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


                                   FORM 10-KSB
                                   -----------
                                   (Mark One)

           [X] Annual Report to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                  For the Fiscal Year ended December 31, 2003.

     [ ] Transition report pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

          For the transition period from _____________to______________

                           Commission File No. 0-23416


                      MODERN MEDICAL MODALITIES CORPORATION
                     ---------------------------------------
             (Exact name of registrant as specified in its charter)


            New Jersey                                   22-3059258
 --------------------------------           ------------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)


                      439 Chestnut Street, Union, NJ                 07083
                      ---------------------------------            ----------
               (Address of principal executive offices)            (Zip code)


       Registrant's telephone number, including area code: (800) 367-3926
       -------------------------------------------------------------------
           Securities registered pursuant to Section 12(b) of the Act:


      Title of each Class             Name of each Exchange on which Registered
      -------------------------------------------------------------------------
               Not Applicable                           None

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


                         Common Stock, $.0002 Par Value
                         ------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required


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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 prior 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-KSB or any amendment to
this Form 10-KSB. Yes  X   No     .
                      ---     ---

The issuer's net sales for the most recent fiscal year were $3,036,976.

The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on June 14, 2004 was approximately $378,296.

    As of June 14, 2004 there were 14,706,471 shares of Common Stock, par
value $.0002 per share, outstanding.

                                     PART I

Item 1. Business

Modern Medical Modalities Corporation provides complete line of imaging
equipment to hospitals, outpatient clinics, and physicians. Additionally, Modern
Medical on a clerical and administrative level manages hospital based and
physician managed ambulatory centers for third parties who provide medical
imaging services. Modern Medical offers a full range of services to hospitals or
physician clients, including:

         o  Selection and acquisition of appropriate equipment;
         o  Design and supervision of facility construction;
         o  Training of technical and support staff;
         o  Patient billing and collection; and  Marketing and management
            services.

Modern Medical can provide either its full range of services at medical
technology centers or a more limited range of services at mobile or fixed sites
depending on the needs of its customers.

Modern Medical presently provides equipment and manages one hospital based MRI
site located in Passaic, New Jersey, 3 Diagnostic Imaging ambulatory centers in
Union, New Jersey and one free standing MRI center in Metairie, Lousianna.
Modern Medical also receives a management fee of 11.25% of gross cash
collections from the site in Union, New Jersey, for performing management
functions. The management fees are eliminated in the consolidated financial
statements. Modern Medical's relationship with its joint ventures, range from
50%through 82% equity interest.

Generally, Modern Medical's centers participate in HMO or PPO programs because
many of the physicians who refer patients to the centers belong to the HMO or
PPO. In many instances Modern Medical's centers initiate contact with various


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third parties, such as insurance companies, unions or managed care providers, to
provide services to their membership. This is usually the case with the larger
insurance plans. In the case of unions or managed care programs, the benefit
managers representing the various programs usually make contacts. Typically, the
physicians in the area recommend the centers.

Modern Medical has positioned itself to participate in the expanding managed
health care market and intends to continue to seek to joint venture with
hospital and physician managed ambulatory centers.

UNION JOINT VENTURE

In July 1990, Modern Medical entered into a Joint Venture Agreement with Union
Imaging Associates, Inc. for the purpose of providing magnetic resonance and CT
Scan imaging services to radiologists and other medical professionals, including
leasing and financing equipment for use in such business. The Union joint
venture terminates upon the earliest of: (a) June 30, 2010, (b) the sale of the
subject business or (c) mutual agreement of the joint venturers. Modern Medical
serves as the managing joint venturer pursuant to the Union joint venture
agreement and has managerial responsibility for the business including:

         o  Hiring of personnel;
         o  Leasing equipment;
         o  Budgeting;
         o  Contracting;
         o  Billing;
         o  Paying debts;
         o  Making lease payments; and
         o  Making distributions to the joint venturers.

Modern Medical shall continue to serve as managing joint venturer until Modern
Medical's liability under the Union joint venture's equipment debt is satisfied.
Thereafter, Modern Medical shall continue to serve as the managing joint
venturer until the earlier to occur of: (a) Modern Medical's resignation upon 60
days notice to Union Imaging or (b) 60 days after receipt of notice from Union
Imaging that the holders of at least 80% of Union Imaging's stock had voted to
terminate Modern Medical as managing joint venturer. For serving as managing
joint venturer, Modern Medical receives 11.25% of gross collections for a
management fee as well as a 10% equity position. Modern Medical purchased an
additional 40% equity position in the Union joint venture during 2003.

METAIRIE MEDICAL EQUIPMENT LEASING

In June 1997, Metairie Medical Equipment Leasing Corp. was incorporated in the
state of New Jersey, as a 100% owned subsidiary of Modern Medical. In October
1997, Metairie Medical Equipment Leasing Corp. was registered as a corporation
doing business in the State of Louisiana. The site is operated by Open MRI &
Imaging Center of Metairie, LLC and Modern Medical will receive 100% of the
profits and equity of Open MRI & Imaging Center of Metairie, LLC. The site
opened for business in February of 1998. There was an agreement with Southern
Medical Consultants LLP, which provided that if they raised $250,000 and
provided marketing and management services, they would receive 34% of the site.
To date the $250,000 has not been raised and in September 1998, Modern Medical
terminated the management contract with Southern Medical Consultants LLP for the
management of Open MRI & Imaging Center of Metairie. Accordingly pursuant to the
agreement, if Southern Medical is not active in marketing or managing the site
through the end of the lease


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payments, then no stock transfers will be made and none have been made to date.

MRI IMAGING AT PBI CORPORATION


In May 2001, MRI Imaging at PBI Corporation entered into a new seven (7) year
lease agreement with Passaic Beth Israel Hospital, Inc., which replaces the
original joint venture agreement dated June 1995. Under the terms of the new
agreement the company leases land from the hospital for $300 per month, leases
four exclusive and four non-exclusive parking spaces for $975 per month and pays
a fee of $850 per month for security. The total monthly rent paid to the
hospital is $2,125. Additionally the Company has signed a non-exclusive License
Agreement with Passaic Beth Israel Hospital,Inc. for $5,000 per annum. The
license allows the Company to use the marks "Passaic Beth Israel". "Passaic
Beth" and/or "PBI".

On December 30, 2002, the Company transferred 18% ownership in MRI Imaging at
PBI Corporation to Mr. Sami Merhi in consideration for entering into a
marketing agreement.

Passaic Beth Israel Hospital, Inc., has effectively closed on December 31, 2003
and Modern Medical Modalities Corporation has agreed to vacate the facility by
October 31, 2004.

Modern Medical has leased space in Bloomfield, NJ and will transfer the
equipment currently at Passiac Beth Israel hospital and it anticipates it will
maintain most of the current outpatient referring partners.

TSI Billing Service Inc.

In November 2003, Modern Medical entered into an agreement to purchase 50% of
TSI Billing Service(TSI Billing). TSI Billing is a billing company that has been
providing billing services for various medical practices since 1994. Modern
Medical has also outsourced its billing to TSI Billing.


Medical imaging industry and systems:

Modern Medical has focused on the advanced imaging technologies of MRI and CT
Scan. Management believes that the use of these technologies has grown
significantly in the U.S. during the last several years. This growth is
attributable to physicians' beliefs that diseases can be detected in their early
stage, in a non-invasive manner, through the use of MRI and CT Scan. Hospitals
are facing competitive pressures to provide technology and related services
despite strict budgetary limitations. Changes in third party reimbursement
systems have resulted in declining profit margins for many hospitals, thus
reducing capital available to hospitals and the traditional incentives to
purchase or lease equipment and pass such costs through to third parties. By
leasing equipment and purchasing services from third parties, hospitals are able
to conserve their limited capital resources for other purposes and reduce the
risks associated with technological obsolescence and under utilization of
equipment and services. As a result hospitals are increasingly utilizing
companies that provide MRI and CT Scan equipment, such as Modern Medical, in
order to decrease their equipment and personnel costs.

Medical diagnostic imaging systems facilitate the diagnosis of disease and
disorders at an early stage, often minimizing the amount and cost of care needed


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to stabilize or cure the patient and frequently obviating the need for invasive
diagnostic procedures, such as exploratory surgery. Diagnostic imaging systems
are based on the ability of energy waves to penetrate human tissue and generate
images of the body, which can be displayed either on film or on a video monitor.
Imaging systems have evolved from conventional x-ray to the advanced
technologies of MRI and CT Scan.

MRI is an advanced imaging system that uses a strong magnetic field and radio
waves to allow physicians to explore the inner workings of the human body. The
pictures produced by this technology assist the doctor in detecting and defining
the differences between healthy and diseased tissue.

CT is a specialized method of examining various body parts using x-rays and
computer reconstruction to form a cross sectional image. During the exam the
x-ray tube travels completely around the body and the computer reconstructs the
information to form a cross sectional image. A series of these images, or
slices, is taken through the area of interest, providing the physician with a
detailed look at structures not otherwise seen with regular X-rays.

Our services:

Modern Medical offers the full range of services discussed below. The needs of a
particular hospital or physician group determine the extent of the services
offered in each instance, which Modern Medical can deliver either on a limited
basis or through a full service medical technology center. Administrative,
technical and support personnel staff each site. In addition, a physician and a
physician group provide professional services and interpret MRI or CT Scans at
each site. Modern Medical does not engage in the practice of medicine. Such
physicians are not employees of Modern Medical. However, the most significant
cost of operating an imaging center is the capital and finance costs of
equipment.

Modern Medical provides equipment and related services, technical and support
staffing, marketing, patient scheduling, billing and collection and management
in all of Modern Medical's sites located throughout New Jersey and Metairie,
Louisiana.

Equipment and related services. Modern Medical consults with its potential
clients and existing clients to identify the equipment best suited to meet the
client's needs on a cost-effective basis. Modern Medical then acquires the
equipment through lease/purchase agreements. In addition, Modern Medical assists
the hospital or physicians and their personnel in complying with licensing and
other regulatory requirements, which consist of all applicable county building
permits and architectural filings as well as filing all necessary equipment
registration forms with the applicable state agencies. Modern Medical supervises
the installation and testing of the equipment and provides periodic inspection
of the equipment at the facility. Modern Medical undertakes to maintain its
clients' equipment and typically enters into agreements with equipment
manufacturers or other third parties for the delivery of maintenance services.

Technical and support staffing. Modern Medical provides technologists who
operate the equipment at the facility. Modern Medical trains and provides
on-going safety instruction and educational programs for its technologists as
well as the hospital's technologists. Modern Medical also provides clerical
personnel to provide administrative duties such as scheduling and answering
phone inquiries.


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Marketing. Modern Medical provides its customers with marketing services,
including the design and formulation of a marketing program for each facility to
inform physicians in the community as to the technology and services available
at the facility. Modern Medical also provides marketing personnel who market
patient referral sources, including HMOs and other health plans.

Patient scheduling, billing and collection at the medical technology centers.
Modern Medical schedules patient appointments, prepares all patient billing and
is responsible for collection. In providing billing and collection services,
Modern Medical bills the patients directly and, therefore, assumes the credit
risk on such billings and any delays attendant to reimbursement through
governmental programs or third party payors. Modern Medical also is responsible
at the centers for related administrative and record-keeping functions and all
management information services.

Management. Modern Medical provides full managerial responsibility and control
over facility operations, including all of the foregoing services, at medical
technology centers.

Delivery of our services:

Modern Medical delivers its services to its customers through either contractual
arrangements with hospitals and clinics or medical technology center
arrangements with hospitals or physician groups, as discussed below. Modern
Medical may form imaging centers utilizing a variety of ownership vehicles.
Presently, Modern Medical operates its sites under joint venture agreements.
Below is a description of Modern Medical's medical technology centers and
radiology group centers:

Medical technology centers. Modern Medical will establish a medical technology
center within a hospital or with a physician group through which Modern Medical
will offer its full range of services. A hospital center is located on a
hospital campus, is affiliated with that hospital and provides both inpatient
and outpatient services. A hospital requiring part-time service will engage
Modern Medical to schedule its mobile unit to be on location at the hospital at
prescribed times. Modern Medical maintains a mobile unit, which is a
custom-designed vehicle that is a totally self-contained facility.

