New York Health Care Inc - Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2008

o	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 Identification No.)
incorporation or organization)

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

Issuer's telephone number, including area code: (718) 378-6700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ࿠	Accelerated filer ࿠
Non-accelerated filer ࿠ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 33,536,767 (as of May 15, 2008)

Part I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

(a) Our unaudited financial statements for the first quarter (three months ended March 31, 2008), are set forth below. See Item 2 below for Management's Discussion and Analysis of Financial Condition and Results of Operations for our first quarter.

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2008			2007
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	3,262,740		$	2,246,241
Due from lending institution		55,042			-
Accounts receivable, net of allowance for uncollectible accounts of approximately $555,000 and $576,000, respectively		7,975,996			8,298,837
Unbilled services		109,118			137,079
Prepaid expenses and other current assets		276,367			120,857

Total current assets		11,679,263			10,803,014

Property and equipment, net		14,970			22,090
Goodwill, net		783,000			783,000
Other intangible assets, net		611,383			628,056
Other assets		169,415			181,046

Total assets	$	13,258,031		$	12,417,206

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities:
Note payable under insurance financing agreement	$	14,508		$	25,054
Amounts due to related parties		10,190			27,133
Accrued payroll		1,054,168			871,171
Accounts payable and accrued expenses		6,010,851			5,541,457
Income taxes payable - current		7,150			28,450
Due to HRA		8,920,521			8,754,408

Total current liabilities		16,017,388			15,247,673

Commitment and contingencies

Shareholders' (deficiency) equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; Class A Preferred, 590,375 shares issued, none outstanding		-			-
Common stock, $.01 par value, 100,000,000 shares authorized; 33,536,767 shares issued and 33,532,722 outstanding		335,368			335,368
Additional paid-in capital		37,174,185			37,174,185
Common stock and options to be issued		774,220			774,220
Accumulated deficit		(41,033,657	)		(41,104,767	)
Less: Treasury stock (4,045 common shares at cost)		(9,473	)		(9,473	)

Total shareholders' (deficiency)		(2,759,357	)		(2,830,467	)

Total liabilities and shareholders' (deficiency)	$	13,258,031		$	12,417,206

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

F-1

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For The Three Months Ended March 31,
	2008			2007

Net patient service revenue	$	11,021,811		$	11,184,902

Expenses:
Professional care of patients		9,258,663			9,111,496
		1,763,148			2,073,406

Other operating expenses:
General and administrative		1,613,535			1,982,416
Product development		33,069			292,460
Depreciation and amortization		41,749			98,002

Total other operating expenses		1,688,353			2,372,878

Operating income (loss)		74,795			(299,472	)

Other income (expenses):
Interest income		16,213			22,747
Interest expense		(9,898	)		(1,971	)

Other income, net		6,315			20,776

Income (loss) before provision for income taxes		81,110			(278,696	)

Provision for income taxes - current		10,000			51,000

Net income (loss)	$	71,110		$	(329,696	)


Basic and diluted income (loss) per share:
Net income (loss) per share:		$0.00			($0.01	)

Weighted and diluted average shares outstanding		33,536,767			33,536,767

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

F-2

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Three Months Ended March 31,
	2008			2007
Cash flows from operating activities:

Net income (loss)	$	71,110		$	(329,696	)

Adjustments to reconcile net (loss) to net cash used in operating activities
Stock-based compensation		-			6,500
Depreciation and amortization		30,117			98,002
Bad debts (recovery)		(21,382	)		-
Abandonment of property and equipment		-			5,652

Changes in operating assets and liabilities
Decrease (increase) in accounts receivable and unbilled services		372,184			(702,241	)
(Increase) decrease in due from lending institution		(55,042	)		167,280
(Increase) in prepaid expenses and other current assets		(155,510	)		(70,684	)
Decrease in other assets		11,631			85,547
(Decrease) in note payable under insurance financing agreement		(10,546	)		-
(Decrease) in due to related parties		(16,943	)		-
Increase in accrued payroll		182,997			140,413
Increase (decrease) in accounts payable and accrued expenses		469,394			(364,328	)
(Decrease) increase in income taxes payable - current		(21,300	)		51,000
Increase in due to HRA		166,113			361,556

