job  fairs, flexible work schedules and competitive
compensation  arrangements.  We cannot assure you, however, that we will be able
to continue to attract and retain sufficient qualified personnel.  The inability
to  either  attract  or  retain  such  qualified personnel would have a material
adverse  effect  on  our  business.

HOME HEALTH CARE EMPLOYEES

At March 31, 2005, our home health care business had 1,927 employees, of whom 94
are  salaried,  including  two  division  officers,  a  controller,  seven
administrators/branch  managers,  18 nurses, 12 accounting staff, seven clerical
staff  and 47 field staff supervisors. The remaining 1,833 employees are paid on
an  hourly  basis  and  consist  of  professional  and  paraprofessional  staff.


                                       19
<PAGE>
None  of  our  Home  Health  Care  or BioBalance employees are compensated on an
independent  contractor  basis or represented by a labor union.  We believe that
our  employee  relations  are  good.




ITEM 2.    DESCRIPTION OF PROPERTIES

     All  of  our  executive and branch offices are located in facilities leased
from  unaffiliated  persons.

     Our  corporate  headquarters  is  located  in  a  building  containing
approximately  6,000  square  feet  located  in Brooklyn, New York under a lease
expiring  in 2010, at a monthly rental of approximately $7,000 subject to annual
increases  and  rent  escalations  based on increases in real estate taxes.  Our
home health care business is administered from our corporate headquarters and 12
branch  and recruitment offices located in New York (six offices) and New Jersey
(six  offices) under month to month tenancies and term leases expiring from June
2005  through April 2010 at annual rentals ranging from approximately $14,000 to
$55,000  and additional rent based upon increases in real estate taxes and other
cost  escalations.  We expect that the six leases with respect to our New Jersey
offices  will be assigned to and assumed by Accredited Health in connection with
the  closing  of  the  sale  of  the  NJ  Business  to  Accredited.

     BioBalance's  executive office is located in the Borough of Manhattan, City
of  New  York  under  a  lease  expiring  in  May  2006  at  a monthly rental of
approximately  $6,200.

ITEM 3.    LEGAL PROCEEDINGS

     We  are subject to various legal proceedings and claims, either asserted or
unasserted,  which  arise in the ordinary course of business.  While the outcome
of  these claims cannot be predicted with certainty, management does not believe
that  the  outcome  of  any  of these legal matters will have a material adverse
effect  on  our  results  of  operations  or  financial  position.

ITEM 4.    SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

Not  applicable.
                                     PART II

ITEM 5.    MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED STOCKHOLDER
           MATTERS

     Our  common  stock traded on the National Association of Securities Dealers
Automated  Quotation  System  ("NASDAQ")  SmallCap  Market  until April 6, 2004.
Since  that time, our common


                                       20
<PAGE>
stock has been trading over-the-counter on the Pink Sheets. Our common stock was
also  listed  on the Boston Stock Exchange ("BSE") until March 5, 2005, when our
voluntary  delisting  application  was granted, although no trades of our common
stock  had  been  executed on the BSE for at least two years prior to our making
the  voluntary  application  to  delist  from  the BSE. The following table sets
forth,  for the quarters indicated, the high and low sales prices for our common
stock  on  the  NASDAQ  SmallCap  Market  or  the  Pink  Sheets  as  applicable.

<TABLE>
<CAPTION>
Fiscal 2004              High       Low
--------------           ----       ----
<S>                      <C>        <C>

First Quarter            3.95       2.99
Second Quarter           1.22       0.60
Third Quarter            0.82       0.50
Fourth Quarter           0.67       0.46

Fiscal 2003              High       Low
--------------           ----       ----

First Quarter            4.50       2.59
Second Quarter           3.20       2.13
Third Quarter            4.39       2.07
Fourth Quarter           4.19       1.96
</TABLE>

HOLDERS

     At  March  8,  2005,  we  had approximately 145 holders of record and 1,385
beneficial  holders  of  our  Common  Stock.

DIVIDENDS

     The  Company  has  not  paid  any  cash  dividends  since its inception and
presently  anticipates  that  all  earnings,  if  any,  will  be  retained  for
development  of  the  Company's  business and that no dividends on the shares of
Common  Stock  will be declared in the foreseeable future.  Any future dividends
will  be  subject to the discretion of the Company's Board of Directors and will
depend  upon,  among  other things, future earnings, the operating and financial
condition  of the Company, its capital requirements, general business conditions
and  other  pertinent  facts.  Therefore,  there  can  be  no assurance that any
dividends  on  the  Common  Stock  will  be  paid  in  the  future.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     For  information  on securities authorized for issuance under the Company's
equity  compensation  plans,  see  Part  III, Item 11 of this report, "Executive
Compensation  -  Savings  and  Equity  Compensation  Plans."


                                       21
<PAGE>
ITEM 6:   SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                        NEW YORK HEALTH CARE HISTORICAL FINANCIAL INFORMATION

                                    AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                    ----------------------------------------------------------------
                                                                                Period May 21, 2001
                                                                                (Inception) Through
                                        2004          2003           2002          DECEMBER 2001
                                    ------------  -------------  ------------  ---------------------
<S>                                 <C>           <C>            <C>           <C>
Total revenues                      $48,854,358   $ 45,060,449   $         -   $                  -
Net loss                             (6,071,685)   (22,052,170)   (1,399,057)              (452,169)
Basic loss per share                      (0.24)         (0.91)        (0.07)                 (0.03)
Diluted loss per share                    (0.24)         (0.91)        (0.07)                 (0.03)
Current assets                       11,941,842     14,543,209     3,051,720                906,926
Total assets                         16,503,195     21,628,968     5,259,449              2,918,836
Current liabilities                  13,918,937     12,607,203       349,182                117,070
Long-term liabilities, net of
  current portion                             -              -             -                      -
Shareholders' equity                  2,584,258      9,021,765     4,910,267              2,801,766
Book value per share                        .10            .36           .23                    .16

Dividends per share                           -              -             -                      -

Shares used in computing
loss per common share:
    Basic                            24,939,776     24,283,907    20,562,131             17,574,891
    Diluted                          24,939,776     24,283,907    20,562,131             17,574,891
</TABLE>

ITEM  7:     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATION

RESULTS  OF  OPERATIONS - YEAR ENDED DECEMBER 31, 2004 COMPARED WITH YEARS ENDED
DECEMBER  31,  2003  AND  2002

Overview

     On  January  2,  2003,  the  Company  and  BioBalance  completed a business
combination  (a  "reverse  merger"),  accounted for as "reverse acquisition," in
which  BioBalance  became  a  wholly-owned  subsidiary  of  the  Company and the
stockholders of BioBalance exchanged all of the outstanding shares of the common
stock  of  BioBalance  for  approximately  90%  of the outstanding shares of the
Company's common stock.  For accounting purposes, BioBalance is considered to be
the  "accounting  acquirer"  in  the  transaction.  As  a result, the historical
financial  information  in this report for the years ended December 31, 2004 and
December 31, 2003 is that of the Company while the data for December 31, 2002 is
that  of BioBalance, not of the Company. Prior reports of the Company filed with
the  SEC  remain  available  on  the  SEC  website  at  http://www.sec.gov.

     The  Company  operates  in  two  industry  segments;  the  home health care
business,  which  business  has  a  20-year operating history, and the specialty
pharmaceutical  business  of BioBalance, which commenced in 2001 and is still in
its  development  stage.  All numerical amounts and percentages in the following
discussion  are  approximate.

See Recent Developments for a description of the Company's agreement to sell the
NJ  Business  to  Accredited.


                                       22
<PAGE>
RESULTS OF OPERATIONS

     Revenues  in  2004  increased  to $48,854,000 from $45,060,000 in 2003. The
increase  in  revenue  is  due  to  an  increase  in sales volume to some of our
existing  home  health  care clients. There was no reported revenue for the year
2002.

     Cost of professional care of patients in 2004 increased to $39,214,000 from
$36,107,000 in 2003. The increase in cost is due to the increase in sales. There
were  no  reported  costs  for  the  year  2002.

     Selling,  general and administrative expenses ("SG&A") in 2004 increased to
$12,056,000 from $11,249,000 in 2003 and $830,000 in 2002, an increase of 7% and
1,255%  for  the  years 2003 and 2002 respectively. The increase in expenses for
the  year  2004  compared  to  2003  is  the  result of administrative personnel
increases  and  other  costs associated with the increased revenue. In addition,
the  Company  incurred  significant legal, accounting and insurance cost in 2004
relating  to  the  indictment of one of its former directors. The year 2002 only
includes  the  expenses  related  to  the  BioBalance  segment.

     As  a  result  of  the  merger  in  2003,  the  Company recognized goodwill
associated  with  the  Company's  home  health  care  business.  The Company has
determined,  based  upon  the opinion of a valuation expert engaged to determine
the  Company's fair market value as of the date of the merger, that goodwill was
impaired  to  the  extent  of  $17,869,000.  The  Company determined that in the
current  market for home health care businesses, the value of the Company's home
health  care  business  would  not  generate  the amount of goodwill recorded in
connection  with  the  merger,  assuming  the business had been sold in the open
market,  based  on  current  sources of revenue and limited profit margin of the
business  and  potential  regulatory  threats to the business, which threats, if
realized,  could  adversely  affect  the economic structure of its business. The
valuation  expert  used  the  capitalized cash flow and the guidelines companies
methodologies  in  valuing  the Company. The impairment charge of $17,869,000 is
non-cash  in  nature  and  does  not  affect  the  Company's  liquidity.

     The  net  loss  of $6,072,000 for the year 2004 includes income of $351,000
from  the  operation  of the home care segment and a loss of $6,423,000 from the
BioBalance  segment  which  to  date has not generated any revenue. The net loss
from  the  BioBalance  segment  also  includes an expense of $1,740,326, for the
impairment  writedown  of  the  NexGen Platform technology that was purchased in
2003.  BioBalance intends to pursue the NexGen Platform technology in the future
as  funds  and management time allow although there can be no assurance that any
commercially  usable  product  will  be  derived  from  the  NexGen  Platform.

     For  the  year  2003,  the Company suffered a net loss of $22,052,000. This
includes  the  non-cash  impairment  charge  of $17,869,000, a net loss from the
BioBalance  segment  of  $4,657,000,  which  includes  a non-cash expense in the
amount  of  $1,591,000  resulting  from  an  increase  in  the  fair  value  of
outstanding  stock options and warrants as a result of the merger, and income of
approximately $474,000 from the operation of its home care segment. The net loss
of  $1,399,000 for the year 2002  was due principally to product development for
PROBACTRIX  by  BioBalance.  BioBalance  had  no  revenues  in  2002.

RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

     In  January  2003,  the  FASB  issued  Financial  Interpretation  No.  46
"Consolidation  of  Variable  Interest Entities" ("FIN 46"), which clarifies the
application  of  Accounting  Research  Bulletin  No. 51, "Consolidated Financial
Statements."  FIN  46  requires  certain  variable  interest  entities  to  be


                                       23
<PAGE>
consolidated by the primary beneficiary of the entity if the equity investors in
the  entity  do not have the characteristics of a controlling financial interest
or  do  not  provide  sufficient  equity  at  risk for the entity to support its
activities.  In December 2003, the FASB revised certain elements of FIN 46 ("FIN
46-R"). The FASB also modified the effective date of FIN 46. This interpretation
applies immediately to variable interest entities created after January 31, 2003
and  variable  interest  entities in which the Company obtains an interest after
January  31, 2003. For variable interest entities in which a company obtained an
interest  before  February  1,  2003,  the interpretation applies to the periods
ending  after  March  15,  2004.  The adoption of FIN 46 did not have a material
impact  on  the  Company's  consolidated  financial  position  or  results  of
operations.

     In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment,"  or  SFAS  No.  123R.  SFAS  No. 123R, which replaces SFAS No. 123 and
supersedes  APB  Opinion  No.  25,  requires  that compensation cost relating to
share-based  payment  transactions  be  recognized  in the financial statements,
based  on the fair value of the equity or liability instruments issued. SFAS No.
123R  is  effective  as of the beginning of the first interim period that begins
after December 31, 2005 and applies to all awards granted, modified, repurchased
or  cancelled  after  the  effective date. We do not expect the adoption of this
standard  to have a significant impact on our consolidated results of operations
or  financial  position.

     In  December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets-an  amendment  of  APB  Opinion  No.  29,"  or SFAS No. 153. SFAS No. 153
eliminates the exception for non-monetary exchanges of similar productive assets
of  APB Opinion No. 29 and replaces it with a general exception for exchanges of
non-monetary  assets  that  do  not  have  commercial substance.  A non-monetary
exchange  has  commercial  substance  if the future cash flows of the entity are
expected  to  change significantly as a result of the exchange.  SFAS No. 153 is
effective  for  non-monetary  asset  exchanges  occurring  in the fiscal periods
beginning  after  June 15, 2005.  We do not expect the adoption of this standard
to  have  a  significant  impact  on  our  consolidated results of operations or
financial  position.

LIQUIDITY AND CAPITAL RESOURCES

     The  sources  of  liquidity  and capital resources for the home health care
segment are internally generated funds, cash on hand and amounts available under
a  $4,000,000  revolving credit facility with G.E. Capital Health Care Financial
Services  relating  exclusively to the home health care segment. Currently there
is  no  outstanding  indebtedness  under  this  facility.

     Loans  under this revolving credit loan facility, which expires in November
2005,  may  be  used  only for working capital of the Company's home health care
business  and  other  costs arising in the ordinary course of that business. The
Company's  obligations  to pay the principal of, and interest on, loans advanced
under this facility are secured by substantially all the assets of the Company's
home  health  care  business,  and  not by any assets of BioBalance.  Borrowings
under  the facility are permitted to the extent of a borrowing base of up to 85%
of  "qualified  accounts  receivable" of the Company's home health care business
and  there are no events of default under the relevant loan documents subject to
the  lender's  right to reduce the borrowing base by applying a liquidity factor
percentages  formula  based  upon  a  calculation  relating to recent collection
histories  of  certain  classes  of  qualified  accounts


                                       24
<PAGE>
receivable.  Currently,  application of the liquidity factors percentage formula
results  in  97%  of  qualified  accounts receivable being part of the borrowing
base. Accordingly, at December 31, 2004 the amount available for borrowing under
this  facility  was  $4,000,000.  The  agreement  contains  various  restrictive
covenants,  which  amongst  other  things,  require  that the Company maintain a
minimum  tangible net worth greater than $500,000. The Company utilizes the line
of  credit  from  time  to  time,  and  at  the present time there is no balance
outstanding.

     The Company has amended its loan agreement relating to the revolving credit
facility  to  allow it to lend money to its BioBalance subsidiary if there is no
loan outstanding under  the revolving credit facility. At December 31, 2004, New
York  Health  Care had loaned BioBalance $1,500,000 and at February 25, 2005 the
loan  amount  was  approximately  $1,700,000,  which  was repaid in full with  a
portion  of  the  proceeds  of  the Offering.   The loan agreement has also been
amended  to  allow  the  Company  to  invest  money  in  BioBalance.

     In  addition,  on April 11, 2005, the Company's loan agreement was modified
to  permit  the  sale  of the NJ Business to Accredited Health and to remove the
lender's lien with respect to the assets of the NJ Business. As a result of this
modification,  no loans under the agreement will be made until the net worth has
been  amended  to  the  lender's  satisfaction.

     The principal amount of loans borrowed under this facility bear interest at
a  variable  annual  rate  equal  to the prime rate charged from time to time by
CitiBank,  N.A.  plus  1.5%  (currently, 6.75% per annum) and the loan agreement
creating  this  facility  provides  for  monthly  payments  of  interest  on the
outstanding  loan balance on the basis of the actual number of days elapsed over
a  year  of  360  days.

Contractual  Obligations  and  Commitments

Information  in  the  following  table  provides  a  summary  of our contractual
obligations  and  commercial  commitments  as  of  December  31,  2004.


                                       25
<PAGE>
<TABLE>
<CAPTION>
                            Payments due, by period


Contractual Obligations                     Total       Less than 1 year    1-3 years     3-5 years    More than 5 years
                                       ---------------  -----------------  ------------  ------------  ------------------
<S>                                    <C>              <C>                <C>           <C>           <C>
Long-Term Debt                                     -0-                 --            --            --                  --
Capital Lease Obligations                          -0-                 --            --            --                  --
Operating Lease Obligations*           $    1,166,000   $         423,000  $    458,000  $    253,000  $           32,000
Purchase Obligations                               -0-                 --            --            --                  --
Other Long-Term Liabilities Reflected
on the Registrant's Balance Sheet
GAAP                                   ---------------  -----------------  ------------  ------------  ------------------
Total                                  $    1,166,000   $         423,000  $    458,000  $    253,000  $           32,000
                                       ===============  =================  ============  ============  ==================
<FN>
*    These leases generally contain provisions allowing rental obligations to be
     accelerated upon default in the payment of rent or the performance of other
     lease obligations. These leases generally contain provisions for additional
     rent  based upon increases in real estate taxes and other cost escalations.
     Because  we  anticipate  that  the  leases  used  in connection with the NJ
     Business will be assigned to and assumed by Accredited Health in connection
     with  the  closing of the sale of the NJ Business to Accredited Health, the
     total  operating  lease  obligations  are expected to decrease by $207,000.
</TABLE>

     Net  cash used in operating activities for the year 2004 was $5,073,333, as
compared to net cash provided of $233,269 and net cash used of $958,773  for the
years  2003  and  2002,  respectively.  The change in net cash used in operating
activities from 2004 to 2003 is due mainly to an increase in accounts receivable
and  unbilled services, a decrease in accrued payroll, a decrease in amounts due
to  related  parties  and  a  net  loss for the period, offset by an increase in
accounts payable and accrued expenses and an increase in the amounts due to HRA.
The  net  cash provided by operating activities for 2003 as compared to net cash
used  in  operating  activities  for  2002 is mainly the result of comparing two
business  segments  in  2003  to  only  one  segment  in  2002.

     Net  cash  used in investing activities for the year 2004 totaled $77,805 ,
as  compared  to  net cash provided of $3,175, 321 and net cash used of $510,419
for  the  years 2003 and 2002 respectively. The increase in 2003 was  due mainly
to  cash  acquired  from  the  acquisition  of  the  BioBalance  subsidiary.

     There  was  no net cash provided by financing activities for the year ended
December  31, 2004. Net cash provided by financing activities for the year ended
December  31,  2003  totaled approximately $1,304,000, as compared to $3,198,000
for  the year ended December 31, 2002. The decrease was due mainly to a decrease
in  the  sales  and  issuance  of  common  stock.

     As of December 31, 2004, approximately $8,656,000 (approximately 52.4% ) of
the  Company's  total  assets consisted of accounts receivable from customers as
compared  to  approximately  $6,577,000  or 30.4% as of December 31, 2003. As of
December  31,  2002  BioBalance  had  no  accounts  receivable.

     Days  Sales  Outstanding ("DSO") is a measure of the average number of days
required  for the Company to collect its account receivable, calculated from the
date  services  are  billed. For the years ended December 31, 2004 and 2003, the
Company's  DSO's  were  74 and 62, respectively. For the year ended December 31,
2002,  BioBalance  had  no  revenue  and  accounts  receivable.


                                       26
<PAGE>
BIOBALANCE  SEGMENT

     As  of  December 31, 2004, BioBalance had a cash overdraft in the amount of
$12,736.  On February 24, 2005 the Company consummated the Offering and received
gross  proceeds of approximately $4,900,000. The net funds for the offering were
to  be  used  exclusively  by  BioBalance  primarily  for the development of its
proposed  products,  to  repay to the Company a loan in the amount of $1,717,969
and  pay  accrued  expenses  and accounts payable in the amount of $782,995. The
remaining  proceeds  will  be used for BioBalance operations in 2005. BioBalance
estimates  that  its  capital  requirements  for  the  remainder of 2005 will be
approximately  $4,000,000,  which  it  plans to fund with existing cash from the
offering  and  the proceeds from the sale of the NJ Business and via the sale of
equity,  debt  or  convertible  securities  of  the Company. We believe that our
current  capital  will  sustain  BioBalance's  operations  for  twelve  months.

     BioBalance  has  incurred  product  development  costs  excluding  non-cash
compensation  of  $1,426,423 for the twelve months ended December 31, 2004.  The
majority  of  these  costs  were for manufacturing clinical supplies, conducting
clinical  studies to assess the safety and efficacy of  PROBACTRIX and the costs
for  preparing  and  filing the Investigational New Drug ("IND") application for
PROBACTRIX.  During  this  period, BioBalance completed an extended safety study
in  healthy  human  volunteers at ten times the normal dose in 35 subjects for a
six  month  period.  The data from this study has been submitted for publication
in a peer-reviewed medical journal. BioBalance began an Irritable Bowel Syndrome
("IBS")  medical  food  clinical  trial at Ichilov Medical Center in Tel Aviv in
November  2003.  An  additional  site (St. Michael's Hospital in Toronto) became
operational  in  the  first  quarter this year, but enrollment was significantly
delayed due to personnel issues. Additional sites in New York and Jerusalem were
added  in  the  third  quarter  to  compensate  for  the  slow enrollment. Total
enrollment  of  200  patients is anticipated for this trial, which will continue
into  2005.

     BioBalance  is  pursing  accelerated regulatory approval of PROBACTRIX as a
prescription drug for the prevention and/or treatment of pouchitis and has filed
an  Investigational  New  Drug  ("IND")  application with the U.S. Food and Drug
Administration  ("FDA"). Pouchitis is a non-specific inflammation of the "pouch"
or  ileal reservoir, which usually occurs during the first two years after bowel
reconstruction due to ulcerative colitis. Symptoms of pouchitis include steadily
increasing  stool  frequency  that may be accompanied by incontinence, bleeding,
fever  and/or  a  feeling of urgency. There are currently no approved treatments
for  pouchitis.  BioBalance  also  will  seek  orphan  drug designation for this
indication.  "Orphan  drug"  refers  to  a  product  that  treats a rare disease
affecting  less  than  a  specified number of persons (200,000 in the U.S.). The
orphan  drug  regulatory  strategy  provides  a  significantly  shorter approval
process  and  less  costly  clinical  studies.  Additional  clinical studies can
subsequently  be  conducted  to  determine  whether there is support for broader
usage.  BioBalance  submitted  the  IND  to FDA at year-end 2004. On February 2,
2005,  we  were  notified  by the FDA that the IND was on clinical hold and that
comments  would  be sent to us within 30 days. Comments on the IND were received
on  March 4, 2005. BioBalance has reviewed the comments and is currently working
to  provide  a  response to all of the issues raised by FDA. We expect to have a
response  prepared  and  sent  back to the FDA during second quarter of 2005. We
feel  that all of the issues raised by the FDA can be properly addressed, but we
can  give  no assurance that the FDA will agree with all of our responses to the
issues  raised  or  give  us clearance to move forward with the clinical trials.


                                       27
<PAGE>
OFF-BALANCE  SHEET  ARRANGEMENTS

     The  Company  has  not  entered  into  any transactions with unconsolidated
entities  whereby  the  Company  has financial guarantees, subordinated retained
interests,  derivative  instruments or other contingent arrangements that expose
the  Company  to material continuing risks, contingent liabilities, or any other
obligation  under  a variable interest in an unconsolidated entity that provides
financing,  liquidity,  market  risk  or  credit  risk  support  to the Company.

LEASE COMMITMENTS

     As  of  December 31, 2004, the Company had total outstanding commitments on
non-cancelable  operating leases for office space of approximately $1,166,000 of
which  $207,000  represents  the  New  Jersey  offices.  Remaining  terms on the
Company's  existing  operating  leases  range from June 2005 through March 2010.

     Accounts  receivable  of  our  home  health  care business consist of trade
receivables  recorded  at  original invoice amounts, less an estimated allowance
for  uncollectible  accounts.  We  generally extend trade credit on a short-term
basis.  Accordingly, our trade receivables do not bear interest, although we may
apply  a  finance  charge  to  receivables  that  are past due.  We periodically
evaluate  accounts  receivables for collectibility, based on past credit history
of customers and the current financial condition of those customers.  Changes in
the estimated collectibility of accounts receivables are recorded in the results
of  operations for the fiscal period in which the estimate is revised.  Accounts
receivables  we  judge  to be uncollectible are offset against the allowance for
uncollectible  accounts.  Generally, we do not require account debtors to secure
the  payment  of  accounts  payable.