In addition to the equipment and facility services provided in its arrangements,
Modern Medical provides at a medical technology center all technical and support
staffing, expanded marketing services, patient scheduling, billing and
collection services, management information systems, and overall management.

Radiology group centers. Modern Medical began its medical technology center
operations by establishing freestanding, outpatient-imaging centers with groups
of radiologists.

In most cases Modern Medical is approached by a group of physicians or a
hospital who are looking to install a MRI or CT scanner. Modern Medical first
reviews the location that the equipment is to be placed in and reviews a general
outline or business plan. Information that is presented includes other centers
in the area, patient financial class, patient demographics in the area served,
and potential referring physicians. In the case of a hospital, Modern Medical
requests the number of MRI and CT scans that the hospital sends to other
facilities. Modern Medical also contacts neighboring sites to determine the
waiting time for scheduling an exam to see if patients are waiting an excessive
amount of time for an exam. Modern Medical contacts potential referring

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physicians to determine if they are experiencing problems with existing
facilities and if they would support a new facility. Managed care groups and
HMO's are contacted to determine if contracts for providing service are
available and to ascertain the membership in their service area of the potential
new sites. If the site is considered to be positive a request is made to the
various equipment manufacturers for a bid on the equipment Modern Medical deems
necessary. Modern Medical then makes a determination as to the financial
viability of the project. Based on the criteria above, Modern Medical reviews
each site to determine whether the site can generate revenues to support the
costs associated with the operation of the site.

Our growth strategy and marketing plan

Modern Medical markets its services to physicians and hospitals through various
methods. These include telemarketing, direct solicitation, direct mail, and
sponsorship of in service education programs for physicians and technical staff,
and personal visits to physician offices. Modern Medical's management also
attends many of the large radiology shows throughout the country.

Modern Medical is pursuing a strategy of seeking new hospital centers and
physician managed ambulatory centers. Its target markets also include hospitals
without a diagnostic imaging facility, to which Modern Medical can offer its
part-time mobile units. Modern Medical will engage in intensive marketing in
areas of specialized physician groups, chiropractors, health maintenance
organizations (HMO), preferred provider organizations (PPO), union locals,
municipalities and insurance companies. Modern Medical currently negotiates
discounts with large suppliers of patients, as allowed by law. Modern Medical's
objective is to respond to the concerns of spiraling health care costs while
maintaining quality of care to the patient. Increased volume results in a
reduction of the cost of each procedure because fixed costs at each facility are
spread over a larger number of procedures. This reduction in cost is passed
along to Modern Medical's contracted clients. In addition, in order to increase
patient volume, Modern Medical has expanded its hours of operations, including
extended hours during the week and weekend scheduling.

Modern Medical applies a variety of criteria in evaluating each prospective
hospital customer. These criteria include: (a) the extent of the hospitals'
present diagnostic imaging services; (b) its competitive environment; (c) the
size and type of hospital; (d) the number of referring physicians and their
specialties; (e) patient volume; and (f) the nature of the payors (private
insurance programs, government reimbursement programs or other health or medical
organizations).

Modern Medical's plan of operation will be to continue to expand the equipment
use of its current customers. Modern Medical will, with its direct marketing
efforts, continue to seek new clients, either through the acquisition of
complementary businesses or the establishment of new centers. Modern Medical
currently does not have any agreements to acquire complementary businesses.

Equipment and supplies

Modern Medical obtains its medical equipment and ancillary supplies from various
manufacturers, including General Electric, Toshiba, Siemens, Philips, Picker,
Hitachi, DuPont and Kodak. Modern Medical is not dependent on any one supplier
and believes that it has good relationships with its suppliers.

Equipment acquisition costs can range dramatically depending upon the model and

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peripheral equipment acquired. Currently, MRI equipment ranges from $1,000,000
to $2,000,000, extremity MRI and CT equipment currently ranges from $300,000 to
$800,000.

Installation and maintenance costs on the equipment can be substantial,
particularly with respect to MRI units. Installation costs can range from
$250,000 to $500,000 for an MRI unit depending on the particular installation
circumstances, such as excavation costs, electrical problems (i.e. bringing
additional power into the facility), delays in construction and problems
encountered in installing the equipment. Maintenance costs on a unit can be as
high as $150,000 per year. Modern Medical typically enters into agreements with
equipment manufacturers or other third parties for equipment maintenance.

Either Modern Medical or its joint venture finances equipment, typically over a
sixty-month period, with the lender or leasing company. In each case the
equipment serves as security for the loans and in certain instances the lessor
requires a corporate guarantee for a percentage of the amount being financed,
which is based on the financial projections of the equipment purchased. Modern
Medical leases all of its medical equipment.

Modern Medical's equipment and supplies are available from a variety of sources.
The loss of any single supplier would not have a material adverse effect on
Modern Medical.

Governmental reimbursement and regulations of our business

Government reimbursement. In major areas of its business, Modern Medical relies
on third party reimbursement for payment of its services, which is typically the
federal government. Its charges are predominantly paid either directly by third
party payors or by its clients, which in turn receive reimbursement from such
sources. Extensive payment delays are not uncommon and adversely affect our
operations while awaiting payment.

The centers with which Modern Medical is affiliated all participate in many
reimbursement programs including Medicare and Medicaid as well as private
insurers. Under these arrangements the center agrees to accept the approved
amount of reimbursement from each individual payor. In certain cases the amount
billed may exceed the predefined fee schedule, resulting in an amount to be
written off by Modern Medical as disallowed.

Regulations. Congress has enacted certain legislation, referred to as
Anti-Kickback Laws, in order to curb the potential for fraud and abuse under the
Medicare and Medicaid programs. Anti-Kickback Laws prohibit the payment or
receipt for referring patients to a healthcare provider if such payments may be
made in whole or in part by the Medicare or Medicaid programs. New Jersey and
some other states have enacted similar laws.

The Anti-Kickback Laws apply both to the provider making as well as receiving
the referral. Violation of the Anti-Kickback Laws is a criminal felony
punishable by fines of up to $25,000 and/or up to five years imprisonment for
each count. Federal law also permits the Department of Health and Human
Services, or HHS, to impose civil fines against violators of the Anti-Kickback
Laws and to exclude them from participation in the Medicare and Medicaid
programs. These civil sanctions can be levied under circumstances that do not
involve the more rigorous requirements and standards of proof required in a
criminal trial.


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In 1991, New Jersey enacted the Health Care Cost Reduction Act, or so-called
"Codey Bill", (N.J.S.A. 45: 9-22.4 et seq.) which provided that:

         o  a medical practitioner shall not refer a patient, or direct
            one of its employees to refer a patient, to a health care
            service in which the practitioner and/or the practitioner's
            immediate family has any beneficial interest;

         o  for beneficial interests which were created prior to the
            effective date of the Act, July 31, 1991, the practitioner
            could continue to refer patients, or direct an employee to do
            so, if the practitioner disclosed such interest to his
            patients. The disclosure must take the form of a sign posted
            in a conspicuous place in the practitioner's office. It must
            inform the patients of the beneficial interest and state that
            a list of alternative health care service providers could be
            found in the telephone directory, and

         o  all physicians who refer in the sites in New Jersey and
            alsohave a financial interest in those sites must have a
            signposted as mandated by the law.

The federal "Ethics in Patient Referrals Law of 1989", often referred to as the
"Stark Bill", prohibits a physician who has a financial relationship with an
entity from making referrals to the entity for the furnishing of clinical
laboratory services for which payment is made under the Medicare or Medicaid
programs. The Stark Bill, passed with an effective date of January 1, 1995,
expands the application of the Medicare ban on self- referrals after December
31, 1994.

As of the date of this filing, Modern Medical has not experienced any material
adverse effects of limited Medicare and Medicaid referrals and has not
experienced any material adverse effect as a result of the "Codey Bill", the
"Stark Bill" or any other government regulations applicable to our business.

Competition

Modern Medical faces competition from various other companies ranging from small
local companies to those operating on a regional or national scale, such as
Medical Resources Inc., U.S. Diagnostic Labs, Inc. and Healthcare Integrated
Services, Inc. Although these companies may be more experienced or have more
financial resources at their disposal, Modern Medical competes in the
marketplace on the basis of its performance in the industry, its reputation for
the quality of its services and its expertise in tailoring the structure of its
contractual arrangements and services to meet the specific needs of its
customers. Modern Medical does this by meeting with the hospital or physician to
discuss the specific needs of each site. Thereafter a determination can be made
as to which services Modern Medical will perform at a particular site and
whether the hospital or physician wants to be financially involved in the site.

Modern Medical believes that few of its competitors provide Modern Medical's
range of services from full service medical technology centers to more limited
mobile and fixed site arrangements. Modern Medical maintains close working
relationships with two major equipment manufacturers (Hitachi and General
Electric). Representatives of these manufacturers introduce Modern Medical to
various clients in an effort to arrange joint ventures between Modern Medical
and physician groups or hospitals in an effort to sell their equipment to the


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joint venture.

Modern Medical's imaging centers compete for patients with other hospitals and
radiology groups in their area. These centers and hospital customers compete on
the basis of efficiency and service.

Insurance

Modern Medical carries general liability insurance with coverage of up to
$1,000,000 per claim and a commercial umbrella policy of $10,000,000. Modern
Medical believes that such coverage is adequate. Additionally, Modern Medical
maintains insurance for the replacement of all leased equipment at each of its
facilities.

Employees

As of December 31, 2003, Modern Medical employed 35 persons on a full-time basis
and 22 persons on a part time basis. The following table reflects the employees
per facility:

                                   TOTAL       FULL-TIME      PART-TIME
                                   -----       ---------      ---------

Modern Medical (Corporate)           7             5             2

Passaic, NJ                          6             5             1

Metairie, LA                         3             2             1

Union, NJ                           33            15            18

TSI Billing, Union, NJ               8             8             0

Total:                              57            35            22
                                    ==            ==            ==

Equipment lease agreements

On July 16, 1997, Metairie Medical Equipment Leasing Corporation entered into a
63 month lease which provided for the purchase of a Picker Outlook Whole Body
MRI Imaging System, the first payment of $21,892.02 was due in the forth month
of the lease. In May of 2000, Metairie Medical Equipment Leasing Corporation
refinanced the outstanding balance of the lease for 48 months at $21,538.39 per
month.

During October 2002, the equipment was severely damaged by water as a result of
a storm. The site was operating with a mobile MRI unit until November 17, 2003
when it was replaced with a permanent MRI unit. During November 2002, Metairie
Medical Equipment Leasing Corporation paid off the outstanding balance of the
lease.

In December of 2000, Modern Medical Modalities Corporation, acting in its
capacity of managing joint-venturer of Union Imaging Associates JV entered into
a lease purchase agreement with Citicorp North America, Inc. to refinance
$1,102,887 of existing and new Union Imaging Associates, JV debt. The amount was
made up of the following:

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          Marconi Open MRI system upgrade                           $  185,500
          Buyout of the balance of the:
            DVI Financial Services equipment debt                      301,517
            DVI Business Credit accounts receivable line               615,870
                                                                    ----------

                                                Total               $1,102,887
                                                                    ==========

The lease commenced December 5, 2000, is a sixty-month financing lease with a
$1.00 buyout option at the end of the lease. The sixty monthly installments are
for $23,631 each. Modern Medical Modalities Corporation was not required to
guarantee the lease.

In June of 2001 Modern Medical consolidated all of its preexisting debt with DVI
Financial Services, Inc. into one note with 48 equal monthly payments of
$47,200. This resulted in a reduction of its monthly debt service of
approximately $20,000 or $240,000 per year

Item 2. Properties

In July of 1997, Metairie Medical Equipment Leasing Corporation entered into a
120 month facility lease with Independence Mall I Limited Partnership for
approximately 2,100 square feet on the ground floor of a two story building.
Under the terms of the lease the monthly rental is $2,911.00.

In December of 1997, Metairie Medical Equipment Leasing Corporation entered a
56-month lease with Equity Properties covering $100,000 in leasehold
improvements for the office space. The terms of the lease call for 56 equal
monthly installments of $2,340.82.