Net cash provided by (used in) operating activities		1,022,823			(550,999	)

Cash flows from investing activities:
Additions to intangible assets		(6,324	)		(30,476	)

Net cash (used in) investing activities		(6,324	)		(30,476	)

Net increase (decrease) in cash and cash equivalents		1,016,499			(581,475	)

Cash and cash equivalents at beginning of period		2,246,241			2,469,789

Cash and cash equivalents at end of period	$	3,262,740		$	1,888,314

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

F-3

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

NOTE 1 – ORGANIZATION, RECENT DEVELOPMENTS AND 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. The BioBalance Corp. (“BioBalance”), a Delaware corporation, was formed in May 2001. BioBalance is a biopharmaceutical company focused on the development of treatments for gastrointestinal diseases that are poorly addressed by current therapies. BioBalance is currently pursuing prescription drug development of its lead product, PROBACTRIX® for the prevention of pouchitis. On March 24, 2006, the Company received approval from the FDA to start Phase II clinical trials. There can be no assurance that BioBalance will be successful in obtaining regulatory approval or in marketing any such products. The consolidated entity, collectively referred to, unless the context otherwise requires, as the “Company”, “we”, “our” or similar pronouns, includes New York Health Care and its wholly-owned subsidiaries, BioBalance and NYHC Newco Paxxon, Inc. D/B/A Helping Hands Healthcare (“Helping Hands”).

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s recurring losses and negative working capital raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management’s plans in connection with this matter include drawing down the line of credit as necessary and continuing the search for a strategic partner for the BioBalance operations.

The accompanying interim consolidated financial statements have been prepared by the Company without audit, in accordance with the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and therefore do not include all information and notes normally provided in the annual financial statements and should be read in conjunction with the audited financial statements and the notes thereto included in Form 10-K of New York Health Care, Inc. for the year ended December 31, 2007 as filed on April 14, 2008 with the SEC.

In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (which consist of normal and recurring adjustments) necessary for a fair presentation of the financial statements. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the full year.

Recent Developments:

As of March 31, 2008, BioBalance had cash on hand of approximately $180,023 all of which was available to fund operations. BioBalance management estimates that its capital requirements for an entire year of operations are approximately $5,000,000. This amount includes the cost of the initial up front payment for the Phase I/II clinical trial, in the amount of $3,000,000, for the Company's lead product PROBACTRIX® that is not expected to be started in 2008. It will be necessary for the Company to secure additional funding in order for BioBalance to begin the Phase I/II clinical trial, which was approved by FDA on March 24, 2006. The Company has not been able to obtain additional funding up to the present time and the BioBalance subsidiary has been operating solely by utilizing funds from the health care operations, which are insufficient for BioBalance's needs. Management is continuing to search for potential funding sources but none have been found thus far. Accordingly, since additional funding from outside sources has not been obtained, the Company began scaling back the operations of BioBalance at the end of November 2006, and BioBalance began operating on a substantially reduced budget in 2007. Management has instituted temporary cutbacks in consultant compensation until such time as additional funds or a strategic partner can be found. There can be no assurances that the Company will be able to raise additional capital in the near term to allow BioBalance to continue its normal level of operations.

F-4

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

BioBalance has also commenced preliminary studies regarding the use of PROBACTRIX® in the treatment of Celiac disease (a dietary gluten intolerance). This study was conducted as a small scale pilot study which, while not providing data that is clinically or statistically useful in demonstrating efficacy, produced encouraging preliminary results. The Company is contemplating various options including funding costs relating to clinical research and statistical analysis for a follow up study.

The Company has taken steps to safeguard the biological strain of PROBACTRIX ® by storing it in two separate secure facilities. It is currently evaluating its options for manufacturing of product to enable progress with clinical development.