GOODWILL AND OTHER INTANGIBLE ASSETS

     Statement  of Financial Accounting Standards No.142 requires that good will
and  intangible  assets having indefinite lives not be amortized, but instead be
tested  for  impairment at least annually.  Intangible assets determined to have
definite  lives  are  amortized  over  their  remaining  useful  lives.

LONG-LIVED ASSETS

We  evaluate  long-lived  assets, such as intangible assets other than goodwill,
equipment  and  leasehold improvements, for impairment when events or changes in
circumstances  indicate  that  the  carrying  amounts  of  the assets may not be
recoverable  through  estimated  undiscounted  cash  flows from the use of these
assets.  When  an impairment exists, the related assets are written down to fair
value.

     THE COMPANY OPERATES IN A CHANGING ENVIRONMENT THAT INVOLVES NUMEROUS KNOWN
AND  UNKNOWN  RISKS AND UNCERTAINTIES THAT COULD MATERIALLY ADVERSELY AFFECT ITS
OPERATIONS.  THE  FOLLOWING  HIGHLIGHTS  SOME OF THE FACTORS THAT HAVE AFFECTED,
AND/OR  IN  THE  FUTURE  COULD  AFFECT,  ITS  OPERATIONS.

RISKS RELATING TO THE BIOBALANCE BUSINESS


                                       28
<PAGE>
     BIOBALANCE  IS  A  DEVELOPMENT  STAGE COMPANY, HAS GENERATED NO REVENUES TO
DATE  AND  HAS  A  LIMITED  OPERATING  HISTORY  UPON  WHICH IT MAY BE EVALUATED.

     BioBalance  was  incorporated  in  May 2001, has generated no revenues from
operations,  and  has no meaningful assets, other than its intellectual property
rights  and  available  cash  generated from the Offering and the sale of the NJ
Business. BioBalance faces all of the risks inherent in a new business and those
risks  specifically  inherent  in the business of developing, testing, obtaining
regulatory  approvals  for,  manufacturing,  commercializing  and  selling a new
ethical  drug  or  a new medical food product, with all of the unforeseen costs,
expenses, problems, and difficulties to which such ventures are subject. In July
2001  BioBalance  acquired  the  intellectual  property  rights  with respect to
certain  probiotic  agents  from  Israeli  companies  engaged  in  the research,
development,  marketing  or sales of probiotic bacteria and other technology. We
cannot  assure that BioBalance will be able to generate revenues or profits from
operation of its business or that BioBalance will be able to generate or sustain
profitability  in  the  future.

     FAILURE  TO SECURE ADDITIONAL FINANCING WOULD RESULT IN IMPAIRED GROWTH AND
INABILITY  TO  OPERATE.

     BioBalance  will  be  required  to  expend  substantial  amounts of working
capital  in  order  to develop, test, obtain the requisite regulatory approvals,
manufacture  and  market  its  proposed  product  and  establish  the  necessary
relationships  to  implement  its business plan. BioBalance had negative cash on
hand  at  December 31, 2004. Since then, both a portion of the net proceeds from
the  Offering,  and  a  portion  of the proceeds of the Company's sale of the NJ
Business  to  Accredited  Health  are  being  used  to fund BioBalance's current
operations.  We  expect these funds will be sufficient to sustain its operations
for  the next twelve months. If BioBalance fails to obtain additional financing,
BioBalance's  clinical  and  regulatory programs would need to be scaled back or
cancelled. BioBalance has no firm agreements or arrangements with respect to any
such  financing and we cannot assure you that any needed funds will be available
to  BioBalance on acceptable terms or at all. The inability to obtain sufficient
funding  of  BioBalance's  operations  in  the  immediate  future  could  cause
BioBalance  to  curtail  or  cease  it  operations.

     THE  SALE  OF  OUR  NEW  YORK  HOME  HEALTH  CARE  BUSINESS IS NOT ASSURED.

     We  are  currently  negotiating  to  sell  our  remaining  home  healthcare
operations  which  are  located  in  New York in whole or in part, to the entity
controlled  by  Messrs.  Braun and Rosenberg. Even if we reach an agreement with
Messrs.  Braun  and Rosenberg with respect to such sale, the sale is expected to
be subject to a number of conditions, including, but not limited to, shareholder
and regulatory approval. Even if shareholder approval and regulatory approval of
the  proposed  sale are obtained, there can be no assurance that litigation will
not  be  commenced  by a shareholder or other third party seeking to prevent the
sale  of  the  remaining  home  healthcare  business to the entity controlled by
Messrs.  Braun  and  Rosenberg  from being consummated. Until the time, if ever,
that  our  New  York  home healthcare business is sold, we expect to continue to


                                       29
<PAGE>
operate  the remaining home healthcare business under Braun and Rosenberg, or an
entity  controlled  by  them.

     IF WE DIVEST OUR HOME HEALTH CARE BUSINESS, WE WILL BE A PURELY DEVELOPMENT
STAGE COMPANY, HAVING GENERATED NO REVENUES TO DATE AND HAVING MINIMAL OPERATING
HISTORY  UPON  WHICH  WE  MAY  BE  EVALUATED.

     To  date,  the  only  revenues that have been generated by the Company have
been  produced  by  the  home health care business.  BioBalance has generated no
revenues  from  operations  or  meaningful  assets,  other than its intellectual
property  rights.  We  have  recently  sold  the  NJ Business and if we sell our
remaining  home  health  care  business  which  is located in New York, our only
remaining  operating  business  will be BioBalance, which faces all of the risks
inherent in a new business and those risks specifically inherent in the business
of  developing, manufacturing, introducing and selling a new drug or new product
to  the  market  with  all  of  the  unforeseen  costs,  expenses, problems, and
difficulties  to  which  such  ventures  are  subject. We cannot assure you that
BioBalance  will  be  able to generate revenues or profits from operation of its
business.

     THE  LOSS OF KEY EXECUTIVES OR CONSULTANTS OR THE FAILURE TO HIRE QUALIFIED
EMPLOYEES  WOULD  DAMAGE  OUR  BUSINESS.

     Because  of  the  highly  technical  nature  of our BioBalance business, we
depend  greatly  on  attracting  and retaining experienced management and highly
qualified  and  trained scientific personnel.  Our future success will depend on
the  continued services of our key scientific and management personnel with whom
we have entered into various agreements.  The management team for BioBalance was
only  assembled,  during  2003  with  the  addition  of  Dennis  O'Donnell  as
BioBalance's President and Chief Executive Officer, Dr. Robert Hoerr as Director
of  Medical  and  Regulatory  Affairs  and  Dr.  Eileen  Bostwick as Director of
Research  and  Development.  We  have  also  retained the services of Dr. Nellie
Kelner-Padalka,  the  original  inventor  of PROBACTRIX, and have entered into a
written  agreement with Dr. Khursheed Jeejeebhoy and are finalizing an agreement
with  Dr.  Harold  Jacob,  both of whom serve on our Medical Advisory Board.  We
compete  intensely for these professionals with other companies in our industry.
If  we  cannot  retain  or hire and effectively integrate a sufficient number of
qualified  scientists and experienced professionals, such inability would have a
material  adverse  effect  on  our capacity to grow our business and develop our
products  through  the clinical trial process.  We do not presently maintain key
person  insurance  for any of BioBalance's key personnel.  Moreover, as a result
of  the  resignations  of Messrs. Braun and Rosenberg, Mr. O'Donnell is our only
executive  officer.  Although  Mr. O'Donnell has previously served as an officer
of subsidiaries or divisions of public companies, he has no direct experience as
a  chief  executive  of  a  public  company.

     WE  COULD  BE REQUIRED TO PAY FUNDS TO SATISFY INDEMNITY AND OTHER POSSIBLE
CLAIMS  BY  FORMER  EMPLOYEES  AND  CONSULTANTS.

     In  November  2003, a former director of  the Company who was an officer of
BioBalance  resigned  and a consulting agreement with a consultant to BioBalance
was  suspended,  and


                                       30
<PAGE>
subsequently  terminated,  as a result of matters related to certain claims made
against  the  former  director  and the consultant by the U.S. Attorney's office
relating  to  an  alleged  attempt  by  these  two individuals to manipulate the
Company's  common  stock. The Company is obligated, under certain circumstances,
to  indemnify  the former director against liability and to pay for his costs of
defending himself from certain legal actions that arose from his activities as a
director or officer of the Company. To date, the Company's insurance carrier has
advanced  funds  on  behalf  of  the Company to the former director to cover the
expenses  of  his  defense  to  the  government  action.  Unless  it  is legally
determined  that  the  former  director  is not entitled to indemnification, the
Company  will be required to reimburse the insurance carrier for $250,000 of the
amount it advanced on behalf of the former director. The Company has accrued the
$250,000  on  its financial statements as of December 31, 2004. In addition, the
terminated  consulting  agreement  that BioBalance had entered into in 2001 with
the  consultant  and  a  company affiliated with the consultant provided for the
payment to the consultant of annual consulting fees of $250,000 per year through
at  least  January  2008  and the issuance of 200,000 warrants to the consulting
company,  subject  to  earlier  termination  of  the  consulting agreement under
certain  circumstances,  including  for  cause,  as defined in the agreement, or
without  cause.  Although  BioBalance  has  notified  the  consultant  of  the
termination  of  the consulting agreement for cause, should the consultant bring
an action to challenge the termination and a court determines that the agreement
was  actually terminated without cause, then BioBalance could be obligated under
the  agreement  to  pay  to  the consulting company a severance payment equal to
three times the sum of its annual base consulting fee and any cash bonus paid to
it in the three-year period preceding the date of termination and to provide the
consultant  with  certain  health and other benefits for a period of five-years.
The  Company  has  accrued $353,910 as of December 31, 2004, in its consolidated
financial statements. There can be no assurance as to the actual amount of money
that  the  Company  will  be required to pay on behalf of its former director in
connection  with  the indemnification provisions. Moreover, the Company believes
that  it  will  be  able  to  defend  its  position  in  a possible claim by the
consultant  that it is owed money under the consulting agreement, although there
can be no assurance as to the amount of monies, if any, that BioBalance may have
to  pay  under the consulting agreement or that the consultant will not bring an
action against BioBalance or the Company for an alleged breach of the consulting
agreement.

     BIOBALANCE'S  PRODUCTS  ARE  IN  DEVELOPMENT AND MAY NOT SATISFY REGULATORY
REQUIREMENTS  OR  BECOME  COMMERCIALLY  VIABLE.

     The  products  that  we  are  currently  developing will require additional
development,  testing,  and  investment  in order to market it as a prescription
drug.  We  cannot be sure that our product research and development efforts will
be  successful, that candidates will enter clinical studies as anticipated, that
we will satisfy Good Laboratory Procedures ("GLP"), medical food or prescription
drug  requirements  or  that  any  required  regulatory  approvals  will  be
expeditiously applied for or obtained, or that any products, if introduced, will
be  commercially successful. We have conducted anecdotal and pre-clinical trials
and  have  recently commenced an IBS medical food clinical trial for our initial
product and have established GRAS (Generally Recognized As Safe) status to date.
The  results  of  these  pre-clinical  and  anecdotal  trials  on products under
development are not necessarily predictive of results that will be obtained from
large  scale


                                       31
<PAGE>
clinical  testing.  We cannot be sure that clinical trials of the products under
development  will  demonstrate  the safety and efficacy of such products or will
result  in  a  marketable  product.  In addition, the administration alone or in
combination  with  drugs  of  any  product  developed  by BioBalance may produce
undesirable  side  effects  in humans. The failure to demonstrate adequately the
safety  and efficacy of a therapeutic drug product under development could delay
or  prevent regulatory approval, where required, and delay or prevent commercial
sale  of  the  product,  any  of  which  could have a material adverse effect on
BioBalance.  The  commercial formulation has yet to be developed for PROBACTRIX.
We  may  encounter  difficulties  in  manufacturing,  process  development  and
formulation  activities  that  could  result  in  delays  in  clinical  trials,
regulatory  submissions,  regulatory  approvals  and  commercialization  of  our
product,  or  cause  negative  financial and competitive consequences. We cannot
assure  you that PROBACTRIX or any other product will be successfully developed,
be  developed  on  a  timely  basis or prove to be more effective than competing
products  based  on  existing  or newly developed technologies. The inability to
successfully  complete  development,  or a determination by us, for financial or
other  reasons,  not  to  undertake to complete development of PROBACTRIX or any
other  product,  particularly  in  instances  in  which we have made significant
capital  expenditures,  could  have  a  material  adverse  effect  on  us.

     POTENTIAL  FAILURE  OF  PLANNED  CLINICAL  TRIALS  TO PRODUCE STATISTICALLY
SIGNIFICANT  DATA  COULD IMPAIR OUR ABILITY TO SUCCESSFULLY MARKET OUR PRODUCTS.

     Even if we are successful in satisfying medical food status, there still is
substantial risk that the studies that we are planning will not yield sufficient
statistically  significant  data  to  make  strong  marketing claims. This could
adversely  affect  marketing  efforts  to  the  medical  community,  which  is
traditionally  resistant  to  new  treatments  unless supported by statistically
significant  data  before recommending it to patients. This could severely limit
our  ability  to  successfully  market  our  product.

     WE ARE DEPENDENT ON NEW PRODUCTS AND CONTINUED INNOVATION.

     The  pharmaceutical  industry  in general, including the market for IBS and
pouchitis  treatments,  is characterized by rapid innovation and advances. These
advances result in frequent product introductions and short product life cycles,
requiring  a  high  level  of  expenditures for research and development and the
timely  introduction of new products. We believe our ability to grow and succeed
is partially dependent upon our ability to introduce new and innovative products
into  such markets. We cannot assure you that we will be successful in our plans
to  introduce  additional  products  to  the  market or expand our current label
indications.

     INTELLECTUAL PROPERTY RIGHTS MAY NOT PROTECT OUR BUSINESS.

     We  have  adopted  a  comprehensive  patent  policy  on  current and future
products.  We  use  a  combination  of  patents, trademarks and trade secrets to
protect  our  proprietary  position on PROBACTRIX. We cannot assure you that our
pending  or future patent and trademark


                                       32
<PAGE>
registration  applications  will  result  in  issued  patents  and  registered
trademarks,  or  that, if issued, our applications will be upheld if challenged.
Further, even if granted, we cannot assure you that these patents and trademarks
will provide us with any protection from competitors or, that if they do provide
any  meaningful  level  of protection, that we will have the financial resources
necessary  to  enforce  our  patent and trademark rights. In addition, we cannot
assure  you  that  others will not independently develop technologies similar to
those  covered  by  our  pending patents and trade secrets, or design around the
pending patents. If others are able to design around our patents, our results of
operations  could  be  materially adversely affected. Further, we will have very
limited,  if  any,  protection  of our proprietary rights in those jurisdictions
where  we  have  not  affected any filings or where we fail to obtain protection
through  our  filings.  We  cannot assure you that third parties will not assert
intellectual  property infringement claims against us in the future with respect
to  current or future products. We are responsible for defending against charges
of  infringement  of third party intellectual property rights by our actions and
products  and  such  assertion  may  require  us to refrain from the sale of our
products,  enter  into  royalty  arrangements  or  undertake  costly litigation.
Further,  challenges  may  be  instituted  by  third parties as to the validity,
enforceability  and  infringement  of  our  patents.  Our  adherence to industry
standards  with  respect  to  our product may limit our opportunities to provide
proprietary  features  which  may be protected. In addition, the laws of various
countries  in  which  our  product  may  be sold may not protect our product and
intellectual  property  rights  to  the  same  extent  as the laws of the United
States.

     THE  VALIDITY  OF  PATENTS  COVERING  PHARMACEUTICAL  AND  BIOTECHNOLOGICAL
INVENTIONS AND THE SCOPE OF CLAIMS MADE UNDER SUCH PATENTS IS UNCERTAIN; FAILURE
TO  SECURE  NECESSARY PATENTS COULD IMPAIR OUR ABILITY TO PRODUCE AND MARKET OUR
PRODUCTS.

     There  is  no  consistent policy regarding the breadth of claims allowed in
specialty  pharmaceutical  and  biotechnology  patents. In addition, patents may
have  been  granted, or may be granted, to others covering products or processes
we  need for developing our products. If our products or processes infringe upon
the  patents,  or  otherwise  impermissibly utilize the intellectual property of
others,  we  might  be  unable to develop, manufacture, or sell our products. In
such  event, we may be required to obtain licenses from third parties. We cannot
be  sure that we will be able to obtain such licenses on acceptable terms, or at
all.

     FAILURE  TO  ASSEMBLE  OR  CONTRACT  WITH  AN  ADEQUATE  SALES  & MARKETING
ORGANIZATION  OR  PARTNER WITH A LARGER PHARMACEUTICAL COMPANY COULD RESULT IN A
LACK  OF  FUTURE  REVENUES.

     To  market  any  of  our  products  directly,  we  would  have to develop a
substantial  marketing  and  sales  force.  Alternatively,  we  may, for certain
products,  attempt  to  obtain the assistance of larger pharmaceutical companies
with  established  distributions systems and direct sales forces. We do not know
if  we  will  be able to enter into agreements with other companies to assist in
the  marketing  and  sales  of  our  products.


                                       33
<PAGE>
     WE  OWN  NO MANUFACTURING FACILITIES AND WILL BE DEPENDENT ON THIRD PARTIES
TO  MAKE  OUR  PRODUCT.

     We  own  no  manufacturing  facilities  or  equipment,  and  employ  no
manufacturing  personnel.  We expect to use third parties to manufacture certain
of  our  products  on  a  contract  basis.  We  may  not  be  able  to  obtain
contract-manufacturing  services  on  reasonable  terms or at all. If we are not
able  to  contract  manufacturing  services,  we  will  not  be able to make our
products.

     WE MAY BE REQUIRED TO COMPLY WITH GOOD MANUFACTURING PRACTICES.

     The  manufacture of our proposed products will likely be subject to current
Good Manufacturing Practices ("GMP") prescribed by the FDA in the United States.
We  cannot  give  assurance  that we or any entity manufacturing products on our
behalf will be able to comply with GMP or satisfy certain regulatory inspections
in connection with the manufacture of our proposed products. Failure or delay by
any  manufacturer  of  our products to comply with GMP or similar regulations or
satisfy  regulatory  inspections  would  have  a  material adverse effect on us.

     POTENTIAL  SIDE  EFFECTS  OF  OUR  PRODUCT  COULD  IMPAIR  OUR  ABILITY  TO
SUCCESSFULLY  MARKET  OUR  PRODUCTS.

     Although no side effects of our products have been reported, it is possible
that  any  time  during  clinical  trials  or patient usage, side effects may be
encountered.  If they are common enough or significant enough, this could result
in  our  products  being  withdrawn  from  the  market or liability claims being
asserted  against  us.

     OUR PRODUCTS MAY NOT BE ACCEPTED BY PHYSICIANS, PATIENTS OR THIRD PARTY
PAYERS.

     Patients,  doctors  and  third-party  payers  must  accept  our products as
medically  useful  and  cost-effective  for  us  to  be  successful. Doctors and
patients  are very important constituents because they directly make all medical
decisions.  Third  party  payers  are also very important because they pay for a
major portion of all medical care expenses. Third party payers consist of health
maintenance  organizations  ("HMOs"),  health  insurers, managed care providers,
Medicare  and  Medicaid,  and  their  equivalent  organizations in jurisdictions
outside  the  U.S. In order to achieve our sales targets in the jurisdictions in
which  we  intend  to  sell  our products, we must educate patients, doctors and
third-party  payers  on  the benefits of our products. We cannot assure you that
patients,  doctors  or  third-party  payers  will  accept  our products, even if
approved  for  marketing,  on  a  timely  basis.

     GOVERNMENT AND PRIVATE INSURANCE PLANS MAY NOT PAY FOR OUR PRODUCTS.

     The  success  of  our  products  in the United States and other significant
markets  will  depend, in part, upon the extent to which a consumer will be able
to  obtain  reimbursement  for  the  cost  of  such  product  from  governmental
authorities,  third-party payers and other


                                       34
<PAGE>
organizations.  We cannot determine in advance the reimbursement status of newly
approved  therapeutic  products. Even if a product is approved for marketing, we
cannot  be  sure  that  adequate  reimbursement  will be available. Also, future
legislation  or regulation, or related announcements or developments, concerning
the  healthcare  industry  or  third  party  or  governmental  coverage  and
reimbursement  may  adversely affect our business. In particular, legislation or
regulation  limiting  consumers'  reimbursement  rights  could  have  a material
adverse  effect  on  our  revenues.

     WE  MAY  LOSE  ANY  TECHNOLOGICAL ADVANTAGE BECAUSE PHARMACEUTICAL RESEARCH
TECHNOLOGIES  CHANGE  RAPIDLY.

     The  pharmaceutical  research field is characterized by rapid technological
progress  and  intense competition. As a result, we may not realize the expected
benefits  of  our  business  strategy.  Businesses,  academic  institutions,
governmental  agencies,  and other public and private research organizations are
conducting  research  to  develop  technologies  that  may compete with those of
BioBalance.  It  is  possible  that  competitors  could  acquire  or  develop
technologies  that  would  render  our technology obsolete or noncompetitive. We
cannot  be  certain  that  we will be able to access the same technologies at an
acceptable  price,  or  at  all.

     WE  COULD  BE  FACED  WITH  POSSIBLE  PRODUCT  LIABILITY LOSSES AND ADVERSE
PRODUCT  PUBLICITY.

     BioBalance,  like any other wholesaler, retailer or distributor of products
that  are designed to be ingested, faces an inherent risk of exposure to product
liability claims and negative publicity in the event that the use of its product
results  in  injury.  We face the risk that materials used in the manufacture of
the final product may be contaminated with substances that may cause sickness or
injury  to  persons  who  have  used the products, or that sickness or injury to
persons may occur if the product distributed by us is ingested in dosages, which
exceed  the dosage recommended on the product label. In the event that insurance
coverage  or  contractual  indemnification  is  not  adequate, product liability
claims  could  have a material adverse effect on us. The successful assertion or
settlement  of any uninsured claim, a significant number of insured claims, or a
claim  exceeding  any  future  insurance coverage, could have a material adverse
effect  on  us. Additionally, we are highly dependent upon consumers' perception
of the safety and quality of our product as well as similar products distributed
by other companies. Thus, the mere publication of reports and negative publicity
asserting that such products may be harmful could have a material adverse effect
on  us,  regardless  of  whether  such  reports  are  scientifically  supported,
regardless  of  whether  the  harmful  effects  would  be present at the dosages
recommended  for  such  products, and regardless of whether such adverse effects
resulted  from  failure  to  consume  the  product  as  directed.

     INTENSE  COMPETITION  MAY  RESULT  IN  OUR INABILITY TO GENERATE SUFFICIENT
REVENUES  TO  OPERATE  PROFITABLY.

     The pharmaceutical industry is highly competitive. Numerous companies, many
of  which  are  significantly  larger  than  us,  which  have greater financial,
personnel,  distribution  and  other resources than us and may be better able to
withstand  volatile  market conditions, will compete with us in the development,
manufacture  and  marketing  of  probiotics for the treatment


                                       35
<PAGE>
of  IBS  or  other  GI  disorders.  There  can  be no assurance that national or
international  companies  will  not seek to enter, or increase their presence in
the  industry.  In  addition, large nationally known companies (such as Novartis
and  GlaxoSmithKline)  are  in  competition with us in this industry, since they
have already spent millions of dollars to develop treatments for IBS or other GI
disorders.  Increased competition could have a material adverse effect on us, as
our  competitors may have far greater financial and other resources available to
them  and  possess  extensive  manufacturing,  distribution  and  marketing
capabilities  far  greater  than  ours.

RISKS RELATING TO THE HOME HEALTH CARE BUSINESS

RECENT  RULING REGARDING COMPANIONSHIP SERVICES EXEMPTION MAY IMPACT OUR ABILITY
TO  PROVIDE  HEALTH  CARE  SERVICES

On  July  22,  2004, the federal Second Circuit Court of Appeals issued a ruling
concerning  the  Fair  Labor Standards Act on the validity of the "companionship
services"  exemption  from  minimum  wage  and  overtime payment requirements to
paraprofessional  field  staff  in  New York State Home care providers have long
relied on this exemption to provide compensation to home care aides and personal
care  workers with the expectation that there is no obligation for overtime pay.
In  September 2004, a request for a rehearing was submitted en banc for the full
court.  On  January  13, 2005, the Court rejected the request for a rehearing on
the  issue.  At  this  point,  preparations  are  being made to submit papers to
request  a  review of the issue before the U.S. Supreme Court. Simultaneously, a
request  for  a  stay  of  mandate  from  the Court is pending resolution at the
Supreme  Court  level.