In May 2001, MRI Imaging at PBI Corporation entered into a new seven (7) year
lease agreement with Passaic Beth Israel Hospital, Inc., which replaces the
original joint venture agreement dated June 1995. Under the terms of the new
agreement the company leases land from the hospital for $300 per month, leases
four exclusive and four non-exclusive parking spaces for $975 per month and pays
a fee of $850 per month for security. The total monthly rent paid to the
hospital is $2,125. Additionally the Company has signed a non-exclusive License
Agreement with Passaic Beth Israel Hospital, Inc. for $5,000 per annum. The
license allows the Company to use the marks "Passaic Beth Israel". "Passaic
Beth" and/or "PBI".

Passaic Beth Israel Hospital, Inc., has effectively closed on December 31, 2003
and Modern Medical Modalities Corporation has entered into an agreement with the
New Jersey School Construction Corporation to vacate the facility no later than
October 31, 2004. Modern Medical was compensated for its relocation expenses.


In April 1995 Modern Medical and Union Imaging Associates, JV entered into a
five (5)year lease agreement for approximately 4,540 square feet on 445 chestnut
St. in Union, NJ. The lease was renewed for an additional 5 year term at $28 SF
which expires on April 1, 2005.

In December 1999 Modern Medical and Union Imaging Associates, JV entered into a
five (5)year lease agreement for approximately 1,125 square feet on 439 chestnut
St. in Union, NJ. at $24 SF.


<PAGE>

In February 2002 Modern Medical and Union Imaging Associates, JV entered into a
five (5)year lease agreement for approximately 960 square feet on 418 chestnut
St. in Union, NJ. at $22 SF.

Modern Medical believes that its current facilities are adequate to operate its
business.

Item 3. Legal Proceedings


Modern Medical Modalities Corporation has been served with a lawsuit in May 2004
in the District Court of Clark County, Nevada alleging a breach of contract with
a marketing partner seeking in excess of $40,000 in damages. Modern Medical
intends to vigorously defend itself in this suit.

Other than the legal proceeding described above, Modern Medical is not a party
to any material legal proceedings.


Item 4. Submission of Matters to a Vote of Security Holders

In October 2003, Modern Medical held an annual meeting of its shareholders to
approve the following items:

         1.  To elect the Board of Directors of Modern Medical Modalities
             Corporation for 2004;

         2.  To approve an amendment to the Company's Restated and Amended
             Certificate of Incorporation to increase the number of the
             Company's authorized shares, $.0002 par value per share, from
             15,000,000 to 100,000,000;

         3.  To approve an amendment to the Company's Restated and Amended
             Certificate of Incorporation providing for 1,000,000 shares of
             "blank check" preferred stock;

         4.  To approve the adoption of the Company's 2003 Stock Option
             Plan for 2,000,000 shares; and

         5.  To ratify the appointment of Liebman Goldberg & Drogin, LLP as
             the Company's independent certified public accountants for the
             ensuing year.

         Each of the above proposals was approved by a majority of the shares
         outstanding and entitled to vote at the Annual Meeting of Shareholders.

                                     PART II

Item 5. Market for Modern Medical's Common Stock

On March 12, 1999, we effected a 1 for 2 reverse split of our authorized and

<PAGE>

outstanding shares of common stock. As of June 14, 2004, we had 14,506,471
shares of common stock outstanding. Our common stock is traded on the Pink
Sheets under the symbol "MODM." The following table sets forth the high and low
closing bid prices for the common stock as reported on the OTC Bulletin Board.
The high and low bid prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions. All bid
prices for the periods prior to our 1-for-2 reverse stock split effected on
March 12, 1999, have been adjusted to reflect the reverse stock split.

                                   Common Stock
                                   ------------

Fiscal 2002

First                    $  0.015                 $  0.01
Second                       0.01                   0.005
Third                        0.01                   0.005
Fourth                     0.0075                  0.0025

Fiscal 2003

First                     $  0.01                 $ 0.005
Second                     0.0075                   0.005
Third                        0.01                   0.005
Fourth                     0.0075                  0.0025

On June 14, 2004, there were approximately 50 holders of record of Modern
Medical's 14,506,471 outstanding shares of Common Stock.

On June 14, 2004, the last sale price of the Common Stock as reported on the OTC
Bulletin Board was $_.12.

Dividend Policy

Modern Medical has never paid or declared dividends on its common stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon Modern Medical's earnings, its capital
requirements, financial condition and other relevant factors. Modern Medical
intends, for the foreseeable future, to retain future earnings for use in Modern
Medical's business.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward-looking Statements

When used in this Form 10-KSB and in future filings by Modern Medical with the
Securities and Exchange Commission, the words or phrases "will likely result"
and "the company expects", "will continue", "is anticipated", "estimated",
"project", or "outlook" or similar expressions are intended to identify
"forward-looking statements". Modern Medical wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Modern Medical
has no obligation to publicly release the result of any revisions, which may be
made to any forward-looking statements to reflect anticipated or unanticipated

<PAGE>

events or circumstances occurring after the date of such statements.

Modern Medical Modalities Corporation provides magnetic resonance imaging (MRI)
and computerized axial tomography (CT Scan) equipment to hospitals and
physicians. Additionally, Modern Medical on a clerical and administrative level
manages hospital based and physician managed ambulatory centers for third
parties who provide medical imaging services. Modern Medical offers a full range
of services to hospitals or physician clients, including:

         o   Selection and acquisition of appropriate equipment;
         o   Design and supervision of facility construction;
         o   Training of technical and support staff;
         o   Patient billing and collection; and
         o   Marketing and management services.

Modern Medical can provide either its full range of services at medical
technology centers or a more limited range of services at mobile or fixed sites
depending on the needs of its customers.

Modern Medical presently provides equipment and manages one hospital based MRI
site located in Passaic, New Jersey, and four free standing MRI and CT Scan and
Diagnostic Imaging ambulatory centers in Louisiana (1) and New Jersey (3).
Modern Medical also receives a management fee of 11.25% of gross cash
collections from the site in Union, New Jersey, for performing management
functions. Modern Medical's relationship with its joint ventures, range from 10%
through 84% equity interest.

Generally, Modern Medical's centers participate in HMO or PPO programs because
many of the physicians who refer patients to the centers belong to the HMO or
PPO. In many instances Modern Medical's centers initiate contact with various
third parties, such as insurance companies, unions or managed care providers, to
provide services to their membership. This is usually the case with the larger
insurance plans. In the case of unions or managed care programs, the benefit
managers representing the various programs usually make contacts. Typically, the
physicians in the area recommend the centers.

Modern Medical has positioned itself to participate in the expanding managed
health care market and intends to continue to seek to joint venture with
hospital and physician managed ambulatory centers. Modern Medical has hired
additional marketing representatives, a marketing company and a telemarketer in
an effort to establish new sources of patient referrals, which are generally
referred to Modern Medical's sites through HMO's, PPO's, union contracts and
hospital contracts.

Results of Operations:

For the year ended December 31, 2003 compared to the year ended December 31,
2002

Net Revenues from Services:

Net revenue from services has decreased approximately $12,000 from approximately
$3,049,000 for the year ended December 31, 2002 to approximately $3,037,000 for
the same period in 2003. This decrease resulted from an increase of
approximately $1,047,000 resulting from the consolidation of Union Imaging


<PAGE>

Associates for the last 4 months of 2003. This increase was off-set by the
closing of the South Plainfield, NJ center at the end of 2002, approximately
$289,000, Open MRI & Imaging Center of Metairie closed for approximately 9
months during 2003 because of storm damage, $545,000, the sale of the South
Jersey Imaging center in 2002, approximately $67,000 and the reduced management
fee revenues of Modern Medical Modalities because of the consolidation of Union
Imaging Associates for the last 4 months of 2003, approximately $158,000.

Cost of services provided:

For the year ended December 31, 2003, cost of services provided totaled
approximately $2,061,000 as compared to approximately $2,090,000 for the same
period in 2002, resulting in a decrease of approximately $30,000. This decrease
relates to the changes in volume discussed above resulting in lower costs
related to medical supplies, primarily film costs.

Selling, general and administrative expenses:

For the year ended December 31, 2003, selling, general and administrative
expenses totaled approximately $651,000 as compared to $893,000 for the same
period in 2002, resulting in a decrease of approximately $242,000. This is
primarily a result of a decrease in marketing expenses of approximately $263,000
resulting from site closings discussed above, offset approximately $100,000 in
marketing expenses related to the consolidation of Union Imaging Associates for
the last 4 months of 2003. Legal fees were down in 2003 as a result of settling
the Prime Contracting Corp. litigation of approximately $65,000, the balance of
the reduction related to other office expenses of approximately $14,000.

Bad debts:

Bad debt expense for the year ended December 31, 2003 was approximately
$1,499,000 resulting from insurance companies refusing to make reimbursements
for claims prior to the New Jersey centers obtaining their New Jersey facility
license. This resulted in write-off's in excess of contractual allowances at MRI
Center @ PBI, $588,000 and Union Imaging Associates of $379,000, South
Plainfield accounted for $159,000 as a result of write-off's in excess
contractual allowances and general revaluation of the collectibility of the
receivables subsequent to closing this center.The company wrote off $373,000 in
receivables at its Metairie La. Center resulting increased difficulty in
collecting PIP claims and overall evaluation of the accounts receivable.

Miscellaneous income:

Miscellaneous Income for the year ended December 31, 2002 was $64,000 as
compared to $43,000 for the same period in 2003 resulting in a decrease of
approximately $21,000. This decrease resulted primarily from reduced equipment
rental fees from third parties and reduced transcription fees.

Loss on Sale of Subsidiary

On November 7, 2002, the Company sold South Jersey Medical Equipment Leasing
Corporation to Mr. Stewart Novack and incurred a loss of $67,352.


Liquidity and Capital Resources:

<PAGE>

Modern Medical has a working capital deficiency of $1,034,509 at December 31,
2003 as compared to a working capital deficiency of $32,499 at December 31,
2002.

Effective June 30, 2001, Modern Medical refinanced all of its DVI Financial
Services debt with DVI Financial Services. The refinancing resulted in a monthly
reduction of its debt service of approximately $20,000 per month. The refinanced
debt is due in 48 equal installments of $47,200. At the same time Modern Medical
made the last of it debt payments on its mobile MRI unit, further reducing its
debt service by approximately $14,000. The combined debt service reduction is
approximately $34,000 per month or $408,000 per year.

In addition, Modern Medical paid off the balance of the accounts receivable
working capital line of credit. On May 14, 2002 the group of investors agreed to
pay off DVI Business Credit Corporation as follows: $60,000 on May 15, 2002,
June 15, 2002 and July 15, 2002. The final payment of approximately $108,500 was
made August 26, 2002.

In October 1999, the Company issued an aggregate of $500,000 of its convertible
notes ("Notes") to two investors. The Notes are convertible into shares of the
Company's common stock at 72.5% of the market price at the time of conversion.

In June 2002, Jacov Hayut purchased each of the notes and on July 29, 2002, Mr.
Hayut converted $43,500 principal amount of the Notes into shares of the
Company's common stock.

In June 2002, the Company issued an aggregate of $220,000 principal amount of
its 9.25% convertible secured promissory notes to Jacov Hayut which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company. As
of December 31, 2002, an aggregate of $25,000 principal amount has been retired
by the Company.

In June 2002, the Company issued an aggregate of $100,000 principal amount of
its 9.25% convertible secured promissory notes to Motti Sharon which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

In July 2002, the Company issued an aggregate of $65,000 principal amount of its
9.25% convertible secured promissory notes to Yossef Azoulai which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

In August 2002, the Company issued an aggregate of $100,000 principal amount of
its 9.25% convertible secured promissory notes to Irit and Yossef Azoulai which
are due on June 2007. The notes are convertible at anytime while any portion of
it is outstanding into shares of the Company's common stock at the lowest bid
price of the Common Stock as reported on the OTC Bulletin Board during the 30
days prior to the date a duly executed Notice of Conversion is delivered to the
Company.


<PAGE>

In March 2000, the Company opened a commercial line of credit in the amount of
$300,000 with Bridge View Bank in Englewood, New Jersey. Under the terms of the
agreement, certain former directors of the Company were guarantors of the loan.
Thisloan was for one year in duration and carried an interest rate of Prime plus
one (1%) percent. On March 21, 2001, this agreement was renewed for one year
under the same terms. In April of 2002 the loan was extended for an additional
six months. In June 2002, the Hayut Group, of which Jacov Hayut the Company's
President, made a $100,000 payment and arranged to convert the balance of the
Company's revolving line of credit with Bridge View Bank into a long term note.
In November 2002, the Company's line of credit with Bridge View Bank was fully
paid.

