UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D. C. 20549





FORM
      10-KSB





xAnnual
      Report to
      Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year
      ended December
      31, 2007.





oTransition
      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 Incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)





439
      Chestnut Street, Union, NJ 07083





(Address
      of principal executive offices) (Zip code)





Registrant's
      telephone number, including area code: (908) 687-8840





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 to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o.





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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 o.





Indicate
      by check mark whether registrant is a shell company, as defined in Rule 12b-2
      of
      the Exchange Act. Yes o No
x





The
      issuer's net sales for the most recent fiscal year were $7,712,226.





The
      aggregate market value of the voting stock held by non-affiliates based upon
      the
      last sale price on April 9, **** 2008
      was
      approximately $928,549.





As
      of
      April 9, 2008 there were 24,234,051 shares of Common Stock, par value $.0002
      per
      share, outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes oNo x










FORWARD
      LOOKING STATEMENTS





Some
      of
      the statements under “Management’s Discussion and Analysis of Financial
      Condition or Plan of Operations,” and “Description of Business” in this Annual
      Report on Form 10-KSB are forward-looking statements. These statements involve
      known and unknown risks, uncertainties and other factors that may cause our
      actual results, levels of activity, performance or achievements to be materially
      different from any future results, levels of activity, performance, or
      achievements expressed or implied by forward-looking statements.





In
      some
      cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative
      of these terms or other comparable terminology. You should read statements
      that
      contain these words carefully, because they discuss our expectations about
      our
      future operating results or our future financial condition or state other
“forward-looking” information. There may be events in the future that we are not
      able to accurately predict or control. Before you invest in our securities,
      you
      should be aware that the occurrence of any of the events described in this
      Annual Report could substantially harm our business, results of operations
      and
      financial condition, and that upon the occurrence of any of these events, the
      trading price of our securities could decline and you could lose all or part
      of
      your investment. Although we believe that the expectations reflected in the
      forward-looking statements are reasonable, we cannot guarantee future results,
      growth rates, levels of activity, performance or achievements. We are under
      no
      duty to update any of the forward-looking statements after the date of this
      Annual Report to conform these statements to actual results.





PART
      I





Item
      1.
      Business





We
      provide healthcare administrative, clinical, and information services that
      are
      supported by our advanced, web-based, enterprise-wide information system. Our
      network of healthcare services is currently focused on the diagnostic imaging
      services specialty market, and has the capacity to service other multi-specialty
      markets. Our healthcare services are delivered through a network of owned
      diagnostic imaging centers, joint venture operations, and contractual services
      agreements. The healthcare management services include marketing, procurement
      of
      medical equipment, facilities construction and maintenance, recruitment and
      training of technical and support staff, and administrative and information
      services, such as leasing, managed care and contract management, human
      resources, inventory management, and medical records, and billing and
      collections. The healthcare clinical services include magnetic resonance imaging
      (MRI), computerized axial


tomography
      (CT Scan), positron emission tomography (PET), ultrasound, densitometry,
      mammography, nuclear medicine, and general radiography (X-ray).





We
      believe that our network of centers are being optimized by providing a full
      array of management and imaging services to better meet the varied needs of
      our
      customers, providers of care, and other participants in our growing network.
      In
      addition, we are seeking to maximize the productivity and quality of each center
      that we own, as well as of each network of centers we contract with, by
      providing integrated technology solutions through state-of-the art medical
      equipment and industry leading information management systems.


1





As
      of
      December 31, 2007, we own, operate, and manage three diagnostic imaging centers
      located in New Jersey. The Company's ownership interests range from 50% to
      100%.
      We intend to continue to expand through a combination of joint ventures,
      acquisitions, and targeted marketing activities.





On
      a
      consolidated basis, we currently recognize the majority of our revenues from
      a
      range of diagnostic imaging services that allow us to leverage the variety
      of
      imaging systems in our network of centers, in order to potentially increase
      operating income once fixed costs are more rapidly covered with higher volumes
      of procedures performed. In addition, we are creating the infrastructure to
      expand our revenues through management services contracts with an increasing
      emphasis on providing web-based, comprehensive information services as the
      healthcare outpatient services and related markets to continue to grow and
      operate within larger networks.





Our
      diagnostic imaging centers are dependent on referrals from physicians and other
      healthcare professionals, and we intend to conduct direct marketing activities
      to consumers in order to supplement our valued referrals. In addition, the
      Company accepts referred patients that are insured through managed care
      contracts that help keep a more consistent volume of business flowing while
      requiring more competitive rates for procedures performed. We expect to continue
      to better integrate the optimal mix of managed care and traditional insurance
      covered services and reimbursements with consumer driven on-demand services
      and
      payments while maximizing the


ratio
      of
      effective diagnostic imaging utilization over capacity in each center, and
      maintaining high quality patient outcomes and overall service.





We
      have
      also positioned ourselves to expand our business and participate more in
      outsourced management services and the expanding, more profitable information
      and administrative services markets, and intend to seek out more networks of
      clinics and other outpatient facilities through joint ventures and collaborative
      contractual arrangements with hospitals, physician managed ambulatory centers,
      payers, and other key participants in the industry. In order to support our
      business expansion, we acquired advanced software assets and added


customizations
      to produce an integrated information system that will allow us to provide better
      management and related services and improve overall profitability.





On
      February 28, 2007 Modern Medical Modalities Corporation entered into an Asset
      Purchase Agreement (the "Agreement") with MTI Partners II, L.P. ("MTI-II")
      to
      acquire MTI-II's Medical Software Assets (the "Assets") in exchange for 1
      million shares of the Company's common stock. The transaction closed on March
      23, 2007. The Assets consist of medical computer software that organizes,
      manages, and maintains patient scheduling, registration, medical records,
      billing, and includes other customized components. The shares of common stock
      were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.
      Paul Harrison, a member of the


Company's
      Board of Directors, is the President of INEX Group, Inc., which serves as the
      General Partner of MTI-II. Mr. Harrison will be entitled to receive 562,500
      shares of the Company's common stock issuable to MTI-II pursuant to this
      Agreement.





On
      September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin
      Software Asset (the "Asset") in exchange for 500,000 shares of our common stock
      ("Common Stock"), warrants ("Warrants") for 900,000 shares of our common stock
      with an exercise price of $0.70 per share, and $250,000 to be paid within 12
      months from the date of the Agreement. The transaction closed in October,
      2007. **** The
      Asset
      consists of healthcare payer admin computer software that helps organize,
      manage, and maintain health plans, **** membership,
      eligibility, claims
      administration, and includes other customized components. The shares of Common
      Stock were issued **** pursuant
      to Section 4(2) of the Securities Act of 1933, as amended. Paul Harrison, a
      member of the Board of Directors of MODM, is the President of INEX Group, Inc.,
      which serves as the General Partner of MTI-II. Mr. Harrison will be entitled
      to
      receive 281,250 shares of our Common Stock, and a Warrant for 506,250 of our
      Common Stock with an exercise price of $0.70 per share issuable to MTI-II
      pursuant to this Agreement.


2





On
      February 28, 2008, we filed a Certificate of Incorporation for HealthIXS
      Corporation, a newly formed subsidiary of Modern Medical Corporation. HealthIXS
      was formed to focus on using our health information system to provide
      information and administrative services to healthcare organizations. Our health
      information system is based on the integration of the software assets acquired
      on February 28, 2007 and September 14, 2007 and value-added customizations
      that
      has culminated into a health common system platform with a comprehensive array
      of software applications that can be used to provide web-based information
      and
      administrative services.





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. Modern Medical serves
      as the managing joint venture pursuant to the Union joint venture agreement
      and
      provides a comprehensive range of management services for the business
      including:





o
            Hiring
                of personnel;


o
            Leasing
                equipment;


o
            Budgeting;


o
            Contracting;


o
            Billing;


o
            Paying
                debts;


o
            Making
                lease payments;


o
            Information
                services; and


o
            Making
                distributions to the joint
                venturers.





Initially
      Modern Medical owned 10% and Union Imaging Associates Inc. owned 90% of the
      Joint Venture. Starting in 2003 Modern Medical began acquiring shares of Union
      Imaging Associates, Inc. and as a result increased its ownership to 50% of
      the
      Union Joint Venture at the end of 2003 and acquired additional shares in Union
      Imaging Associates, Inc., further increasing its interest in Union Imaging
      Associates, Joint Venture during 2004, from 50% to 80%. Modern Medical intends
      to acquire the balance of Union Imaging Associates, Inc
      and
      merge Union Imaging Associates, Inc. and Union Imaging Associates, Joint
      Venture.





On
      September 1, 2006, we purchased Dr. Wolkstein's share of his ownership interest
      in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 350,000 shares
      of the Company's common stock with a valuation of $154,000 at the time of
      purchase, and a note for $27,000 to be paid in 18 payments of $1500.00 per
      month. The 350,000 shares of common stock were issued on October 20, 2006.
      As a
      condition of the purchase, the Company agreed to re-purchase the 350,000 shares
      from Dr. Wolkstein for $75,000 if for any consecutive 20 day period commencing
      September 1, 2008 through the last day of February 2009, the stock price was
      below $1.00 per share. The purchase of Dr. Wolkstein's ownership interest brings
      the Company's total ownership in UIA, Inc. to 89.99%.