The  implication  of  these changes for paying the overtime expense for the home
care industry and the State will be challenges to ensuring patient continuity of
care,  if agencies can no longer afford to authorize overtime during an outgoing
workforce  shortage,  and the inability of workers to secure the number of hours
of  work  they  desire,  all  of  these factors may cause a higher cost per hour
serviced  thereby  adversely affecting profit, ability.

     WE  ARE  INDIRECTLY  DEPENDENT  UPON  REIMBURSEMENT  BY THIRD-PARTY PAYERS;
HEALTH  CARE  REFORM  COULD  REDUCE  REVENUES.


     More than 40% of our revenues of are paid by Certified Home Health Agencies
and  Long-Term  Home  Health Care Programs, as well as other clients who receive
their  payments from "third- party payers," such as private insurance companies,
self-insured  employers  and HMOs. Our revenues and profitability, like those of
other  home  health  care  companies,  are affected by the continuing efforts of
third-party  payers  to  contain  or reduce the costs of health care by lowering
reimbursement  or  payment  rates, increasing case management review of services
and  negotiating  reduced  contract pricing. Because home care is generally less
costly  than  hospital-based  care,  home  nursing  and home care providers have
benefited  from  cost  containment  initiatives  aimed  at reducing the costs of
medical  care.  However, as expenditures in the home health care market continue
to  grow, cost containment initiatives aimed at reducing the costs of delivering
services  at  non-hospital sites are likely to increase. A significant reduction
in  coverage  or  payment  rates  of  public or private third-party payers would
reduce  New  York  Health  Care's  revenues and profit margins. While we are not
aware  of  any  substantive  changes  in  the Medicare or Medicaid reimbursement
systems  for  home health care which are about to be


                                       36
<PAGE>
implemented,  revised  budget  plans of New York State or the federal government
could  result in limitation or reduction in the reimbursement of home care costs
and  in the imposition of limitations on the provision of services which will be
reimbursed.  Moreover,  third  party  payers,  particularly  private  insurance
companies,  may  negotiate  fee discounts and reimbursement caps for services we
provide.

     SLOW  PAYMENTS  AND  POSSIBLE BAD DEBTS MAY CAUSE WORKING CAPITAL SHORTAGES
AND  OPERATING  LOSSES.

     We  generally  collect  payments  from  our contractors within one to three
months  after services are rendered, but pay our obligations on a current basis.
This timing delay may cause working capital shortages from time to time. We have
a  secured  revolving  credit  facility,  which  may be available to cover these
periodic  shortages.  Borrowings  or  other  methods  of  financing  may  not be
available  when  needed  or, if available, may not be on terms acceptable to us.
Although  we have established a bad debt reserve for uncollectible accounts, any
significant  increase  in  bad  debts  would  damage  our  profitability.

     PROFESSIONAL  LIABILITY INSURANCE MAY BECOME INADEQUATE, UNAVAILABLE OR TOO
COSTLY.

     The  administration  of  home  care  and  the provision of nursing services
entail  certain  liability  risks.  We maintain professional liability insurance
coverage  with  limits  of $1,000,000 per claim and $3,000,000 annual aggregate,
with an umbrella policy providing an additional $5,000,000 of coverage. Although
we  believe that the insurance we maintain is sufficient for present operations,
professional  liability  insurance  is  increasingly  expensive  and  sometimes
difficult  to obtain. A successful claim against us in excess of, or not covered
by,  our  insurance could adversely affect our business and financial condition.
Claims  against  us,  regardless  of their merit or eventual outcome, could also
adversely  affect  our  reputation  and  home  health  care  business.

     CHANGES  IN  FEDERAL  AND  STATE REGULATION COULD INCREASE COSTS AND REDUCE
REVENUES.

     Our  home  health care business is subject to substantial regulation at the
state  level  and  also  under  the  federal  Medicare  and  Medicaid  laws.  In
particular, we are subject to state laws regulating home care, nursing services,
health  planning  and  professional  ethics,  as  well as state and federal laws
regarding  fraud  and abuse in government funded health programs. Changes in the
law  or new interpretations for existing laws can increase the relative costs of
doing  business and reduce the amount of reimbursement by government and private
third-party  payers.  Although  we have not experienced any difficulties to date
complying  with  applicable  laws,  rules or regulations, our failure to obtain,
renew  or  maintain  any  required regulatory approvals or licenses could have a
material  adverse  effect  on us and could prevent us from offering our existing
services  to patients or from further expansion. Pending legislation in both the
States  of New York and New Jersey could substantially impact the conduct of our
home  health  care  business  and  potentially  adversely  affect  the  cost  of
operations  and  available  reimbursement.  Under the pending legislation in New
Jersey,  home  health  care  aides  would  be  required to register with various
State-funded  home  care councils; the home care councils would have the


                                       37
<PAGE>
ability  to  employ  home  health  care aides and provide referrals to consumers
seeking  the  services  of  home  health  care aides; the State could assess and
collect  fees  from  home health care agencies to pay the costs of operating the
home  care  councils, and the State could fix minimum wages for home health care
aides,  as  well as place caps on permissible administrative expenses. Under the
pending legislation in New York, certain reporting requirements, as well as caps
on  permissible  administrative  expenses,  would  be  imposed.  If  the pending
legislation  becomes  law  in  its current form, costs of operations of our home
health care business in both New York and New Jersey are likely to increase, and
we would not be able to conduct our home health care business in New Jersey on a
profitable  basis.

     INTENSE  COMPETITION  COULD  RESULT  IN LOSS OF CLIENTS, LOSS OF PERSONNEL,
REDUCED  REVENUES  AND  INABILITY  TO  OPERATE  PROFITABLY.

     The  home  health  care industry is marked by low entry costs and is highly
fragmented  and competitive. We compete for personnel with hospitals and nursing
homes,  and we also compete for both personnel and business with other companies
that  provide  home  health  care  services, most of which are large established
companies  with  significantly  greater resources, access to capital and greater
name  recognition  than  we  have.  Our  principal  business competitors include
Premiere  Health  Services, National Home Health Care Corp., Patient Care, Inc.,
and  Personal  Touch  Home  Care  Services, Inc. We also compete with many other
small  temporary  medical  staffing  agencies.  Competition  for  qualified
paraprofessional  personnel  in  the  New  York Metropolitan area is intense. We
believe  that,  given  the  increasing  level  of  demand  for nursing services,
significant  additional  competition  can  be expected to develop in the future.


     DEPENDENCE  ON  MAJOR  CUSTOMERS  AND  REFERRAL  SOURCES  MAY  RESULT  IN
SUBSTANTIAL  DECLINES  IN  REVENUES  IF  CUSTOMERS  ARE  LOST.

     The  development and growth of our home care and nursing businesses depends
to  a significant extent on our ability to establish close working relationships
with  hospitals,  clinics,  nursing homes, physician groups, HMO's, governmental
health  care  agencies  and other health care providers. Many of our contractual
arrangements  with  customers are renewable annually. Existing relationships may
not  be  successfully  maintained  and  additional  relationships  may  not  be
successfully  developed  and  maintained  in existing and future markets. Our 10
largest customers accounted for approximately 80.8% of gross revenues during the
year  ended  December 31, 2004. One referral source, New York City Medicaid, was
responsible  for  approximately  43.4%  of our gross revenues for the year ended
December  31,  2004.  The  loss  of, or a significant reduction in, referrals by
these  sources,  as  well  as  certain  other key sources, would have a material
adverse  effect  on  results  of  operations  of  our home health care business.

     LOSS  OF  KEY  PERSONNEL MAY RESULT IN IMPAIRMENT OF THE ABILITY TO DELIVER
SERVICES  OR  MANAGE  OPERATIONS.

     Our  success  in  the  home  health care business segment to a large extent
depends  upon  the  continued  services  of  Jerry  Braun,  President  and Chief
Executive  Officer  of  the Home Health


                                       38
<PAGE>
Care  division, and Jacob Rosenberg, Vice President, Chief Operating officer and
Chief  Financial  Officer of the Home Health Care division. Although the Company
has  entered  into  employment agreements with Messrs. Braun and Rosenberg which
expire  in  2009,  and  the Company is the sole beneficiary of a $5,000,000 life
insurance  policy  covering  Mr.  Braun  and  a $3,000,000 life insurance policy
covering  Mr.  Rosenberg,  the loss of the services of either of these employees
for  any  reason, including, but not limited, to a violation of their employment
agreements,  would  damage us. The success of our home health business will also
depend, in part, upon our ability in the future to attract and retain additional
qualified  licensed  health  care, operating, marketing and financial personnel.
Competition  in  the  home health care industry for qualified personnel is often
intense  and  we  may  not  be  able  to retain or hire the necessary personnel.

RISKS RELATING TO OUR COMMON STOCK

     POSSIBLE  VOLATILITY  OF COMMON STOCK MAY RESULT IN LOSSES TO SHAREHOLDERS.

     The  trading  price  of  our  Common  Stock has been subject to significant
fluctuations  and  there is a limited market for our Common Stock. Over the last
12  months,  the  price of our Common Stock has ranged from a high of $4.50 to a
low of $0.46. The price of our Common Stock is likely to continue to be affected
by  various factors, including but not limited to the results of our development
efforts  of  PROBACTRIX  and  other products, variations in quarterly results of
operations,  announcements of new contracts or services or acquisitions by us or
our  competitors, governmental regulatory action, general trends in the industry
and other factors, such as extreme price and volume fluctuations which have been
experienced  by  the  securities  markets  from  time  to  time in recent years.

     OUR  DELISTING  FROM  NASDAQ  DUE  TO OUR FAILURE TO SATISFY NASDAQ LISTING
STANDARDS AND OUR STOCK BEING SUBJECT TO THE "PENNY STOCK" RULES HAS RESULTED IN
REDUCED  LIQUIDITY  AND  LOWER  STOCK  PRICE.

     Our  Common  Stock,  which  was delisted from the Nasdaq SmallCap market in
April  2004  as  a  result of Nasdaq's public interest concerns regarding events
relating  to  the indictments by the U.S. Attorney's Office of a former Director
of  the  Company who was an officer of BioBalance and a consultant to BioBalance
for  allegedly  attempting  to  manipulate  our Common Stock, and our failure to
timely hold one of our annual shareholder meetings, is now listed for trading in
the  OTC  "pink  sheets,"  which  provides  significantly  less liquidity than a
securities  exchange  (such  as  the  American or New York Stock Exchange) or an
automated  quotation system (such as the Nasdaq National or SmallCap Market). As
a  result,  the liquidity of our Common Stock has been impaired, not only in the
number  of  shares  which can be bought and sold, but also through delays in the
timing  of  transactions,  reduction  in  security  analysts'  and  news media's
coverage and lower prices for our Common Stock than might otherwise be attained.
There  is  currently a very limited volume of trading in our Common Stock and on
many  days  there  is  no trading activity at all in our Common Stock. Moreover,
because  of  the  limited  volume of trading, our Common Stock is more likely to
fluctuate  due  to  broad  market  fluctuations,  general  market  conditions,
fluctuations in our operating results, future securities offering by us, changes
in  the


                                       39
<PAGE>
market's perception of our business, announcements made by us or our competitors
and  general  industry  conditions.  Our  Common Stock may not be accepted for a
listing  on  an  automated  quotation  system  or  securities  exchange.

     In  addition,  our  Common  Stock  is subject to the low-priced security or
so-called "penny stock" rules that impose additional sales practice requirements
on  broker-dealers  who  sell  such  securities. For any transaction involving a
penny  stock,  the rules require, among other things, the delivery, prior to the
transaction,  of a disclosure schedule required by the SEC relating to the penny
stock  market.  The  broker-dealer also must disclose the commissions payable to
both  the broker-dealer and the registered representative and current quotations
for  the  securities. Finally, monthly statements must be sent disclosing recent
price  information  for  the  penny  stocks  held in the customer's account. The
regulations  relating  to penny stocks could limit the ability of broker dealers
to  sell  our  Common Stock and, thus, the ability of shareholders to sell their
shares  in  the  market.

     FUTURE  SALES  OF  SHARES  OF  OUR  COMMON STOCK COULD ADVERSELY AFFECT THE
MARKET  PRICE  OF  OUR COMMON STOCK AND OUR ABILITY TO RAISE ADDITIONAL CAPITAL.

     We  have  previously issued a substantial number of shares of Common Stock,
which  are  eligible  for resale under Rule 144 of the Securities Act, and which
may  become  freely  tradable.  We  have  registered  or  agreed  to  register a
substantial number of shares of Common Stock that are issuable upon the exercise
of  options and warrants or that were previously issued in private transactions.
If  holders  of options or warrants choose to exercise their purchase rights and
sell  shares  of  Common  Stock in the public market, or if holders of currently
restricted shares choose to sell such shares in the public market under Rule 144
or  otherwise,  the  prevailing  market  price for the Common Stock may decline.
Future  public  sales  of shares of Common Stock may adversely affect the market
price  of  our  Common  Stock or our future ability to raise capital by offering
equity  securities.

     ISSUANCE  OF  PREFERRED  STOCK  COULD  REDUCE THE VALUE OF COMMON STOCK AND
COULD  HAVE  ANTI-TAKEOVER  EFFECTS.

     We  are  authorized  by  our  certificate  of  incorporation to issue up to
5,000,000 shares of preferred stock, on terms which may be fixed by our board of
directors  without  further  shareholder action. There are now 590,375 shares of
Series  A convertible preferred stock currently issued and outstanding which can
be converted, on a 1-for-2/3rds basis, into shares of Common Stock. The terms of
any  new  series of preferred stock, which may include priority claims to assets
and  dividends  and  special voting rights, could adversely affect the rights of
holders  of  the Common Stock. The issuance of an additional series of preferred
stock,  depending upon the rights and preferences of such series, could make the
possible  takeover  of  our  company  or  the  removal  of  our  management more
difficult,  discourage  hostile  bids  for  control  of  our  company  in  which
shareholders may receive premiums for their shares of Common Stock, or otherwise
dilute  the rights of holders of Common Stock and the market price of the Common
Stock.

     WE HAVE NEVER PAID ANY DIVIDENDS ON OUR COMMON STOCK.


                                       40
<PAGE>
     We  have never paid any dividends on our Common Stock and do not anticipate
paying  cash  dividends in the foreseeable future. We currently intend to retain
all  earnings.  The declaration and payment of future dividends, if any, will be
at  the  sole  discretion  of  our  board  of directors and will depend upon our
profitability,  financial  condition,  cash  requirements, future prospects, the
rights  of  any  other  classes  of  preferred  stock,  and other factors deemed
relevant  by  the  board  of  directors.

     SHARES  OF  OUR  COMMON  STOCK ISSUED IN CONNECTION WITH OUR ACQUISITION OF
BIOBALANCE  MAY HAVE BEEN ISSUED WITHOUT COMPLYING WITH CERTAIN STATE SECURITIES
LAWS.

     During October 2003, it was determined that certain of the shares of common
stock  that  we  issued  to  holders  of BioBalance stock in connection with our
January  2003  acquisition  of  BioBalance  may  not  have  been exempt from the
registration  or  qualification  requirements  of  the  state securities laws of
certain  of  the  states  where  the  holders  of  BioBalance stock then resided
although  they  were  registered  under  the Securities Act of 1933, as amended.
Although we are unable to quantify the actual number of shares involved that are
still owned by the original recipients of our shares in the acquisition, the per
share  purchase  price  paid  by  the  BioBalance  holders  for  the shares they
exchanged  in  the  acquisition  ranged  from  $.03  to  $3.00  per share and we
currently  believe  that  the purchase price paid by such persons who might have
certain  statutory  rescission  rights  does  not exceed approximately $345,000,
exclusive  of any penalties or interest, although no assurance can be given that
any such claims will not exceed this amount.  We cannot determine the effect, if
any, on our operations or financial condition that may occur from the failure to
register  or qualify these shares under applicable state securities laws.  If it
is  determined  that  we  offered  securities  without  properly  registering or
qualifying  them  under  state  laws,  or  securing exemption from registration,
regulators  could  impose  on  us  monetary fines or other sanctions as provided
under  these  laws.  We  are unable to estimate the amount of monetary fines, if
any,  or  the  nature  or  scope  of  any  sanctions  at  this  time.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  consolidated  financial  statements  of the Company, together with the
independent  Registered  Public  Accounting Firms' report thereon of Weiser LLP,
for  the  year  ended December 31, 2004, 2003 and from Holtz Rubenstein Reminick
LLP  for  the  year  ending  December  31,  2002,  appears  herein. See Index to
Financial  Statements  appearing  on  page  77.

ITEM 9.    CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE

     None.


                                       41
<PAGE>
ITEM 9A.    CONTROLS AND PROCEDURES

     As  required  by  Rule  13a-15(b) under the Securities Exchange Act of 1934
(the  "Exchange  Act"),  the Company's management, with the participation of the
Company's  Chief  Executive Officer ("CEO") and Chief Financial Officer ("CFO"),
evaluated  the effectiveness of the Company's disclosure controls and procedures
as  of  the  end  of  the period covered by this report in reaching a reasonable
level  of assurance that the information required to be disclosed by the Company
in  the  reports  that  it  files with the Securities and Exchange Commission is
recorded, processed, summarized and reported within the time period specified in
the  Securities  and  Exchange  Commission's  rules  and  forms. Based upon that
evaluation, the CEO and CFO concluded that the Company's disclosure controls and
procedures  were  effective  as of the end of the period covered by this report.
As  required by Exchange Act Rule 13a-15(d), the Company's management, including
the  Chief  Executive  Officer  and  Chief  Financial Officer, also conducted an
evaluation  of  the  Company's  internal  control  over  financial  reporting to
determine  whether  any  changes  occurred during the fourth fiscal quarter that
have  materially  affected,  or  are reasonably likely to materially affect, the
Company's  internal  control  over  financial  reporting.

     Please  note  that  any  system  of  controls,  however  well  designed and
operated,  can  provide  only  reasonable,  and not absolute, assurance that the
objectives  of  the  system  will be met. In addition, the design of any control
system  is based in part upon certain assumptions about the likelihood of future
events.

ITEM 9B.  OTHER INFORMATION:

Not applicable.

                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  executive  officers  and  directors  of  the  Company  are as follows:

<TABLE>
<CAPTION>
Name                 Age                  Position
-------------------  ---  ----------------------------------------
<S>                  <C>  <C>
Dennis M. O'Donnell   49  Director, Chief Executive Officer, Chief
                          Financial Officer and Secretary of the
                          Company and President & CEO
                          of The BioBalance Corporation

Fred E. Nussbaum      57  Director

Mordecai H. Dicker    44  Director

Mark Gray             46  Director
</TABLE>


                                       42
<PAGE>
     Dennis  O'Donnell  has  been  a director of the Company since January 2004,
Chief  Operating  Officer  of the Company's BioBalance subsidiary since May 2003
and  President  of  BioBalance  since November 2003 and on February 24, 2005, he
became  the  Company's Chief Executive Officer and Secretary.  Mr. O'Donnell has
more  than  20  years  of general management, marketing and business development
experience  in  the  pharmaceutical,  consumer  healthcare  and  nutritional
industries,  principally  with Wyeth (formerly American Home Products) from 1983
to  2002,  including  as  manager  of  the  Wyeth's  Respiratory and GI/Topicals
Divisions  from  1994  to  1996;  Senior  Vice  President  of  Global  Business
Development & Strategic Planning for Wyeth's OTC Drug Division from 1996 to 1998
(where  he  identified  drugs,  devices  and  medical  foods  for  potential
acquisition); and Executive Vice President and General Manager of Wyeth's Solgar
division,  a  manufacturer  of  premium  dietary  supplements,  probiotics  and
specialty  nutritional  products.  From  February  2002  to April 2003, he was a
consultant  to  the  pharmaceutical  and  consumer  healthcare  industries.  Mr.
O'Donnell  is  a  registered pharmacist, with a B.S. in Pharmacy from St. John's
University  and  an  MBA in Marketing & Finance from New York University's Stern
School  of  Business.

     Fred E. Nussbaum has been a director of the Company since January 2004. Mr.
Nussbaum  became  Chairman  of  the  Board  of the Company in February 2005. Mr.
Nussbaum  is  licensed as a certified public accountant in New York and has, for
more  than  the  past  five  years, provided accounting and auditing services to
individuals,  partnerships,  corporations  and  not-for-profit  and  charitable
organizations. From 1997 to 1999 Mr. Nussbaum was the Chief Financial Officer of
DEB-EL Foods Corporation, a large producer of eggs and egg-based products in the
Northeast.  Mr.  Nussbaum  is  a  member  of the American Institute of Certified
Public  Accountants  as  well  as the New York State Society of Certified Public
Accountants.  He  has  a  BBA  from  the  Bernard  M. Baruch College of the City
University  of  New  York.

     Mordecai  H.  Dicker has been a director of the Company since January 2004.
From  1998  to  1999, Mr. Dicker was the Company's Program Director, responsible
for payroll, billing, accounts receivable and cash receipts.  From 2000 to 2003,
Mr.  Dicker  was  Administrator  of the Sayreville Senior Living Center, Inc., a
230-bed  long-term  care  facility. Since 2003, he has been the Administrator of
the  Franklin  Care  Center,  a  180-bed  long-term  care  facility.

     Mark Gray has been a director of the Company since January 2004.  From 1985
to  2000,  Mr.  Gray  was  an independent computer consultant serving insurance,
banking,  technology  and  consumer  goods  corporations  in the development and
management  of  various  computer  systems and software.  From 2000 to 2003, Mr.
Gray  was  the  Director of Clinical Services for CATECG Medical Services, PC, a
provider of mobile diagnostic cardiology and neurology services to hospitals and
other medical care facilities in the New York metropolitan area.  Since 2003, he
has  been  Executive  Vice  President  of  ESF  Marks,  LLC, a computer software
company.  Mr.  Gray has a B.A. in Medical Computer Science from Brooklyn College
of  the  City  University  of  New  York.

     Directors  hold  office  until  the next annual meeting of the stockholders
and/or  until  their  successors  have been duly elected and qualified, or until
death,  resignation  or removal.  Executive


                                       43
<PAGE>
officers  are  elected by the Board of Directors on an annual basis and serve at
the  discretion of the Board. There is no family relationship between any of the
Company's  directors  or  its  executive  officers.

AUDIT COMMITTEE

     The  Board  of  Director has a standing Audit Committee. The members of the
Audit  Committee  are  Mordecai Dicker, Mark Gray and Fred E. Nussbaum.  Fred E.
Nussbaum  serves  as  Chairman of the Audit Committee and as the Audit Committee
financial  expert.  The  Board  has  determined  that  each  member of the Audit
Committee,  including the Company's audit committee expert, is "independent," as
that  term is defined in the applicable  SEC rules and would also be independent
under  NASD  Marketplace  rules.

SECTION 16(a) COMPLIANCE REPORTING

     Section  16(a)  of  the  Exchange  Act requires the Company's directors and
executive officers and holders of more than 10% of the Company's common stock to
file  reports  with  the  SEC  about  their  ownership of common stock and other
securities  of  the Company.  These persons are required by SEC rules to furnish
the  Company  with  copies  of all Section 16(a) forms they file. The Company is
required  to  identify  anyone  who  filed  a  required report late during 2004.

     Based solely on our review of forms we received and written representations
from  reporting persons stating that they were not required to file these forms,
the  Company  believes,  that during 2004, all Section 16(a) filing requirements
were  satisfied  on  a  timely  basis.

CODE OF ETHICS

     The  Company  has  adopted  a  Code of Ethics for Senior Financial Officers
which  applies  to the Company's Chief Executive Officer and Chief Financial and
Principal  Accounting Officer. A copy of this Code was filed with the Securities
and  Exchange Commission as an exhibit to the Company's Form 10-K for the fiscal
year  ended  December  31,  2003.