Effective December 9, 2002, the Company entered into a 36 month note with Ronnie
Antebi in the amount of $260,000. This note bears an interest rate of 12% per
annum and is payable in 36 equal installments of $8,635.72, commencing January
9, 2003. The proceeds of this note were used to retire the Bridge View Bank line
of credit (see footnote 6), the balance was used for working capital purposes.

In February, 2003 the Company issued an aggregate of $150,000 principal amount
of its 9.25% convertible secured promissory notes to Medical Equipment
Solutions, LLC which are due on February 2008. The notes are convertible at
anytime while any portion of it is outstanding into shares of the Company's
common stock at the lowest bid price of the Common Stock as reported on the OTC
Bulletin Board during the 30 days prior to the date a duly executed Notice of
Conversion is delivered to the Company.

In March, 2003 the Company issued an aggregate of $50,000 principal amount of
its 9.25% convertible secured promissory notes to Medical Equipment Solutions,
LLC which are due on March 2008. The notes are convertible at anytime while any
portion of it is outstanding into shares of the Company's common stock at the
lowest bid price of the Common Stock as reported on the OTC Bulletin Board
during the 30 days prior to the date a duly executed Notice of Conversion is
delivered to the Company.

In August, 2003 the Company issued an aggregate of $100,000 principal amount of
its 9.25% convertible secured promissory notes to Medical Equipment Solutions,
LLC which are due on August 2008. Simultaniously Irit and Yossef Azoulai have
assigned their $100,000 note from August 2002, under the same terms, to Medical
Equipment Solutions, LLC. Yossef Azoulai is a principal of Medical Equipment
Solutions, LLC. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

Modern Medical does not believe that its cash flow from operations will be
sufficient to fund its ongoing operations and it will continue to have to raise
capital to fund its operations.

These are the only trends, commitments, events and/or material uncertainties
known to Modern Medical.

Going Concern

Modern Medical's 2003 and 2002 financial statements have been presented on a
basis that it is a going concern. Due to significant losses during the years
ended December 31, 2003 and 2002, the accountants' reports have an explanatory

<PAGE>

paragraph stating that Modern Medical's continued existence is in doubt.

Valuation of Accounts Receivable

Modern Medical values its uncollected accounts receivable as part of its
determination of profit. Modern Medical constantly reviews the accounts
receivable valuation. The continuing monthly review, gathering of additional
information, as well as changing reimbursement rate, may cause adjustments to
the accounts receivable valuation.

Item 7. Financial Statements

See pages F-1 to F-17

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

Item 8A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the
participation of our Chief Executive Officer and Chief Financial officer, has
evaluated the effectiveness of our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) pursuant to Rule 13a-15(b) under
the Exchange Act as of the end of the period covered by this Annual Report on
Form 10-KSB. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of such date, our disclosure controls
and procedures are effective to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in applicable SEC rules and forms.

Changes in Internal Control Over Financial Reporting. There was no change in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the period covered by
this Annual Report on Form 10-KSB that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.


                                    PART III

Item 9. Directors and Executive Officers, Promoters and Control Person
Compliance with Section 16(a) of the Exchange Act

The officers and directors of the Company, and further information
concerning them, are as follows:

Name                    Age          Position
----                    ---          --------

Baruh Hayut             41           Chairman of the Board of Directors and CEO


<PAGE>

Jacov Hayut             36           President, COO, Secretary and Director

Minesh Patel            32           Chief Financial Officer and Director


Each of the above officers and directors shall hold office until the next annual
meeting of the Company's shareholders and until a successor is elected and
qualified.

BARUH HAYUT was appointed Chairman of the Board of Directors and Chief Executive
Officer on March 31, 2003. From June 2002 through March 31, 2003, Mr. Hayut
served as a financial consultant to the Company. Prior thereto, Mr. Hayut served
as a corporate finance and investment banker with Thornhil Group and Joseph
Charles and Associates. From 1992 to 1997, Mr. Hayut was a registered
representative with H.J. Meyers & Co. Mr. Hayut received his Bachlor degrees in
Business Administration and Economics from Hebrew University in Jrusalem,
Israel.

JACOV HAYUT was appointed Chairman of the Board of Directors, Chief Executive
Officer and Acting Chief Financial Officer of the Company in June 2002 and
served in these capacities until March 31, 2003. Mr. Hayut has however retained
the positions of Director, President, Chief Operating Officer and Secretary.
From 1995 to present, Mr. Hayut has been President and Chief Operating Officer
of AA Flooring based in Atlanta, Georgia. From 1993 to 1995, Mr. Hayut was a
registered representative with H.J. Meyers & Co. and Argent Securities Corp.

MINESH PATEL was appointed to the Board of Directors of the Company in June 2002
and on November 2002 was appointed Chief Financial Officer. From February 2001
through November 2002, Mr. Patel was an Investment Broker with the firm of JP
Turner & Company LLC. From October 1998 through February 2001, Mr. Patel was an
Investment Broker with the firm of JW Genesis. Mr. Patel received his Masters in
Business Administration with a concentration in Finance from Georgia State
University.

Under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any persons holding ten percent or
more of the Company's Common Stock must report on their ownership of the
Company's Common Stock and any changes in that ownership to the Securities and
Exchange Commission and to the National Association of Securities Dealers,
Inc.'s Automated Quotation System. Specific due dates for these reports have
been established. During the year ended December 31, 2002, the Company believes
all reports required to be filed by Section 16(a) were filed on a timely basis.

Item 10. Executive Compensation

The following table sets forth all cash compensation for services rendered in
all capacities to the Company, for the year ended December 31, 2003 (referred to
as "2003" in this table), the year ended December 31, 2002 (referred to as
"2002" in this table), and for the year ended December 31, 2001 (referred to as
"2001" in this table), paid to the Company's Chief Executive Officer.


Summary Compensation Table

Name and Principal                                           All Other
Position                  Year          Salary              Compensation
                          ----          ------              ------------

<PAGE>

Jacov Hayut               2002        $ 12,436                  -0-
President                 2003        $ 30,025

Baruh Hayut               2002        $ 22,531                  -0-
Chairman, CEO             2003       $ 158,772


Employment Agreements

The Company does not currently have any employment agreements with any of its
executive officers.

Stock Option Plan

In October 2003, the board of directors and shareholders adopted the 2003 stock
option plan. The plan will be administered by the compensation committee or our
board of directors, who will determine among other things, those individuals who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of common stock issuable upon the
exercise of the options and the option exercise price. The options may be
granted as either or both of the following: (a) incentive stock options, or (b)
non-qualified stock options. 2,000,000 shares may be issued under this plan. To
date, 200,000 options have been granted under the plan.

In connection with the plan, the exercise price of each incentive stock option
may not be less than 100% of the fair market value of our common stock on the
date of grant or 110% of fair market value in the case of an employee holding
10% or more of our outstanding common stock. The aggregate fair market value of
shares of common stock for which incentive stock options granted to any employee
are exercisable for the first time by such employee during any calendar year,
pursuant to all of our, or any related corporation's, stock option plan, may not
exceed $100,000. Non-qualified stock options may be granted at a price
determined by our compensation committee, but not at less than 85% of the fair
market value of our common stock. Stock options granted pursuant to our stock
option plan will expire not more than ten years from the date of grant.

The plan is effective for a period of ten years, expiring in 2013. Options may
be granted to officers, directors, consultants, key employees, advisors and
similar parties who provide their skills and expertise to us. The plan is
designed to enable our management to attract and retain qualified and competent
directors, employees, consultants and independent contractors. Options granted
under the plan may be exercised for up to ten years, and shall be at an exercise
price all as determined by our board. Options are non-transferable except by the
laws of descent and distribution or a change in control of us, as defined in the
plan, and are exercisable only by the participant during his or her lifetime.
Change in control includes (a) the sale of substantially all of the assets of us
and merger or consolidation with another company, or (b) a majority of the board
changes other than by election by the stockholders pursuant to board
solicitation or by vacancies filled by the board caused by death or resignation
of such person.

If a participant ceases affiliation with us by reason of death, permanent
disability or retirement at or after age 70, the option remains exercisable for
one year from such occurrence but not beyond the option's expiration date. Other
types of termination allow the participant three months to exercise, except for

<PAGE>

termination for cause which results in immediate termination of the option.

Any unexercised options that expire or that terminate upon an employee's ceasing
to be employed by us become available again for issuance under the plan.

The plan may be terminated or amended at any time by our board of directors,
except that the number of shares of common stock reserved for issuance upon the
exercise of options granted under the plan may not be increased without the
consent of our stockholders.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of June 14, 2004 with
respect to each beneficial owner of five percent (5%) or more of the outstanding
shares of common stock of Modern Medical, each officer and director of Modern
Medical and all officers and directors as a group. The table does not include
securities exercisable into common stock that have not yet vested or are not
exercisable within 60 days of the date hereof. Unless otherwise indicated, the
address of each such person or entity is 439 Chestnut Street, 2nd Floor, Union,
New Jersey 07083.

Name and Address                 Number of Shares             Percentage of
Of Beneficial Owner              Beneficially Owned(1)         Common Stock
-------------------              ---------------------         ------------
Jacov Hayut                         11,254,008                   76.5%
Barry Hayut                                 -0-                   0.0%
Minesh Patel                                -0-                   0.0%

All officers and directors          11,254,008                   76.5%
as a group (3 persons)


Equity Compensation Plan Information

<TABLE>
<S>                         <C>                       <C>                       <C>
----------------------------------------------------------------------------------------------------------
Plan category               Number of Securities to   Weighted-average          Number of securities
                            be issued upon exercise   exercise price of         remaining available for
                            of outstanding options,   outstanding options,      future issuance under
                            warrants and rights       warrants and rights       equity compensation
                                                                                plans (excluding
                                                                                securities reflected in
                                                                                column (a))
----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S>                         <C>                       <C>                       <C>
Equity compensation plans     300,000                   $2.125                    200,000
approved by security
holders
----------------------------------------------------------------------------------------------------------
Equity compensation plans     -0-                       -0-                       -0-
not approved by security
holders
----------------------------------------------------------------------------------------------------------
</TABLE>

Item 12. Certain Relationships and Related Transactions

Modern Medical believes that the transactions set forth below were made on terms
no less favorable to it than could have been obtained from unaffiliated third
parties. All future transactions, including any loans between Modern Medical and
any of its officers, directors, principal stockholders and their affiliates will
be approved by a majority of Modern Medical's board of directors and will
continue to be on terms no less favorable to Modern Medical than could be
obtained from unaffiliated third parties.

In June 2002, the Company issued an aggregate of $220,000 principal amount of
its 9.25% convertible secured promissory notes to Jacvo Hayut which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company. As
of December 31, 2002, an aggregate of $25,000 principal amount has retired by
the Company. Jacov Hayut is a Director and Officer of the Company.

In June 2002, the Company issued an aggregate of $100,000 principal amount of
its 9.25% convertible secured promissory notes to Motti Sharon which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.
Motti Sharon was a Director of the Company at the time the notes were issued.


Item 13. Exhibits and Reports on Form 8- K

         (a)      Exhibits

         Exhibit Index
         Number         Description
         ------         -----------

         31.1           Certification Pursuant To Sarbanes-Oxley Section 302
         31.2           Certification Pursuant To Sarbanes-Oxley Section 302
         32.1           Certification Pursuant To 18 U.S.C. Section 1350 (*)
         32.2           Certification Pursuant To 18 U.S.C. Section 1350 (*)

<PAGE>

* A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

         (b)        Reports on Form 8-K.  None.


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Annual Report on Form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized.

                      MODERN MEDICAL MODALITIES CORPORATION

             By: /s/ Baruh Hayut
                 ---------------
                 Baruh Hayut, Chairman of the Board and Chief Executive Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons and in the capacities and on the dates indicated.