Estimates:

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

Recently Issued Accounting Pronouncements:

In December 2007, the FASB issued SFAS No. 141 (revised 2007), " Business Combinations. " SFAS 141(R) broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS 141(R) expands on required disclosures to improve the statement users' abilities to evaluate the nature and financial effects of business combinations. SFAS 141(R) is effective for our fiscal year beginning January 1, 2009. The adoption of SFAS 141(R) is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, " Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. " SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent's ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 is effective for our fiscal year beginning January 1, 2009. We have not yet determined the impact of adopting SFAS 160 on the Company's financial position, results of operations or cash flows.

In June, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes (FIN48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 as of January 1, 2007. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2007. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense. The Company is currently subject to a three year statue of limitations by major tax jurisdictions. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, New York State, New York City and New Jersey.

NOTE 2 - EARNINGS AND LOSS PER SHARE:

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

F-5

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

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. For the three months ended March 31, 2008, common stock attributable to options and warrants outstanding of 8,813,659 were not included in the computation of diluted earnings per share because their exercise prices were all greater than the average market price of the common shares. Due to losses for the three months ended March 31, 2007, potential common stock attributable to options and warrants outstanding of 8,732,046 for the three months then ended, were not included in the computation of diluted earnings per share, because to do so would be antidilutive.

NOTE 3 - INTANGIBLE ASSETS:

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

	March 31, 2008
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Estimated Useful Life in Years

Patents and trademarks	$	916,519	$	305,136	$	611,383		10
Customer base		316,000		316,000		-		5
	$	1,232,519	$	621,136	$	611,383

	December 31, 2007
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Estimated Useful Life in Years

Patents and trademarks	$	910,195	$	282,139	$	628,056		10
Customer base		316,000		316,000		-		5
	$	1,226,195	$	598,139	$	628,056

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts payable and accrued expenses consist of the following:

	March 31, 2008		December 31, 2007
Accounts payable	$	447,846	$	492,446
Accrued expenses		309,066		505,995
Accrued settlement per consulting agreement		1,131,100		1,131,100
Accrued employee benefits		4,122,839		3,411,916
	$	6,010,851	$	5,541,457

F-6

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

NOTE 5 - LINE OF CREDIT:

On September 20, 2007, the Company entered into a Loan and Security Agreement with CIT Healthcare LLC, as lender (“CIT”). The term of the Loan and Security Agreement is three years. The Loan and Security Agreement provides for a revolving line of credit facility under which the Company may borrow, repay and re-borrow an amount not exceeding the lesser of $5,000,000 or the borrowing base, which is an amount that may not exceed 85.00% of the estimated net value of the Company's Eligible Accounts, as defined in the agreement. As of March 31, 2008, approximately $3,309,000 of the line was available for borrowing by the Company.

Interest is payable on the outstanding principal balance of the credit facility at an annual rate equal to 30-day LIBOR plus three and one-half percent (3.50%), adjusted monthly in accordance with changes in 30-day LIBOR. At March 31, 2008, the interest rate on this facility was 6.61%. Additionally, the Company is required to pay an Unused Line Fee and a Collateral Management Fee, the total of which represent 0.50% per annum of the line amount.

The Company's obligations to Lender under the Loan and Security Agreement are secured by a first priority lien on all of the Company's accounts receivable, general intangibles, instruments and documents, and the proceeds thereof. However, no collateral will consist of any assets or property of BioBalance.

Beginning with the quarter ended September 30, 2007, the Company is subject to meeting periodic financial covenants contained in the Loan and Security Agreement. As of March 31, 2008, the Company was in compliance with all of the specified financial covenants.

The Company is prohibited from making dividends, distributions and other withdrawals during the term of the credit facility. However, the Company is permitted to make loans, advances or contributions to its subsidiary, BioBalance provided that certain liquidity requirements are met. The Company is further restricted from mergers and acquisitions, as well as asset sales or dispositions outside the ordinary course of business, provided that such sale restrictions are not applicable to the sale of the stock or assets of BioBalance.

As of March 31, 2008, there was no balance due on this line of credit. For the three months ended March 31, 2008, the company incurred interest expense of $9,311 on this line of credit. As of March 31, 2008, there was a balance due from CIT of $55,042 representing collections deposited with CIT through a lockbox and then transferred to the Company's bank account.