ITEM 11.    EXECUTIVE COMPENSATION

The  following  table  sets forth, for the fiscal years ended December 31, 2002,
2003  and  2004,  the  cash compensation paid by the Company, as well as certain
other  compensation  paid  with  respect to those fiscal years, to the Company's
Chief  Executive  Officer and to each of the three other most highly compensated
executive  officers  of  the  Company and its BioBalance subsidiary, whose total
salary  and bonuses for the fiscal year 2004, in all capacities in which served,
was  $100,000  or  more  (collectively,  the  "Named  Executive  Officers"):

<TABLE>
<CAPTION>
                                ANNUAL COMPENSATION                       LONG-TERM COMPENSATION
                                -------------------                       ----------------------
NAME AND
PRINCIPAL                                                   OTHER         SECURITIES
POSITION                                                    ANNUAL        UNDERLYING        ALL OTHER
                                   SALARY      BONUS     COMPENSATION    OPTIONS/SARS     COMPENSATION
                            YEAR     ($)        ($)          ($)                               ($)
                            -----------------------------------------------------------------------------
<S>                         <C>   <C>        <C>        <C>             <C>             <C>
Jerry Braun (6)             2004  $ 341,026  $ 276,325  $    49,823(1)  200,000 Shares  $      634,789(3)
  President and Chief       2003  $ 333,872  $  35,000  $    44,085(1)  200,000 Shares  $      412,500(3)
  Executive Officer         2002  $ 325,200  $ 405,000  $    48,395(1)                  $            0
---------------------------------------------------------------------------------------------------------
Jacob Rosenberg (6)
  Chief Operating Officer   2004  $ 288,560  $ 271,340  $    47,862(2)  200,000 Shares  $      535,737(3)
  and Chief Financial       2003  $ 257,557  $  30,000  $    46,447(2)  200,000 Shares  $      337,500(3)
  Officer                   2002  $ 242,815  $ 401,000  $    50,582(2)                  $            0
---------------------------------------------------------------------------------------------------------
Dennis O'Donnell (5)
  President and Chief       2004  $ 200,000  $       0  $    20,321(4)  150,000 Shares  $              0
  Operating Officer of      2003  $ 126,923  $       0  $    12,198(4)  200,000 Shares  $              0
  BioBalance                2002  $       0  $       0  $         0                     $              0
---------------------------------------------------------------------------------------------------------
<FN>


                                       44
<PAGE>
(1)  Includes $35,518, $31,081 and $25,720 of medical insurance premiums paid on
     behalf  of  such  individual  for  the  fiscal  years  2004, 2003 and 2002,
     respectively,  $4,305,  $3,004  and  $12,675  for  automobile  and
     automobile-related  costs,  including insurance, incurred on behalf of such
     individual,  respectively,  for  the  fiscal  years  2004,2003 and 2002 and
     $10,000  in  expense  allowance  for  the fiscal years ended 2004, 2003 and
     2002.

(2)  Includes $35,518, $31,081 and $25,720 of medical insurance premiums paid on
     behalf  of  such  individual  for  the  fiscal  years  2004,2003  and 2002,
     respectively,  $2,344,$5,366  and  $14,862  for  automobile  and
     automobile-related  costs,  including insurance, incurred on behalf of such
     individual,  respectively,  for each of the fiscal years 2004,2003 and 2002
     and  $10,000 in expense allowance for the fiscal years ended 2004, 2003 and
     2002.

(3)  Change  in  control  payment.  This  change  in control took place with the
     merging  of  the  Company  and  BioBalance  on  January  2,  2003.

(4)  Includes  $20,321 and $12,198 for medical insurance premiums paid on behalf
     of  such  individual  for  the  fiscal  years  2004 and 2003, respectively.

(5)  Dennis  O'Donnell  became  President of BioBalance on November 26, 2003. On
     February  24,  2005,  he  became  the Company's Chief Executive Officer and
     Secretary.

(6)  Messrs. Braun and Rosenberg resigned as executive officers and directors of
     the  Company  on  February  24,  2005.
</TABLE>

OPTION/SAR GRANTS IN 2004

The  following  table provides certain information with respect to stock options
granted  to  the  Named  Executive  Officers in 2004.


                                       45
<PAGE>
<TABLE>
<CAPTION>
                                     INDIVIDUAL GRANTS

-------------------------------------------------------------------------------------------
                   Number of      % of Total
                   Securities    Options/SARs
                   Underlying     Granted to                                    Grant Date
                  Options/SARs   Employees in     Exercise Price   Expiration    Present
Name                Granted     Fiscal Year (1)  Per Share ($/sh)     Date      Value (2)
-------------------------------------------------------------------------------------------
<S>               <C>           <C>              <C>               <C>         <C>

Jerry Braun            200,000           36.36%              2.13    01/28/14  $    248,940
Jacob Rosenberg        200,000           36.36%              2.13    01/28/14  $    248,940

Dennis O'Donnell       100,000           18.18%               .50    09/13/14  $     32,000
                        50,000            9.09%              2.13    01/28/14  $     62,235
<FN>

(1)  Based on the total number of options granted to employees of the Company in
     2004,  including  the  Named  Officers.

(2)  Estimated  fair  value  of  each  option  grant  on  the  date of grant was
     determined  by  use  of  the  Black-Scholes  option  pricing  model.
</TABLE>


STOCK OPTION EXERCISES AND YEAR END VALUES

The  following table sets forth, for the Named Executive Officers, the number of
shares  covered  by  stock  options  as  of  December 31, 2004, and the value of
"in-the-money"  stock  options, which represents the positive spread between the
exercise  price  of a stock option and the market price of the shares subject to
such  option  on  December  31,  2004.  No  options  were exercised by the Named
Officers  in  2004.

<TABLE>
<CAPTION>
                                                        Number of
                                                       Securities           Value of
                                                       Underlying         Unexercised
                                                       Unexercised       In- the-Money
                                                     Options/SARs at    Options/SARs at
                                                     Fiscal Year-End    Fiscal Year-End
                  Shares Acquired                     Exercisable/        Exercisable/
Name                on Exercise    Value Realized     Unexercisable      Unexercisable
----------------------------------------------------------------------  ----------------
<S>               <C>              <C>             <C>                  <C>
Jerry Braun                                              862,496/0 Shs  $              0


Jacob Rosenberg                                          799,996/0 Shs  $              0

Dennis O'Donnell                                   216,667/133,333 Shs  $              0
</TABLE>


     COMPENSATION  OF  DIRECTORS

     Directors  who are employees of the Company or its BioBalance subsidiary do
not  receive  any additional compensation for their services as directors.  Each
non-employee  director  of  the  Company is paid a fee of $2,000 per month, plus
$1,000  for  each Board meeting attended and $500 for attendance at each meeting
of a committee of the Board of Directors of which such director is a member. The
Company  also  reimburses  each  director  for  all  expenses  of attending such
meetings.


                                       46
<PAGE>
     No  additional  compensation  of  any nature is paid to employee directors.

     The  Company  also  issues  common  stock purchase warrants to non-employee
directors  from  time  to  time  in  recognition  of  their  services.

EMPLOYMENT  AGREEMENTS  OF  THE  NAMED  EXECUTIVE  OFFICERS;  CHANGE  IN CONTROL
ARRANGEMENTS

The  Company entered into amended employment agreements with Messrs. Jerry Braun
and  Jacob  Rosenberg  for  employment  terms  that expire on December 26, 2009.
Messrs.  Braun  and  Rosenberg served as executive officers of the Company until
February  24,  2005,  and  continue  to  serve as officers of the Company's home
health  care  division.

Mr.  Braun's  amended  agreement provides for his service as President and Chief
Executive  Officer  in  consideration of (i) initial annual base compensation of
$233,000  and  annual  salary  increases  of 10%; (ii) reimbursement of business
expenses;  (iii)  participation  in the Company's bonus, 401(k) and stock option
plans;  (iv)  $750 per month automobile leasing cost allowance and reimbursement
of  automobile  insurance  and maintenance costs; (v) $10,000 per year allowance
for  the  cost  of  insurance  and  other  items (which has been in effect since
January  2002);  and (vi) 48 days of compensated absences per year.  Mr. Braun's
current  annual  base  compensation under the amended agreement is approximately
$375,000.  Mr.  Braun  resigned  as  an  executive  officer  and director of the
Company  on  February  24,  2005.  Mr. Braun will continue to be employed by the
Company  as  the  President  of  its  Home Health Care division.  Other than his
ceasing  to  be  an  executive  officer  and  director, his employment agreement
remains  in  effect.

Mr.  Rosenberg's  employment agreement has the same general terms and conditions
as  Mr.  Braun's,  except  that he serves as Vice President, Secretary and Chief
Operating  Officer,  and  his initial annual base compensation was approximately
$186,000.  Mr.  Rosenberg's current annual base compensation under the agreement
is  approximately  $300,000.  Mr. Rosenberg resigned as an executive officer and
director of the Company on February 24, 2005.  Mr. Rosenberg will continue to be
employed  by the Company as the Vice President of its Home Health Care division.
Other  than  his ceasing to be an executive officer and director, his employment
agreement  remains  in  effect.

These  employment  agreements  also  provide additional benefits if a "change of
control" of the Company occurs. A "change of control" is deemed to have occurred
if:

-    the  Company  enters into an agreement for its merger or consolidation with
     another  corporation  or  for  the sale of all or substantially all of it's
     assets,  followed  by  termination  of the executive's employment within 12
     months;

-    persons,  other than the Company's then current stockholders, acquire (1) a
     majority  in  book  value  of  the  Company's assets, (2) a majority of its
     common  stock, (3) the power to designate a majority of the Company's Board
     of Directors, or (4) otherwise acquire the ability to control the Company's
     management;  or


                                       47
<PAGE>
-    any  other  event (or series of events) occurs which, in the opinion of the
     Company's board of directors, will, or is likely to, if carried out, result
     in a change of control of the Company. In the event of a change of control,

-    the  unexercised  stock options of each executive will immediately vest and
     be  exercisable  in  full;

-    the  Company will pay each executive a lump-sum payment equal to 2.99 times
     the  average  of  their  annual base salary and bonus for the previous five
     years  and  the  cost  of  either  maintaining  the  lease  or transferring
     ownership  of  the  automobile  for  which  the Company had been paying the
     leasing  costs  for  the  executive,  and

-    to  the  extent  any  payments  received  by  an executive from the Company
     subjects  the  executive to an excise tax under Section 499 of the Internal
     Revenue  Code, the Company will make an additional payment to the executive
     so  that  the  executive's net after-tax compensation is not reduced by the
     excise  tax.

     All  "change  of  control"  compensation  is  limited  by  each  employment
agreement,  to  the extent the compensation may qualify as a "parachute payment"
under  Section 280G of the Internal Revenue Code, to the maximum amount that may
be  paid to that executive without any part of that compensation being deemed to
be an "excess parachute payment." That maximum amount is generally determined by
multiplying  the average of the executive's annual base salary and bonus for the
previous  five  years  by  a factor of three.  A change of control took place on
January 2, 2003 when the Company merged with BioBalance and the Company recorded
a  liability of $1,940,526.  The change of control provision is still  contained
in  their  employment  agreements  and  may,  under  certain  circumstances,  be
triggered  again  upon  the  occurrence  of  another  change  of  control event.

     Messrs.  Braun  and  Rosenberg  also  participate,  together with all other
salaried  employees  of  the Company's home healthcare business, in a bonus plan
pursuant  to  which  10%  of the annual pre-tax net income of the Company's home
healthcare business income is contributed to a bonus pool which is distributable
to  these  employees  in  amounts  determined  by  the  Company's  Compensation
Committee.

     Mr.  O'Donnell  is  party  to a three-year employment agreement pursuant to
which  he  will serve as BioBalance's Chief Executive Officer until May 3, 2006.
Mr.  O'Donnell  will  also agree to serve, if requested, as one of the Company's
officers  and to be nominated or appointed as a member of the Company's Board of
Directors. Under the agreement, Mr. O'Donnell's base annual salary was $200,000,
which  increased  to $225,000 upon the completion of  the Offering. In addition,
Mr.  O'Donnell  received  a  ten-year  option  to purchase 200,000 shares of the
Company's  common  stock  under  the  Company's existing stock option plan at an
exercise  price  of $2.48. An additional option to purchase 50,000 shares of the
Company's  common  stock at its then fair market value will be granted each year
during  the  term  of the agreement. Mr. O'Donnell is entitled to bonus payments
upon  the  satisfaction  of  specified  financial  performance criteria, certain
lump-sum  payments  upon the occurrence of certain change of control events, and
insurance  and  other benefits. In September 2004, Mr. O'Donnell received 50,000
ten-year


                                       48
<PAGE>
options under his employment agreement and an additional 50,000 ten-year options
as  a bonus, with an exercise price of $0.50. In 2004, Mr. O'Donnell was awarded
a  bonus of $66,667 in accordance with the term in his contract. This amount was
accrued  on  the  books  at  December  31,  2004.

SAVINGS AND EQUITY COMPENSATION PLANS

401(K) PLAN

     The  Company  maintains  an  Internal  Revenue  Code  Section 401(k) salary
deferral  savings plan (the "Plan") for all of its eligible New York home health
care  division employees who have been employed for at least one year and are at
least  21  years  old  (effective  July  1,  1996,  field staff employees at the
Company's  Orange  County  branch  office  in  Newburgh,  New  York ceased being
eligible  to participate in the Plan).  Subject to certain limitations, the Plan
allows  participants  to  voluntarily  contribute  up  to  15% of their pay on a
pre-tax  basis.  Under  the Plan, the Company may make matching contributions on
behalf  of  the  pre-tax  contributions  made  by  participants.

EQUITY COMPENSATION PLANS

The  following  table  summarizes with respect to options and warrants under the
Company's  equity  compensation  plans  at  December  31,  2004:

<TABLE>
<CAPTION>
                                                                  NUMBER OF SECURITIES
                      NUMBER OF SECURITIES  WEIGHTED-AVERAGE    REMAINING AVAILABLE FOR
                       TO BE ISSUED UPON    EXERCISE PRICE OF    FUTURE ISSUANCE UNDER
                          EXERCISE OF          OUTSTANDING     EQUITY COMPENSATION PLANS
                      OUTSTANDING OPTIONS,  OPTIONS, WARRANTS    (EXCLUDING SECURITIES
PLAN CATEGORY         WARRANTS AND RIGHTS      AND RIGHTS       REFLECTED IN COLUMN (A))
--------------------  --------------------  -----------------  --------------------------
<S>                   <C>                   <C>                <C>
Equity compensation            2,058,333               2.03                  2,611,167
plans approved by
security holders(1)

Equity compensation              794,786               2.56
plans not approved
by security
holders(2)

    Total                      2,853,119
<FN>

(1)  Represents  shares  of  the Company's common stock issuable pursuant to the
     Company's  Performance Incentive Plan, as amended (the "Option Plan"). Does
     not  include  the  500,000  options  granted  to  each of Messrs. Braun and
     Rosenberg  on  February  24,  2005.  The  Company's  board of directors and
     stockholders  approved  and  adopted  the  Option  Plan  in March 1996. The
     Company's  stockholders  approved amendments to the Option Plan (previously
     adopted  by the board of directors) in 1998, 1999, 2000 and 2002. Under the
     terms  of  the  amended  Option Plan, as amended, up to 4,712,500 shares of


                                       49
<PAGE>
     common  stock  may  be  granted  at  December  31, 2004. The Option Plan is
     administered  by  the  standing compensation committee (the "Committee") of
     the  board  of  directors  (the  "Committee"), which is authorized to grant
     incentive  stock  options  and  non-qualified  stock  options  to  selected
     employees  of  the Company and to determine the participants, the number of
     options  to  be  granted  and  other  terms  and provisions of each option.
     Options  become  exercisable  in  whole  or  in  part  from time to time as
     determined  by  the  Committee,  but  in  no  event  may  a stock option be
     exercisable  prior  to the expiration of six months from the date of grant,
     unless the grantee dies or becomes disabled prior to the end of the period.
     Stock  options  have  a  maximum  term  of 10 years from the date of grant,
     except  that  the  maximum term of an incentive stock options granted to an
     employee  who,  at  the  date of grant, is a holder of more than 10% of the
     outstanding  common  stock  (a "10% holder") may not exceed five years from
     the  date  of the grant. The exercise price of an incentive stock option or
     nonqualified option granted under the Option Plan may not be less than 100%
     of  the  fair  market  value  per  share of the common stock at the date of
     grant, except that the exercise price of an incentive stock options granted
     to  a  10%  holder  may not be less than 110% of the fair market value. The
     exercise  price of options must be paid in full on the date of exercise and
     is  payable in cash or in shares of Common Stock having a fair market value
     on  the  exercise  date.

(2)  Includes 62,500 shares of common stock issuable upon exercise of a non-plan
     option  granted  to  an  executive  officer  of  the  Company in 1996 at an
     exercise  price  of $4.50 per share which expires in 2006, 80,834 shares of
     common  stock  issuable  upon  exercise of warrants granted to non-employee
     directors  at  exercise  prices not less than 100% of the fair market value
     per  share  of  the  common  stock  at  the  respective  dates of grant and
     generally expiring three to 10 years from the date of grant, 330,000 shares
     of common stock issuable upon exercise of warrants issued to consultants in
     consideration for services performed or to be for the Company or BioBalance
     at exercise prices not less than 100% of the fair market value per share of
     the  common  stock  at the respective dates of grant; and 321,452 shares of
     common stock issuable upon exercise of non-plan options and warrants issued
     by  the  Company  in  exchange  for non-plan options and warrants issued by
     BioBalance  in  connection  with  the  Company's acquisition of BioBalance.
</TABLE>

ITEM 12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND
          MANAGEMENT

     The  following table sets forth certain information regarding shares of the
Common  Stock beneficially owned as of March 28, 2005, by (i) each person, known
to the Company, who beneficially owns more than 5% of the Common Stock,(ii) each
Named  Executive  Officer,  (iii)  each  of the Company's directors and (iv) all
officers  and  directors  as  a  group:


                                       50
<PAGE>
<TABLE>
<CAPTION>
                                          Shares        Percentage
Name and Address of                    Beneficially      of Stock
Beneficial Owner (1)                     Owned(l)     Outstanding(l)
-------------------------------------  -------------  --------------
<S>                                    <C>            <C>

Dennis O'Donnell (4)                         427,368           1.29%



Fred E. Nussbaum (5)                                              *

Mark Gray  (6)                                                    *



Mordecai Dicker  (7)                                              *

Jerry Braun (2)                            2,139,454           6.51%

Jacob Rosenberg (3)                        1,694,761           5.22%

Pinchas Stefansky (8)                      2,024,000           6.16%
Hershey Holdings
Leon House
Secretary's Lane
P.O. Box 450, Gibraltar

Douglas Andrew Ryan (9)                    1,800,000           5.48%
Birizma Associates
c/o Tallhurst Ltd.
P.O. Box 795, Gibraltar

Bernard Korolnick (10)                     1,729,208           5.26%
KPT Partners
c/o Alton Management
Splelhof 14A, Postach 536
8750 Glarus, Switzerland

Rivvi Rose (11)                            1,950,000           5.93%
Nekavim Investors
1/1 Library Run
P.O. Box 317, Gibraltar

All executive officers and directors         427,368           1.29%
as a group (4)
_____________________________
* Less than one percent (1%).
<FN>


                                       51
<PAGE>

(1)  The  shares  of  Common Stock owned by each person or by the group, and the
     shares  included in the total number of shares of Common Stock outstanding,
     have  been  adjusted  in  accordance  with  Rule 13d-3 under the Securities
     Exchange  Act  of  1934,  as  amended,  to  reflect the ownership of shares
     issuable  upon  exercise  of  outstanding options, warrants or other common
     stock equivalents which are exercisable within 60 days. As provided in such
     Rule,  such  shares  issuable  to any holder are deemed outstanding for the
     purpose of calculating such holder's beneficial ownership but not any other
     holder's  beneficial  ownership  unless otherwise indicated, the address of
     each  shareholder  is  c/o  the  Company.

(2)  Includes  a  total  of 1,362,496 shares issuable upon the exercise of stock
     options  granted  to  Mr.  Braun  and  147,594  Shares  issuable  upon  the
     conversion  of  shares  of  Class  A  Convertible  Preferred  Stock.

(3)  Includes  a  total  of  (i)  1,299,996 shares issuable upon the exercise of
     stock  options  granted  to Mr. Rosenberg, (ii) 73,797 Shares issuable upon
     the  conversion  of his shares of Class A Convertible Preferred Stock (iii)
     120,968  shares  and  60,484  warrants  of  common stock owned by his wife.

(4)  Includes  a  total  of  350,000  shares issuable upon the exercise of stock
     options  granted  to  Mr. O'Donnell and also 8,064 shares issuable upon the
     exercise  of  warrants.

(8)  All  shares are owned of record by Hershey Holdings, of which Mr. Stefansky
     holds  sole  voting  and  investment  power.

(9)  All  shares  are  owned  of record by Birizma Associates, of which Mr. Ryan
     holds  sole  voting  and  investment  power.

(10) All  shares  are  owned  of  record by KPT Partners, of which Mr. Korolnick
     holds  sole  voting  and  investment  power.

(11) All  shares  are  owned  of  record by Nekavim Investors, of which Ms. Rose
     holds  sole  voting  and  investment  power.
</TABLE>


                                       52
<PAGE>
ITEM 13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

On  July 15, 2004, the Company executed the Purchase Agreement providing for the
sale  of  the  assets  of  its  home  healthcare  business to the LLC, a company
controlled  by  Messrs.  Braun and Rosenberg, who at the time were the Company's
chief  executive  officer and chief operating officer, for consideration of $2.7
million  in  cash, the assumption of all of the liabilities and obligations with
respect  to  the  home healthcare business and the forgiveness of certain future
obligations  that  may  be  due  to  these  individuals  pursuant  to employment
agreements  each  of  them  has  with  the  Company. On April 11, 2005, with the
consent  of  Messrs.  Braun,  Rosenberg and the LLC, the Company entered into an
agreement to sell the NJ Business to Accredited Health, a subsidiary of National
for  $3.0  million.  There  are  ongoing  discussions  regarding the sale of the
remaining portion of the assets of the Company's home healthcare business to the
LLC.

On  February  24, 2005, the Company consummated the Offering. In connection with
the  consummation  of  the  Offering,  Braun and Rosenberg, who were at the time
executive officers of the Company, at the request of the Placement Agent for the
Offering,  resigned  irrevocably  as  directors  and  executive  officers of the
Company.  In  connection with Braun and Rosenberg's agreement with the Placement
Agent,  in  order to secure the obligations of the Company and its subsidiary to
(i)  consummate  the  sale  of  all  the  assets  relating to the Company's home
healthcare  business (the "Asset Sale") to the LLC, pursuant to the terms of the
Purchase  Agreement  or  (ii)  to comply with any future payment obligations the
Company to Braun and Rosenberg under their respective employment agreements with
the  Company,  the  Company entered into the Security Agreement, on February 24,
2005,  which  granted  Messrs.  Braun  and  Rosenberg a security interest in the
assets  of  the Company's home healthcare business being conducted in the states
of  New  York and New Jersey and provided for the deposit of up to $3.55 million
in  cash collateral (the "Collateral"). None of the assets of BioBalance will be
used  as  Collateral to secure the Company's obligations to Braun and Rosenberg.

At  the  close  of  business  on  February 24, 2005: (i) Mr. Braun resigned as a
director and as the Company's Chief Executive Officer and President and (ii) Mr.
Rosenberg  resigned  as  a  director  and as the Company's Vice President, Chief
Operating  Officer,  Chief  Financial  Officer,  Chief  Accounting  Officer  and
Secretary. Mr. Braun continues to be employed by the Company as the President of
its  home  healthcare division and Mr. Rosenberg continues to be employed by the
Company  as  the Vice President of the Company's home healthcare division. Other
than  their  ceasing  to  be  officers  and  directors  of  the Company, and the
resulting  changes  in  their  duties  and  responsibilities,  their  respective
employment  agreements  with  the Company remain in effect. In addition, Messrs.
Braun  and  Rosenberg  have  board observer rights with respect to the Company's
board of directors until such time as the Asset Sale is consummated. Pursuant to
the  terms  of  their  respective  employment  agreements,  as a result of their
resignations  from  the Company's Board of Directors, on February 24, 2005, each
of  Braun  and  Rosenberg received the Options to purchase 500,000 shares of the
Company's  Common Stock at an exercise price of $0.85 per share, pursuant to the
Company's  Performance  Incentive  Plan.