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

/s/ Baruh Hayut        Chairman of the Board and Chief           June 16, 2004
---------------        Executive Officer
Baruh Hayut

/s/ Jacov Hayut        President, COO, Secretary and Director    June 16, 2004
---------------
Jacov Hayut


/s/ Minesh B. Patel    Director                                  June 16, 2004
-------------------
Minesh B. Patel



<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Modern Medical Modalities Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheet of Modern Medical
Modalities Corporation (a New Jersey corporation) and Subsidiaries (the
"Company") as of December 31, 2003, and the related consolidated statements of
operations, changes in stockholders' deficit, and cash flows for the years ended
December 31, 2003 and 2002. These consolidated 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 audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Modern Medical
Modalities Corporation and Subsidiaries as of December 31, 2003, and the results
of operations and their cash flows for each of the years ended December 31, 2003
and 2002, in conformity with accounting principles generally accepted in the
United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has a working capital deficiency
and has suffered recurring losses from operations. These factors raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ LIEBMAN GOLDBERG & DROGIN, LLP

Garden City, New York
June 11, 2004


                                       F-1

<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2003


<TABLE>
<S>                                                                        <C>

                                      ASSETS

Current assets:

        Cash and cash equivalents                                          $   97,261
        Accounts receivable (less contractual allowances
        of $1,962,235)                                                      1,484,288
        Notes receivable - current portion                                     74,548
        Other current assets                                                   58,928
                                                                           ----------

                                   Total current assets                     1,715,025
                                                                           ----------

Property and equipment, net of accumulated depreciation of $5,619,447       1,954,487
                                                                           ----------

Other assets:
        Note receivable,net of current portion                                 39,001
        Deposits                                                               22,820
                                                                           ----------

                                    Total other assets                         61,821
                                                                           ----------

                                    TOTAL ASSETS                           $3,731,333
                                                                           ==========
</TABLE>


                       See notes to financial statements.



                                      F-2
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2003


<TABLE>
<S>                                                                           <C>
                      LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Current liabilities:
        Line of credit                                                        $    70,899
        Accounts payable                                                          637,145
        Accrued expenses                                                          501,465
        Current portion long term debt                                          1,320,174
        Loans payable - shareholders, current portion                             119,851
        Provision for site closings                                               100,000
                                                                              -----------

                                 Total current liabilities                      2,749,534
                                                                              -----------

Other liabilities:
        Long term debt, net of current portion                                  1,618,286
        Convertible debt                                                        1,413,154
        Due to affiliate                                                          200,000
        Loans payable shareholders, net of current portion                         49,350
                                                                              -----------

                                  Total other liabilities                       3,280,790
                                                                              -----------

                                     Total liabilities                          6,030,324
                                                                              -----------

Minority interest                                                                 452,946
                                                                              -----------

Commitments and contingencies

Stockholders' deficit:
        Common stock, $0.0002 par value, Authorized - 100,000,000 shares
             Issued and outstanding - 14,706,471 shares                             2,942
        Additional paid-in capital                                              4,515,715
        Accumulated (deficit)                                                  (7,270,594)
                                                                              -----------

                               Total stockholders' (deficit)                   (2,751,937)
                                                                              -----------

                   TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)              $ 3,731,333
                                                                              ===========
</TABLE>


                       See notes to financial statements.


                                      F-3
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                       For the Years Ended December 31,
                                                      ----------------------------------
                                                           2003               2002
                                                      ------------       ------------
<S>                                                   <C>                <C>
Operating income:
     Net revenues from services                       $  3,036,976       $  3,048,831
     Cost of services provided                           2,060,507          2,090,080
                                                      ------------       ------------

Total operating income                                     976,469            958,751
                                                      ------------       ------------

Operating Expenses:
     Selling, general and administrative                   682,710            892,543
     Bad debts                                           1,499,078             97,000
     Depreciation and amortization                         583,737            710,153
                                                      ------------       ------------

Total operating expenses                                 2,765,525          1,699,696
                                                      ------------       ------------

(Loss) from operations                                  (1,789,056)          (740,945)
                                                      ------------       ------------

Other income (expenses):
     Interest income                                        11,893             35,788
     Interest expense                                     (246,366)          (393,713)
     Miscellaneous income                                   43,376             64,459
     Loss from write-off of investment in JV              (116,643)                --
     Gain on settlement of insurance claim                      --             48,027
     Loss on sale of subsidiary                                 --            (67,352)
     (Loss)/Income from joint ventures                        (977)            49,401
                                                      ------------       ------------

Total other income(expense)                               (308,717)          (263,390)
                                                      ------------       ------------

(Loss) before income taxes and minority interest        (2,097,773)        (1,004,335)

Provision/(benefit) for income taxes                            --                 --
                                                      ------------       ------------

(Loss) before minority interest                         (2,097,773)        (1,004,335)

Minority interests                                         287,154             22,085
                                                      ------------       ------------

Net (loss)                                            $ (1,810,619)      $   (982,250)
                                                      ============       ============

(Loss) per share, basic and diluted                   $      (0.12)      $      (0.19)
                                                      ============       ============

Number of weighted average shares outstanding           14,556,471          5,058,554
                                                      ============       ============

</TABLE>


                       See notes to financial statements.


                                      F-4
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>

                                                                           Additional          Retained
                                            Number of         Common         Paid-In           Earnings
                                             Shares           Stock          Capital          (Deficit)           Total
                                         ----------------   -----------  ----------------  -----------------  ---------------
<S>                                      <C>                 <C>         <C>               <C>                <C>
Balance at December 31, 2001                   2,506,471           502        $4,460,223        ($4,477,725)        ($17,000)

Issuance of common stock as
     a partial conversion of the
     Company's convertible debt:
                           July 29, 2002         250,000            50               856                  -              906
                        October 12, 2002      11,750,000         2,350            40,244                  -           42,594

Net loss for the year ended
     December 31, 2002                                 -             -                 -           (982,250)        (982,250)
                                         ----------------   -----------  ----------------  -----------------  ---------------

Balance at December 31, 2002                  14,506,471         2,902        $4,501,323        ($5,459,975)       ($955,750)

Issuance of common stock to
     acquire a 50% interest in
     subsidiary
                         October 1, 2003         200,000            40            14,392                              14,432

Net loss for the year ended
     December 31, 2003                                 -             -                 -         (1,810,619)      (1,810,619)
                                         ----------------   -----------  ----------------  -----------------  ---------------

Balance at December 31, 2003                  14,706,471         2,942        $4,515,715        ($7,270,594)     ($2,751,937)
                                         ================   ===========  ================  =================  ===============

</TABLE>

                       See notes to financial statements




                                      F-5
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                For the years Ended December 31,
                                                                                --------------------------------
                                                                                   2003                 2002
                                                                                -----------          -----------
<S>                                                                             <C>                  <C>
Cash flows from operating activities
     Net (loss)                                                                 $(1,810,619)         $  (982,250)
                                                                                -----------          -----------
     Adjustments to reconcile net loss to net cash
     provided (used) by operating activities:
            Depreciation and amortization                                           583,737              710,153
            Contractual allowances                                                 (138,676)            (204,653)
            Bad debts                                                             1,499,078               97,000
            Income from an unconsolidated joint venture                                 977              (49,401)
            Minority interest                                                      (287,154)             (22,085)
            Loss on write-off of investment in JV                                   116,643                    -
            Gain on settlement of insurance claim                                         -              (48,027)
            Loss on sale/disposal of subsidiaries                                         -               67,352
Increase (decrease) in cash attributable to
     changes in operating assets and liabilities:
            Accounts receivable                                                     215,535              747,674
            Accounts receivable - joint venture                                           -              (28,521)
            Affiliate receivables                                                    48,420                3,481
            Other current assets                                                     19,444               14,783
            Deposits and other assets                                                (5,642)                 (78)
            Accounts payable                                                        179,200             (272,766)
            Accrued expenses                                                        306,765             (121,753)
            Affiliate payables                                                            -             (219,223)
                                                                                -----------          -----------
     Total adjustments                                                            2,538,327              673,936
                                                                                -----------          -----------
Net cash provided (used) by operating activities                                    727,708             (308,314)
                                                                                -----------          -----------
Cash flows from investing activities:
     Net (decrease)increase in provision for site closings & other assets          (287,847)              80,153
     Fixed asset acquisitions                                                    (4,498,377)                   -
     Fixed asset dispositions                                                     2,992,128              716,010
     Proceeds from conversion of convertible debt                                         -               43,500
     Investment in joint venture                                                     34,377                    -
     Increase in minority interest                                                  509,608               22,085
                                                                                -----------          -----------
Net cash provided by investing activities                                        (1,250,111)             861,748
                                                                                -----------          -----------
Cash flows from financing activities:
     Decrease in notes receivable - affiliates                                     (169,599)            (130,222)
     Proceeds from loan payable joint venture                                      (219,618)              10,713
     (Reduction)increase in shareholder loans                                             -             (166,190)
     Decrease in deferred tax asset                                                (484,718)
     Due to Affiliates                                                              200,000
     Line of credit (payments)                                                         (281)            (225,715)
     Net increase(reduction) long term debt                                       1,286,828               19,995
                                                                                -----------          -----------
Net cash (used) by financing activities                                             612,612             (491,419)
                                                                                -----------          -----------
Net increase(decrease) in cash and cash equivalents                                  90,209               62,015
Cash and equivalents, beginning of year                                               7,052              (54,963)
                                                                                -----------          -----------
Cash and equivalents, end of year                                               $    97,261          $     7,052
                                                                                ===========          ===========

Supplemental cash flow information
     Interest paid                                                              $   265,708          $   583,928
                                                                                ===========          ===========
     Income taxes paid                                                                  $ -                  $ -
                                                                                ===========          ===========
     Convertible shares issued (12,000,000 in 2002)                                     $ -                  $ -
                                                                                ===========          ===========
</TABLE>

                       See notes to financial statements.


                                      F-6
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Organization and Business:

Modern Medical Modalities Corporation (the "Company") was incorporated in the
State of New Jersey on December 6, 1989. The Company provides high technology
medical equipment and management services to hospitals and physicians. Modern
Modalities Corporation was incorporated in the State of New Jersey on June 4,
1990, for the same purpose. The two companies had common ownership, directors
and officers. In July 1992 the two companies were merged under the laws of the
State of New Jersey, by way of an agreement accounted for as a tax-free merger.
The surviving corporation is known as Modern Medical Modalities Corporation.

Basis of Presentation:

The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Medical Marketing and Management, Inc., Somerset
Imaging Corporation, South Plainfield Imaging, Inc., Amherst Medical Equipment
Leasing Corp., MRI Imaging Center at PBI Corporation, Metairie Medical Equipment
Leasing Corp., West Paterson Medical Equipment Leasing Corp., Ohio Medical
Equipment Leasing Corp., its subsidiaries MRI Imaging at PBI Corporation and TSI
Billing Services, Inc., owned 82% and 50%, respectively and its joint ventures,
Plainfield MRI Associates, JV and Union Imaging Associates, JV,owned 84% and 50%
respectively. By contract the Company manages these joint ventures, is the
managing joint venturer and has unilateral control. All significant
inter-company transactions and accounts have been eliminated in consolidation.

Revenue recognition:

At each of the Company's diagnostic imaging centers, all medical services are
performed exclusively by physician groups (the "Physician Group" or the
"Interpreting Physician(s)"), generally consisting of radiologists with whom the
Company has entered into a facility service or independent contractor
agreements. Pursuant to such agreements, the Company agrees to provide
equipment, premises, comprehensive management and administration, typically
including billing and collection of receivables and technical imaging services,
to the interpreting Physician(s).

Net revenues from services are reported, when earned, at their net realizable
amounts from third party payers, patients, and others for services rendered at
contractually established billing rates, which generally are at a discount from
gross billing rates. Known and estimated differences between contractually
established billing rates and gross billing rates ("contractual allowances") are
recognized in the determination of net revenues from services at the time
services are rendered. Subject to the foregoing and various State and Federal
regulations, imaging centers operated or managed by the Company recognize
revenue under one of the following two types of agreements with Interpreting
Physicians:




                                      F-7
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

Type I - In accordance with a facility service agreement with Interpreting
Physician(s) or Physician Group, the Company receives a technical fee for
diagnostic imaging procedures performed, the amount of which is dependent upon
the type of procedures performed at the center. The fee included in revenues is
net of estimated contractual allowances. The Company and the Interpreting
Physician(s) or Physician Group proportionally share in any losses due to
uncollectible amounts from patients and third party payers, and the Company has
established reserves for its share of the estimated uncollectible amount.