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. It consisted of one
      Open MRI and primarily served the personal injury market. It operated under
      the
      names of two wholly owned subsidiaries, Open MRI & Imaging of Metairie, LLC
      and Independence Imaging Center, LLC. During 2006 we decided to discontinue
      our
      business operations in the Greater New Orleans area and to abandon our facility
      in Metairie, Louisiana due to the significant damage caused by hurricane
      Katrina, the continued delays related to reaching a settlement with our
      insurance carrier, and the negative economic impact that has led to a loss
      from
      discontinuance of business of approximately ($320,000). We have provided for
      the
      loss and gain from the insurance recovery in our financial statements in
      accordance with SAFS 5.


3





Union
      Imaging Center, LLC





In
      February 2004, Modern Medical established Union Imaging Center LLC, a wholly
      owned subsidiary, to acquire and manage a multi-modality imaging center, in
      Union, NJ. There was a $225,000 note with $25,000 down and a monthly payment
      of
      $6,666.67 for 30 months beginning 90 days after closing. This obligation was
      fully paid in mid 2007. Union Imaging Center, LLC, does approximately $2,700,000
      in revenues per year. It is adjacent to our Union Imaging Associates; the
      combined radiology practices offer a full range of imaging
      services.





PET
      Scan
      at Union Imaging, LLC





PET
      Scan
      at Union Imaging, LLC is an equal partnership between Union Imaging Associates
      and Medical Equipment Solutions. The Partnership was formed in 2003 to acquire
      a
      Positive Emission Tomography Unit or PET Scanner. The PET Scan center was
      licensed and opened in March 2004. Modern Medical is the managing
      partner.





Modern
      Medical Imaging at Atrium LLC





Modern
      Medical established Modern Medical Imaging at Atrium LLC, a wholly owned
      subsidiary, to own and operate the Manalapan, NJ location. Effective April
      1,
      2004 the Company took over a full service imaging center in Manalapan, NJ.
      The
      center contained a new Open MRI unit, Ultrasound, X-ray, Mammography and bone
      density units. The company completed the facility licensing process with the
      state of New Jersey in December 2004.





In
      July,
      2006, we entered into a Letter of Intent to divest its ownership interests
      in
      Modern Medical Imaging at Atrium, L.L.C., a Limited Liability Company ("the
      L.L.C."). The transaction was structured in the form of a sale of the L.L.C.
      whereby 100% of the membership interest is acquired, in exchange for $250,000
      in
      cash with specific provisions included for the timing of payments with the
      majority of payment due at closing. In addition, assignments will be included
      for the Company to assume certain accounts receivables and accounts payables
      as
      of the closing date of the transaction. On September 1, 2006, we entered into
      a
      definitive agreement with a privately-held organization and sold the
      organization our ownership interests in Modern Medical Imaging at Atrium, L.L.C.
      for $250,000 under essentially the same terms and conditions as described above
      and outlined in the Letter of Intent. Even though the new owners of the Imaging
      Center at Atrium assumed the liabilities of the business, the Company is
      contingently liable for a long term facility lease, and medical equipment
      contracts. The purchaser of Modern Medical Imaging at Atrium, LLC, subsequently
      acquired the condominium property housing the imaging center terminating the
      long term facility lease that we were contingently liable for. The estimated
      obligation remaining on the medical equipment lease that we remain contingently
      liable for is approximately $173,000.


4





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 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-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 provides full managerial responsibility and control over facility
      operations at our medical technology centers, and 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. In addition, a physician and a physician group provide
      professional services and interpret MRI or CT Scans. 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 Medicals sites located throughout New Jersey, and has positioned itself
      to expand the information based side of the business by providing more
      information services with the support of its web-based, enterprise-wide
      information system.





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.


5





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.





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.





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 acquire or contract with imaging centers utilizing a variety of
      ownership vehicles and collaborative agreements. Presently, Modern Medical
      operates its sites under joint venture agreements. Below is a description of
      Modern Medicals 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 hospital
      campus, is affiliated with that hospital and provides both inpatient and
      outpatient services.





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 other management
      services.





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 hospital that
      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 physicians to determine if they are
      experiencing problems with existing facilities and if they would support a
      new
      facility. Managed care groups' anthems 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.


6





Our
      growth strategy and marketing plan





We
      expect
      to grow through a combination of acquisitions and direct marketing of our
      services to physicians and hospitals through various methods. The acquisitions
      targeted are expected to include outpatient clinics such as diagnostic imaging
      centers, or management services companies that already have contracts with
      the
      same types of clinics and medical centers. The clinics and medical centers
      may
      include complimentary multi-specialty healthcare centers that enhance the
      network of services being provided by us. The direct marketing methods 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 Medicals management also attends many of the large
      radiology and other selected healthcare shows throughout the
      country.





Modern
      Medical is pursuing a strategy of building a network of more participants using
      its enterprise-wide information system, which will include additional hospital
      centers and physician managed ambulatory centers. In addition to acquiring
      new
      business, we expect to continue to 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 and improved information management
      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 Medicals 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 customer.
      These criteria include: (a) the extent of the hospitals' present diagnostic
      imaging services; (b) its competitive environment; (c) the size and type of
      facility; (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
      Medicals 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, but not limited to, General Electric, Siemens,
      Philips, Konica 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 peripheral
      equipment acquired. 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 the majority of its medical equipment.





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


7





Governmental
      reimbursement and regulations of our business.





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.


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: 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;





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 All physicians who refer in the sites
      in
      New Jersey and also have 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 governmental 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. 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.


8





Modern
      Medical believes that few of its competitors provide the same comprehensive
      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 (Siemens and General
      Electric). From time-to-time, 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 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, 2007 Modern Medical employed 46 persons on a full-time basis and
      20
      persons on a part time basis. The following table reflects the equivalent full
      and part-time employees per facility:





Total
            
            Full
                Time
            
            Part
                TimeModern
                Medical
            
            
            3
            
            
            3
            
            
            0Metairie,
                LA
            
            
            1
            
            
            1
            
            
            0Union
                Imaging Assoc., Union, NJ
            
            
            28
            
            
            18
            
            
            10Union
                Imaging Center, Union, NJ
            
            
            33
            
            
            23
            
            
            10PET
                Scan at Union Imaging
            
            
            1
            
            
            1
            
            
            0Total
            
            
            66
            
            
            46
            
            
            23





Equipment
      lease agreements:




Union
      Imaging Associates and Modern Medical Modalities Corporation entered into a
      line
      of credit with GE Healthcare Financial Services in the amount of $2,500,000.
      This line of credit has been fully utilized in acquiring new medical equipment.
      Under this line of credit Union Imaging has a restrictive covenant relating
      to a
      master lease agreement with GE Healthcare Financial Services. This restrictive
      covenant requires Union Imaging Associates to be current in its lease payments
      before making any payments or distributions to Modern Medical Modalities
      Corporation. See schedule detailing use of this line and payment schedule
      below.





In
      February 2004, PET scan at Union Imaging entered into a financing lease to
      purchase a Philips ADAC PET Scanner with a loan amount of $530,000. The term
      is
      for 60 months at $11,449.40 per month.





Union
      Imaging Associates, the sub lessee, entered in a lease with Spur Imaging for
      a
      Siemens 1.5T Symphony MRI, located in Union, NJ. Spur Imaging is the lessee
      of
      the equipment from Siemens Financial Services. The amount financed is $1,050,000
      over 63 months with an option to purchase the MRI for $100.





In
      July
      2006, Modern Medical Modalities entered into an operating lease with IBM Credit
      for various hardware and software for the implementation of a Radiology
      Information System at our Union, NJ site and a common system platform project
      for the company. The term is for 48 months at $9,300 per
      month.