On  March  23,  2005,  the  security  interest  that was granted pursuant to the
Security  Agreement  was  terminated and Messrs. Braun and Rosenberg agreed that
the Company could enter into an agreement with a third party for the sale of the
New  Jersey portion of the Company's home health care operations under specified
conditions  without  being in breach of the Purchase Agreement. The LLC has also
consented  to  the  sale.  The  Company entered into an agreement to sell the NJ
Business  to Accredited Health on April 11, 2005.  See - Recent Developments for
a  more  detailed  explanation  of  the  above  transactions.

ITEM 14.  PRINCIPAL  ACCOUNTING  FEES  AND  SERVICES

     The  following table presents fees for professional audit services rendered
by  Weiser  LLP and Holtz Rubensrein Reminick LLP for the audit of the Company's
annual  financial  statements  for  the  years ended December 31, 2004, 2003 and
2002:

<TABLE>
<CAPTION>
                         Fiscal 2004   Fiscal 2003   Fiscal 2002
                        ------------  ------------  ------------
<S>                     <C>           <C>           <C>
Audit Fees(1)          $    442,757  $    165,000  $     97,000
Audit-Related Fees(2)       105,139        95,000        36,000
Tax  Service Fees(3)         58,377        35,000         6,000
All Other Fees(4)
<FN>

(1)  Audit  Fees  consist  of fees billed for professional services rendered for
     the  audit  of  the  Company's consolidated annual financial statements and
     review  of  the  interim  consolidated  financial  statements  included  in
     quarterly  reports and services that are normally provided by Weiser LLP in
     connection  with  statutory  and  regulatory  filings  or  engagements.

(2)  Audit-Related  Fees  consist  of  fees  billed  for  assurance  and related
     services  that  are  reasonably  related to the performance of the audit or
     review  of  the  Company's  consolidated  financial  statements and are not
     reported  under  "Audit  Fees."

(3)  Tax  Fees consist of fees billed for professional services rendered for tax
     compliance,  tax  advisory  and  tax  planning.  These  services  include
     assistance  regarding  federal,  state  and  local  tax  compliance and tax
     planning.

(4)  No  other fees for professional services rendered to the Company during the
     fiscal  2004,  2003  and  2002  were  billed  by Weiser LLP, other than the
     services  reported  above.
</TABLE>

     Policy  on  Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services  of  Independent  Auditor.  The  Audit  Committee has not yet adopted a
formal  pre-approval  policy  for  audit  and  non-audit  services.  The  Audit
Committee pre-approves all audit, audit-related, tax and other services provided
by  Weiser  LLP  prior  to  the  engagement  of  Weiser  LLP to provide to these
services.  The  Chairman  of the Audit Committee has been delegated authority by
the  Audit Committee to pre-approve the engagement of Weiser LLP when the entire
Audit  Committee  is  unable  to  do  so.  The  Chairman  must  report  all such
pre-approvals  to  the  entire  Audit  Committee  at the next committee meeting.


                                       53
<PAGE>
                                    PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  The following documents are filed as a part of this report:

(1)  Consolidated Financial Statements: See Index to Financial Statements on
     page 54 of this report for financial statements and supplementary data
     filed as part of this report.

(2)  Financial Statement Schedules
     Schedule II - Valuation and Qualifying Accounts for each of the years ended
     December  31,  2004,  2003  and  2002.

(3)  Exhibits:
     The  exhibits  listed  in  the  accompanying Index to Exhibits are filed or
     incorporated  by  reference  as  part  of  this  report.


                                       54
<PAGE>


                           NEW YORK HEALTH CARE, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                        DECEMBER 31, 2004, 2003 AND 2002




<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

NEW YORK HEALTH CARE, INC.:

Consolidated  Financial  Statements:

<S>                                                                     <C>
     Report of Independent  Registered Public Accounting Firm
     for the years ended December 31, 2004 and 2003                           F-1

     Report  of Independent Registered Public Accounting Firm
     for the year ended December  31,  2002                                   F-2

     Consolidated Balance Sheets at December 31, 2004 and 2003                F-3

     Consolidated Statements of Operations for the years ended
         December 31, 2004, 2003 and 2002                                     F-4

     Consolidated Statements of Shareholders' Equity for the years ended
         December 31, 2004, 2003 and 2002                                     F-5

     Consolidated Statements of Cash Flows for the years ended
         December 31, 2004, 2003 and 2002                                     F-6

     Notes to Consolidated Financial Statements                           F-7 - F-31

     Financial Statement Schedule:
         Schedule II - Valuation and Qualifying Accounts                      F-32
</TABLE>


<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

REPORT  OF  INDEPENDENT  REGISTERED  PUBLIC  ACCOUNTING  FIRM



The  Board  of  Directors
New  York  Health  Care,  Inc.

We  have audited the accompanying consolidated balance sheets of New York Health
Care,  Inc.  and  Subsidiaries (the "Company") as of December 31, 2004 and 2003,
and  the related consolidated statements of operations, shareholders' equity and
cash  flows  for  the  years  then  ended.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with the standards of Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audit  to obtain reasonable assurance about whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  consolidated  financial  statement  presentation.  We
believe  that  our  audits  provide  a  reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects, the consolidated financial position of New
York  Health  Care,  Inc. and Subsidiaries as of December 31, 2004 and 2003, and
the  consolidated results of their operations and their cash flows for the years
then  ended,  in  conformity with U.S. generally accepted accounting principles.

We  have  also  audited  the financial statement Schedule II for the years ended
December  31,  2004 and 2003.  In our opinion, this schedule presents fairly, in
all  material  respects,  the  information  required  to  be  set forth therein.


Weiser  LLP

April  11,  2005
New  York,  NY


                                      F-1
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


             Report of Independent Registered Public Accounting Firm


Board  of  Directors  and  Stockholders
New  York  Health  Care,  Inc.


We  have  audited  the  accompanying  consolidated  statements  of  operations,
shareholders'  equity  and  cash  flows,  and  financial  statement  Schedule II
(Valuation  and Qualifying Accounts) of New York Health Care, Inc. (formerly The
Bio  Balance Corporation) for the year ended December 31, 2002.  These financial
statements  and  financial  statement  schedule  are  the  responsibility of the
Company's  management.  Our  responsibility  is  to  express  an  opinion on the
consolidated  financial  statements  based  on  our  audit.

We  conducted  our  audit  in  accordance  with auditing standards of the Public
Company  Accounting  Oversight  Board  (United Stares).  Those standards require
that  we plan and perform the audit to obtain reasonable assurance about whether
the  financial  statements are free of material misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial statement presentation.  We believe that our
audit  provides  a  reasonable  basis  for  our  opinion.

In  our  opinion,  such consolidated financial statements present fairly, in all
material  respects,  the results of operations and cash flows of New York Health
Care,  Inc.,  (formerly The Bio Balance Corporation) for the year ended December
31,  2002  in  conformity with U.S. generally accepted accounting principles. In
addition,  in  our  opinion, the financial statement schedule referred to above,
when  considered in relation to the basic financial statements taken as a whole,
presents  fairly,  in  all  material  respects,  the  information required to be
included  therein.



/s/  HoltzRubenstein  Reminick  LLP

Holtz  Rubenstein  Reminick  LLP
Melville,  New  York
March  4,  2003


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                      NEW YORK HEALTH CARE , INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEETS
                                         ASSETS

                                                                    DECEMBER 31,
                                                            ----------------------------
                                                                2004           2003
                                                            -------------  -------------
<S>                                                         <C>            <C>
Current assets:
   Cash and cash equivalents                                $  2,186,756   $  7,337,896
   Due from lending institution                                  566,523        208,721
   Accounts receivable, net of allowance for uncollectible
      amounts of $460,000 and $397,000, respectively           8,656,311      6,577,283
   Unbilled services                                              65,627        100,114
   Prepaid expenses and other current assets                     466,625        319,195
                                                            -------------  -------------
       Total current assets                                   11,941,842     14,543,209

Property and equipment, net                                       87,006        145,898
Goodwill, net                                                    900,587        900,587
Other intangible assets, net                                   3,496,295      5,971,622
Other assets                                                      77,465         67,652
                                                            -------------  -------------
       Total assets                                         $ 16,503,195   $ 21,628,968
                                                            =============  =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accrued payroll                                          $  1,328,127   $  1,786,044
   Accounts payable and accrued expenses                       7,326,115      5,849,732
   Due to HRA                                                  5,264,695      3,756,507
   Due to related parties                                              -      1,190,526
   Income taxes payable                                                -         24,394
                                                            -------------  -------------
       Total current liabilities                              13,918,937     12,607,203
                                                            -------------  -------------

Commitments and contingencies

Shareholders' equity:
   Preferred stock, $.01 par value, 5,000,000 shares
      authorized; Class A Preferred, 590,375 shares
      authorized, issued and outstanding                           5,904          5,904
   Common stock, $.01 par value, 100,000,000 shares
      authorized; 24,943,821 shares issued and
       24,939,776 outstanding.                                   249,438        249,438
   Additional paid-in capital                                 32,313,470     32,679,292
   Accumulated deficit                                       (29,975,081)   (23,903,396)
   Less: Treasury stock (4,045 common shares at cost)             (9,473)        (9,473)
                                                            -------------  -------------
       Total shareholders' equity                              2,584,258      9,021,765
                                                            -------------  -------------
       Total liabilities and shareholders' equity           $ 16,503,195   $ 21,628,968
                                                            =============  =============
</TABLE>

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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS


                                                        Year Ended      Year Ended      Year Ended
                                                       December 31,    December 31,    December 31,
                                                           2004            2003            2002
                                                      --------------  --------------  --------------
<S>                                                   <C>             <C>             <C>
Net patient service revenue                           $  48,854,358   $  45,060,449   $           -
                                                      --------------  --------------  --------------
Expenses:
    Professional care of patients                        39,214,216      36,106,721               -
                                                      --------------  --------------  --------------
    General and administrative
        (excluding noncash compensation)                 12,052,255       9,941,923         810,427
    Noncash compensation                                      4,127       1,307,119          19,414
                                                      --------------  --------------  --------------
        Total general and administrative expenses        12,056,382      11,249,042         829,841
                                                      --------------  --------------  --------------

    Product development
        (excluding noncash compensation)                  1,426,423         956,262         354,616
    Noncash compensation                                   (369,949)        284,340               -
                                                      --------------  --------------  --------------
        Total product development                         1,056,474       1,240,602         354,616
                                                      --------------  --------------  --------------

    Goodwill impairment                                           -      17,869,339               -
    Impairment of intangible assets                       1,740,326               -               -
    Bad debts expense                                        90,400          50,250               -
    Depreciation and amortization                           871,710         606,747         214,600
                                                      --------------  --------------  --------------

        Total operating expenses                         55,029,508      67,122,701       1,399,057
                                                      --------------  --------------  --------------

Loss from operations                                     (6,175,150)    (22,062,252)     (1,399,057)

Non-operating income (expenses):
   Interest income                                           69,877          51,255               -
   Interest expense                                         (29,538)         (2,173)              -
                                                      --------------  --------------  --------------
Non-operating income (expenses), net                         40,339          49,082               -
                                                      --------------  --------------  --------------

Loss before (benefit) provision for income taxes         (6,134,811)    (22,013,170)     (1,399,057)

(Benefit) provision for income taxes:
Current                                                     (63,126)         39,000               -
                                                      --------------  --------------  --------------

Net loss                                              $  (6,071,685)  $ (22,052,170)  $  (1,399,057)
                                                      ==============  ==============  ==============

Basic and diluted loss per share                      $       (0.24)  $       (0.91)  $       (0.07)
                                                      --------------  --------------  --------------

Weighted and diluted average shares outstanding          24,939,776      24,283,907      20,562,131
                                                      ==============  ==============  ==============
</TABLE>

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


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                                NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                                              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                             FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

                               Common Stock      Preferred Stock   Additional      Treasury Stock                        Total
                           --------------------  ----------------    Paid-In     -------------------   Accumulated   Shareholders'
                             Shares    Amount    Shares   Amount     Capital      Shares    Amount       Deficit        Equity
                           ----------  --------  -------  -------  ------------  --------  ---------  -------------  -------------
<S>                        <C>         <C>       <C>      <C>      <C>           <C>       <C>        <C>            <C>
Balance at
January 1, 2002            19,700,667  $197,007        -  $     0  $ 3,056,928         -   $      -   $   (452,169)  $  2,801,766

Common stock
issued for cash             1,415,827    14,158        -        -    3,473,986         -          -              -      3,488,144

Amortization of
unearned compensation               -         -        -        -       19,414         -          -              -         19,414

Net loss                            -         -        -        -            -         -          -     (1,399,057)    (1,399,057)
                           ----------  --------  -------  -------  ------------  --------  ---------  -------------  -------------
BALANCE AT
DECEMBER 31, 2002          21,116,494   211,165        -        -    6,550,328         -          -     (1,851,226)     4,910,267

Common stock issued
for cash, net                 327,327     3,273        -        -    1,010,535         -          -              -      1,013,808

Reverse acquisition on
January 2, 2003             2,500,000    25,000  590,375    5,904   19,940,579    24,846    (31,483)             -     19,940,000

Revaluation of options
/warrants as part of
reverse acquisition                 -         -        -        -      721,100         -          -              -        721,100

Common stock
Issued for purchase
of intangible assets
on August 20, 2003          1,000,000    10,000        -        -    3,590,000         -          -              -      3,600,000

Issuance of treasury
Stock (during Sept 2003)
pursuant to the exercise
of options at an average
exercise price of $.86              -         -        -        -       (3,969)  (20,001)    21,170              -         17,201

Issuance of treasury
stock (during Oct 2003)
pursuant to the exercise
of options at an average
exercise price of $1.50             -         -        -        -          360      (800)       840              -          1,200

Warrants earned
for service                         -         -        -        -      870,359         -          -              -        870,359

Net Loss                            -         -        -        -            -         -          -    (22,052,170)   (22,052,170)
                           ----------  --------  -------  -------  ------------  --------  ---------  -------------  -------------
BALANCE AT
DECEMBER 31, 2003          24,943,821   249,438  590,375    5,904   32,679,292     4,045     (9,473)   (23,903,396)     9,021,765
Warrants earned
for service                         -         -        -        -       15,743         -          -              -         15,743

Reduction of
compensation expense
due to revaluation
of options/warrants                 -         -        -        -     (381,565)        -          -              -       (381,565)

Net loss                            -         -        -        -            -         -          -     (6,071,685)    (6,071,685)
                           ----------  --------  -------  -------  ------------  --------  ---------  -------------  -------------
BALANCE AT
DECEMBER 31, 2004          24,943,821  $249,438  590,375  $ 5,904  $32,313,470     4,045   $ (9,473)  $(29,975,081)  $  2,584,258
                           ==========  ========  =======  =======  ============  ========  =========  =============  =============
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
The above statements give retroactive effect to change in par value from $.0001
                        to $.01, due to reverse merger.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                     Year Ended      Year Ended      Year Ended
                                                                    December 31,    December 31,    December 31,
                                                                        2004            2003            2002
                                                                   --------------  --------------  --------------
<S>                                                                <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                                        $  (6,071,685)  $ (22,052,170)  $  (1,399,057)
   Adjustments to reconcile net loss to net cash
      (used in) provided by operating activities:
         Impairment of intangible assets                               1,740,326
         Goodwill impairment                                                   -      17,869,339               -
         Noncash compensation                                           (365,822)      1,591,459          19,414
         Depreciation and amortization                                   871,710         606,747         214,600
         Bad debts expense                                                90,400          50,250               -
         Changes in operating assets and liabilities
         net of effects of purchase of subsidiary:
            Increase in accounts receivable and unbilled services     (2,134,953)     (1,352,003)              -
            Increase in prepaid expenses and other current assets       (147,430)        (98,231)        (25,842)
            Increase in due from lending institution                    (357,802)        (55,896)              -
            (Increase)decrease in other assets                            (9,813)          8,927               -
            (Decrease)increase in accrued payroll                       (457,917)        588,269         120,000
            Increase in accounts payable and accrued expenses          1,476,383       1,977,474         112,112
            Increase in due to HRA                                     1,508,188       1,824,710               -
            Decrease in due to related parties                        (1,190,526)       (750,000)              -
                                                                                                   --------------
            (Decrease)increase in income tax payable                     (24,394)         24,394               -
                                                                   --------------  --------------  --------------
               Net cash (used in) provided by
                  operating activities                                (5,073,335)        233,269        (958,773)
                                                                   --------------  --------------  --------------

Cash flows from investing activities:
        Net cash acquired from purchase of subsidiary                          -       3,548,658               -
        Acquisition of property and equipment                             (8,495)        (50,724)              -
        Acquisition of intangible assets                                 (69,310)       (422,613)       (148,723)
        Increase in other assets                                               -               -         (13,333)
        Decrease (increase) in restricted cash                                 -         100,000        (100,000)
        Increase in deferred merger cost                                       -               -        (248,363)
                                                                   --------------  --------------  --------------
   Net cash (used in) provided by  investing activities                  (77,805)      3,175,321        (510,419)
                                                                   --------------  --------------  --------------

Cash flows from financing activities:
       Exercise of options                                                     -          18,401               -
       Payments on lease obligation payable                                    -         (18,281)              -
       Proceeds of issuance of common stock                                    -       1,013,808       3,488,144
       Decrease (increase) in subscription receivable                          -         290,000        (290,000)
                                                                   --------------  --------------  --------------
  Net cash provided by financing activities                                    -       1,303,928       3,198,144
                                                                   --------------  --------------  --------------

  Net (decrease) increase in cash and cash equivalents                (5,151,140)      4,712,518       1,728,952

  Cash and cash equivalents at beginning of year                       7,337,896       2,625,378         896,426
                                                                   --------------  --------------  --------------

  Cash and cash equivalents at end of year                         $   2,186,756   $   7,337,896   $   2,625,378
                                                                   ==============  ==============  ==============
</TABLE>

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


                                      F-6
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION AND BASIS OF CONSOLIDATION:

New York Health Care, Inc. ("New York Health Care") was organized under the laws
of  the  State  of  New York in 1983.  New York Health Care provides services of
registered  nurses and paraprofessionals to patients throughout New York and New
Jersey.  The  BioBalance Corporation, ("BioBalance") a Delaware Corporation, was
formed in May 2001.  BioBalance is a specialty pharmaceutical company focused on
the  development  of  proprietary  biotherapeutic  agents  for  various
gastrointestinal  diseases  that  are  poorly  addressed  by  current therapies.
BioBalance  is  pursuing  accelerated  prescription drug development of its lead
product,  PROBACTRIX(TM)  by  filing  an  investigational  new  drug  ("IND")
application  for  the  prevention and/or treatment of pouchitis. There can be no
assurance  that  BioBalance  will  be successful in marketing any such products.
The  consolidated  entity,  collectively  referred to as the "Company", includes
BioBalance  and  New York Health Care, Inc. and its wholly owned subsidiary NYHC
Newco  Paxxon,  Inc.  D/B/A  Helping  Hands  Healthcare  ("Helping Hands").  All
significant  intercompany  balances  and  transactions  have  been  eliminated.

On  January  2,  2003, BioBalance acquired New York Health Care in a transaction
accounted  for  as  a  reverse  acquisition  (See  Note  2).  The  accompanying
consolidated  financial statements of the Company reflect the historical results
of  the  predecessor  entity,  BioBalance,  prior  to  January  2,  2003 and the
consolidated  results of operations of the Company subsequent to the acquisition
date  of  January  2,  2003.

The  common  stock  and  per  share  information  in  the consolidated financial
statements  and related notes have been retroactively adjusted to give effect to
the  reverse  acquisition  on  January  2,  2003.


COMPANY DEVELOPMENTS:

In  November  2003,  the  Company  learned  that an individual then serving as a
director  of  the  Company  and  president of BioBalance (Mr. Stark) and another
individual  then  serving  as a consultant (Mr. Grossman) to BioBalance were the
subjects  of a federal indictment alleging that they conspired to manipulate the
price  and  demand  for  the  Company's common stock by offering to pay a bribe,
consisting  of warrants to purchase 500,000 shares of the Company's common stock
and  causing  the  Company's  board  of directors to approve the issuance of the
warrants  by disguising the warrants as compensation to an outside consultant to
be  engaged  to  perform  financial  advisory  services  for  BioBalance. At the
Company's  request, the then director of the Company and president of BioBalance
resigned  from  all  positions  with  the  Company  and  the  Company's Board of
Directors authorized an independent internal investigation regarding the subject
matter  of  the  indictment.

In  November 2003, the board also authorized suspension of the warrants referred
to  in  the  indictment  and a stock option to purchase 100,000 shares of common
stock granted to Mr. Stark and the termination of a consulting agreement between
BioBalance and Emerald Asset Management, Inc., a company owned and controlled by
Mr.  Grossman,  and  appointed  Dennis  O'Donnell,  BioBalance's Chief Operating
Officer,  as  President  of  BioBalance.

The  law  firm  retained  by  the  Company  to  conduct the independent internal
investigation  found  no evidence that any current officer, director or employee
of  the  Company  knew of, or participated in, any alleged attempt to manipulate
the  Company's  common stock and, concluded that  the Company responded properly
to the indictment based on the information at the time available to the Company.


                                      F-7
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In  January  2004,  the  staff  of Listing Investigations, a division of  Nasdaq
Stock  Market,  Inc.,  ("Nasdaq"),  notified  the  Company, after requesting and
obtaining  information  and documents from the Company, that they had determined
that  the  Company no longer qualified for inclusion in the Nasdaq  Stock Market
primarily  based on public interest concerns and the Company's failure to timely
hold  its  2002  annual  stockholders'  meeting  in  compliance  with the Nasdaq
marketplace rules.  In response, the Company requested a hearing before a Nasdaq
Listing Qualifications Panel to review the staff determination.  The hearing was
held  and  on April 5, 2004, the Company announced that the Panel had determined
that  the  Company's  common  stock was delisted from Nasdaq, effective with the
opening  of  business  on  April 6, 2004. The Panel addressed concerns regarding
events  related  to  the indictment and the Company's failure to timely hold its
2002  Annual  Stockholder's  meeting.  Subsequently,  the Company's common stock
began  trading  in  the  Over-the-Counter  Market  on  the  Pink  Sheets.

On  May  13,  2004,  the  Company  executed  a non-binding letter of intent with
executive  officers  of the Company who have since resigned (see below), for the
acquisition of its home healthcare business, subject to satisfaction of a number
of  conditions,  including  execution  of  a  definitive  acquisition agreement,
obtaining  various  corporate  and  regulatory  approvals, including stockholder
approval, obtaining an acceptable fairness opinion and receipt by the Company of
at  least  $4 million to finance its remaining operations. On July 15, 2004, the
Company  executed a definitive agreement (the "Purchase Agreement") for the sale
of  the  assets  of  its home healthcare business to a company controlled by its
chief  executive  officer  and chief operating officer for consideration of $2.7
million  in  cash, the assumption of all of the liabilities and obligations with
respect  to  the  home healthcare business and the forgiveness of certain future
obligations  that  may  be due to them pursuant to Employment Agreements each of
them  has  with the Company. The sale is subject to the satisfaction of a number
of  conditions  including  obtaining  shareholder and regulatory approvals; such
conditions had not been satisfied as of April 11, 2005. As noted below, on April
11,  2005  the company entered into a definitive sales agreement to sell certain
of  the  assets  to  an  unaffiliated  entity.

The  Company  will  consider  its  home  health  care division as a discontinued
operations  of the entire home health care business upon shareholder approval of
the  proposed  sale.

We  cannot  assure  you  that  the  conditions  to  the  sale of the entire home
healthcare  business  will  be  satisfied.