Type II - The Company bills patients and third party payers directly for
services provided and pays the Interpreting Physician(s) either (i) a fixed
percentage of fees collected for services performed at the center, or (ii) a
contractually fixed amount based upon the specific diagnostic imaging procedures
performed. Revenues are recorded net of contractual allowances and the Company
accrues the Interpreting Physician(s) fees as an expense on the consolidated
Statements of Operations. The Company bears the risk of loss due to
uncollectible amounts from patients and third party payers, and the Company has
established reserves for such amounts.

Management fees are generated through a contractual agreement between the
Company and a joint venture, Union Imaging Associates, Joint Venture ("Union"),
in which the Company owns 50% interest, based on a percentage of cash
collections. Under the terms of the joint venture agreement, the Company
receives 11.25% of the joint venture's percentage of the cash collections in
exchange for managing the joint venture. The Company records management fees
from Union as income when realized. The Company's responsibilities include the
management of all personnel, leasing of operating facilities and equipment,
negotiation of contracts, payments of debts and obligations and preparation and
review of invoices and claims.

Contractual Allowances:

The physicians with which the Company contracts, operate under various payment
systems with third-party payers. A substantial portion of the Company's revenues
is attributable to payments made by government-sponsored health care programs
and other third party payers. The Company receives these payments either
directly, in the case of imaging center revenues relating to reimbursable direct
patient billings, or indirectly, in the case of technical fee-for-service
payments by hospitals. Any change in reimbursement regulations, or the enactment
of legislation, which would have the effect of placing material limitations on
the amount of reimbursement for imaging services could adversely affect the
operations of the Company. In addition, health care reimbursement programs are
not uniformly prompt in making required payments. Extensive payment delays are
not uncommon, and the Company's financial resources could be strained while
awaiting payment.




                                      F-8
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

Use of Estimates:

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

Concentration of Credit Risk/Fair Value:

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable.

The Company maintains, at times, deposits in federally insured financial
institutions in excess of federally insured limits. Management attempts to
monitor the soundness of the financial institutions and believes the Company's
risk is negligible. Concentrations with regard to accounts receivable are
limited due to the Company's large customer base.

The carrying amounts of cash, accounts receivable, accounts payable and accrued
expenses approximate fair value due to the short-term of these items. The
carrying amount of long-term debt also approximates fair value since the
interest rates on these instruments approximate market interest rates.

Cash and Cash Equivalents:

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company places its
cash with high credit quality financial institutions.

Accounts Receivable:

Accounts receivable is stated net of contractual allowances. Based upon its past
history, the Company estimates the amount of the accounts receivable it does not
expect to receive. The Company values its uncollected accounts receivable as
part of its determination of profit and constantly reviews the valuation. The
continuing review and gathering of additional information, as well as changing
reimbursement rates, may cause adjustments.

Property and Equipment:

Furniture, fixtures, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are provided for, generally using the
straight-line method over the lease term or the estimated useful lives of the
related asset, which is five to seven years for office equipment and furniture
and fixtures, and ten years for medical equipment.


                                      F-9
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

Deferred Financing Costs:

All deferred financing costs incurred by the Company in conjunction with the
issuance of convertible notes and warrants were amortized over a period of
twelve months, the term of the debt.

Revenue and Cost Recognition:

The Company recognizes revenue from services upon performance of medical,
management and marketing services for financial statement reporting purposes.

Income Taxes:

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". SFAS 109 requires an asset and liability approach for financial
reporting for income taxes. Under SFAS 109, deferred taxes are provided for
temporary differences between the carrying values of the assets and liabilities
for financial reporting and tax purposes at the enacted rates at which these
differences are expected to reverse.

Net Income (Loss) Per Share:

Net income (loss) per common share amounts ("basic EPS") are computed by
dividing net earnings (loss) by the weighted average number of common shares
outstanding, excluding any potential dilution. Net income (loss) per common
share amounts assuming dilution ("diluted EPS") are computed by reflecting
potential dilution from the exercise of stock options and warrants. The effect
of dilutive securities is not presented for 2001, as the Company incurred a loss
in 2001 and the inclusion of the effect of dilutive securities would be
anti-dilutive.

Stock-based Compensation:

SFAS No. 123 "Accounting for Stock Based Compensation", effective January 1,
1996, requires the Company to either record compensation expense or to provide
additional disclosures with respect to stock awards and stock option grants made
after December 31, 1994. The accompanying Notes to Consolidated Financial
Statements include the disclosures required by SFAS No. 123. No compensation
expense is recognized pursuant to the Company's stock option plan under SFAS No.
123, which is consistent with prior treatment under APB No. 25.

Advertising and Promotion Costs:

Advertising and promotion costs, which are included in general and
administrative expenses, are expensed as incurred. For the two years ended
December 31, 2003 and 2002, such costs aggregated $340,489 and $476,462,
respectively.



                                      F-10
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

Retirement Plan:

The Company maintains a qualified 401-(k) wage deferral plan. Employees may
defer a portion of their salary. The Company does not contribute to the plan.

Comprehensive Income:

In June 1997, the Financial Accounting Standards Board issued Statement No. 130
"Reporting Comprehensive Income" ("SFAS 130"), which prescribes standards for
reporting other comprehensive income and its components. SFAS 130 is effective
for fiscal years beginning after December 15, 1997. Since the Company currently
does not have any items of other comprehensive income, a statement of
comprehensive income is not yet required.

Recently Issued Accounting Pronouncements:

In July 2001, the FASB issued Statements of Financial Accounting Standards No.
141, "Business Combinations" and No. 142, "Goodwill and other Intangible
Assets". SFAS No. 141 requires all business combinations initiated after June
30, 2001, to be -accounting for using the purchase method. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no longer amortized but
are reviewed annually (or more frequently, if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will continue to be amortized over their useful lives (but with no maximum
life). The company has adopted this standard effective October 1, 2001 and,
accordingly, those intangible assets that will continue to be classified as
goodwill or as other intangibles with indefinite lives will no longer be
amortized. Additionally, in accordance with SFAS No. 142, intangible assets,
including purchased goodwill, will be evaluated periodically for impairment. The
impact of adoption of SFAS No. 142 will not be material.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". The statement supersedes SFAS No. 121 and
Accounting Principles Board Opinion No. 30 "Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Statement
retains the fundamental provisions of SFAS No. 121 for the recognition and
measurement of impairment, but accounting and reporting standards for segments
of a business to be disposed of. The provisions of this statement are required
to be adopted no later than fiscal years beginning after December 31, 2001, with
early adoption encouraged. The Company is currently evaluating the impact of the
adoption of SFAS No. 144, which the Company expects will not be material.



                                      F-11
<PAGE>


In 2002, the Company adopted the disclosure provisions of SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure (an
amendment to FASB Statement No. 123)/" SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulleting
No. 51." In December 2003, the FASB issued FIN No. 46R, which clarified certain
issues identified in FIN 46. Fin 46R requires an entity to consolidate a
variable interest entity if it is designated as the primary beneficiary of that
entity even if the entity does not have a majority of voting interests. A
variable interest entity is generally defined as an entity where its equity is
unable to finance its activities or where the owners of the entity lack the risk
and rewards of ownership. The provisions of this statement apply at inception
for any entity created after January 31, 2003. For an entity created before
February 1, 2003, the provisions of this interpretation must be applied at the
beginning of the first-interim or annual period beginning after March 1, 2004.
The Company does not have any interest in variable interest entities and
therefore the adoption of this standard is not expected to have an impact on the
Company's financial position and results of operation.

In April 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have any impact on the Company's financial position, results of
operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance were
recorded as equity, be recorded as liabilities. The financial instruments
affected include mandatorily redeemable stock, certain financial instruments
that require the issuer to buy back some of its shares in exchange for cash or
other assets, and certain obligations that can be settled with shares of stock.
The Company adoptee SFAS No. 150 on June 1, 2003. The adoption of this statement
did not have any effect on the Company's financial position, results of
operations or cash flows.




                                      F-12
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 2 - GOING CONCERN UNCERTAINTY.

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has a working capital deficiency of
$1,034,058 as of December 31, 2003, and has continuously sustained significant
losses from operations, which raise substantial doubt about the Company's
ability to continue as a going concern. In view of these matters, realization of
the assets of the Company is dependent upon the Company's ability to meet its
financing requirements and the success of future operations. The financial
statements do not include adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.

The Company has continued its implementation of a restructuring plan for its
subsidiaries and believes this plan will make the Company profitable in future
periods. The plan includes increasing marketing personnel to increase patient
service revenue, as well as a reduction of administrative personnel. Duties of
those employees whose jobs were eliminated were reassigned to existing
employees. Management believes that the steps it is taking will allow the
Company to continue in existence.

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS.

In October 1995, the Company entered into a joint venture ("Open MRI of
Morristown, Joint Venture") agreement with RMC Consulting, Inc. and two
individuals to develop a MRI facility located in Morristown, New Jersey. Open
MRI accepted delivery of a new magnetic resonance imaging machine and opened in
February 1996. The Company had a 72% interest in the profit, obligations and
liabilities under the joint venture agreement until September 30, 1998. On
September 30, 1998 the Company sold 70 of its 72% interest in Open MRI of
Morristown, Joint Venture for $300,000 and the purchaser's agreement to provide
the Company's creditor, DVI Business Credit, personal guaranties of the
principals of purchaser in an amount not to exceed $150,000. The Company
recorded a gain on this transaction in the amount of $30,171. The Company has
retained a 2% ownership in Open MRI.

On May 14, 2002, the Company agreed to sell its two percent interest in Open MRI
of Morristown to the Open MRI of Morristown partnership for $10,000 to be paid
no later than May 15, 2002. Additionally, the partnership will be responsible
for any tax liability incurred as a result of the sale.

In June 1997, Metairie Medical Equipment Leasing was incorporated in the state
of New Jersey, as a 100% owned subsidiary of the Company. In October of 1997,
Metairie Medical Equipment Leasing Corporation was registered as a Corporation
doing business in the State of Louisiana. On April 15, 1998, Open MRI & Imaging
Center of Metairie, LLC ("LLC") was organized in the state of Louisiana. Under
terms of the venture agreement, the Company, through its 100% owned corporation,
owns 85% of the LLC. The 15% interest owner, KFC Venture, LLC, made an initial
capital contribution of $250,000. Profits shall be allocated to the interest



                                      F-13
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS. (Continued)

holders in proportion to their percentages after such time as KFC Ventures have
been repaid $125,000 of its initial capital contribution without interest. Until
such time, all distributions shall be divided equally with fifty (50%) percent
of said distribution being paid to KFC Ventures, LLC as a return of its initial
capital contribution up to the amount of $125,000 and the other fifty (50%)
percent of said distribution being distributed to the members in accordance with
their percentage interests in the Company.

Effective as of the close of business on November 7, 2002, the Company sold all
of the issued and outstanding shares (100 shares) of South Jersey Medical
Equipment Leasing Corporation for $239,520. The sale price is payable in 31
equal installments of $7,726, commencing on the 15th day of November 2002. The
Company recorded a loss on this transaction in the amount of $67,352.

March 20, 2003, the Company acquired an additional 10% interest in Union Imaging
Associates, JV its unconsolidated joint venture. This additional 10% brought the
Company's ownership of Union Imaging Associates, JV to 50%. This was acquired
for $300,000, payable $50,000 at the close and $5,000 monthly installments
commencing 30 days after the closing date.

On August 20, 2003 the Company acquired an additional 30% interest in Union
Imaging Associates, JV its unconsolidated joint venture. This additional 30%
brings the Company's ownership of Union Imaging Associates, JV to 50%. This was
acquired for $800,000, payable $100,000 at the close and $15,000 monthly
installments commencing 30 days after the closing date.

Effective October 1, 2003, the Company acquired 50% of the outstanding shares of
TSI Billing Services, Inc. for two hundred thousand restricted shares of Modern
Medical Modalities Corporation. As part of this transaction the seller has the
right starting November 1, 2004 to put the Company's shares to the Company. The
Company has agreed that if the average selling price of its shares is less than
$0.50 per share for the month of October 2004, that for the 45 day period
starting November 1, 2004 it will reacquire the shares for $0.50 per share.