9





Payments
      schedule listed in table below:


Equipment
                  
                  Operating/
                    Financial
                  
                  Start
                  
                  End
                  
                  No.
                      of
                    Pymts
                  
                  
                  Recurring
                      Payments
                  
                  
                  Leased/Loan
                      AmountGE-CT
                  
                  Operating
                  
                  12/31/03
                  
                  02/28/04
                  
                  03
                  
                  $
                  0.0003/31/04
                  
                  05/31/04
                  
                  03
                  
                  $
                  5,879.6906/30/04
                  
                  06/30/06
                  
                  24
                  
                  $
                  19,782.5207/31/06
                  
                  09/30/06
                  
                  03
                  
                  $
                  0.0010/31/06
                  
                  09/30/08
                  
                  24
                  
                  $
                  23,062.6110/31/08
                  
                  09/30/09
                  
                  12
                  
                  $
                  19,782.52
                  
                  $
                  1,155,000.00GE-Dell
                      Hardware
                  
                  Financing
                  
                  01/01/04
                  
                  03/01/09
                  
                  63
                  
                  $
                  1,184.38
                  
                  $
                  61,199.53GE-Medrad
                      Injector
                  
                  Operating
                  
                  05/11/04
                  
                  04/11/09
                  
                  60
                  
                  $
                  1,987.12
                  
                  $
                  99,167.81GE-Ultrasound
                      &
                  
                  Operating
                  
                  04/17/04
                  
                  07/17/04
                  
                  03
                  
                  $
                  0.00Bone
                      Density
                  
                  
                  
                  08/17/04
                  
                  07/17/09
                  
                  60
                  
                  $
                  6,041.08
                  
                  $
                  295,500.00GE-Digital
                      Mammo
                  
                  Operating
                  
                  12/17/04
                  
                  02/17/05
                  
                  03
                  
                  $
                  0.0003/17/05
                  
                  06/17/06
                  
                  16
                  
                  $
                  8,320.4607/17/06
                  
                  09/17/06
                  
                  03
                  
                  $
                  0.0010/17/06
                  
                  07/17/08
                  
                  22
                  
                  $
                  9,539.4408/17/08
                  
                  11/17/09
                  
                  16
                  
                  $
                  8,320.46
                  
                  $
                  398,500.00GE-iCAD
                      SL GE V5.1
                  
                  Financing
                  
                  12/05/05
                  
                  11/05/09
                  
                  48
                  
                  $
                  1,067.93
                  
                  $
                  42,503.90Toyota
                  
                  Financing
                  
                  04/11/03
                  
                  03/11/08
                  
                  60
                  
                  $
                  343.04
                  
                  $
                  18,000.00CIT
                      Tech - Mas90
                  
                  Financing
                  
                  10/30/04
                  
                  09/30/09
                  
                  60
                  
                  $
                  430.36
                  
                  $
                  20,000.00Dell
                  
                  Financing
                  
                  06/01/06
                  
                  05/01/09
                  
                  36
                  
                  $
                  334.96
                  
                  $
                  9,191.23GE
                      - Toshiba
                  
                  Financing
                  
                  02/18/03
                  
                  03/18/08
                  
                  60
                  
                  $
                  417.63
                  
                  $
                  18,561.50Dell
                  
                  Financing
                  
                  03/01/04
                  
                  02/01/08
                  
                  48
                  
                  $
                  188.10
                  
                  $
                  5,721.92Marcap-PET
                      Scan
                  
                  Financing
                  
                  02/07/04
                  
                  01/15/09
                  
                  60
                  
                  $
                  11,449.40
                  
                  $
                  530,000.00Siemens/Spur
                      MRI
                  
                  Financing
                  
                  04/01/06
                  
                  06/01/07
                  
                  63
                  
                  $
                  22,684.0007/01/07
                  
                  09/01/08
                  
                  15
                  
                  $
                  35,634.0010/01/08
                  
                  0801/11
                  
                  36
                  
                  $
                  22,684.00
                  
                  $
                  1,050,000.00GE-Konica
                      CR Sys
                  
                  
                  
                  02/01/06
                  
                  02/28/06
                  
                  01
                  
                  $
                  964.72Financing
                  
                  03/01/06
                  
                  12/31/10
                  
                  58
                  
                  $
                  913.0001/01/11
                  
                  01/01/11
                  
                  01
                  
                  $
                  913.01
                  
                  $
                  42,399.91IBM-Hard/Software
                  
                  Operating
                  
                  07/01/06
                  
                  10/31/2010
                  
                  48
                  
                  $
                  9,300.00
                  
                  $
                  320,414.70DocuTeam-copiers
                  
                  Operating
                  
                  01/03/07
                  
                  12/31/2012
                  
                  60
                  
                  $
                  1,056.00
                  
                  $
                  55,000.00KEY
                      Eq. – Chili PACS
                  
                  Financing
                  
                  09/25/07
                  
                  10/25/2012
                  
                  60
                  
                  $
                  1,518.06
                  
                  $
                  59,180.36AEL –
                      CHILI Software
                  
                  Financing
                  
                  12/01/07
                  
                  11/01/12
                  
                  60
                  
                  $
                  1,810.56
                  
                  $
                  70,364.00MES –
                      Automobile
                  
                  Financing
                  
                  07/10/07
                  
                  6/10/2010
                  
                  36
                  
                  $
                  1,230.19
                  
                  $
                  48,000.00




10


LONG
      TERM
      DEBT TABLE.


Balance
                  at
                December
                  31, 2007
              
              Debt
                  holder
              
              Commencement
                  date
              
              Final
                  payment dateNotes
                payable:$
              126,716.69
              
              Howard
                  Kessler, MD
              
              March
                  18, 2005
              
              May
                  1, 2009$
              160,899.08
              
              Two
                  founding shareholders
              
              Various
              
              Open$
              5,741.79
              
              Marvin
                  Teitelbaum
              
              January
                  1, 2006
              
              January
                  1, 2008,$
              215,935.66
              
              Union
                  Imaging Associates,Inc.
              
              Various
                  (1)
              
              Various
                  (1)$
              75,000.00
              
              Jacov
                  Hayut
              
              February
                  11, 2006
              
              February
                  11, 2010$
              59,863.81
              
              Irit
                  & Yosef Azoulai
              
              November
                  10, 2006
              
              May
                  9, 2008$
              116,438.36
              
              Irit
                  & Yosef Azoulai
              
              March
                  6, 2007
              
              September
                  5, 2008$
              29,453.67
              
              Complete
                  Flooring
              
              November
                  1, 2006
              
              October
                  1, 2008$
              118,926.84
              
              Complete
                  Flooring
              
              December
                  6, 2006
              
              December
                  5, 2010$
              250,000.00
              
              MTI
                  Partners II, L.P.
              
              September
                  14, 2007
              
              September
                  13, 2008Capitalized
                lease obligations:$
              17,072.82
              
              GE
                  Financial Services
              
              April
                  1, 2004
              
              March
                  1, 2009$
              22,374.43
              
              GE
                  Financial Services
              
              December
                  5, 2005
              
              November
                  5, 2009$
              28,487.08
              
              GE
                  Financial Services
              
              February
                  1, 2006
              
              January
                  01, 2011$
              150,045.87
              
              MARCAP
                  Financial Services
              
              November
                  7, 2003
              
              January
                  15, 2009$
              7,928.02
              
              CIT
                  Technology
              
              October
                  30, 2004
              
              September
                  30, 2009$
              954,772.94
              
              Spur
                  Imaging (Siemens)
              
              April
                  1, 2006
              
              October
                  1, 2011$
              1,227.22
              
              GE
                  Financial Services
              
              February
                  18, 2004
              
              March
                  18, 2008$
              1,019.60
              
              Toyota
                  Financial Services
              
              April
                  11, 2003
              
              March
                  11, 2008$
              364.83
              
              Dell
                  Financial Services
              
              March
                  1, 2004
              
              February
                  1, 2008$
              4,972.87
              
              Dell
                  Financial Services
              
              June
                  1, 2006
              
              May
                  1, 2009$
              58,573.34
              
              Key
                  Equip. Leasing
              
              September
                  25, 2007
              
              October
                  25, 2012$
              70,364.00
              
              AEL
                  Financial, LLC
              
              December
                  1, 2007
              
              November
                  1, 2012$
              32,429.00
              
              Medical
                  Equipment Solutions
              
              July
                  10, 2007
              
              June
                  10, 2010$
              2,508,607.92
              
              Total
                  long-term debt$
              1,335,275.51
              
              Less
                  current portion$
              1,173,332.41
              
              Long-term
                  debt net of current portion




(1)
              =
                  Represents a series of notes used to acquire an additional 80%
                  of theownership
                  of Union Imaging Associates, JV (UIA, JV), commencing March 2003through
                  September 2006. The purchase of additional ownership interest in
                  UIA, JV
                  brings the Company'stotal
                  ownership in its related company UIA, Inc. to 89.9%. Average monthly
                  payments are $11,223 (2008), $4,855 (2009), $2,636 (2010) and $879
                  (2011).





Available
      Information





We
      file
      annual, quarterly and current reports, proxy statements and other information
      with the Securities and Exchange Commission (the “SEC”). You may read and copy
      any document we file with the SEC at the SEC's public reference room at 100
      F
      Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
      for
      further information on the public reference rooms. Our SEC filings are also
      available to the public from the SEC's Website at www.sec.gov.


11





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 was $2,911.00. During 2006 we decided to
      discontinue our business operations in the Greater New Orleans area and to
      abandon our facility in Metairie, Louisiana due to the significant damage caused
      by hurricane Katrina and the negative economic impact that has led to a loss
      from discontinuance of business of approximately ($320,000). We have provided
      for the loss and gain from the insurance recovery in our financial statements
      in
      accordance with SAFS 5.





In
      April
      2005 Modern Medical entered into a five (5) year lease agreement for
      approximately 7,150 square feet on 441-445 Chestnut St. in Union, NJ for
      approximately $15,000 per month. This lease is renewable for an additional
      5-year term at no more than $17,875 per month, which term expires on April
      1,
      2015. On March 19, 2008, Modern Medical exercised its lease option through
      March
      31, 2015 at $17,875 per month and obtained an additional 5 year option through
      March 31, 2020 at $19,067 per month.