NOTE 6 - STOCK OPTIONS/WARRANTS:

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R), using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 and beyond includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all stock-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated and there is no cumulative effect upon adoption of SFAS 123(R).

Performance Incentive Plan:

On August 31, 2005, the shareholders approved the Company's 2004 Incentive Plan, (the “Incentive Plan”). Under the terms of the Incentive Plan, up to 5,000,000 shares of common stock may be granted. The Incentive Plan is administered by the Compensation Committee which is appointed by the Board of Directors. The Committee determines which key employee, officer or director on the regular payroll of the Company, or outside consultants shall receive stock options. Granted options are exercisable after the date of grant in accordance with the terms of the grant up to ten years after the date of the grant. The exercise price of any incentive stock option or nonqualified option granted under the Incentive 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-7

On March 26, 1996, the Company's Board of Directors adopted the Performance Incentive Plan, (the “Option Plan”). The option plan has substantially the same terms as the Incentive Plan above.

Activity in stock options and warrants, including those outside the Performance Incentive Plan, for the three months ended March 31, 2008 is summarized as follows:

	Shares Under			Weighted Average
	Options/Warrants			Exercise Price
Balance at January 1, 2008		8,862,046		$	0.88

Options granted		-
Options cancelled/expired		(48,387	)		3.31
Options exercised		-			-
Balance at March 31, 2008		8,813,659		$	0.87

Options eligible for exercise at March 31, 2008		8,813,659		$	0.87

NOTE 7 - COMMITMENTS AND CONTINGENCIES:

On March 6, 2006, the Company entered into a settlement agreement (the “Emerald Settlement Agreement”) with Emerald Asset Management, Inc. (“Emerald”) and Yitz Grossman related to the resolution of disputes under a consulting agreement dated June 1, 2001 between the Company and Emerald.

Pursuant to the Emerald Settlement Agreement and in order avoid the cost and uncertainty of litigation, the Company agreed to (i) the immediate payment of $700,000 to Emerald, (ii) payment of $22,000 per month for eighteen months beginning January 1, 2006, (iii) the issuance of 400,000 shares of common stock, (iv) options to purchase 1,100,000 shares of common stock at $0.78 per share until March 1, 2010 and (v) health insurance for Grossman and his family for the eighteen month period ending June 30, 2007 amounting to approximately $35,100. In return, Emerald and Grossman have executed a general release of all claims they may have against the Company. The Company has not paid any of this liability and has expensed $1,545,931 for the above settlement during the year ended December 31, 2005. The Company has recorded a liability of $1,131,100 and common stock and options to be issued valued at $774,220 as of December 31, 2005. On April 17, 2006, the Company and Emerald amended the Emerald Settlement Agreement so that the cash portion of the settlement would not be paid until such time as the Company receives new funds from any source.

On March 9, 2006, the Company entered into a final settlement agreement (the “Corval Settlement Agreement”) with Mark Olshenitsky related to the resolution of disputes under a consulting agreement dated April 14, 2003, between the Company and Corval International, Inc. (“Corval”).

Pursuant to the Corval Settlement Agreement and in order to avoid the cost and uncertainty of litigation, the Company agreed to issue 300,000 shares of Common Stock to Olshenitsky in return for a general release of all claims Corval and Olshenitsky may have against the Company.

On August 21, 2006, the Company unilaterally rescinded the settlement between the Company and Emerald Asset and Yitz Grossman. The rescission of the settlement by the Company was done without the consent of Emerald Asset and Yitz Grossman. Accordingly there may be future litigation brought against the Company by Emerald Asset and Yitz Grossman to seek enforcement of the agreement. The Company continues to retain the accrual for the settlement agreement on its books in its entirety. If there is litigation brought by Emerald Asset and Yitz Grossman to enforce the settlement agreement, there can be no assurance that at a future time the accrual that was recorded would be sufficient to offset amounts resulting from the future litigation. On April 24, 2008, the Company was contacted by counsel for Yitz Grossman, demanding that the Company perform its obligations under the settlement agreement. The Company is presently considering its options and has not yet responded to this demand.