The Company believes it now has adequate ownership and control over Union
Imaging Associates, JV and TSI Billing Services, Inc. to consolidate them as
part of Modern Medical Modalities Corporation consolidated financial statements.
The following selected proforma financial data assumes Union Imaging Associates,
JV and TSI Billing Services, Inc. consolidated effective January 1, 2002:

                                          Years ended December 31,
                                    -----------------------------------
                                       2003                      2002
                                       ----                      ----

     Gross revenues:                $5,745,443                $7,487,893
                                    ----------                ----------

     Net Loss:                     ($1,776,215)               ($ 492,454)
                                   -----------                ----------

     (Loss) per share,
      basic and fully diluted        ($   0.12)                ($   0.10)
                                    ==========                ==========


                                      F-14
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 4 - PROPERTY AND EQUIPMENT.

Property and equipment are summarized by major classification as follows:

                                                                    December 31,
                                                   Useful lives        2003
                                                   ------------        ----
       Medical Equipment                          5 - 10 years     $6,538,048
       Building                                       15 years        310,860
       Furniture and Fixtures                      3 - 5 years         59,353
       Automobiles                                     5 years         19,865
       Computer equipment and software             3 - 5 years        142,634
       Leasehold improvements                     5 - 10 years        470,922
       Construction in progress                                        32,253
                                                                   ----------

                                                                    7,573,935
       Less: Accumulated Depreciation
           and Amortization                                         5,619,447
                                                                    ---------
                                                                   $1,954,488
                                                                   ==========
       Depreciation expense for the year ended December 31, 2003   $  583,737
                                                                   ==========
NOTE 5 - INVESTMENT IN JOINT VENTURE.

In 1990, the Company acquired a ten percent (10%) interest in Union Imaging
Associates, Joint Venture, which it accounted for using the equity method of
accounting due to the significant influence it has on the joint venture as its
managing venturer. On March 20, 2003, the Company acquired an additional 10%
interest in Union Imaging bringing its ownership to 20%. Effective August 20,
2003, the Company acquired an additional 30% of Union Imaging Associates, JV
bringing it ownership to 50%, See footnote 3 above. At this point the Company
changed it accounting for Union Imaging Associates, JV to the consolidation
method.

The following is a summary of selected financial information from the financial
statements of the joint venture in which the Company has an investment.

                             Total      Long-term         Total        Total
                             Assets        Debt         Liabilities   Capital
                             ------     ---------       -----------   -------

       August 20, 2003     $3,102,654     $483,920    $1,130,804     $1,894,163
       December 31, 2002    3,461,981      699,345     1,482,905      1,979,076
                                                                          10%

                                           Gross                      Allocation
                                         Revenues     Net Income      of Income
                                         --------     ----------      ---------

       August 31, 2003                  $2,574,108      ($ 4,891)        ($489)
       December 31, 2002                 4,259,682       494,010        49,401



                                      F-15
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 5 - INVESTMENT IN JOINT VENTURE, continued.

In accordance with the Company's agreement with Union Imaging Associates, the
Company has received management fees and partner cash distributions as follows:

                                                        January 1, to
                                                   8/20/03         12/31/02
                                                   -------         --------
                                                        (in thousands)
      Revenue Received:
        Management fees                             $361.9           $484.3
        Partner cash distributions                     8.8             64.2
                                                      ----             ----

              Total receipts                        $370.7           $548.5
                                                    ======           ======

The other joint ventures that the Company owns an interest in
aggregate $0 and $0 for the years ended December 31, 2003 and 2002,
respectively.

NOTE 6 - LINE OF CREDIT.

In January 2002, the Company opened a commercial line of credit in the amount of
$100,000 with First Union National Bank. This loan was for one year in duration
and carries an interest rate of Prime plus zero (0%) percent. In February 2004,
this line was terminated and converted to a short term note payable.

In March 2000, the Company opened a commercial line of credit in the amount of
$300,000 with Bridge View Bank in Englewood, New Jersey. Under the terms of the
agreement, certain Directors of the Company are guarantors of the loan. This
loan was for one year in duration and carries an interest rate of Prime plus one
(1%) percent. On March 21, 2001, this agreement was renewed for one year under
the same terms. In April of 2002 the loan was extended for an additional six
months. In June 2002, the Hayut Group, of which Jacov Hayut the Company's
Chairman and CEO, made a $100,000 payment and arranged to convert the balance of
the Company's revolving line of credit with Bridge View Bank in to a long term
note. In November 2002, the Company's line of credit with Bridge View Bank was
fully paid.

NOTE 7 - CONVERTIBLE DEBT

In October 1999, the Company issued an aggregate of $500,000 principal amount of
it's 10% convertible notes to two investors which were due on October 18, 2000.
The notes are convertible at anytime while any portion of it is outstanding into
shares of the Company's common stock at the lower of: (a) 72.5% of the lowest
closing bid price of the Company's common stock for the thirty (30) trading days
immediately preceding the date of conversion, or (b) $2.0625.



                                      F-16
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 7 - CONVERTIBLE DEBT, continued.

In June 2002, Jacov Hayut purchased each of the notes and intends to convert
each Note into shares of the Company's common stock. On July 29, 2002, Mr. Hayut
formally notified the Company that he intends to convert $43,500 principal
amount of the Notes into shares of the Company's common stock. Pursuant to the
terms of the conversion of the Note, Mr. Hayut is required to give the company
seventy-five (75) days prior written notice of his intention to convert the Note
into more than 9.9% of the Company's outstanding shares of common stock.
Therefore, 250,000 shares of common stock were issued immediately and the
remaining 11,750,000 shares were issued approximately 75 days later on October
15, 2002. Based on conversion price of $.003625, $43,500 principal amount of the
Notes converts into 12,000,000 shares of common stock. Mr. Hayut is required to
transfer 2% of such shares received upon conversion to the previous Noteholder.
After the issuance of the 11,750,000 shares of common stock, Mr. Hayut owns
approximately 78% of the Company's issued and outstanding common stock.

In June 2002, the Company issued an aggregate of $220,000 principal amount of
it's 5.00% convertible secured promissory notes to Jacov Hayut & Motti Sharon
which are due on June 2007. The notes are convertible at anytime while any
portion of it is outstanding into shares of the Company's common stock at the
lowest bid price of the Common Stock as reported on the OTC Bulletin Board
during the 30 days prior to the date a duly executed Notice of Conversion is
delivered to the Company. As of December 31, 2003, an aggregate of $55,000
principal amount has been retired by the Company.

In July 2002, the Company issued an aggregate of $65,000 principal amount of
it's 9.25% convertible secured promissory notes to Yossef Azoulai which are due
on June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

In August 2002, the Company issued an aggregate of $100,000 principal amount of
it's 9.25% convertible secured promissory notes to Irit and Yossef Azoulai which
are due on June 2007. The notes are convertible at anytime while any portion of
it is outstanding into shares of the Company's common stock at the lowest bid
price of the Common Stock as reported on the OTC Bulletin Board during the 30
days prior to the date a duly executed Notice of Conversion is delivered to the
Company.



                                      F-17
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 7 - CONVERTIBLE DEBT, continued.

On February 1, 2003, the Company issued an aggregate of $150,000 principal
amount of its 9.25% convertible secured promissory notes to Ronnie Antiebi,
Yossef Azoulai and Shimon Elmaiem which are due on June 2007. The notes are
convertible at anytime while any portion of it is into shares of the Company's
common stock at the lowest bid price of the Common Stock as reported on the OTC
Bulletin Board during the 30 days prior to the date a duly executed Notice of
Conversion is delivered to the Company. Subsequent to the issuance of these
notes they were transferred to Medical Solutions, Inc., a company owned by
Messrs. Antiebi, Azoulai and Elmaiem.

In May 2003, the Company issued an aggregate of $50,000 principal amount of its
9.25% convertible secured promissory notes to Medical Equipment Solutions, Inc.
which are due June 2007. The notes are convertible at anytime while any portion
of it is into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

In June 2003, the Company issued an aggregate of $45,000 principal amount of
it's 5.00% convertible secured promissory notes to Motti Sharon which are due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.

NOTE 8 - EMPLOYEE STOCK OPTIONS.

Stock options granted to date under the Company's 1999 Stock Option Plan expire
ten years after date of grant and are immediately exercisable.

A summary of options granted and related information for the years ended
December 31, 2003 and 2002 is as follows:
                                                             Weighted Average
                                                Options        Exercise Price
                                                -------        --------------

        Outstanding, December 31, 2001          300,000            $2.125

        Granted                                    -                 -

        Exercised                                  -                 -

        Canceled                                   -                 -

        Outstanding, December 31, 2002          300,000            $2.125

        Granted                                    -                 -

        Exercised                                  -                 -

        Canceled                                   -                 -
        Outstanding, December 31, 2003          300,000            $2.125
                                                =======            ======



                                      F-18
<PAGE>



             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 8 - EMPLOYEE STOCK OPTIONS (continued).

The weighted-average remaining contractual life of these options is
approximately 4.5 years. Five individuals hold the outstanding options at
December 31, 2003.

The Company applies APB 25 and related Interpretations in accounting for the
Option Plan. Accordingly, no compensation cost has been recognized for its
Option Plan. Had compensation cost for the Option Plan been determined using the
fair value based method, as defined in SFAS 123, the Company's net loss and loss
per share would have been adjusted to the pro forma amounts indicated below:


                                                   2003             2002
                                                   ----             ----
       Net loss:
         As reported                           ($1,786,600)    ($982,250)
         Pro forma                             ($1,786,600)    ($982,250)
       Basic and diluted loss per share:
         As reported                              ($0.12)         ($0.19)
         Pro forma                                ($0.12)         ($0.19)

The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for 2003 and 2002: expected volatility of 50%; risk free interest
rate of 6.0%; and expected lives of 4.5 and 5.5 years, respectively.

Since there was a substantial market decrease in the Company's common stock
price, the option was deemed to be worthless, accordingly there is no Proforma
compensation cost in 2003 and 2002.

NOTE 9 - LONG-TERM DEBT.

Long-term debt consists of the following:
                                                         December 31, 2003
                                                         -----------------
       Line of credit                                        $   70,899
       Notes payable                                            931,541
       Capitalized lease obligations            (a)           2,024,919

       Less current portion                                  (1,391,072)
                                                             ----------

       Long-term debt, net of current portion                $1,618,287
                                                             ==========




                                      F-19
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 9 - LONG-TERM DEBT (continued).

Line of credit:

In January 2002, the Company opened a commercial line of credit in the amount of
$100,000 with First Union National Bank. This loan was for one year in duration
and carries an interest rate of Prime plus zero (0%) percent. In February 2004,
this line was terminated and converted to a short term note payable.

Notes Payable:

During December 2002, the Company negotiated a 36 month note payable with an
unrelated third party. This note was utilized to pay the Bridge View Bank line
of credit in full, see note 6 and provide working capital. The note carries an
annual interest rate of 12% and is payable in 36 equal installments of
$8,635.72, commencing on January 9, 2003.

Capitalized Lease Obligations:

The Company entered into certain leases for the rental of equipment, which have
been recorded as capital leases for financial statement reporting purposes and
are included in equipment. The assets and liabilities under capital leases are
recorded at the lower of the present value of the minimum lease payments or the
fair market value of the asset. Accumulated depreciation of assets under capital
lease at December 31, 2003 aggregated $3,093,734. The interest rates on these
capital leases vary between 7.0% and 14.0% per annum. Monthly payments for these
leases is approximately $93,000 for interest and principal.

The future principal payments for long-term debt are as follows:

                                              December 31, 2002
                                              -----------------
                     2004                         $1,391,072
                     2005                            972,108
                     2006                            361,466
                     2007                            132,419
                     Beyond                          152,294
                                                  ----------
                                                  $3,009,359
                                                  ==========

NOTE 10 - RESTRUCTURING OF LONG-TERM DEBT

Effective June 30, 2001, the Company refinanced all of its debt with DVI
Financial Services Inc. The refinancing resulted in a monthly reduction of its
debt service of approximately $20,000 per month. The refinanced debt is due in
48 equal installments of $47,200.