On  or  about September 23, 2004 the Company commenced an offering for sale (the
"Offering")  of  a  minimum  aggregate  offering  of  $4,000,000  and  a maximum
aggregate  offering  of  $6,000,000, of shares of its unregistered common stock,
$0.01  par value ("Common Stock") and associated warrants to persons who qualify
as  "accredited  investors"  as defined in the rules under the Securities Act of
1933, as amended, (the "Securities Act") pursuant to the terms of a Confidential
Private  Placement Memorandum. The purchase price per share of Common Stock sold
in the Offering will be equal to 95% of the volume weighted average price of the
Common  Stock  for  the  10  trading  days  prior  to the initial closing of the
Offering,  but  not  less  than  $0.60  nor  more  than  $1.00  per  share.

For  every  two shares of Common Stock purchased in the Offering, investors will
receive  a  five-year redeemable warrant to purchase shares of Common Stock (the
"Warrants").  Each  Warrant  is  exercisable for one share of Common Stock at an
exercise  price equal to 125% of the price per share of Common Stock sold in the
Offering.

On February 24, 2005, the Company consummated the Offering which resulted in its
issuing  an aggregate of 7,899,362 shares (the "Shares") of the Company's common
stock,  par value $0.01 per share (the "Common Stock"), and warrants to purchase
3,949,681  shares  of  Common  Stock  (the "Warrants") to persons who qualify as
"accredited  investors"  within  the  meaning  of  rule  501  of  Regulation  D
promulgated  under  the  Securities  Act.  The  aggregate purchase price for the
Shares  and Warrants was $4,897,600. Each Warrant is exercisable to purchase one
share  of  the  Company's  Common  Stock at an exercise price of $0.78 per share
during  the  five-year  period  commencing  on February 24, 2005. The Shares and
Warrants  were  issued  to the purchasers without registration under the Act, in
reliance  upon  the  exemptions from registration provided under Section 4(2) of
the  Securities  Act and Regulation D promulgated thereunder. In connection with
the  Offering,  the Company paid the Placement Agent commissions of $470,260 and
an  additional  $146,616  to cover non-accountable and certain other expenses of
the  Placement Agent. In addition, the Company issued to the Placement Agent and
its designees five-year warrants to purchase an aggregate of 1,777,356 shares of
the  Company's  common  stock  at  $0.62  per  share.


                                      F-8
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  proceeds  from  this offering will be used to support BioBalance operations
including  R&D, clinical trials and working capital. In addition, a $1.7 million
loan  from  New  York  Health Care to BioBalance was repaid from the proceeds of
the  Offering.

In  connection  with  the  consummation  of  the  Offering,  Messrs. Jerry Braun
("Braun")  and  Jacob  Rosenberg  ("Rosenberg")  then  executive officers of the
Company  agreed with the request of the Placement Agent to resign irrevocably as
directors  and  executive officers of the Company. Therefore, in order to secure
the  obligations  of  the  Company  and  its subsidiary, NYHC Newco Paxxon, Inc.
agreed  to  (i)  consummate the sale of all the assets relating to the Company's
home  healthcare  business  (the  "Asset Sale") to New York Health Care, LLC, an
entity  controlled by Braun and Rosenberg pursuant to the terms of the "Purchase
Agreement  or  (ii) comply with any future payment obligations of the Company to
Braun  and  Rosenberg  under  their  respective  employment  agreements with the
Company, the Company entered into an agreement (the "Agreement") on February 24,
2005,  which  supercedes  an  escrow  agreement  dated  August  3, 2004 that was
canceled,  and  which granted Messrs. Braun and Rosenberg a security interest in
the  assets  of  the  Company's  home healthcare business being conducted in the
states  of  New  York and New Jersey and provides for the deposit of up to $3.55
million  in  a cash collateral account (collectively, the "Collateral"). None of
the  assets  of  BioBalance  will  be used as Collateral to secure the Company's
obligations  to Braun and Rosenberg under their respective employment agreements
or  the  Agreement.

The  Agreement  provided  that  Messrs.  Braun and Rosenberg will be entitled to
receive all or a portion of the Collateral (and any additional amounts that they
are entitled to under their employment agreements and the Agreement) if prior to
the  consummation  of  the  Asset  Sale:  (i)  the Company breaches the Purchase
Agreement  and  the  breach  is  not  cured within any applicable cure period or
waived  by Messrs Braun and Rosenberg, (ii) there are changes in the composition
of  a  majority of the Company's Board of directors (other than the resignations
of  Messrs  Braun  and  Rosenberg  or a reduction in the number of Board members
resulting  from death, disability or resignation of a member or the additions of
directors  that  have  been  expressly  approved  in writing by Messrs Braun and
Rosenberg)  (iii) an event occurs that would be considered "good reason" for the
resignation  of  Messrs.  Braun  and Rosenberg under their employment agreements
with  the  Company  or  would  be  considered  a "change of control" under those
employment  agreements  or  (iv) the Asset Sale has been terminated or abandoned
for any reason prior to December 31, 2005 (other than as a result of a breach of
the  Purchase  Agreement by, or a failure to act by, New York Health Care LLC or
Braun  or  Rosenberg).


                                      F-9
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant  to the terms of their respective employment agreements, as a result of
their  resignations  from  the  Company's  Board of Directors as of the close of
business  on  February  24,  2005,  on  that  date,  each of Braun and Rosenberg
received  ten  year  stock  options  to purchase 500,000 shares of the Company's
common  stock at an exercise price of $0.85 per share, pursuant to the Company's
Performance  Incentive  Plan.

At  the  close  of  business  on  February 24, 2005:(i)  Mr. Braun resigned as a
director and as the Company's Chief Executive Officer and President and (ii) Mr.
Rosenberg  resigned  as  a  director  and as the Company's Vice President, Chief
Operating  Officer,  Chief  Financial  Officer,  Chief  Accounting  Officer  and
Secretary.  Mr.  Braun  will  continue  to  be  employed  by  the Company as the
President  of its home healthcare division and Mr. Rosenberg will continue to be
employed  by  the Company as the Vice President of the Company's home healthcare
division.  Other  than  their  ceasing  to  be  officers  of the Company and the
resulting  changes  in  their  duties  and  responsibilities,  their  respective
employment  agreements  with the Company remain in effect.  In addition, Messrs.
Braun  and  Rosenberg  will  have  board  observer  rights  with  respect to the
Company's  board  of directors until such time as the Asset Sale is consummated.

As  of  the  close  of  business  on February 24, 2005, Mr. O'Donnell became the
Company's  Chief Executive Officer and Secretary. Mr. O'Donnell also retains his
position  as  the  Chief Executive Officer and a director of BioBalance and as a
director  of  the  Company.  His  salary  was  increased by $25,000 to $225,000.

On  March  24, 2005 Mr. Braun and Mr. Rosenberg agreed with New York Healthcare,
Inc  and  its  subsidiary,  NYHC  Newco  Paxxon, Inc., to terminate the security
interest  in  the  Company's  home  healthcare business that had been granted to
Messrs.  Braun  and  Rosenberg  pursuant  to  the  Agreement.  Messrs  Braun and
Rosenberg  have  also  consented, under certain conditions, that the Company may
sell  all or a portion of the Company's home health care operations in the State
of  New Jersey (the "New Jersey Operations") to one or more third parties and to
the  use  by  the  Company  of  the  proceeds  of  any  such sale to finance the
operations  of  its  BioBalance  Corporation  subsidiary.

On  April  11,  2005,  the  Company  entered  into  a  definitive agreement with
Accredited  Health  Services,  Inc. ("Accredited"), a wholly owned subsidiary of
National  Home  Health  Care  Corp,  pursuant  to  which Accredited will acquire
certain  assets  of  the  Company's New Jersey home healthcare business (the "NJ
Business")  for  $3  million.  Revenues  for  the  New  Jersey  business  were
approximately  $6.6  million  in  2004.  Pursuant to the terms of the definitive
agreement  funding  of  the  purchase  price  was  received  by the Company upon
execution of the agreement, with the exception of $150,000 (the "Escrow Funds"),
which  was  placed  in  escrow  to  cover  actual  losses,  if  any, incurred by
Accredited for which the Company is required to indemnify Accredited pursuant to
the  definitive agreement. If no claims by Accredited for indemnification by the
company are made, the Escrow Funds will be released to the Company 90 days after
the  formal  closing  of  the transaction which will occur within 45 days of the
signing  of  the  definitive agreement, subject only to an orderly transition of
the  business.

Below  is  selected  financial  data for the New Jersey home healthcare business
(unaudited):

<TABLE>
<CAPTION>
                               December  31,
                           ----------------------
                              2004        2003
                           ----------  ----------
<S>                        <C>         <C>
Current assets             $  516,277  $  541,485

Total assets                  542,093     584,304

Total current liabilities  $  284,970  $  323,289
</TABLE>

<TABLE>
<CAPTION>
                                Year Ended     Year Ended
                               December 31,   December 31,
                                   2004           2003
                               -------------  -------------
<S>                            <C>            <C>
Net patient service revenue    $   6,567,915  $   6,490,823

Professional care of patients      4,433,245      4,254,593
</TABLE>

RISK FACTOR ASSOCIATED WITH FAIR LABOR STANDARDS ACT:

On  July  22,  2004, the federal Second Circuit Court of Appeals issued a ruling
concerning  the  Fair  Labor Standards Act on the validity of the "companionship
services"  exemption  from  minimum  wage  and  overtime payment requirements to
paraprofessional  field  staff  in  New  York  State.


                                      F-10
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Home  care  providers have long relied on this exemption to provide compensation
to  home care aides and personal care workers with the expectation that there is
no  obligation  for  overtime  pay.

In  September 2004, a request for a rehearing was submitted en banc for the full
court.  On  January  13, 2005, the Court rejected the request for a rehearing on
the  issue.

At  this point, preparations are being made to submit papers to request a review
of  the  issue  before  the U.S. Supreme Court.  Simultaneously, a request for a
stay  of mandate from the Court pending a resolution at the Supreme Court level.

The  implications  of these changes for paying the overtime expense for the home
care industry and the State will be challenges to ensuring patient continuity of
care,  if  agencies  can no longer afford to authorize overtime during workforce
shortage,  and  the  inability  of workers to secure the number of hours of work
they  desire.


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 could 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.  Actual results could differ from those estimates.

ACCOUNTS  RECEIVABLE:

Accounts  receivable  consists of trade receivables recorded at original invoice
amount, less an estimated allowance for uncollectible accounts.  Trade credit is
generally  extended  on  a  short-term basis; thus trade receivables do not bear
interest,  although a finance charge may be applied to receivables that are past
due.  Trade  receivables  are periodically evaluated for collectibility based on
past  credit  history  with  customers  and  their  current financial condition.
Changes in the estimated collectibility of trade receivables are recorded in the
results  of  operations  for the period in which the estimate is revised.  Trade
receivables  that  are deemed uncollectible are offset against the allowance for
uncollectible  accounts.  The  Company generally does not require collateral for
trade  receivables.

REVENUE  RECOGNITION:

The  Company  recognizes  patient  service  revenue  on  the  date  services are
rendered.  Unbilled  services  represent  amounts due for services rendered that
had  not been billed at the end of each period because written authorization had
not  been  received  from  the  referral  source.

PROPERTY  AND  EQUIPMENT:

Property  and  equipment  is  carried  at  cost  and  is  depreciated  under the
straight-line  method  over  the following estimated useful lives of the assets.
Leasehold  improvements  are  amortized  over  the estimated useful lives of the
improvements  or  the  life  of  the  lease,  whichever  is  shorter.

                                      F-11
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                      <C>
Machinery and equipment      3-5 years
Furniture and fixtures       5-7 years
Leasehold improvements   Life of lease
</TABLE>

GOODWILL AND OTHER INTANGIBLE ASSETS:

Statement  of  Financial Accounting Standards (SFAS No. 142) "Goodwill and Other
Intangible  Assets"  requires  that  goodwill  and  intangible  assets  having
indefinite lives not be amortized, but instead be tested for impairment at least
annually. Intangible assets determined to have definite lives are amortized over
their  remaining  useful  lives.

INCOME TAXES:

The Company used the asset and liability method to calculate deferred tax assets
and liabilities.  Deferred taxes are recognized based on the differences between
financial reporting and income tax bases of assets and liabilities using enacted
income  tax  rates.  Deferred  tax  assets  and  liabilities  are measured using
enacted  tax  rates in effect for the years in which those temporary differences
are  expected to be recovered or settled.  The effect on deferred tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes  the  enactment  date.

LONG-LIVED ASSETS:

Long-lived  assets,  such  as  intangible assets other than goodwill, furniture,
equipment  and  leasehold improvements, are evaluated for impairment when events
or  changes in circumstances indicate that the carrying amount of the assets may
not be recoverable through estimated undiscounted future cash flows from the use
of  these  assets.  When  any such impairment exists, the related assets will be
written  down  to  fair  value.

CASH EQUIVALENTS:

The  Company  considers  all  highly liquid investments with maturities of three
months  or  less  when  purchased  to  be  cash  equivalents.

STOCK BASED COMPENSATION:

The Company uses the intrinsic-value method of accounting for stock-based awards
granted to employees.  No stock-based compensation cost is included in net loss,
as  all  options  granted  to employees during periods presented had an exercise
price  equal  to  the  market  value  of  the  stock  on  the  date  of  grant.

In  accordance  with  SFAS  No.  148, "Accounting for Stock Based Compensation -
Transition  and Disclosure," the following table presents the effect on net loss
and  net loss per share had compensation cost for the Company's stock plans been
determined  consistent  with  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation".

The  fair value of each option grant is estimated on the date of grant by use of
the  Black-Scholes  option  pricing  model:


                                      F-12
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                 Year Ended       Year Ended       Year Ended
                                                December 31,     December 31,     December 31,
                                                    2004             2003             2002
                                               --------------  ----------------  --------------
<S>                                            <C>             <C>               <C>

Net loss, as reported                          $  (6,071,685)  $   (22,052,170)  $  (1,399,057)
Less stock-based compensation expense
   determined under fair value method for
   all employee stock options, net of tax
   effect                                           (711,723)      ( 1,620,705)              -
                                               --------------  ----------------  --------------
Pro forma net loss                             $  (6,783,408)  $   (23,672,875)  $  (1,399,057)
                                               ==============  ================  ==============

Basic and diluted loss per share, as reported  $       (0.24)  $         (0.91)  $       (0.07)
Basic and diluted loss per share, pro forma    $       (0.27)  $         (0.97)  $       (0.07)
</TABLE>

The options' assumptions used to estimate these values are as follows:

<TABLE>
<CAPTION>
                                        2004         2003
                                     -----------  -----------
<S>                                  <C>          <C>
Risk free interest rate              1.59%-2.81%  1.10%-3.23%
Expected volatility of common stock     88%-103%     67%-102%
Dividend yield                                0%           0%
Expected option term                       3yrs.      1-5yrs.
</TABLE>

The  weighted  average  fair  value  of  options was $1.12 and $2.29 for options
granted  during  the  years  ended  December  31,  2004  and 2003, respectively.

LOSS  PER  SHARE:

Basic  loss  per  share  excludes  dilution  and  is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding  for  the  period.

Diluted  earnings  per  share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period,  adjusted  to  reflect  potentially  dilutive  securities  including the
presumed conversion of the preferred stock from the date of its issuance. Due to
losses  during the years ended December 31, 2004, 2003 and 2002 potential common
stock  attributable  to  options,  warrants  and  convertible  preferred  stock
outstanding of 3,246,701 for 2004, 3,649,234 for 2003 and 538,066 for 2002, were
not  included in the computation of diluted earnings per share, because to do so
would  be  antidilutive.

RECENT ISSUED ACCOUNTING PRONOUNCEMENTS:

In  January 2003, the FASB issued Financial Interpretation No. 46 "Consolidation
of  Variable  Interest  Entities" ("FIN 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46
requires  certain  variable  interest entities to be consolidated by the primary
beneficiary  of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not provide sufficient
equity  at  risk for the entity to support its activities. In December 2003, the
FASB revised certain elements of FIN 46 ("FIN 46-R"). The FASB also modified the
effective  date  of  FIN 46. This interpretation applies immediately to variable
interest  entities created after January 31, 2003 and variable interest entities
in  which  the  Company obtains an interest after January 31, 2003. For variable
interest  entities  in  which  a company obtained an interest before February 1,
2003, the interpretation applies to the periods ending after March 15, 2004. The
adoption  of  FIN  46  did  not  have  an  impact  on the Company's consolidated
financial  position  or  results  of  operations.

In  December  2004,  the  FASB  issued SFAS No. 123 (revised 2004), "Share-Based
Payment,"  or  SFAS  No.  123R.  SFAS  No. 123R, which replaces SFAS No. 123 and
supersedes  APB  Opinion  No.  25,  requires  that compensation cost relating to
share-based  payment  transactions  be  recognized  in


                                      F-13
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the  financial  statements,  based  on the fair value of the equity or liability
instruments  issued. SFAS No. 123R is effective as of the beginning of the first
interim  or  annual  reporting  period  that  begins after December 31, 2005 and
applies  to  all  awards  granted,  modified, repurchased or cancelled after the
effective  date.  We  do  not  expect  the  adoption  of this standard to have a
significant  impact  on  our  consolidated  results  of  operations or financial
position.

In  December  2004,  the  FASB  issued  SFAS  No. 153, "Exchanges of Nonmonetary
Assets-an  amendment  of  APB  Opinion  No.  29,"  or SFAS No. 153. SFAS No. 153
eliminates  the exception for nonmonetary exchanges of similar productive assets
of  APB Opinion No. 29 and replaces it with a general exception for exchanges of
nonmonetary  assets  that  do  not  have  commercial  substance.  A  nonmonetary
exchange  has  commercial  substance  if the future cash flows of the entity are
expected  to  change significantly as a result of the exchange.  SFAS No. 153 is
effective  for  nonmonetary  asset  exchanges  occurring  in  the fiscal periods
beginning  after  June 15, 2005.  We do not expect the adoption of this standard
to  have  a  significant  impact  on  our  consolidated results of operations or
financial  position.

NOTE 2 - ACQUISITION OF NEW YORK HEALTH CARE, INC. AND PRIVATE PLACEMENT:

On  January 2, 2003, BioBalance consummated a business combination with New York
Health  Care.  As  a result of the merger, BioBalance shareholders exchanged all
of  their  BioBalance  shares  for 21,443,821 shares of common stock of New York
Health  Care.  New  York  Health  Care  effectuated  a  one and one-half for one
reverse  stock  split  simultaneously  with  the  merger.  Because  the  former
BioBalance stockholders own a majority of the common stock (89.7%) of the merged
company,  BioBalance  is  considered  to  be  the  accounting  acquirer  in  the
transaction.  The  acquisition  of New York Health Care provides BioBalance with
access  to  the  public equity markets through New York Health Care, which would
otherwise  be  unavailable  to  BioBalance.

The  purchase  price  of  the acquisition was as follows (rounded to the nearest
thousand):

<TABLE>
<CAPTION>
<S>                                                      <C>
Value of New York Health Care common stock               $13,100,000
Value of New York Health Care preferred stock              1,890,000
Value of New York Health Care options/warrants             4,950,000
BioBalance's transaction costs                               390,000
                                                         -----------

Total purchase price                                     $20,330,000
                                                         ===========
</TABLE>

Common  stock  valued at approximately $13.1 million is based on New York Health
Care's  common stock outstanding at January 2, 2003, at an average closing price
for  a  six  day  period  ended  July 24, 2002 ($5.30) (measurement date) (after
giving  effect  to  the  one  and  one  half  for  one  reverse  stock  split).

The  value  of  the  preferred stock was calculated using the common stock price
less a 10% discount which reflects the limited marketability of the common stock
into  which  the preferred stock is convertible.  The fair value of $4.9 million
of  the  New  York  Health  Care  options/warrants  was  determined  using  the
Black-Scholes  valuation  model.  To  determine  the  fair  value  of  these
options/warrants,  the  following  assumptions were used: expected volatility of
122%, risk-free interest rates ranging from 1.62% to 4.55%, and expected life of
approximately  4.95  years.


                                      F-14
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As  part of the merger, outstanding BioBalance options/warrants (586,452 shares)
became  exercisable  for  New  York  Health  Care's  common stock.  Compensation
expense of $721,100 was recorded on January 2, 2003 for the increase in the fair
value  of the vested BioBalance options/warrants as a result of the merger.  The
unvested  options/warrants  will  be remeasured at the fair value on the date of
vesting  and  recorded  as  compensation expense, which was $33,928 for the year
ended  December  31,  2003  and  $15,743  for  the year ended December 31, 2004.

As  part  of  their amended employment agreements, if the two officers/directors
from  New  York Health Care are terminated or resign from the Board of Directors
prior  to the expiration of their employment agreements, the Company is required
to  issue  an  options to each officer/director to acquire 500,000 shares of the
Company  common  stock  at the fair market value on the date of termination. The
Company  issued  these  options  to  Messrs. Bruan and Rosenberg on February 24,
2005. As Messrs Bruan and Rosenberg will continue as officers of the health care
divison  the  options  were  issued in accordance with the Company's Performance
Incentive  Plan.  In  addition,  the  agreements required a payment to them if a
change  in control of New York Health Care occurred. This amounted to $1,940,526
and  was  recorded as a liability in due to related parties in the net assets of
New  York Health Care on January 2, 2003. As of December 31, 2003, this amounted
to  $1,190,526.  During  the  year ended December 31, 2003, payments of $750,000
were  made  related  to  this obligation, and during the year ended December 31,
2004,  the  remaining  $1,190,526  was  paid.

Under  the  purchase method of accounting, the total estimated purchase price as
detailed  above  was  allocated  to  New  York  Health  Care's  net tangible and
intangible  assets  based  on  their  fair  values  as of January 2, 2003.    At
January  2, 2003, New York Health Care's tangible assets and liabilities at fair
value  were  as  follows  (rounded  to  the  nearest  thousand):

<TABLE>
<CAPTION>
<S>                                        <C>
Cash                                       $ 3,549,000
Due from lending institution                   153,000
Accounts receivable                          5,280,000
Unbilled services                               96,000
Prepaid expenses and other current assets      185,000
Property and equipment                         225,000
Other assets                                    53,000
Accrued payroll                             (1,198,000)
Current portion of lease obligation            (18,000)
Accounts payable and accrued expenses       (3,382,000)
Due to related parties                      (1,941,000)
Due to HRA                                  (1,932,000)
                                           ------------
                                           $ 1,070,000
                                           ============
</TABLE>

Based  on  the  independent  valuation  prepared using estimates and assumptions
provided  by  management,  the  total  purchase  price  of  $20,330,000 has been
allocated  as  follows:

Purchase  price  allocation:

<TABLE>
<CAPTION>
<S>                                          <C>
Net tangible assets of New York Health Care  $ 1,070,000
Goodwill                                      18,770,000
Customer base                                    390,000
Patient list                                     100,000
                                             -----------

                                             $20,330,000
                                             ===========
</TABLE>


                                      F-15
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  following  unaudited  supplemental  pro  forma  information is presented to
illustrate  the  effects  of the acquisition on the historical operating results
for  the year ended December 31, 2002, as if the acquisition had occurred at the
beginning  of  that  period.  Since the acquisition occurred on January 2, 2003,
there  is no difference in the pro forma information for the year ended December
31,  2003.

<TABLE>
<CAPTION>
                           Year Ended
                          December 31,
                              2002
                         --------------
<S>                      <C>
Net revenue              $  38,880,477
Net loss for the period  $  (1,020,689)
Net loss per share       $       (0.05)
</TABLE>

Private  Placement:

On  January  2, 2003, BioBalance completed a private placement of 327,327 shares
of its common stock.  The shares were offered to accredited investors at a price
of  approximately $3.27 per share for aggregate gross proceeds of $1,072,000 and
net  proceeds  of  $1,013,808.


NOTE 3 - PROPERTY AND EQUIPMENT:

Property  and  equipment,  at  cost  consists  of  the following at December 31:

<TABLE>
<CAPTION>
                                 2004      2003
                               --------  --------
<S>                            <C>       <C>
Machinery and equipment        $141,661  $133,161
Furniture and fixtures           87,536    87,536
Leasehold improvements           54,033    54,033
                               --------  --------
                                283,230   274,730

Less accumulated depreciation
and amortization                196,224   128,832
                               --------  --------
                               $ 87,006  $145,898
                               ========  ========
</TABLE>

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS:

As  a  result  of  the  merger,  the  Company  had  recognized  goodwill  on the
transaction.  The  goodwill is associated with the home care business and on the
date  of the merger, the Company determined that the goodwill was impaired.  The
indicator  leading to an impairment was the fact that, based on the then current
home  health care market, the home health care business could not be sold in the
open  market  for  its  recorded  purchase price.  The Company hired a valuation
expert  who  valued  the  Company  using  the  capitalized  earnings/cash  flow
methodology  and the market multiple approach.  Based on these methodologies, it
was  determined  that  an impairment had been incurred.  The goodwill impairment
amounted  to  $17,869,339  for  the  year  ended  December  31,  2003.