In
      April
      2005 Modern Medical entered into a five (5) year lease agreement for
      approximately 2,250 square feet on 439 Chestnut St. in Union, NJ for
      approximately $3,844 per month. This lease is renewable for an additional 5-year
      term at no more than $4,500 per month, which term expires on April 1, 2015.
      On
      March 19, 2008, Modern Medical exercised its lease option through March 31,
      2015
      at $4,500 per month and obtained an additional 5 year option through March
      31,
      2020 at $4,875 per month.





In
      February 2001 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 for approximately $1,760 per month. Effective September 1,
      2004, Union Imaging Associates, JV and Modern Medical took an additional 600
      square feet for an additional $1,000 per month and extending the lease to
      February 1, 2007 and obtained an option to renew the lease for an additional
      3
      years upon 180 days prior written notice of the Company's intent to exercise
      its
      option. The Company exercised its option to extend the lease for 3 years,
      extending the lease through February 1, 2010.





On
      April
      1, 2004 Modern Medical entered into a 10-year lease with an option for an
      additional 5 years, in Manalapan NJ. The lease is for approximately 5,620 square
      feet, the monthly rental is $11,240. The previous tenant had abandoned the
      space
      which was being used as an imaging center. We reactivated the center and
      completed the state of New Jersey licensing procedure. Subsequently we sold
      the
      facility to a third party who also acquired the condominium space covered by
      this lease, terminating our contingent liability under the lease.





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





Item
      3.
      Legal Proceedings





On
      October 12, 2006, we were served with a lawsuit by MARCAP seeking $350,000
      for
      amounts MARCAP claims are owed by the Company under an Agreement for the PET
      medical equipment. The Company has cured **** the
      default and settled the complaint brought by MARCAP.





Other
      than the matters described above, we are not involved in any material legal
      proceedings. We also are not aware of any pending material legal
      proceedings.





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





There
      were no matters submitted to a vote of security holders during the forth quarter
      of the fiscal year covered by this report.


12




PART
      II





Item
      5.
      Market for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities





Our
      common stock is traded on the over-the-counter market on the OTC Bulletin Board
      under the symbol MODM. The following table sets forth the high and low bid
      information for our common stock for each quarter within the last two fiscal
      years **.** Such
      prices represent quotations between dealers, without dealer markup, markdown
      or
      commissions, and may not represent actual transactions.





Common
      Stock:





Fiscal
                2007
            
            High
            
            LowFirst
                Qtr
            
            $
            0.96
            
            $
            0.61Second
                Qtr
            
            
            0.81
            
            
            0.53Third
                Qtr
            
            
            0.65
            
            
            0.30Fourth
                Qtr
            
            
            0.45
            
            
            0.40Fiscal
                2006First
                Qtr
            
            $
            0.14
            
            $
            0.06Second
                Qtr
            
            
            0.35
            
            
            0.09Third
                Qtr
            
            
            0.50
            
            
            0.08Fourth
                Qtr
            
            
            0.95
            
            
            0.36





On
      April
      9, 2008, there were approximately 84 holders of record of Modern Medical's
      24,234,051 outstanding shares of Common Stock.





On
      April
      9, 2008, the last sale price of the Common Stock as reported on the OTC Bulletin
      Board was $0.11.


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 Medicals 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.


13




Equity
      Compensation Plan Information





The
      following table sets forth certain information, as of December 31, 2007,
      concerning shares of common stock authorized for issuance under the Company’s
      existing equity compensation plans.




Plan
                  Category
              
              Number of Securities to be
                issued upon exercise of
                outstanding options
              
              Weighted-average
                exercise price of
                outstanding options,
                warrants and rights
                plans (excluding
                securities reflected
                in column (a))
              
              Number of Securities
                remaining available for
                future issuance under
                equity compensationEquity
                  compensation plans approved by security holders
              
              
              1,558,000
              
              $
              0.48
              
              
              942,000Equity
                  compensation plans not approved by security holders
              
              
              6,655,198
              
              $
              0.68
              
              
              -0-




2003
      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.
      The
      shares issuable pursuant to this plan were registered on Form S-8, Registration
      No. 333-143-653.





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 would 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 maybe 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.


14





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
      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.





1999
      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. 500,000 shares may be issued under this plan. 300,000 options
      were previously issued under this plan to former officers and directors of
      the
      Company, which by their terms expired and such 300,000 options are available
      for
      reissuance under the 1999 Stock Option 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 would expire not more than ten years from the date of
      grant.





The
      plan
      is effective for a period of ten years, expiring in 2009. Options maybe 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
      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.


15





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.





Recent
      Sales of Unregistered Securities





During
      the year ended December 31, 2007, we did not issue any securities that were
      not
      registered under the Securities Act of 1933, as amended (the “Securities Act”)
      except as disclosed in previous SEC filings.




Purchases
      of Equity Securities by the Issuer and Affiliated Purchasers





There
      were no repurchases of equity securities by the issuer or affiliated purchasers
      during the fourth quarter of the year ended December 31, 2007.





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





Forward-looking
      Statements





Some
      of
      the statements under “Management’s Discussion and Analysis of Financial
      Condition or Plan of Operations,” and “Description of Business” in this Annual
      Report on Form 10-KSB are forward-looking statements. These statements involve
      known and unknown risks, uncertainties and other factors that may cause our
      actual results, levels of activity, performance or achievements to be materially
      different from any future results, levels of activity, performance, or
      achievements expressed or implied by forward-looking statements.





In
      some
      cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative
      of these terms or other comparable terminology. You should read statements
      that
      contain these words carefully, because they discuss our expectations about
      our
      future operating results or our future financial condition or state other
“forward-looking” information. There may be events in the future that we are not
      able to accurately predict or control. Before you invest in our securities,
      you
      should be aware that the occurrence of any of the events described in this
      Annual Report could substantially harm our business, results of operations
      and
      financial condition, and that upon the occurrence of any of these events, the
      trading price of our securities could decline and you could lose all or part
      of
      your investment. Although we believe that the expectations reflected in the
      forward-looking statements are reasonable, we cannot guarantee future results,
      growth rates, levels of activity, performance or achievements. We are under
      no
      duty to update any of the forward-looking statements after the date of this
      Annual Report to conform these statements to actual results.





Management's
      Discussion and Analysis.





We
      provide healthcare administrative, clinical, and information services that
      are
      supported by our advanced, web-based, enterprise-wide information system. Our
      network of healthcare services is currently focused on the diagnostic imaging
      services specialty market, and has the capacity to service other multi-specialty
      markets. Our healthcare services are delivered through a network of owned
      diagnostic imaging centers, joint venture operations, and contractual services
      agreements. The healthcare management services include marketing, procurement
      of
      medical equipment, facilities construction and maintenance, recruitment and
      training of technical and support staff, and administrative and information
      services, such as leasing, managed care and contract management, human
      resources, inventory management, and medical records, and billing and
      collections. The healthcare clinical services include magnetic resonance imaging
      (MRI), computerized axial tomography (CT Scan), positron emission tomography
      (PET), ultrasound, densitometry, mammography, nuclear medicine, and general
      radiography (X-ray).


16





We
      believe that our network of centers are being optimized by providing a full
      array of management and imaging services to better meet the varied needs of
      our
      customers, providers of care, and other participants in our growing network.
      In
      addition, we are seeking to maximize the productivity and quality of each center
      that we own, as well as of each network of centers we contract with, by
      providing integrated technology solutions through state-of-the art medical
      equipment and industry leading information management systems.





As
      of
      December 31, 2007, we own, operate, and manage three diagnostic imaging centers
      located in New Jersey. The Company's ownership interests range from 50% to
      100%.
      We intend to continue to expand through a combination of joint ventures,
      acquisitions, and targeted marketing activities.





On
      a
      consolidated basis, we currently recognize the majority of our revenues from
      a
      range of diagnostic imaging services that allow us to leverage the variety
      of
      imaging systems in our network of centers, in order to potentially increase
      operating income once fixed costs are more rapidly covered with higher volumes
      of procedures performed. In addition, we are creating the infrastructure to
      expand our revenues through management services contracts with an increasing
      emphasis on providing web-based, comprehensive information services as the
      healthcare outpatient services and related markets to continue to grow and
      operate within larger networks.





Our
      diagnostic imaging centers are dependent on referrals from physicians and other
      healthcare professionals, and we intend to conduct direct marketing activities
      to consumers in order to supplement our valued referrals. In addition, the
      Company accepts referred patients that are insured through managed care
      contracts that help keep a more consistent volume of business flowing while
      requiring more competitive rates for procedures performed. We expect to continue
      to better integrate the optimal mix of managed care and traditional insurance
      covered services and reimbursements with consumer driven on-demand services
      and
      payments while maximizing the ratio of effective diagnostic imaging utilization
      over capacity in each center, and maintaining high quality patient outcomes
      and
      overall service.





Results
      of Operations:





For
      the
      year ended December 31, 2007 compared to the year ended December 31,
      2006:





Net
      Revenues from Services:





Net
      revenue from services has increased approximately $858,200 to approximately
      $7,712,200, for the year ended December 31, 2007 from approximately $6,854,000
      for the same period in 2006. The increase resulted from additional procedures
      being performed at both the Union Imaging Associates and Union Imaging Center
      sites increasing net revenues by approximately $570,500 and $271,200,
      respectively. These increases resulted from increased marketing and decreased
      competition resulting from the closing of Union Memorial Hospital approximately
      1 mile from the two sites. The balance of the increase came from collections
      of
      approximately $16,500 in receivables from our site in Metairie, Louisiana,
      as a
      result of damages sustained from hurricane Katrina.