Effective December 9, 2002, the Company entered into a 36 month note with Ronnie
Antebi in the amount of $260,000. This note bears an interest rate of 12% per
annum and is payable in 36 equal installments of $8,635.72, commencing January
9, 2003. The proceeds of this note were used to retire the Bridge View Bank line
of credit (see footnote 6), the balance was used for working capital purposes.


                                      F-20
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002


NOTE 11 - STOCKHOLDERS' EQUITY

In February 1994, the Company completed an initial public offering of its
securities pursuant to the Securities Act of 1993 (as amended) from which it
received proceeds of $1,986,181, net of commissions and expenses of the offering
of $601,319. The offering included the sale of 258,750 units including the
underwriters' over allotment of 33,750 units at a selling price of $10.00 per
unit. Each unit consisted of one (1) share of the Company's $0.0002 par value
common stock ("Common Stock") one (1) Class A Redeemable Common Stock Purchase
Warrant ("A Warrant") and one (1) Class B Redeemable Common Stock Purchase
Warrant ("B Warrant). The A & B Warrants were allowed to expire on February 5,
2002.

On April 8, 1999 and July 17, 1999, the Company changed its common stock stated
par value from $.0001 to $.0002 and increased its authorized shares from
2,500,000 to 15,000,000, respectively.

In October 1999, the Company issued 2,500,000 warrants to purchase shares of
common stock at an exercise price of $2.0625, subject to adjustment, in
connection with the issuance of $500,000 in convertible notes. The warrant
holders are entitled to purchase the shares at anytime for a period of three
years, this right expired on October 18, 2002. In connection with the issuance,
the Company issued 60,000 shares of common stock as follows: J. Hayut, 45,000
shares; Libra Finance, S.A., 10,000 shares; Hyett Capital, LTD, 5,000 shares.

In June 2002, Jacov Hayut purchased the Company's $500,000 in convertible notes
and intends to convert the notes into shares of the Company's common stock. On
July 29, 2002, Mr. Hayut formally notified the Company that he intends to
convert $43,500 principal amount of the Notes into shares of the Company's
common stock. Pursuant to the terms of the conversion of the Note, Mr. Hayut is
required to give the company seventy-five (75) days prior written notice of his
intention to convert the Note into more than 9.9% of the Company's outstanding
shares of common stock. Therefore, 250,000 shares of common stock were issued
immediately and the remaining 11,750,000 shares were issued approximately 75
days later on October 15, 2002. Based on conversion price of $.003625, $43,500
principal amount of the Notes converts into 12,000,000 shares of common stock.
Mr. Hayut is required to transfer 2% of such shares received upon conversion to
the previous Noteholder. Upon the issuance of the remaining 11,750,000 shares of
common stock, Mr. Hayut will own approximately 82% of the Company's issued and
outstanding common stock.

At the October 2003, stockholders meeting an amendment of the Restated and
Amended Certificate of Incorporation to increase the authorized number of shares
the Company may issue from 15,000,000 to 100,000,000 shares. The Company
designated 99,000,000 shares authorized as Common Stock, $.0002 par share was
approved. The Company does not currently have any plans, proposals or
arrangements, written or otherwise, to issue any of the additional shares
authorized.



                                      F-21
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 11 - STOCKHOLDERS' EQUITY, continued.

At the October 2003, stockholders meeting, Amendment II to the Articles of
Incorporation was approved allowing 1,000,000 shares of "blank check" preferred
stock is provided for. The Company does not currently have any plans, proposals
or arrangements, written or otherwise, to issue any of the "blank check"
preferred stock to be authorized.

At the October 2003, stockholders meeting the Company's 2003 Stock Option Plan
(the "2003 Option Plan")was approved. The purpose of the 2003 Option Plan is to
grant officers, employees and others who provide significant services to the
Company a favorable opportunity to acquire Common Stock so that they have an
incentive to contribute its success and remain in its employ. Under the 2003
Option Plan, the Company is authorized to issue options for a total of 2,000,000
shares of Common Stock. The Company does not have any current plans to make
grants under the 2003 Option Plan at this time.

NOTE 12 - INCOME TAXES

The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the differences between the financial
statement carrying amounts and tax basis of assets and liabilities using enacted
rates in effect in the years in which the differences are expected to reverse.

The Company has recorded an income tax provision (credit) at December 31, 2003
and 2002 of $ -, and $ -, respectively. The Company has a net operating loss
carry-forward for federal income tax purposes of approximately $9,993,000,
available to offset income taxes through 2016 - 2023 and had a capital loss
carry forward approximating $1,135,000 at December 31, 2002 that expired in
2003.

The components of the Company's provision (benefit) for income taxes, for the
fiscal years ended 2003 and 2002 are as follows:

        Current:
                     Federal                            $-                $-
                     State and local                     -                 -
                 Deferred:
                     Federal                             -                 -
                     State and local                     -                 -
                                                         -                 -

                 Net income (loss)                      $-                $-
                                                        ==                ==





                                      F-22
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 12 - INCOME TAXES, continued.

A reconciliation of income tax computed at the statutory rate to income tax
expense (benefit) is as follows:

                                                      2003             2002
                                                      ----             ----

                  U.S. Federal statutory rate         $-                $-
                  State taxes                          -                 -
                                                     ---               ---

                     Effective tax rate               $-                $-
                                                     ===               ===

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2003 and
2002 are presented below:

                                                        2003           2004
                                                        ----           ----
         Deferred tax assets:
                  Net operating loss carryforward   $3,797,000      $3,109,000

                  Less valuation allowance          (3,797,000)     (3,109,000)
                                                    ----------      ----------

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


Based on the Company's continued historical losses and going concern
uncertainties, the net deferred tax assets are fully off-set by valuation
allowances.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of tax liabilities, projected future taxable income and tax
planning strategies in making this assessment.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
the utilization of net operating loss carryforwards is limited under the change
in stock ownership rules of the Code. As a result of ownership changes, which
occurred in June 2002, the Company's operating loss carryforwards are subject to
these limitations. Future ownership changes could also further limit the
utilization of any net operating loss carryforwards as of that date.



                                      F-23
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 13 - RELATED PARTY TRANSACTIONS.

On March 3, 2000, the Company negotiated a commercial line of credit in the
amount of $300,000 with Bridge View Bank in Englewood, New Jersey. Pursuant to
the terms of the line of credit, the former officers of the Company were
guarantors on the loan. The loan was for a one-year period with an interest rate
on the loan based on Bridge View's Base/Prime commercial lending rate plus one
(1) percent floating for the term of the loan. On March 21, 2001, the line of
credit was extended one year to March 21, 2002 and was subsequently extended for
an additional six months. During December 2002 the Bridge View Bank line balance
of approximately $196,000 was paid in full from the proceeds of a note payable
from an unrelated third party, see notes 6 and 9.

NOTE 14 - COMMITMENTS AND CONTINGENCIES.

(a) Employment Agreements:

In June 1997, the Company entered into a five-year employment agreement with
Roger Findlay, President, which expired in June 2002. Pursuant to the agreement
Mr. Findlay receives an annual salary of $120,000 along with a monthly car
allowance of $350. The agreement does not contain a non-competition agreement.

In June 1997, the Company entered into a five-year employment agreement with Jan
Goldberg, Vice President, which expired in June 2002. Pursuant to the agreement
Mr. Goldberg receives an annual salary of $95,000 along with a monthly car
allowance of $350. The agreement does not contain a non-competition agreement.

In June 1997, the Company entered into a five-year employment agreement with
Gregory Maccia, Vice President, which expired in June 2002. Pursuant to the
agreement Mr. Maccia receives an annual salary of $95,000 along with a monthly
car allowance of $350. The agreement does not contain a non-competition
agreement.

(b) Properties:

The Company leases 1,765 square feet located at 1719 Route 10 East, Suite 117,
Parsippany, New Jersey, which is comprised of the Company's executive offices.
The Company is party to a lease covering the facility that expired on February
28, 2004, and provides for monthly rental payments of $2,722. The Company
believes that its facilities are adequate for its current and future operations.
The Company' directly or through its consolidated subsidiaries is also party to
five additional site leases with a combined monthly rental $21,100, these leases
expire at various times through December of the year 2006 and are renewable for
five year terms at the Company's option.



                                      F-24
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 15 - LITIGATION.

In 1999, KFC Ventures, LLC ("KFC") named the Company, its wholly owned
subsidiary Metairie Medical Equipment Leasing Corp., and four principals of the
Company and/or Metairie Medical Equipment Leasing Corp in a suit alleging KFC
was fraudulently induced to invest in Open MRI and Imaging Center of Metairie,
LLC. KFC alleges claims for fraud, federal and state securities fraud, unfair
trade practices, detrimental reliance, intentional breach of contract, breach of
the covenant of good faith and fair dealing, and breach of fiduciary duty. The
parties have reached a settlement whereby the Company will repay the loan
portion of the original investment to KFC. It was paid in full during the first
quarter of 2002.

The Company and certain of its past officers and directors (Messrs. Findlay,
Maccia, Goldberg and Gedeon) are named as defendants in an adversary proceeding
brought by the unsecured creditors committee in the bankruptcy proceeding
involving Prime Contracting Corp., Case No. 00-34073 (DS), US Bankruptcy Court
(NJ), the Official Committee of Unsecured Creditors on Behalf of the Bankruptcy
Estate of Prime Contracting Corp. v. Hamilton McGregor, et al, Adversary
Proceeding No. 00-3602. The Company is named in five counts of the twenty count
Complaint alleging (i) a conspiracy to defraud plaintiffs and other creditors of
Prime pursuant to the RICO Act of 1970, (ii) breach of fiduciary duty and duty
of loyalty, theft of corporate business opportunity and corporate assets, and
(iii) conversion. The complaint also seeks to extend the bankruptcy proceeding
to the company and other corporate defendants named in the Complaint. The
Company is a participant along with a number of affiliated entities, and past
and present officers and directors, in a combined settlement of this litigation.
The settlement provides for a cash payment to the reorganized debtor, along with
a note to be executed, which requires quarterly payments over two years with
interest at 6%. The Company is jointly and severally liable for both the cash
payment and the note along with a number of the other defendants in the case.
Under this settlement the Company is required to make eight quarterly payments
of $12,500 each plus 6% interest commencing July 2002. The first four quarterly
payments have been made. The full amount of the Company's portion of the
settlement has been accrued in the 2001 financial statements.

In December 1999, the Company was named as a defendant in a lawsuit filed by
Stacey Travaglione, a former employee, in Federal District Court in the Southern
District of New York. The suit alleges violations of the Americans with
Disabilities Act and the New York State Human Rights Law. After some discovery
the parties agreed to the terms of an out of court settlement where Modern
Medical will pay the plaintiff a total of $40,000 in ten equal installments over
a ten-month period. Because the plaintiff filed bankruptcy, the bankruptcy
trustee must be a signatory on the agreement. The final payment on the
settlement was made January 1, 2002.



                                      F-25
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE 15 - LITIGATION, continued.

The Company is also a "Defendant Provider in Interest," but not a principal
Defendant, in a number of actions brought by various insurance companies under
the New Jersey Insurance Fraud Prevention Act alleging the staging of certain
fraudulent accidents against the principal Defendants but seeking the
cancellation of any claims for reimbursement and/or the return of any
reimbursements paid by insurers. No allegations of fraud or violation of law are
made against the Company. In all instances to date, the Company has agreed to
relinquish its various claims and be dismissed from the law suits. The amounts
in any single case have not exceeded $7,000.

NOTE 16 - SUBSEQUENT EVENT

Effective February 1, 2004, the Company entered into a lease & management
agreement with Park Imaging Associates, PA. to operate and manage their
radiology practice at 441 Chestnut Street, Union, NJ. Park Imaging Associates
does approximately $2,500,000 in revenues per year. It is adjacent to our Union
Imaging Associates; the combined radiology practices offer a full range of
imaging services.

Effective April 1, 2004 the Company took over a full service imaging center in
Manalapan, NJ. The center contains a new Open MRI unit, CT unit, Ultrasound,
Mammography and bone density units. The company is currently going through the
facility licensing process with the state of New Jersey.

On April 1, 2004 the Company obtained a facility license and opened its first
P.E.T. Scan Unit on Chestnut Street in Union near its Union Imaging Associates
center and Park Imaging Associates Center. This addition completes our ability
to be a full service diagnostic out-patient imaging center.





                                      F-26