                                      F-16
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  changes  in  the  carrying amount of goodwill by reportable segment for the
years  ended  December  31,  2004  and  2003  were  as  follows:

<TABLE>
<CAPTION>
                                  New York        Bio-
                                 Health Care     Balance
                                -------------  -----------
<S>                             <C>            <C>
Balance as of
    January 1, 2003             $          -   $         -
Acquisition
    January 2, 2003               18,769,926             -
Impairment
   January 2, 2003               (17,869,339)            -
                                -------------  -----------
Balance as of
  December 31, 2003                  900,587             -
Impairment for the
  year ended December 31, 2004             -             -
                                -------------  -----------
Balance as of
   December 31, 2004            $    900,587   $         -
                                =============  ===========
</TABLE>

The  impairment  charges  are  noncash in nature and do not affect the Company's
liquidity.

The  major  classifications  of intangible assets and their respective estimated
useful  lives  are  as  follows:

<TABLE>
<CAPTION>
                                           December 31, 2004
                       ----------------------------------------------------------
                                                                       Estimated
                       Gross Carrying    Accumulated   Net Carrying   Useful Life
                           Amount       Amortization      Amount         Years
                       ---------------  -------------  -------------  -----------
<S>                    <C>              <C>            <C>            <C>
Intellectual property  $     2,706,337  $     896,840  $   1,809,497           10
Patents/trademarks           1,112,905        278,357        834,548           10
Non-compete agreement          770,000        211,750        558,250            5
Patient list                   100,000         40,000         60,000            5
Customer base                  390,000        156,000        234,000            5
                       ---------------  -------------  -------------
                       $     5,079,242  $   1,582,947  $   3,496,295
                       ===============  =============  =============
</TABLE>

<TABLE>
<CAPTION>
                                           December 31, 2003
                       ----------------------------------------------------------
                                                                       Estimated
                       Gross Carrying    Accumulated   Net Carrying   Useful Life
                           Amount       Amortization      Amount         Years
                       ----------------------------------------------------------
<S>                    <C>              <C>            <C>            <C>
Intellectual property  $     3,576,500  $     539,189  $   3,037,311           10
Patents/trademarks           1,913,751         83,690      1,830,061           10
Non-compete agreement          770,000         57,750        712,250            5
Patient list                   100,000         20,000         80,000            5
Customer base                  390,000         78,000        312,000            5
                       ---------------  -------------  -------------
                       $     6,750,251  $     778,629  $   5,971,622
                       ===============  =============  =============
</TABLE>


                                      F-17
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On  August 20, 2003, the Company purchased from NexGen Bacterium Inc. ("NexGen")
certain  proprietary  technology  and  intellectual property assets that did not
constitute  a  business.  The  purchase  price  for the assets is comprised of a
$250,000  payment  and  the  issuance  of 1,000,000 shares of the Company's $.01
par-value  common  stock.  The stock was valued at $3,600,000 based on a closing
price  of  $3.60  per share on August 20, 2003.  The asset acquisition agreement
includes  noncompete  provisions  restricting  NexGen  from  competing  with the
Company for a period of five years.  Management has allocated the purchase price
as  follows:  intellectual  property:  $1,540,000,  patents:  $1,540,000,  and
noncompete  agreement:  $770,000.    For  the  years ended December 31, 2004 and
2003,  the  Company  has  also incurred fees approximating $69,000 and $173,000,
respectively,  principally  in connection with patent and trademark applications
for  the  technology.  These  assets  are  being  amortized over their estimated
useful  lives  of 10 years for intellectual property and patents and 5 years for
the  noncompete  agreement.

At  December  31,  2004  it  was  determined  that  the investment in the NexGen
Platform  was  impaired  and  as  a result of the impairment analysis a total of
$1,740,326 was expensed during the 4th quarter. The impairment was determined by
an independent valuation firm using a discounted cash flow model. The impairment
is  due  to  a  number  of factors including the acceleration of PROBACTRIX as a
prescription product, overall limited funding available and available management
time.  While BioBalance believes that the NexGen Platform is a viable technology
that  can  be  commercialized,  it  will  continue to be delayed until the above
mentioned  factors  are  resolved.

As  of December 31, 2004, approximately $3.2 million of intangible assets net of
accumulated  amortization  relate  to  BioBalance.  BioBalance is a research and
development  company and has had significant losses since inception. The Company
cannot  assure that BioBalance will be able to generate revenues or profits from
operations  of  its  business  or  that  BioBalance could be able to generate or
sustain  profitability  in  the  future.

Amortization  expense  amounted to $804,318, $477,029 and $214,600 for the years
ended  December  31,  2004,  2003  and  2002,  respectively.

AMORTIZATION  EXPENSE:

<TABLE>
<CAPTION>
           For The Years
               Ended
            December 31,
            -----------
<S>                         <C>
            2005            $  607,143
            2006               607,143
            2007               607,143
            2008               451,149
            2009               355,149
            Thereafter         868,568
                            ----------
                            $3,496,295
                            ==========
</TABLE>

NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts  payable  and accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>
                              2004        2003
                           ----------  ----------
<S>                        <C>         <C>
Accounts payable           $  622,730  $  500,186
Accrued expenses            2,150,896     967,851
Accrued employee benefits   4,552,489   4,381,695
                           ----------  ----------
                           $7,326,115  $5,849,732
                           ==========  ==========
</TABLE>


                                      F-18
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - LINE OF CREDIT:

New  York  Health  Care has a $4,000,000 line of credit with G.E. Capital Health
Care  Financial  Services  that expires November 29, 2005.   The availability of
the  line  of  credit is based on a formula of eligible accounts receivable.  At
December  31,  2004,  approximately  $4,000,000  was  available  to the Company.
Certain  assets  of the Company collateralize the line of credit.  The agreement
contains  various  restrictive covenants, which among other things, require that
the  Company  maintain  a  minimum  tangible  net  worth.  Borrowings  under the
agreement  bear  interest  at  prime  plus  1 1/2% (6.75%) at December 31, 2004.

At  December  31,  2004,  there  was an amount due from G.E. Capital Health Care
Financial  Services  of  $566,523.  This  is  due to a lockbox being used by the
Company;  all  collections are deposited with G.E. Capital Health Care Financial
Services  and  then  transferred  to  the  bank.

On  March 29, 2004, the loan agreement was amended to allow New York Health Care
to lend money to its subsidiary BioBalance if there is no outstanding loan under
this  agreement.  The  agreement  has also been amended to allow New York Health
Care  to invest money in BioBalance.  At December 31, 2004, New York Health Care
loaned  BioBalance  $1,500,000.

On January 19, 2005, the loan agreement was amended to allow the resignations of
Messrs.  Jerry  Braun  and  Jacob  Rosenberg  as  officers  and directors of the
Company,  conditioned upon Messrs. Braun and Rosenberg remaining managers of the
Home  Health  Care  division.

In  addition,  on  April  11, 2005, the Company's loan agreement was modified to
permit  the  sale  of  the  NJ  Business  to Accredited Health and to remove the
lender's  lien  with  respect  to  the  assets of the New Jersey Operation. As a
result  of  this  modification, no loans under the agreement may be requested or
occur  until  the  net  worth  agreement  has  been  amended  to  the  lender's
satisfaction.

NOTE 7 - INCOME TAXES:

Deferred  tax attributes resulting from differences between financial accounting
amounts  and  tax  bases of assets and liabilities at December 31, 2004 and 2003
follows  (rounded  to  the  nearest  thousand):

<TABLE>
<CAPTION>
                                       2004          2003
                                   ------------  ------------
<S>                                <C>           <C>
Current assets:
Allowance for doubtful accounts    $   194,000   $   166,000
Prepaid expenses                      (154,000)            -
                                   ------------  ------------
                                        40,000       166,000
Valuation allowance                    (40,000)     (166,000)
                                   ------------  ------------

Net current deferred tax asset     $         -   $         -
                                   ============  ============

Noncurrent assets:
Net operating loss carryforwards   $ 3,588,000   $   695,000
Depreciation                            44,000        28,000
Amortization of goodwill               765,000       857,000
Amortization of intangibles            255,000       113,000
                                   ------------  ------------
                                     4,652,000     1,693,000

Valuation allowance                 (4,652,000)   (1,693,000)
                                   ------------  ------------
Net noncurrent deferred tax asset  $         -   $         -
                                   ============  ============
</TABLE>


                                      F-19
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As  of  December  31,  2004, the Company had net operating loss carryforwards of
approximately  $8,400,000,  which  expire  between  2021  through  2024.

The  (benefit)  provision  for  income  taxes,  consist  of  the  following:

<TABLE>
<CAPTION>
                                         2004          2003        2002
                                     ------------  ------------  ---------
<S>                                  <C>           <C>           <C>
Current tax (benefit) expense        $   (63,126)  $    39,000   $       -
Deferred tax expense
(not including amount listed below)    2,800,000     1,007,000           -

Net change in valuation allowance     (2,800,000)   (1,007,000)          -
                                     ------------  ------------  ---------
                                     $   (63,126)  $    39,000   $       -
                                     ============  ============  =========
</TABLE>

The  (benefit)  provision  for  income  taxes  is  comprised  of  the following:

<TABLE>
<CAPTION>
                                     2004      2003    2002
                                   ---------  -------  -----
<S>                                <C>        <C>      <C>
Current:
Federal                            $      -   $     -  $   -
State                               (63,126)   39,000      -
                                   ---------  -------  -----
                                   $(63,126)  $39,000      -
                                   =========  =======  =====
</TABLE>


The  statutory  Federal  income tax rate and the effective rate is reconciled as
follows:

<TABLE>
<CAPTION>
                                         2004   2003   2002
                                         -----  -----  -----
<S>                                      <C>    <C>    <C>
Statutory Federal income tax rate          34%    34%    34%
State taxes, net of Federal tax benefit    12     12     10
Valuation allowance                       (45)   (45)   (44)
Over/under accrual                         (1)    (1)     -
                                         -----  -----  -----

                                            -      -      -
                                         =====  =====  =====
</TABLE>


NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS:

As  of  December  31,  2004  and  2003,  the  carrying  amount  of cash and cash
equivalents,  accounts  receivable  and  accounts  payable, accrued expenses and
accrued  payroll, due to HRA, and due to related parties approximates fair value
due  to  their  short-term  nature.


NOTE 9 - SHAREHOLDERS' EQUITY:

COMMON STOCK

On  January  29,  2002,  the  Company issued 391,656 shares of common stock in a
private  placement.


                                      F-20
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the period April 2002 through June 2002, the Company issued 153,000 shares of
its  common  stock  in  private  placement  for  gross  proceeds  of  $459,000.

In the period July 1, 2002 through September 30, 2002, the Company issued 49,000
shares  of  common  stock  in  private placement for gross proceeds of $147,000.

In  the  period  October  1,  2002 through December 31, 2002, the Company issued
822,171  shares  of  common  stock  in  private placements for gross proceeds of
$2,080,033.  $290,000  of  the  gross  proceeds  were  received in January 2003.

In  January  2003,  the  Company issued 327,327 shares of common stock for gross
proceeds  of  $1,072,000.

On  January  2, 2003, the Company recapitalized 2,475,154 shares of common stock
and  590,375  shares  of  preferred  stock  in  connection  with  the  reverse
acquisition.

On  August  20,  2003,  the  Company  issued 1,000,000 shares of common stock in
connection  with  the  purchase  of  intangible  assets.

PREFERRED STOCK

The  Company  has  authorized  590,375  shares  of Class A preferred stock.  The
holders  of  the  preferred  stock are entitled to a dividend equal to 9% of the
purchase  price for shares of the preferred stock before any dividend is paid on
common  stock.  Dividends  may  be  declared  quarterly at the discretion of the
Board  of  Directors  and  are  not  cumulative.  The holders of preferred stock
receive  no  preference  on  liquidation  and  such shares may be converted into
two-thirds  of  one  share  of  common stock at any time.  The Class A preferred
stockholders  are  entitled  to  vote  on  matters  that  affect  them.

TREASURY STOCK

The  Company  issued treasury stock for the exercise of options that occurred in
September  and  October 2003.  The Company assigned a cost to the treasury stock
based  on  the  first-in,  first-out  method.

NOTE 10 - STOCK OPTION/WARRANTS:

The  following  tables  summarize  options  and warrants issued during the years
ended  December  31, 2004, 2003 and 2002 to consultants and employees (including
non-employee  Board  of  Directors):

Warrants:

These  warrants  were  issued  to  or  earned  by  consultants

<TABLE>
<CAPTION>
Grants for 2004     None
------------------

Grant Date          Number of warrants  Exercise Price   Expiration term
------------------  ------------------  ---------------  ---------------
<S>                 <C>                 <C>              <C>

January 1, 2003                  7,205  $          3.47            5 yrs
January 1, 2003                 25,528  $          3.22            5 yrs
January 1, 2003                 15,653  $          3.37            5 yrs
January 15, 2003               100,000  $          4.15             1 yr
February 3, 2003                35,000  $          3.40             1 yr
April 14, 2003                 500,000  $          2.50             1 yr
July 15, 2003                  135,000  $          2.70             1 yr
September 15, 2003             100,000  $          3.69            5 yrs
*December 17, 2003              75,000  $          2.51            2 yrs

Grant Date          Number of warrants  Exercise Price   Expiration term
------------------  ------------------  ---------------  ---------------
January 30, 2002                39,166  $          3.00            5 yrs
November 4, 2002                25,000  $          1.50            2 yrs
November 7, 2002                20,000  $          1.50            2 yrs
</TABLE>


                                      F-21
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

*These  are  performance  based warrants which were earned on December 17, 2003.
For  accounting  purposes  they  are  deemed  to  be  outstanding.  The  Company
recognized  a  noncash  compensation  charge  of  $102,203 during the year ended
December  31,  2003.

Some  of  these  warrants  granted  in 2003 vest immediately, some warrants vest
monthly.  These  warrants are expensed at the fair value on the date of vesting.
For  accounting purposes, unvested warrants are not considered outstanding.  For
the  year  ended December 31, 2004, $15,743 was expensed as compensation expense
for  these  warrants.  For  the  year  ended  December  31,  2003,  $870,359 was
expensed as compensation for these warrants, which includes compensation expense
for  the BioBalance warrants of $33,928 for the year ended December 31, 2003 and
75,000  performance  based  warrants  earned  in  December  2003  of  $102,203.

The  fair value of options granted to consultants during 2002 was $72,450.  Fair
value  is  estimated  based  on  the Black-Scholes option pricing model with the
following assumptions.  For grants in  2002, the expected volatility used was 0%
and risk-free interest rate of 3.0% and expected lives equal to the lives of the
warrants.

Nasdaq  implemented  a  rule  on  July 1, 2003 that requires a company to obtain
shareholder  approval  prior  to  the  issuance  of  warrants  to consultants or
non-employee  members  of the Board of Directors. The Company committed to issue
warrants  to  certain  consultants subsequent to July 1, 2003.  Therefore, these
commitments  of  warrants  are  re-valued  at  each  balance sheet date with the
appropriate  adjustment  made to compensation expense. Once shareholder approval
is  obtained,  no  further  adjustment to compensation expense will be recorded.
For  the  year  ended  December  31,  2004,  the  re-valued warrants generated a
reduction  in  compensation  of $381,565.  For the year ended December 31, 2003,
the  re-valued  warrants  generated  a  compensation  expense  of  $19,511.


PERFORMANCE INCENTIVE PLAN:

On  March  26,  1996,  the  Company's Board of Directors adopted the Performance
Incentive  Plan,  (the  "Option  Plan").  Under the terms of the Option Plan, as
amended,  up  to 4,712,500 shares of common stock may be granted at December 31,
2004.  The  Option  Plan is administered by the Compensation Committee which was
appointed  by  the  Board  of  Directors.  The  Committee  determines  which key
employee,  officer  or  director  on  the  regular payroll of the Company, shall
receive  stock  options.  Granted  options are exercisable commencing six months
after the date of grant, and expire up to ten years after the date of grant. The
exercise  price  of  any  incentive  stock option or nonqualified option granted
under  the Option Plan may not be less than 100% of the fair market value of the
shares  of  common  stock  of  the  Company  at  the  time  of  the  grant.


                                      F-22
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Options/Warrants:

These  options  and  warrants were issued to employees and non-employee Board of
Directors  in  accordance  with  the  Company's  Performance  Incentive  Plan.

<TABLE>
<CAPTION>
Grant Date          Number of Options  Exercise Price   Expiration Term
------------------  -----------------  ---------------  ---------------
<S>                 <C>                <C>              <C>
January 29, 2004              450,000  $          2.13           10 yrs
September 14, 2004            100,000  $          0.50           10 yrs

Grant Date          Number of Options  Exercise Price   Expiration Term
------------------  -----------------  ---------------  ---------------
March 7, 2003                 560,000  $          3.14           10 yrs
June 16, 2003                   7,500  $          2.87            3 yrs
June 26, 2003                 200,000  $          2.48           10 yrs
September 26, 2003             80,000  $          3.77           10 yrs
</TABLE>

Since  the  options  were  given to employees at not less than fair value on the
date  of  grant,  no  compensation  expense  was  recorded.

On November 26, 2003, the Company suspended the 100,000 options granted on March
7,  2003,  to  Paul  Stark, the former President of BioBalance.  The options are
considered  outstanding  but can not be exercised until the Company gives notice
that  they may be exercised.  The options have been recorded under the intrinsic
value  method  and  are  included  in  the  Black-Scholes  calculation  above.

At December 31, 2004, the Company has  4,834,592 shares of common stock reserved
for  issuance  of  these  options/warrants  and  for  options/warrants  granted
previously.

Activity  in stock options and warrants, including those outside the Performance
Incentive  Plan, for each of the three years ended December 31, is summarized as
follows:

<TABLE>
<CAPTION>
                                              Shares Under     Weighted Average
                                            Options/Warrants    Exercise Price
                                            -----------------  -----------------
<S>                                         <C>                <C>
Balance at December 31, 2002                         538,066   $            1.52

New York Health Care's
options and warrants, due to merger                1,024,167                1.84

Options and warrants granted                      *1,840,886                3.40

Options exercised                                    (20,801)                .88

Options cancelled/expired                           (126,667)               2.25
                                            -----------------  -----------------

Balance at December 31, 2003                       3,255,651                2.27

Options and warrants granted                         550,000                1.83

Options exercised                                          -                   -

Options canceled/expired                            (952,532)               2.31
                                            -----------------  -----------------

Balance at December 31, 2004                       2,853,119                2.17
                                            =================

Eligible for exercise at December 31, 2004         2,753,119                2.23
                                            =================
<FN>

*Includes  the  performance  based  warrants  discussed  above.
</TABLE>


                                      F-23
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  following  table  summarizes  information  about  options  and  warrants
outstanding  and  exercisable  at  December  31,  2004.

<TABLE>
<CAPTION>
                     Options/Warrants  Outstanding          Options/Warrants  Exercisable
                     -----------------------------          -----------------------------
                                                                               Weighted
                                  Weighted                                      Average
                  Options/        Average         Weighted        Options/     Options/
   Range of       Warrants       Remaining         Average        Warrants     Warrants
Exercise Price   Outstanding  Contractual Life  Exercise Price  Exercisable   Exercisable
---------------  -----------  ----------------  --------------  ------------  -----------
<C>              <C>          <C>               <S>             <C>           <C>
$          4.50       62,500        1.24 years  $         4.50        62,500  $      4.50
$          3.77       80,000        8.54 years            3.77        80,000         3.77
$          3.69      100,000        3.71 years            3.69       100,000         3.69
$     3.22-3.47       48,386        3.00 years            3.31        48,386         3.31
$          3.14      560,000        8.19 years            3.14       560,000         3.14
$          3.00       33,900        1.92 years            3.00        33,900         3.00
$          3.00       39,166        2.08 years            3.00        39,166         3.00
$          2.87        7,500        1.46 years            2.87         7,500         2.87
$          2.70      135,000        0.54 years            2.70       135,000         2.70
$          2.55       75,333        3.42 years            2.55        75,333         2.55
$          2.51       75,000        0.96 years            2.51        75,000         2.51
$          2.48      200,000        8.49 years            2.48       200,000         2.48
$          2.13      450,000        9.08 years            2.13       450,000         2.13
$          1.50       51,333        3.98 years            1.50        51,333         1.50
$          1.50       20,000        0.85 years            1.50        20,000         1.50
$          1.00      200,000        6.42 years            1.00       200,000         1.00
$          0.98       66,667        4.86 years            0.98        66,667         0.98
$     0.89-0.98      275,000        3.43 years            0.93       275,000         0.93
$     0.75-0.83      273,334        2.96 years            0.79       273,334         0.79
$          0.50      100,000        9.70 years            0.50             -         0.00
                 -----------                                    ------------

                   2,853,119        5.87 years            2.17     2,753,119         2.23
                 ===========                                    ============
</TABLE>


                                      F-24
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - COMMITMENTS AND CONTINGENCIES:

In  November  2003,  a director, who was also an officer of BioBalance resigned,
and  a  consulting  agreement with a consultant to BioBalance was suspended, and
subsequently  terminated,  as a result of matters related to certain claims made
against  the  former  director and consultant by the U.S. Attorney's office. The
matters related to an alleged attempt by these two individuals to manipulate the
Company's  common  stock. The Company is obligated, under certain circumstances,
to  indemnify  the former director against liability and to pay for his costs of
defending himself from certain legal actions that arose from his activities as a
director or officer of the Company. To date, the Company's insurance carrier has
advanced  funds  on  behalf  of  the Company to the former director to cover the
expenses  of  his  defense  to  the  government  action.  Unless  it  is legally
determined  that  the  former  director  is not entitled to indemnification, the
Company would be required to reimburse the insurance carrier for $250,000 of the
amount  it  advanced  on behalf of the former director. As of December 31, 2004,
the  Company  has accrued the $250,000 on its financial statements. In addition,
the  terminated  consulting  agreement  that BioBalance had entered into in 2001
with  the  consultant  and a company affiliated with the consultant provided for
the  payment  to  the  consultant of annual consulting fees of $250,000 per year
through  at  least  January  2008  and  the  issuance of 200,000 warrants to the
consulting  company,  subject to earlier termination of the consulting agreement
under  certain  circumstances, including for cause, as defined in the agreement,
or without cause.  Although BioBalance has notified the consultant in writing on
September  23,  2004,  of the termination of the consulting agreement for cause,
should  the  consultant  bring  an  action  to  challenge the  termination and a
court  determines   that  the  agreement was actually terminated  without cause,
then  BioBalance  could  be  obligated  under  the  agreement  to  pay  to  the
consulting  company  a  severance  payment  equal  to three times the sum of its
annual  base  consulting  fee  ($750,000)  any  cash  bonus  paid  to  it in the
three-year  period  preceding  the  date  of  termination  and  to  provide  the
consultant  with  certain  health and other benefits for a period of five-years.
The  Company  has  accrued  approximately $359,000 in its consolidated financial
statements  as  of December 31, 2004 relating to this consulting agreement which
includes  $125,000  in  the  third  quarter of 2004 to cover additional payments
provided  for in the consulting agreement which reflects the maximum the Company
may  be  required to pay. Moreover, the Company believes that it will be able to
defend  its position in a possible claim by the consultant that it is owed money
under  the  consulting  agreement,  although there can be no assurance as to the
amount  of  monies, if


                                      F-25
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

any,  that BioBalance may have to pay under the consulting agreement or that the
consultant  will  not  bring  an action against BioBalance or the Company for an
alleged  breach  of  the  consulting  agreement.