Cost
      of
      services provided:





For
      the
      year ended December 31, 2007, cost of services provided totaled approximately
      $5,796,900 as compared to approximately $5,493,900 for the same period in 2006,
      resulting in an increase of approximately $303,000. These costs are affected
      by
      changes resulting from an increase in net revenues and increases in equipment
      service cost, medical supplies, payroll, and facility costs.





Selling,
      General and Administrative (SG&A) Expenses:





For
      the
      year ended December 31, 2007, selling, general and administrative expenses
      totaled approximately $4,498,900 as compared to $981,700 for the same period
      in
      2006, resulting in an increase of approximately $3,517,200. This increase
      related to an increase in stock-based expenses of approximately $2,035,000,
      and
      approximately $1,482,200, in adjustments made to reserves that resulted from
      expenses related to the sale of the Atrium
      business and the closing of the Metairie site as a result of the damage
      sustained from hurricane Katrina, and an increase of other administrative
      expenses incurred while increasing net revenues.


17





Liquidity
      and Capital Resources:





Modern
      Medical has a working capital deficiency of $2,098,952 at December 31, 2007
      as
      compared to a working capital deficiency of $1,118,918 at December 31, 2006,
      resulting in an additional working capital deficiency of $980,034, due primarily
      to an increase in short term debt of approximately $406,900, a decrease in
      net
      accounts receivable of approximately $367,200 and a decrease in prepaid assets
      of approximately $120,800 related to deferred stock-based expenses and a
      decrease in cash and other current assets of approximately $85,100.





Debt:





On
      March
      18, 2005 Modern Medical entered into an unsecured loan agreement with Dr. Howard
      Kessler MD PA, in the amount of $300,000 payable in 12 monthly payments of
      $8,333 with a lump sum due on the 13th month in the amount of $221,826.71 and
      bears an interest rate of 8% per annum. In March 2006, this note was extended
      33
      months under the same terms as the first 12 months. This loan funded the
      settlement of the DVI/US Bank loan settlement.





On
      April
      15, 2005 Modern Medical entered into an unsecured loan agreement with Mr. Ronnie
      Antebi in the amount of $175,000 which bears interest at a rate of 15% per
      annum. The note payments commenced on May 15, 2005. This loan was utilized
      to
      fund the settlement of the CitiCorp lease. On October 27, 2006, the Company
      paid
      Ronnie Antebi $64,545.48 as final payment on his original $175,000
      note.





Effective
      October 1, 2005 Union Imaging Associates entered into a 63 month financing
      lease
      with Siemens Medical Systems/Spur Imaging to acquire a Siemens 1.5T Symphony
      MRI
      unit. The amount financed is $1,050,000, payable at $22,684.00 per month
      commencing April 2006. Union Imaging Associates has the option to purchase
      the
      unit for $100 at the end of the lease. On June 13, 2007 we paid Siemens Medical
      Systems $100,000 on the lease. We paid Spur Imaging $12,950.00 leaving a balance
      on the lease of $954,772.94. We are currently in negotiations to determine
      a
      revised payment plan. Currently the balance of $954,772.94 is to be paid in
      51
      monthly payments of $22,898.00 to Siemens Medical Systems, and 15 monthly
      payments of $12,950.00, mutually acceptable on June 30, 2007. At December 31,
      2007, we are approximately $215,000 in arrears on these payments; this arrearage
      is reflected in the current liabilities of the attached financial
      statements.





Commencing
      March 2003 through September 2006, the Company acquired an additional 80%
      interest in Union Imaging Associates, JV. This additional 80% brought the
      Company's ownership of Union Imaging Associates, JV to 90%. It was acquired
      for
      varying prices totaling $1,706,000, inclusive of 350,000 shares of Modern
      Medical Modalities common stock valued at $154,000. The cash portions of the
      purchases were paid monthly through April 2011. The remaining average monthly
      payments are $11,223 (2008), $4,855 (2009), $2,636 (2010) and $879
      (2011).





In
      February 2006, the Company entered into an unsecured note with Jacov Hayut
      in
      the amount of $150,000. The loan was for 12 months with interest at 15%; monthly
      payments are interest only with lump sum payment of $150,000 February 2007.
      This
      note was extended for 36 months under the same terms and conditions, except
      that
      the Company agreed to pay the note in full or in part at the lenders option
      upon
      the first equity capital raise or February 2010, which ever comes first. On
      June
      13, 2007 we paid $50,000 on the unsecured note, and on June 20, 2007 we paid
      $25,000 on the unsecured note.





On
      October 25, 2006, we entered into an unsecured promissory note with Complete
      Flooring and Renovation, Inc. in the principal amount of $65,000. The loan
      is
      for a period of 24 months with an annual interest rate of 15%. The payments
      are
      to be made on the 26th of each month in 23 equal installments of $3,151.63
      and 1
      final installment of $3,151.67. The payments commenced on November 26,
      2006.


18





On
      November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai
      for $50,000. The terms of the Agreement include an annual interest rate of
      20%
      and the loan is to be repaid, in a lump sum with accrued interest, at the
      earlier of 6 months from the effective date of the Agreement, or the closing
      date of an equity based financing by the Company. In addition, the Company
      is to
      issue a Warrant for the rights to purchase up to 50,000 shares of the Company's
      common stock at an exercise price $0.70 per share, the closing market price
      of
      the Company's common stock on November 10, 2006.





On
      December 6, 2006, we entered into an unsecured promissory note with Complete
      Flooring and Renovation, Inc. in the principal amount of $150,000. The loan
      is
      for a period of 48 months with an annual interest rate of 12%. The payments
      are
      to be made on the 6th of each month in 48 equal installments of $3,950.08.
      The
      payments commenced on January 6, 2006.





On
      March
      6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for
      $100,000. The terms of the Agreement include an annual interest rate of 20%
      and
      the loan is to be paid, in a lump sum with accrued interest, at the earlier
      of 6
      months from the effective date of the Agreement, or the closing date of an
      equity based financing by the Company. In addition, the Company issued a Warrant
      for the rights to purchase 100,000 shares of the Company's common stock at
      an
      exercise price of $0.82.





On
      May
      10, 2007, we offered and the State of New Jersey accepted an agreement to settle
      past due taxes for the Company in the amount of $97,117. On April 24, 2007,
      we
      paid a down payment of $31,028. The balance of $66,089 is to be paid over 36
      equal installments of $2,381 beginning June 27, 2007.





On
      October 29, 2007, we offered and the State of New Jersey accepted an agreement
      to settle past due taxes for Union Imaging Associates, Inc. in the amount of
      $103,854. The terms of the agreement include payments of $3,936 paid October
      23,
      2007 and $1,411 due November 15, 2007, a payment of $10,000 paid on October
      31,
      2007, four $5,000 payments due on November 7, 2007, November 14, 2007, November
      21, 2007, and November 28, 2007. The balance of $68,508 is to be paid in 36
      equal monthly installments of $2,300 due on the 20 th of each
      month starting December 20, 2007. A Judgment has been entered in the Superior
      Court of New Jersey in the amount of $91,137 pending final settlement of these
      taxes.





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





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. At December 31,
      2006, the total principal and interest outstanding was zero.





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 Note holder.
      After the issuance of the 11,750,000 shares of common stock, Mr. Hayut owned
      approximately 82% of the Company's issued and outstanding common stock at that
      time.


19





In
      May
      2006 Jacov Hayut agreed to amend the terms of the 10% Notes from October 1999
      by
      implementing a minimum conversion price of $0.179 per share. On December 21,
      2006, Mr. Hayut converted the remaining outstanding balance of $129,156 into
      339,886 shares at a conversion price of $0.38 per share.





Between
      June 2002 and July 2004 the company has issued an aggregate of $950,000 in
      principal amount of convertible secured promissory notes bearing interest at
      a
      rate of 9.25% per annum. On March 30, 2006, Motti Sharon converted a total
      of
      $57,280 of the convertible notes into 320,000 shares of common stock. On April
      20, 2006, Motti Sharon converted an additional $89,500, of the convertible
      notes
      into 500,000 shares of common stock. On December 21, 2006, the Company converted
      the remaining $803,220 of the 9.25% convertible notes remaining outstanding.
      The
      conversion rate was $0.179 per share, resulting in 4,487,262 shares of common
      stock being issued. 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. Modern Medical may
      raise additional capital through the issuance of debt, equity or a combination
      thereof. There can be no assurance that any additional financing will be
      available on terms acceptable to the Company, if at all. These are the only
      trends, commitments, events and/or material uncertainties known to Modern
      Medical.