F-8

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

NOTE 8 - INCOME TAXES:

The temporary differences that give rise to deferred tax assets are impairment of intangible assets for financial statement book purposes over tax purposes, the direct write-off method for receivables, using accelerated methods of amortization and depreciation for property and equipment for tax purposes, and using statutory lives for intangibles for tax purposes. Also included in the deferred tax asset is a net operating loss carryforward. At March 31, 2008 and December 31, 2007, the Company has computed a deferred tax asset in the amount of approximately $9,255,000 and $9,244,000 , respectively. A full valuation allowance has been recorded against the net deferred tax assets because of the unlikelihood that those assets will be realized in the foreseeable future. The valuation allowance increased by $11,000 during the three months ended March 31, 2008.

NOTE 9 - SUPPLEMENTAL CASH FLOW DISCLOSURES:

	For The Three Months Ended
	March 31
	2008		2007
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	9,898	$	1,971
Income taxes	$	31,300	$	-

F-9

NEW YORK HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2008 and 2007

NOTE 10 - 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 probiotic agent for the treatment of gastrointestinal disorders. BioBalance has not generated any revenue as of March 31, 2008.

	Health Care Segment		BioBalance Segment			Elimination of Intersegment Activity			Consolidated

Three Months Ended March 31, 2008
Revenue:
Net patient service revenue	$	11,021,811	$	-		$	-		$	11,021,811
Total revenue	$	11,021,811	$	-		$	-		$	11,021,811

Net income (loss) before provision for income taxes		236,377	$	(155,267	)	$	-		$	81,110

Total assets	$	19,062,591	$	21,142,860		$	(26,947,420	)	$	13,258,031

Three Months Ended March 31, 2007
Revenue:
Net patient service revenue	$	11,184,902	$	-		$	-		$	11,184,902
Total revenue	$	11,184,902	$	-		$	-		$	11,184,902

Net income (loss) before provision for income taxes		408,198	$	(686,894	)	$	-		$	(278,696	)

F-10

Item 2: MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward Looking Statements

Certain information contained in this report is forward-looking in nature. All statements in this report, including those made by the Company 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 in Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. 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.

All references to fiscal year apply to the Company's fiscal year which ends on December 31, 2008.

Overview

We are currently engaged in two industry segments, the delivery of home healthcare services (sometimes referred to as the “home healthcare business”) and the development of proprietary biotherapeutic agents for the treatment of various gastrointestinal (“GI”) disorders, through our acquisition of BioBalance.

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

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Consolidated Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for allowance for doubtful accounts and potential impairment of goodwill and other intangibles. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

The Company believes that there have been no significant changes, during the three month period ended March 31, 2008, to the items disclosed as critical accounting policies and estimates in Managements Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

Results of Operations

Three Months Ended March 31, 2008 Compared With Three Months Ended March 31, 2007

Revenues for the three months ended March 31, 2008 decreased by $163,091 ( 1.5% ) to $11,021,811 from $11,184,902 for the three months ended March 31, 2007. All of the revenues are generated from the home health care operations.

Cost of professional care of patients for the three months ended March 31, 2008 increased by $147,167 ( 1.6% ) to $9,258,663 from $9,111,496 for the three months ended March 31, 2007. As a percentage of revenue the cost of sales was 84% for the three months ended March 31, 2008 as compared to 81% for the three months ended March 31, 2007.

Selling, general and administrative expenses ("SG&A") for the home health care segment for the three months ended March 31, 2008 decreased by $140,487 ( 8.4% ) to $1,527,831 from $1,668,318 for the three months ended March 31, 2007. This decrease is primarily due to reductions of professional fees.

Selling, general and administrative expenses ("SG&A") for the BioBalance segment for the three months ended March 31, 2008 decreased by $228,394 or 72.7% to $85,704 from $314,098 for the three months ended March 31, 2007. This decrease is due to cost reductions resulting from scaling back BioBalance operations due to lack of available funding.