During  October  2004,  it  was  determined that certain of the shares of Common
Stock  that the Company issued to holders of BioBalance stock in connection with
the  Company's  January  2003 acquisition of BioBalance may not have been exempt
from the registration or qualification requirements of the state securities laws
of  certain  of  the  states  where the holders of BioBalance stock then resided
although  they  were  registered  under  the Securities Act of 1933, as amended.
Although  the Company is unable to quantify the actual number of shares involved
that  are  still  owned by the original recipients of the Company's Common Stock
received in the BioBalance acquisition, the per share purchase price paid by the
BioBalance  holders  for the BioBalance shares they exchanged in the acquisition
ranged  from $.03 to $3.00 per share and the Company currently believes that the
purchase  price paid by such persons who might have certain statutory rescission
rights  does  not  exceed  approximately $345,000, exclusive of any penalties or
interest,  although  no  assurance  can  be  given that any such claims will not
exceed  this  amount.  The  Company  cannot determine the effect, if any, on its
operations or financial condition that may occur from the failure to register or
qualify these shares under applicable state securities laws. If it is determined
that  the  Company  offered  Common  Stock  in  connection  with  the BioBalance
acquisition  without  properly  registering or qualifying the shares under state
laws,  or  securing  exemption from registration, regulators could impose on the
Company  monetary  fines  or  other sanctions as provided under these laws.  The
Company  is  unable  to  estimate  the amount of monetary fines, if any,  or the
nature  or  scope  of  any  sanctions  at  this  time  and  is  continuing  its
investigation  of  this  matter.

LEASE COMMITMENTS

The  Company  leases  office  space under noncancellable operating leases in New
York  and  New  Jersey  that  expire  between  June  2005  and  March  2010.

At  December  31, 2004, future minimum lease payments due under operating leases
approximate:

<TABLE>
<CAPTION>
<S>                            <C>
2005                           $  423,000
2006                              315,000
2007                              143,000
2008                              126,000
2009                              127,000
2010                               32,000
                               ----------
Total minimum future payments  $1,166,000 (1)
                               ==========
</TABLE>

Rental  expense  charged  to operations was approximately $461,000, $432,000 and
$60,000,  for  the  years  ended December 31, 2004, 2003 and 2002, respectively.

(1)  At  December  31,  2004,  the  New  Jersey  operations future minimum lease
payments due under operating leases approximates: 2005 $112,000, 2006 - $71,000,
2007  -  $21,000,  and  2008  -  $3,000.

EMPLOYMENT  AGREEMENTS:

In  June  2004,  the  Company  entered  into an employment agreement with Dennis
O'Donnell  the  president of BioBalance that expires on May 5, 2006 at an annual
compensation  of  $200,000.  The  board approved an increase of $25,000 upon the
closing  of  the  Offering  that  took  place  on  February  24, 2005.


                                      F-26
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On  November  10,  1999, the Company entered into employment agreements with two
officers,  with  terms  beginning  December  27,  1999 and expiring in 2004. The
agreements  called  for  initial  aggregate annual compensation of approximately
$420,000  with  an  annual  increase  of 10% and provided for certain additional
benefits.  This  employment agreement was amended on January 2, 2003 pursuant to
the  Stock  for  Stock Exchange Agreement between the Company and The BioBalance
Corporation.  Under  the  amended  employment  agreement,  the  two  officers'
employment  was  extended  until December 31, 2009. The amendment also calls for
assurance  that  the  two  officers continue their election as Directors for the
full  term  of  their  employment  contracts.  If the officers are terminated as
Directors, the Company shall enter into consulting agreements with the officers,
effective  the  date  of  termination. In such case, consulting services will be
provided  on an as needed basis for a period of not less than five years and, as
compensation  for consulting services, each officer will be granted an option to
acquire  500,000 shares of the Company's common stock for a term of no less than
ten  years  at  a price per share equal to the closing price of the stock on the
date  of  such  termination.  The  employment agreements were further amended to
eliminate the requirerment for consulting agreements. Messrs Braun and Rosenberg
on  February  24, 2005, agreed to a further amendment that their resignations as
Executive  Officers  and  Directors  would be irrevocable. On February 24, 2005,
Messrs  Bruan  and Rosenberg resigned as Executive Officers and Directors of the
Company  and  each  received,  in  accordance  with  their  amended  employment
agreements, 500,000 10 year options to purchase the Company's common stock at an
exercise  price  of  $0.85  per  share.


On  January  13,  2005  and  March 15, 2004, the Compensation Committee approved
bonuses  of $500,000 to be paid to the two officers for the years ended December
31,  2004  and  2003, respectively; such amounts were accrued as of December 31,
2004  and  2003.

401(K)  PLAN:

The  Home  Health Care segment maintains an Internal Revenue Code Section 401(k)
salary  deferred  savings plan (the "Plan") for eligible employees who have been
employed  for  at  least  one  year  and  are at least 21 years old.  Subject to
certain  limitations,  the Plan allows participants to voluntarily contribute up
to 15% of their pay on a pretax basis.  The Company currently contributes 50% of
each dollar contributed to the Plan by participants up to a maximum of 3% of the
participant's  salary.  The  Plan  also  provides  for  certain  discretionary
contributions  by  the  Company  as  determined  by the Board of Directors.  The
Company's contributions offset by unvested, forfeited matching funds amounted to
$40,000  and  $54,000  for  the  years  ended  December  31,  2004  and  2003,
respectively.  The  Bio  Balance segment did not have a 401(k) plan for the year
ended  December  31,  2002.

BONUS PLAN:

The  Home  Health  Care  segment  of  the  Company  has established a bonus plan
pursuant  to  which  10% of the Company's pre-tax net income is contributed to a
bonus  pool  which  is available for distribution to all employees as decided by
the  Company's  Compensation  Committee.  A  bonus  of  $44,000  and $58,000 was
accrued  as  of  December  31,  2004  and  2003,  respectively.

CONCENTRATIONS OF CREDIT RISK:

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  of  temporary  cash  investments, which from time-to-time
exceed  the  Federal  depository  insurance


                                      F-27
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

coverage  and  commercial  accounts  receivable. The Company has cash investment
policies  that restrict placement of these investments to financial institutions
evaluated  as  highly  creditworthy.  Cash and cash equivalents held in one bank
exceed  federally  insured  limits  by  approximately $2,765,000 at December 31,
2004.  The Company does not require collateral on commercial accounts receivable
as the customer base generally consists of large, well-established institutions.

MAJOR CUSTOMERS:

Two  major  customers  accounted  for  approximately  54% and 60% of net patient
service  revenue  for  the years ended December 31, 2004 and 2003, respectively.
In  addition,  three customers represented approximately 49% and 44% of accounts
receivable  at  December  31,  2004  and  2003,  respectively.


BUSINESS RISKS:

The  Company's  primary business, offering home health care services, is heavily
regulated  at both the federal and state levels.  While the Company is unable to
predict  what  regulatory  changes may occur or the impact on the Company of any
particular  change,  the  Company's  operations  and  financial results could be
negatively  affected.

Further,  the Company operates in a highly competitive industry, which may limit
the  Company's ability to price its services at levels that the Company believes
appropriate.  These  competitive  factors  may  adversely  affect  the  Company'
financial  results.

CAUTIONARY STATEMENT

BioBalance  operates  in  a  competitive  environment  that involves a number of
risks,  some  of  which  are  beyond  its  control.  Although  we  believe  the
expectations  for BioBalance are based on reasonable assumptions, we can give no
assurance  that  our  expectations  will  be  attained. Factors that could cause
actual events or results to differ materially from expected results involve both
known  and  unknown risks. Key factors include, among others: our need to secure
additional  financing  and at acceptable terms; the high cost and uncertainty of
clinical  trials  and  other  development  activities  involving  pharmaceutical
products;  the  dependence  on  third  parties  to manufacture its products; the
unpredictability  of  the  duration  and  results of regulatory approval for our
products;  our  dependence  on our lead biotherapeutic agent, PROBACTRIX(TM) and
the  uncertainty  of  its  market  acceptance;  the  possible  impairment of, or
inability  to  enforce, intellectual property rights and the subsequent costs of
defending  these  rights;  and  the  loss  of  key  executives  or  consultants.

NOTE 12 - THIRD-PARTY RATE ADJUSTMENTS AND REVENUE AND CERTAIN CONTRACTS:

Approximately  4%  and  5%  of net patient service revenue was derived under New
York  State  Medicaid reimbursement programs during the years ended December 31,
2004  and  2003,  respectively.  These  revenues  are  based,  in  part, on cost
reimbursement  principles  and  are subject to audit and retroactive adjustment.
Differences  between current rates and subsequent revisions are reflected in the
year  that  the  revisions  are  determined.  There  was no revenue generated by
BioBalance  for  the  years  ended  2004,  2003  and  2002.


                                      F-28
<PAGE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  Company  has  an  agreement  with  the  City of New York acting through the
Department  of  Social Services of The Human Resources Administration ("HRA") to
provide personal care services to certain qualified individuals as determined by
HRA.  The agreement with HRA sets a fixed direct labor cost in the reimbursement
rate.  Should  the  Company  incur direct costs of home attendant services below
this  fixed rate, the Company must repay the difference to HRA, subject to final
audit  by  the  City  of New York.  As of December 31, 2004 and 2003, the amount
included  in  due to HRA relating to direct labor costs amounted to $844,950 and
$828,555,  respectively.  In  addition, the City's reimbursement methodology for
general  and administrative expenses is based on a fixed amount per client based
on  the  number  of  cases.   The  Company is reimbursed at an hourly rate.  Any
amount  over this fixed rate must be repaid to HRA.  As of December 31, 2004 and
2003,  this amount was $4,419,745 and $2,927,952, respectively, subject to final
audit  by  the City of New York.  The aggregate amount due to HRA was $5,264,695
and  $3,756,507 at December 31, 2004 and 2003, respectively.  As of December 31,
2004,  HRA  had  completed  their audit for the fiscal year ended June 30, 2001.

In  January  2003,  the  New  York  State  Department of Health ("DOH") approved
additional  funding  to  home health care agencies in a form of a rate increase.
The  additional  funding  is  to  be  used  exclusively  for the recruitment and
retention  of  home  health  care  employees.  Any  unspent  money  relating  to
recruitment and retention is recorded as an accrued liability until such time as
it is spent. As of December 31, 2004 and 2003, the Company accrued approximately
$1,716,000  and  $1,318,000,  respectively, related to recruitment and retention
funds  not  yet  expended  and  are  included  in  accrued  employee  benefits.

NOTE 13- SUPPLEMENTAL CASH FLOW DISCLOSURES:

<TABLE>
<CAPTION>
                                         Year Ended     Year Ended     Year Ended
                                        December 31,   December 31,   December 31,
                                            2004           2003           2002
                                        -------------  -------------  -------------
<S>                                     <C>            <C>            <C>
Supplemental cash flow disclosures:

   Cash paid during the period for:
      Interest                          $      29,538  $       2,173  $           -
                                        =============  =============  =============

      Income taxes                      $      49,608  $      58,465  $       6,800
                                        =============  =============  =============

Supplemental schedule of noncash
investing and financing activities:

The Company purchased intangibles
which were partially acquired through
the issuance of 1,000,000 shares of
common stock. (See note 4)
                                        $           -  $   3,600,000  $           -
                                        =============  =============  =============
</TABLE>


                                      F-29
<PAGE>
NOTE 14 - SEGMENT REPORTING:

The  Company  has two reportable business segments: New York Health Care, a home
health  care  agency that provides a broad range of health care support services
to  patients  in  their  homes,  and  BioBalance, a segment that is developing a
biotherapeutic  agent  for  the  treatment  of  gastrointestinal  disorders.
BioBalance  has  not  generated  any  revenue  as  of  December  31,  2004.

                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        Elimination of
                                            New York         Bio-        Intersegment        Total
                                           Health Care     Balance         Activity       Consolidated
                                          -------------  ------------  ----------------  --------------
<S>                                       <C>            <C>           <C>               <C>
Year ended December 31, 2004
Revenue:
   Net patient service revenue            $ 48,854,358   $         -   $             -   $  48,854,358
   Sales                                             -             -                 -               -
                                          -------------  ------------  ----------------  --------------
     Total revenue                        $ 48,854,358   $         -   $             -   $  48,854,358
                                          =============  ============  ================  ==============

Income (loss) before (benefit) provision
 for income taxes                         $    290,204   $(6,425,015)  $             -   $  (6,134,811)
                                          =============  ============  ================  ==============

Depreciation and amortization             $    159,119   $   712,591   $             -   $     871,710
                                          =============  ============  ================  ==============
Interest income                           $     90,307   $     2,343   $       (22,773)  $      69,877
                                          =============  ============  ================  ==============
Interest expense                          $     29,538   $    22,773   $       (22,773)  $      29,538
                                          =============  ============  ================  ==============
Income tax (benefit) expense              $    (63,126)  $         -   $             -   $     (63,126)
                                          =============  ============  ================  ==============
Noncash compensation                      $          -   $  (365,822)  $             -   $    (365,822)
                                          =============  ============  ================  ==============
Assets                                    $ 14,646,001   $ 3,379,967   $   ( 1,522,773)  $  16,503,195
                                          =============  ============  ================  ==============
Expenditures for long lived assets        $          -   $    77,817   $             -   $      77,817
                                          =============  ============  ================  ==============
</TABLE>

<TABLE>
<CAPTION>
                                                             New York         Bio-          Total
                                                            Health Care     Balance      Consolidated
                                                           -------------  ------------  --------------
<S>                                                        <C>            <C>           <C>
Year ended December 31, 2003
Revenue:
   Net patient service revenue                             $ 45,060,449   $         -   $  45,060,449
   Sales                                                              -             -               -
                                                           -------------  ------------  --------------
     Total revenue                                         $ 45,060,449   $         -   $  45,060,449
                                                           =============  ============  ==============

Loss before (benefit) provision for income taxes           $(17,370,598)  $(4,642,572)  $ (22,013,170)
                                                           =============  ============  ==============

Depreciation and amortization                              $    225,563   $   381,184   $     606,747
                                                           =============  ============  ==============
Interest income                                            $     35,720   $    15,535   $      51,255
                                                           =============  ============  ==============
Interest expense                                           $      2,173   $         -   $       2,173
                                                           =============  ============  ==============
Income tax (benefit) expense                               $     24,500   $    14,500   $      39,000
                                                           =============  ============  ==============
Noncash compensation                                       $          -   $ 1,591,459   $   1,591,459
                                                           =============  ============  ==============
Assets                                                     $ 14,801,531   $ 6,827,437   $  21,628,968
                                                           =============  ============  ==============
Expenditures for long assets                               $     12,245   $ 4,061,092   $   4,073,337
                                                           =============  ============  ==============
</TABLE>

Prior  to its acquisition of New York Health Care on January 2, 2003, BioBalance
had  only  one  segment,  which  did  not  generate  any  revenue.


                                      F-30
<PAGE>
NOTE 15 - QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
                                 Cost of
                Net Patient   Professional
                  Service        Care of         Net         Basic and
2004              Revenue       Patients         Loss       Diluted EPS
--------------  ------------  -------------  ------------  -------------
<S>             <C>           <C>            <C>           <C>
First quarter   $ 11,506,458  $   9,187,896  $(1,227,584)  $      (0.05)

Second quarter    12,171,007      9,807,932   (1,162,071)         (0.05)

Third quarter     12,397,208      9,961,241   (1,013,904)         (0.04)

Fourth quarter    12,779,685     10,257,147   (2,668,126)(1)      (0.11)
</TABLE>
                  NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                 Cost of
                Net Patient   Professional
                  Service        Care of          Net         Basic and
2003              Revenue       Patients         Loss        Diluted EPS
--------------  ------------  -------------  -------------  -------------
<S>             <C>           <C>            <C>            <C>
First quarter   $ 11,994,489  $   9,706,778  $(19,004,862)  $      (0.79)

Second quarter    10,820,260      8,531,889      (689,088)         (0.03)

Third quarter     11,044,365      8,821,090    (1,099,192)         (0.05)

Fourth quarter    11,201,335      9,046,964    (1,259,028)         (0.04)
</TABLE>

(1)  In  the fourth quarter, it was determined that the NexGen intangible assets
were impaired by $1,740,326 as a result of an impairment analysis performed. See
note  4.


                                      F-31
<PAGE>
<TABLE>
<CAPTION>
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


Column A                                Column B           Column C             Column D     Column E
-------------------------------------  -----------  ------------------------  -----------  ------------
                                                           Additions
                                                    ------------------------
                                       Balance at   Charged to   Charged to
                                        Beginning    Costs and      Other                     Balance at
Description                             of Period    Expenses     Accounts     Deductions   End of Period
-------------------------------------  -----------  -----------  -----------  ------------  --------------
<S>                                    <C>          <C>          <C>          <C>           <C>
Year ended December 31, 2004
   Deducted from asset accounts:
      Allowance for doubtful accounts  $   397,000  $    90,400  $         -  $   (27,400)  $      460,000
      Deferred tax asset valuation
         allowance                     $ 1,859,000  $ 2,800,000  $         -  $         -   $    4,659,000


Year ended December 31, 2003
   Deducted from asset accounts:
      Allowance for doubtful accounts  $         -  $    50,000 *$   694,000  $  (347,000)  $      397,000
      Deferred tax asset valuation
      Allowance                        $   852,000  $ 1,007,000  $         -  $         -   $    1,859,000

Year ended December 31, 2002
   Deducted from asset accounts:
      Allowance for doubtful accounts  $         -  $         -  $         -  $         -   $            -
      Deferred tax asset valuation
         Allowance                     $   208,000  $   644,000  $         -  $         -   $      852,000
<FN>
*Cash  collected in excess of the estimated fair value of accounts receivable of
New  York  Health  Care  acquired in the reverse merger, offset by an additional
equal  amount  of  $347,000.
</TABLE>


                                      F-32
<PAGE>
                                INDEX TO EXHIBITS

     These Exhibits are numbered in accordance with Exhibit Table of Item 601 of
Regulation  S-K.

<TABLE>
<CAPTION>
Exhibit
 Number   Description of Exhibit
--------  ----------------------
<S>       <C>

    2.1   Stock for Stock Exchange Agreement between the Company and BioBalance dated
          October 11, 2001, as amended by Amendment No. 1 dated February 13, 2002,
          Amendment No. 2 dated July 10, 2002, Amendment No. 3 dated August 13, 2002
          and Amendment No. 4 dated October 25, 2002 (incorporated herein by reference to
          Exhibits No. 2.1-2.4, inclusive, to the Company's registration statement on Forms S-
          4, SEC file no. 333-85054).
    2.2   Purchase and Sale agreement dated  as of July 15, 2004 by and among the Company,
          NYHC Newco Paxxon Inc. and New York Health Care, LLC. (7)
    3.1   Certificate of Incorporation of the Company. (1)
    3.2   Restated Certificate of Incorporation of the Company. (1)
    3.3   Certificate of Correction of Restated Certificate of Incorporation of the Company.
          (1)
    3.4   Amendment to the Certificate of Incorporation filed October 17, 1996. (1)
    3.5   By-laws of the Company. (1)
    3.6   Amendment to the Certificate of Incorporation of the Company filed December 4,
          1996. (1)
    3.7   Certificate of Designations, Rights and Preferences of New York Health Care, Inc.
          Class A Convertible Preferred Stock. (2)
    3.8   Certificate of Amendment to the Certificate of Incorporation of New York Health
          Care, Inc. filed on September 10, 2004 (incorporated by reference to the applicable Exhibit filed
          with the Company's 8-K filed on September 15, 2004)
    3.9   Amended By-Laws of the Company*
    4.1   Form of certificate evidencing shares of Common Stock. (1)
   10.1   Engagement Letter Agreement between the Company and Sterling Financial
          Investment Group, Inc. dated May 6, 2004. (5)
   10.2   Employment Agreement for Dennis O'Donnell (6)
   10.3   Option agreement dated September 14, 2004 between the Company and Dennis
          O'Donnell (7)
   10.4   Form of Option Agreement under the Company's Performance Incentive (Stock
          Option) Plan (7)
   10.5   Placement Agreement dated November 19, 2004 between the Company and Sterling Financial Investment
          (incorporated by  reference to the applicable Exhibit filed with the Company's Form 8-K filed on
          November 23, 2004)
   10.8   State of New York Department of Health Office of Health Systems Management
          Home Care Service Agency License for the Company doing business in Rockland,
          Westchester and Bronx Counties dated May 8, 1995. (1)
   10.9   State of New York Department of Health Office of Health Systems Management
          Home Care Service Agency License for the Company doing business in Dutchess,
          Orange, Putnam, Sullivan and Ulster Counties dated May 8, 1995. (1)


                                       55
<PAGE>
  10.10   State of New York Department of Health Office of Health Systems Management
          Home Care Service Agency License for the Company doing business in Nassau,
          Suffolk and Queens Counties dated May 8, 1995. (1)
  10.11   State of New York Department of Health Office of Health Systems Management
          Home Care Service Agency License for the Company doing business in Orange and
          Rockland Counties dated July 1, 1995. (1)
  10.12   Personal Care Aide Agreement by and between the Company and Nassau County
          Department of Social Services dated October 18, 1995. (1)
  10.13   State of New York Department of Health Offices of Health Systems Management
          Home Care Service Agency License for the Company doing business in Bronx,
          Kings, New York, Queens and Richmond Counties dated December 29, 1995. (1)
  10.14   Homemaker and Personal Care Agreements by and between the Company and the
          County of Rockland Department of Social Services dated January 1, 1996. (1)
10.15++   Employment Agreement by and between the Company and Jerry Braun dated
          November 12, 1999. (3)
10.16++   Employment Agreement by and between the Company and Jacob Rosenberg dated
          November 12, 1999. (3)
  10.17   Loan Security Agreement among New York Health Care, Inc., NYHC Newco
          Paxxon, Inc.and Heller Healthcare Finance, Inc. dated November 28, 2000.
          (incorporated by reference to Exhibits to the Company's Form 8-K Report filed
          December 8, 2000)
  10.18   Amendment No. 1 to Loan and Security Agreement and Consent and Waiver with
          Heller Healthcare Finance, Inc. dated November 27, 2002 (incorporated by reference
          to Exhibit to the Company's Form 8-K  Current Report filed on December 4, 2002)
  10.19   Amendment No. 2 to Loan and Security Agreement among GE HFS Holding, Inc.,
          the Company and Newco Paxxon, Inc. dated March 29, 2004 (5)
  10.20   Amendment No. 3 to Loan and Security Agreement among GE HFS Holdings, Inc.,
          the Company and Newco Paxxon, Inc. dated March 29, 2004 (incorporated by
          reference to the Form 8-K filed by the Company on December 12, 2004)
10.51++   Amended Performance Incentive Plan (Stock Option Plan) of the Company. (4)
10.52++   Amendment to Employment Agreement between the Company and Jerry Braun
          dated January 28, 2003. (4)
10.53++   Amendment to Employment Agreement between the Company and Jacob Rosenberg
          dated January 28, 2003. (4)
  14.1    Code of Ethics for Senior Financial Officers (8).
  23.1*   Consent of Weiser LLP
  23.2*   Consent of Holtz Rubenstein Reminick LLP.
  31.1*   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-
          Oxley Act of 2002.
  31.2*   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-
          Oxley Act of 2002.
  32.1*   Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted
          pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
  32.2*   Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted
          pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.


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<PAGE>
      *   Filed  herewith.
     ++   Compensation  plan.
     (1)  Incorporated  by  reference  to  Exhibits  filed  as part of the Company's Registration
          Statement on Form SB-2 under S.E.C. File No. 333-08152, which was  declared
          effective  on  December  20, 1996.
     (2)  Incorporated  by reference to Exhibits filed as part of the Company's Form10-QSB
          report  for  the  quarter  ended  June  30,  1998.
     (3)  Incorporated  by reference to Exhibits filed as part of the Company's Form10-QSB
          Report  for  the  quarter  ended  September  30,  1999.
     (4)  Incorporated by reference to Exhibits filed  as part of Company's Form 10-K
          Annual Report for the year ended December 31, 2002.
     (5)  Incorporated by reference to Exhibits filed as part of the Company's Form 10-Q for
          the quarter ended March 31, 2004
     (6)  Incorporated by reference to Exhibits filed as part of the Company's Form 10-Q for
          the quarter ended June 30, 2004
     (7)  Incorporated by reference to Exhibits filed as part of the Company's Form 10-Q for
          the quarter ended September 30, 2004
     (8)  Incorporated by reference to Exhibits filed as part of the Company's Form 10-K for
          The year ended December 31, 2004.
</TABLE>


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