Going
      Concern





Modern
      Medical's December 31, 2007 and 2006 financial statements have been presented
      on
      a basis that it is a going concern. Although the Company has experienced
      financial gains for fiscal years ended December 31, 2007 and 2006 and has made
      improvements since last recording losses, the audit reports have an explanatory
      paragraph stating that Modern Medicals 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
      2
      F-32





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





We
      conducted an evaluation under the supervision and with the participation of
      our
      management, including our Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures. The term “disclosure controls and procedures,” as defined in Rules
      13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
      amended (“Exchange Act”), means controls and other procedures of a company that
      are designed to ensure that information required to be disclosed by the company
      in the reports it files or submits under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      Securities and Exchange Commission's rules and forms. Disclosure controls and
      procedures also include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed by a company in the reports
      that it files or submits under the Exchange Act is accumulated and communicated
      to the company's management, including its principal executive and principal
      financial officers, or persons performing similar functions, as appropriate,
      to
      allow timely decisions regarding required disclosure. 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.


20





Management’s
      Report on Internal Control Over Financial Reporting





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
      under the Exchange Act. Our internal control over financial reporting is
      designed to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with generally accepted accounting principles. Our internal control
      over financial reporting includes those policies and procedures
      that:




(1)
      pertain to the maintenance of records that in reasonable detail accurately
      and
      fairly reflect the transactions and dispositions of our assets;




(2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with U.S. GAAP, and
      that our receipts and expenditures are being made only in accordance with the
      authorization of our management and directors; and




(3)
      provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a
      material effect on the financial statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




Management
      assessed the effectiveness of our internal control over financial reporting
      as
      of December 31, 2007. In making this assessment, management used the
      framework set forth in the report entitled *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission, or
      COSO. The COSO framework summarizes each of the components of a company’s
      internal control system, including (i) the control environment,
      (ii) risk assessment, (iii) control activities, (iv) information
      and communication, and (v) monitoring. This annual report does not include
      an attestation report of our registered public accounting firm regarding
      internal control over financial reporting. Management's report was not subject
      to attestation by our registered public accounting firm pursuant to temporary
      rules of the Securities and Exchange Commission that permits us to provide
      only
      management's report in this annual report.




Identified
      Material Weaknesses




A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the financial statements will not be prevented or detected.
      Management did not identify any internal control deficiencies during its
      assessment of our internal control over financial reporting as of
      December 31, 2007.





A
      regionally-recognized independent consulting firm assisted management with
      its
      assessment of the effectiveness of our internal control over financial
      reporting, including scope determination, planning, staffing, documentation,
      testing, remediation and retesting and overall program management of the
      assessment project. In conclusion, our Chief Executive Officer and Chief
      Financial Officer surmised that Modern Medical did maintain effective internal
      control over financial reporting as of December 31, 2007.





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.


21





Item
      8B.
      Other Information





None.





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
            PositionBaruh
                Hayut
            45
            Chairman
                of the Board of Directors and CEOPaul
                W. Harrison
            53
            Lead
                DirectorMinesh
                Patel
            36
            Chief
                Operating Officer, 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, 2004. From June 2003 through March 31, 2004, Mr. Hayut
      served as a financial consultant to the Company. Prior thereto, Mr. Hayut served
      as a corporate finance and investment banker with Thornhill 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 Bachelors
      degrees in Business Administration and Economics from Hebrew University in
      Jerusalem, Israel.





MINESH
      PATEL was appointed to the Board of Directors of the Company in June 2003 and
      on
      November 2003 was appointed Chief Financial Officer. In November 2004, Mr.
      Patel
      was appointed Chief Operating Officer. From February 2001 through November
      2003,
      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.





PAUL
      W.
      HARRISON was appointed to the Board of Directors of the Company in June 2006,
      and was subsequently appointed Lead Director of the Company in February 2007.
      From August 2005 to June 2006, Mr. Harrison was a consultant to the Company.
      Since 1994, he has been the Chairman and President of INEX Group, Inc, a
      technology holding company, and since 2004, the CEO of INEX's software
      subsidiary Attune, Inc. Mr. Harrison has held Executive positions with
      publicly-traded Fortune 500 companies including McKesson Corporation and Lincoln
      National Corporation. He was the Chairman and CEO of small publicly-held
      companies, and founded and sold several private companies for high returns
      on
      investments **.** He also
      participated in and completed many mergers and acquisitions, and was
      instrumental in numerous business ventures and software technologies that
      ultimately resulted in additional revenues and increased market capitalizations
      to these companies in excess of $1 billion **.** He has a
      Business Degree (BBA) from Georgia State University, and has many professional
      certifications.





Family
      Relationships





There
      are
      no family relationships among the directors and executive
      officers.


22





Involvement
      in Certain Legal Proceedings





None
      of
      the directors or executive officers has, during the past five
      years:





(a)
      Had
      any bankruptcy petition filed by or against any business of which such person
      was a general partner or executive officer either at the time of the bankruptcy
      or within two years prior to that time;





(b)
      Been
      convicted in a criminal proceeding or subject to a pending criminal
      proceeding;





(c)
      Been
      subject to any order, judgment, or decree, not subsequently reversed, suspended
      or vacated, of any court of competent jurisdiction, permanently or temporarily
      enjoining, barring, suspending or otherwise limiting his involvement in any
      type
      of business, securities, futures, commodities or banking activities;
      and





(d)
      Been
      found by a court of competent jurisdiction (in a civil action), the Securities
      and Exchange Commission or the Commodity Futures Trading Commission to have
      violated a federal or state securities or commodities law, and the judgment
      has
      not been reversed, suspended, or vacated.





Compliance
      with Section 16(a) of the Exchange Act





Based
      solely on review of the copies of such forms furnished to the Company, or
      written representations that no reports were required, the Company believes
      that
      for the fiscal year ended December 31, 2007, beneficial owners complied with
      Section 16(a) filing requirements applicable to them with the exception of
      the
      following: Baruh Hayut had a late Form 4 reflecting a stock warrant granted
      on
      October 9, 2007 (filed October 24, 2007); Minesh Patel had a late Form 4
      reflecting a stock option granted on June 04, 2007 (filed October 24, 2007)
      and
      a stock warrant granted on October 09, 2007 (filed October 24, 2007); Paul
      Harrison had a late Form 4 reflecting common stock granted on September 14,
      2007
      (filed October 24, 2007) and a stock warrant granted September 14, 2007 (filed
      October 24, 2007) and common stock granted on February 23, 2007 (filed October
      24, 2007) and a stock warrant granted on October 09, 2007 (filed
      October **** 24,
      2007); Issak Hayut had a late a Form 3 reflecting beneficial ownership of common
      stock acquired on December 8, 2006 and a late Form 4 reflecting common stock
      acquired on May18, 2007 and a stock warrant to purchase common stock acquired
      on
      October 9, 2007 (both Forms were filed April 11, 2008). ****




Code
      of
      Ethics





The
      Company has not adopted a formal code of ethics because its executive officers
      are also directors, who are already subject to ethical and fiduciary standards
      imposed by law.





Material
      Changes to the Procedures by which Security Holders May Recommend Nominees
      to
      the Board of Directors





None.





Audit
      Committee and Financial Expert





The
      Company's board of directors has elected Minesh Patel as sole audit committee
      member. The Board has determined that it does not have a member of its Board
      that qualifies as an “audit committee financial expert” as defined in Item
      407(d)(5)(ii) of Regulation S-B.





We
      believe that the members of our Board of Directors are collectively capable
      of
      analyzing and evaluating our financial statements and understanding internal
      controls and procedures for financial reporting. However, as part of
      implementing Sarbanes Oxley, we plan to appoint a qualified audit committee
      financial expert to its Board of Directors to strengthen and improve our
      internal disclosure controls and procedures during the fiscal year ending
      December 31, 2008.


23





Compensation
      Committee





We
      do not
      have a separate compensation committee. At this point, we do not intend to
      establish a separate compensation committee as this function will be performed
      by our full Board of Directors.





Nominating
      Committee





We
      do not
      currently have a separate nominating committee as this function is performed
      by
      our full Board of Directors.





Securities
      Authorized for Issuance Under Equity Compensation Plans





For
      information regarding securities authorized for issuance under Equity
      Compensation Plans, and the equity compensation plan information table see
      Part
      II, “Item 5: Market for Common Equity and Related Stockholder
      Matters.”





Item
      10.
      EXECUTIVE COMPENSATION





The
      following executive compensation disclosure reflects all compensation awarded
      to, earned by or paid to the executive officers below for the fiscal year ended
      December 31, 2007. The following table summarizes all compensation for fiscal
      year 2007 received by our Chief Executive Officer, and the Company's two most
      highly compensated executive officers who earned more than $100,000 in fiscal
      year 2007.