Product development costs for the BioBalance segment for the three months ended Mrch 31, 2008 decreased by $259,391 or 88.7% to $33,069 for the three months ended March 31, 2008 as compared to $292,460 for the three months ended March 31, 2007. The decrease is due to temporary suspension of the development work required for the IND for PROBACTRIX ® that the BioBalance segment received approval for Phase I/II testing on March 24, 2006 due to lack of available funding.

The net income of $71,110 for the three months ended March 31, 2008, includes net income of $226,377 from the operations of the home health care segment and offset by a net loss of $155,267 from the BioBalance segment, which to date has not generated any revenue.

The net loss of $329,696 for the three months ended March 31, 2007, includes net income of $357,198 from the operations of the home health care segment and offset by a net loss of $686,894 from the BioBalance segment, which to date has not generated any revenue.

Liquidity and Capital Resources

At March 31, 2008, the Company had no long-term debt. Future minimum rental commitments for all non-cancelable lease obligations at March 31, 2008, are as follows:

	Payment due by period
Contractual Obligations	Total		Less than 1 year		2 years		3-5 years		More than 5 years
Long-term debt obligations	$	-	$	-	$	-	$	-	$	-
Capital lease obligations		-		-		-		-		-
Operating lease obligations*		688,000		306,000		262,000		120,000		-
Purchase obligations		-		-		-		-		-
Total	$	688,000	$	306,000	$	262,000	$	120,000	$	-

These leases also 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.

The Company has no off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

The sources of liquidity and capital resources for the home healthcare segment are internally generated funds and cash in banks.

The Company has a revolving line of credit facility under which the Company may borrow, repay and re-borrow an amount not exceeding the lesser of $5,000,000 or the borrowing base, which is an amount that may not exceed 85.00% of the estimated net value of the Company's Eligible Accounts, as defined in the agreement. As of March 31, 2008, approximately $3,309,000 of the line was available for borrowing by the Company. There was no balance due on this facility as of March 31, 2008.

For the three months ended March 31, 2008, net cash provided by operating activities was $1,022,823 as compared to cash used by operating activities of $550,999 during the three months ended March 31, 2007, an improvement of $1,573,822 .

Net cash used in investing activities for the three months ended March 31, 2008 and 2007 was $6,324 and $30,476 respectively consisting primarily of the acquisition of intangible assets.

Days Sales Outstanding ("DSO") is a measure of the average number of days taken by the Company to collect its account receivable, calculated from the date services are billed. For the three months ended March 31, 2008, the DSO of the home care segment of the Company was 70 , compared to 68 days for the three months ended March 31, 2007.

BioBalance Segment

The Company has taken steps to safeguard the biological strain of PROBACTRIX® by storing it in two separate secure facilities. It is currently evaluating its options for manufacturing of product to enable progress with clinical development.

Recent Accounting Pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Generally, the fair market value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. The Company had no interest rate exposure on fixed rate debt or other market risk at March 31, 2008.

ITEM 4. 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 Principal Financial Officer, 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 (“SEC”) is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms. Based upon that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were not effective with respect to supervision as of the end of the period covered by this report, as we have not had sufficient time to implement the remediation of the weakness as discussed in the form 10-K for the year ended December 31, 2007. The remediation is currently scheduled to be implemented in the third quarter of the current fiscal year.

As required by Exchange Act Rule 13a-15(d), the Company's management, including the Chief Executive Officer and Principal Financial Officer, conducted an evaluation of the Company's internal control over financial reporting to determine whether any changes occurred during the fiscal quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, other than the changes reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, which remained in effect during the quarter ended March 31, 2008, there were no other changes during such quarter.

PART II.

ITEM 1 A. RISK FACTORS

There have been no material changes in the Company's risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

ITEM 6. EXHIBITS

(a)

Exhibits

Exhibit No.		Description

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32. 2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

	NEW YORK HEALTH CARE, INC.

May 19, 2008	By:	/s/ Murry Englard
		Name: Murry Englard
		Title: Chief Executive Officer

May 19, 2008	By:	/s/ Stewart W. Robinson
		Name: Stewart W. Robinson
		Title: Chief Financial Officer

EXHIBIT INDEX

Exhibit
No.		Description

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32. 2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002