SUMMARY
      COMPENSATION TABLE





Name
                and
              Principal
                Position (A)
            
            Year
              (B)
            
            Salary
              ($)
              (C)
            
            Bonus
              ($)
              (D)
            
            Stock
                Awards ($)
              (E)
            
            Options/
                Option Awards ($)
              (F)
            
            Non-Equity
                Incentive
              Plan
                Compensation ($)
              (G)
            
            Non-Qualified
              Deferred
                Compensation Earnings
              ($)
              (H)
            
            All
                Other Compensation ($)
              (I)
            
            Total
              ($)
              (J)Baruh
                Hayut, Chairman & CEO
            
            
            2007
            
            $
            178,784
            (1)
            $
            0
            
            $
            0
            
            $
            460,728
                (2
            )
            $
            0
            
            $
            0
            
            $
            15,870
            
            $
            655,382Minesh
                Patel, COO & CFO
            
            
            2007
            
            $
            89,315
            (1)
            $
            0
            
            $
            0
            
            $
            259,160
                (3
            )
            $
            0
            
            $
            0
            
            $
            6,500
            
            $
            354,975




(1)
              =
              Does
                  not receive any Director fees, the amount shown above is executive
                  compensation.(2)
              =
              Represents
                  the total fair value of 720,000 warrants granted during the year
                  ended
                  December 31, 2007. Of the warrants granted, 0 vested immediately.
                  The
                  remaining 720,000 warrants vest according to performance criteria
                  specified in the warrant agreement.(3)
              =
              Represents
                  the total fair value of 400,000 warrants granted during the year
                  ended
                  December 31, 2007. Of the warrants granted, 200,000 vested immediately.
                  The remaining 200,000 warrants vest according to performance criteria
                  specified in the warrant
                  agreement.




Warrants
      are also included in the Option Award Chart above.





Narrative
      to Summary Compensation Table





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


24





Identification
      to the extent material of any item included under All Other Compensation (column
      (I)) in the Summary Compensation Table. Identification of an item shall not
      be
      considered material if it does not exceed the greater of $25,000 or 10% of
      all
      items included in the specified category in question set forth in paragraph
      (b)(2)(ix) of Item 402. All items of compensation are required to be included
      in
      the Summary Compensation Table without regard to whether such items are required
      to be identified.





The
      following table sets forth certain information concerning unexercised options,
      stock that has not vested, and equity incentive plan awards for each of our
      named executive officers outstanding as of December 31, 2007.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END DECEMBER 31, 2007





Name
            
            Number
                of securities underlying unexercised options (#)
                Exercisable
            
            Number of
                securities underlying unexercised options (#)
              Un-exercisable
            
            Equity
              Incentive
              Plan
              Awards:
                Number of
              Securities
                Underlying Unexercised Unearned
              options
                (#)
            
            Option
              Exercise
              price
                ($)
            
            Option
              expiration
              date
            
            Number of
              shares or
              units of
              stock that
              have not
              vested (#)
            
            Market value of
                shares or units of stock that
                have not vested ($)
            
            Equity incentive
                plan awards: number of unearned shares, units or
                other rights that have rights that have Not
                Vested (#)
            
            Equity incentive
                plan awards: Market or payout value of unearned
                shares, units or other rights
              that
                have
              not
                vested ($)Baruh
                Hayut
            
            
            0
            
            
            0
            
            
            720,000
            
            $
            0.75
            
            
            10/07/12
            
            
            0
            
            
            0
            
            
            0
            
            
            0Minesh
                Patel
            
            
            25,000
            
            
            0
            
            
            192,000
            
            $
            0.50
            
            
            09/26/11
            
            
            0
            
            
            0
            
            
            0
            
            
            0Minesh
                Patel
            
            
            33,334
            
            
            0
            
            
            66,666
            
            $
            0.50
            
            
            09/26/11
            
            
            0
            
            
            0
            
            
            0
            
            
            0Minesh
                Patel
            
            
            200,000
            
            
            0
            
            
            200,000
            
            $
            0.65
            
            
            10/07/12
            
            
            0
            
            
            0
            
            
            0
            
            
            0


25





DIRECTOR
      COMPENSATION





The
      following director compensation disclosure reflects all compensation awarded
      to,
      earned by or paid to the directors below for the fiscal year ended December
      31,
      2007.








Name
            
            Fees Earned or
                Paid in Cash ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-
              Equity
              Incentive
              Plan
              ($)
            
            Change in
                Pension Value and
              Non-Qualified
                Deferred Compensation Earnings ($)
            
            All Other
                Compensation
              ($)
            
            Total
              ($)Baruh
                Hayut (1)
            
            
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Minesh
                Patel (1)
            
            
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Paul
                Harrison
            
            $
            60,000(2
            )
            $
            0
            
            $
            1,685,781
            (3)
            $
            0
            
            $
            0
            
            $
            9,783
            
            $
            1,755,564




(1)
              =
              Serves
                  as a Director, receives no additional compensation for being a
                  director,
                  and only receives compensation as an Executive Officer as shown
                  in the
                  Summary Compensation Table above.(2)
              =
              Director
                  Fee with no written agreement or special arrangements.(3)
              =
              Represents
                  the total fair value of 2,846,250 warrants granted during the year
                  ended
                  December 31, 2007. Of the warrants granted, 1,406,250 vested immediately.
                  The remaining 1,440,000 warrants vest according to performance
                  criteria
                  specified in the warrant
                  agreement.


Warrants
      are also included in the Option Awards chart above.





Item
      11.
      Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.





The
      following table sets forth certain information as of March 15, 2007 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.


Name
              
              Address
              
              Percentage of
                  Beneficial
                Number
                of Shares
              
              Ownership of
                  Common StockBIBY
                  Family Partners, LLC (1)
              
              
              439
                  Chestnut St, Union, NJ
              
              
              7,715,000
              
              
              31.84
              %Issak
                  Hayut (2)
              
              
              135
                  Nautica Way, Roswell, GA
              
              
              3,480,028
              
              
              14.36
              %Paul
                  W. Harrison (3)
              
              
              439
                  Chestnut St, Union, NJ
              
              
              2,433,333
              
              
              10.04
              %Ronnie
                  Antebi (4)
              
              
              552
                  Decatur St SE, Atlanta, GA
              
              
              2,225,000
              
              
              9.18
              %Jacov
                  Hayut
              
              
              5281
                  Marston Rd, Atlanta, GA
              
              
              1,898,918
              
              
              7.84
              %Minesh
                  Patel (5)
              
              
              439
                  Chestnut St, Union, NJ
              
              
              258,333
              
              
              1.07
              %





All
      officers and directors 10,406,666 and 42.94% as a group (3 persons)





(1)
            Mr.
                Barry Hayut, our Chairman and CEO, is the managing member of BIBY
                Family
                Partners, LLC, and has shared voting and dispositive power over the
                shares
                of common stock owned by BIBY Family Partners, LLC. Does not include
                720,000 shares of common stock issuable upon the exercise of outstanding
                options that have not yet vested or are not exercisable within 60
                days
                from the date hereof.


26





(2)
              Includes
                  shares issuable upon exercise of a warrant for 150,000 shares of
                  common
                  stock and a warrant for 65,000 shares of common stock in the name
                  of
                  Complete Flooring & Renovation, Inc. The warrants were exercisable in
                  their entirety on December 6, 2006 and October 9, 2007, respectively,
                  at
                  an exercise price of $0.75. As of April 9, 2008, neither warrant
                  has been
                  exercised in part or in full. Mr. Issak Hayut is the owner of Complete
                  Flooring & Renovation, Inc. The Common shares included above are
                  jointly owned with the Mr. Issak Hayut’s wife, Mazal Hayut. Ms. Hayut
                  disclaimed the power to vote or direct the voting of the
                  shares.


(3)
              Does
                  not include 1,890,666shares
                  of common stock issuable upon the exerciseof
                  outstanding options that have not yet vested or are not exercisable
                  within
                  60 days from the date hereof.


(4)
            Includes
                a warrant for 50,000 shares of common stock issuable upon the exercise
                to
                Medical Equipment Solutions. Mr. Ronnie Antebi is a principal owner
                of
                Medical Equipment Solutions.


(5)
            Does
                not include 458,666 shares of common stock issuable upon the exercise
                of
                outstanding options that have not yet vested or are not exercisable
                within
                60 days from the date hereof.





Item
      12.
      Certain Relationships and Related Transactions and Director
      Independence:





Modern
      Medical believes that the transactions set forth below were made on terms no
      less favorable 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
      2003, the Company issued an aggregate of $140,000 principal amount of its 9.25%
      convertible secured promissory notes to Jacov Hayut, which is 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. Jacov Hayut
      was
      a director and officer of Modern Medical at the time such loan was made. On
      June
      8, Mr. Hayut resigned as an officer and director of Modern Medical. Jacov Hayut,
      is the brother of Baruh
      Hayut, the Chairman and CEO of the Company.





Medical
      Equipment Solutions LLC., which consists of Ronnie Antebi and Yosef Azoulai,
      has
      a management agreement with Modern Medical. MES provides services in selecting,
      providing, and installing medical equipment. For these services, they are
      compensated 5% of Union Imaging Center’s collections net of professional fees
      belonging to the doctors and 6.5% for the Manalapan site collections net of
      professional fees, the 6.5% fee was terminated upon sale of the Manalapan site
      on August 1, 2006. Medical Equipment Solutions LLC has a 50% partnership
      interest in the Company’s PET Scan at Union Imaging site and owns a nuclear
      camera that the Company uses as part of its Union Imaging Associates site.
      Medical Equipment Solutions supplies the camera and all service on the equipment
      and in turn it receives 50% of the camera cash revenues after professional
      fees
      paid to the nuclear radiologist. Ronnie Antebi has provided term financing
      for
      various loan restructurings and Mr. Antebi beneficially owns more than 5% of
      our
      outstanding shares of common stock.





In
      June
      2003, the Company issued an aggregate of $225,000 principal amount of its 9.25%
      convertible secured promissory notes to Motti Sharon which is 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.





On
      July
      10, 2006, in connection with his resignation as the Company's President and
      Secretary, Jacov Hayut agreed to transfer 8,625,000 shares of the Company's
      common stock, representing 58.2% of the total shares issued and outstanding,
      to
      BIBY Family Partners, LLC, a Georgia limited liability company (the "Family
      Fund") controlled by Baruh Hayut, our Chairman and CEO - See Note
      18.


27


On
      August
      23, 2006, we issued a Warrant for the right to buy 100,000 shares of the
      Company's common stock to Paul W. Harrison in connection with his appointment
      as
      a director of the Company. The Warrant Agreement terms include an exercise
      price
      of $0.18 per share, which was above market price at the time of the execution
      of
      the Warrant Agreement. The exercise date is August 23, 2006 and the expiration
      date is August 22, 2011. On August 24, 2006, Paul W. Harrison exercised his
      rights under the August 23, 2006 Warrant Agreement and bought 45,000 shares
      of
      the Company's common stock for $8,100. The 45,000 shares were issued on October
      20, 2006.





In
      May,
      2006, Modern Medical entered into an Information Systems Collaboration Agreement
      with Attune, Inc., a software company that also builds customized information
      systems. The agreement was for special licensing of business software and
      customizations that included computer source code at a cost of $65,200 plus
      support costs of $9,000 per year or $750 per month at the option of Modern
      Medical. Support costs were waived for the first year, and each subsequent
      year
      of software support starts in April. Paul W. Harrison, a member of the Modern
      Medical's Board of Directors is the President of INEX Group, Inc. which has
      a
      majority ownership interest in Attune, Inc. In September, 2006 Modern Medical
      added additional users of the Attune business software under the May, 2006, Information
      Systems Collaboration Agreement and paid Attune, Inc. an additional net fee
      of
      $8,880. Subsequently, in December, 2006, Modern Medical entered into an Addendum
      to the Information Systems Collaboration Agreement with Attune, Inc. to expand
      the special licensing of business software, obtain additional customization
      services, and secure outsourcing services to help manage an enterprise computer
      network and service center. Attune, Inc. agreed to forgo the first 90 days
      of
      costs it had incurred prior to entering into the Addendum, and beginning January
      1, 2007, Modern Medical agreed to pay Attune, Inc. an additional fee of
      $5,373.00 per month for the expanded business software and
      services.





On
      February 28, 2007, Modern Medical entered into an Asset Purchase Agreement
      with
      MTI Partners II, L.P. to acquire MTI-II's Medical Software Assets in exchange
      for 1 million shares of Modern Medical's common stock. The transaction was
      completed in March of 2007. The Assets consist of medical computer software
      that
      organizes, manages, and maintains patient scheduling, registration, medical
      records, billing, and includes other customized components. The shares of Common
      stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as
      amended. Paul Harrison, a member of the Company's Board of Directors, is the
      President of INEX Group, Inc., which serves as the General Partner of MTI-II.
      Mr. Harrison received 562,500 shares of the Company's common stock issued to
      MTI-II pursuant to this Agreement.





On
      September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P. to acquire MTI-II's Healthcare Payer Admin Software
      Asset (the "Asset") in exchange for 500,000 shares of our common stock ("Common
      Stock"), warrants ("Warrants") for 900,000 shares of our common stock with
      an
      exercise price of $0.70 per share, and $250,000 to be paid within 12 months
      from
      the date of the Agreement. The transaction closed in October, 2007. **** The
      Asset
      consists of healthcare payer admin computer software that helps organize,
      manage, and maintain health plans, **** membership,
      eligibility, claims
      administration, and includes other customized components. The shares of Common
      Stock were issued **** pursuant
      to Section 4(2) of the Securities Act of 1933, as amended. Paul Harrison, a
      member of the Board of Directors of MODM, is the President of INEX Group, Inc.,
      which serves as the General Partner of MTI-II. Mr. Harrison will be entitled
      to
      receive 281,250 shares of our Common Stock, and a Warrant for 506,250 of our
      Common Stock with an exercise price of $0.70 per share issuable to MTI-II
      pursuant to this Agreement.





Director
      Independence





The
      Company has not determined whether it has any independent directors as that
      term
      is defined under Nasdaq Rule 4200(a)(15).





Item
                13.
            
            Exhibits:3.1
            
            Certificate
                of Incorporation (incorporated by reference to Exhibit 3.1 to the
                Company's Registration Statement on Form SB-2, Registration No.
                333-86931)3.2
            
            Restated
                and Amendment to Certificate of Incorporation (incorporated by reference
                to Exhibit 3.1 to the Company's Registration Statement on Form SB-2,
                Registration No. 333-86931)3.3
            
            By-Laws
                (incorporated by reference to Exhibit 3.2 to the Company's Registration
                Statement on Form SB-2, filed in February,
                1994)


28





4.1
            
            *Form
                of Warrant – Cash Exercise Format.4.2
            
            *Form
                of Warrant – Cashless Exercise Format.10.2
            
            Agreement
                for Purchase and Sales of Assets between the Company and MTI Partners
                II,
                L.P., dated September 14, 2007 (incorporated by reference to Exhibit
                10.1
                to the Company's Current Report on Form 8-K dated September 20
                2007).10.
                3
            
            Agreement
                for Purchase and Sales of Assets between the Company and MTI Partners
                II,
                L.P., dated February 28, 2007 (incorporated by reference to Exhibit
                10.1
                to the Company's Current Report on Form 8-K dated March 12,
                2007).10.4
            
            2003
                Stock Option Plan, dated September 19, 2003, incorporated herein
                by
                reference to Form 14A filed with the U.S. Securities and Exchange
                Commission on October 1, 2003.10.5
            
            Performance
                for Stock Options Agreement between the Company and Paul W. Harrison
                dated
                September 27, 2006 (incorporated by reference to Exhibit 10.2 to
                the
                Company’s Current Report on Form 8-K dated October 3,
                2006)10.6
            
            Performance
                for Stock Options Agreement between the Company and Minesh Patel
                dated
                September 27, 2006 (incorporated by reference to Exhibit 10.3 to
                the
                Company’s Current Report on Form 8-K dated October 3,
                2006)10.7
            
            Performance
                for Stock Options Agreement between the Company and Bruce Phillips
                dated
                September 27, 2006 (incorporated by reference to Exhibit 10.4 to
                the
                Company’s Current Report on Form 8-K dated October 3,
                2006)10.8
            
            Performance
                Bonus Agreement between the Company and Paul W. Harrison dated September
                27, 2006 (incorporated by reference to Exhibit 10.5 to the Company’s
                Current Report on Form 8-K dated October 3, 2006)10.9
            
            Performance
                Bonus Agreement between the Company and Minesh Patel dated September
                27,
                2006 (incorporated by reference to Exhibit 10.6 to the Company’s Current
                Report on Form 8-K dated October 3, 2006)10.10
            
            Performance
                Bonus Agreement between the Company and Bruce Phillips dated September
                27,
                2006 (incorporated by reference to Exhibit 10.7 to the Company’s Current
                Report on Form 8-K dated October 3, 2006)21
            
            *Subsidiaries31.1
            
            *
                Certification of the Company's Chief Executive Officer and Chief
                Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002.31.2
            
            *
                Certification of the Company's Chief Executive Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32
            
            *
                Certification of the Company's Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.


_____________


*
      filed
      herewith





(b)
      There
      were no reports filed on Form 8-K during the last quarter covered by this Annual
      Report.


29





Item
      14.
      Principal Accountant Fees and Services.





The
      following table sets forth fees billed to us by our independent registered
      public accounting firm, Liebman Goldberg & Drogin, LLP, during the fiscal
      years ended December 31, 2007, and December 31, 2006, for: (i) services rendered
      for the audit of our annual financial statements and the review of our quarterly
      financial statements; (ii) services by our independent registered public
      accounting firms that are reasonably related to the performance of the audit
      or
      review of our financial statements and that are not reported as Audit Fees;
      (iii) services rendered in connection with tax compliance, tax advice and tax
      planning; and (iv) all other fees for services rendered.







Fee
                Category
            
            Year Ended
                December 31,
              2007
            
            Year
                Ended December 31,
              2006Audit
                fees
            
            $
            49,500
            
            $
            58,650Audit-related
                fees
            
            $
            0
            
            $
            0Tax
                fees
            
            $
            5,500
            
            $
            7,821All
                other fees
            
            $
            0
            
            $
            0





Policy
      Related to Board of Directors Pre-Approval of Audit and Permissible Non-Audit
      Services of Independent Registered Accounting Firm.





The
      Company's board of directors has elected Minesh Patel as sole audit committee
      member. The audit committee functions to review and approve the audit services
      provided by Liebman Goldberg & Drogin, LLP and the fees incurred in
      connection therewith.


30


SIGNATURES





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





Modern
                Medical Modalities CorporationDate:
                April 15, 2008
            By:
            /s/
                Baruh HayutName:
            Baruh
                HayutTitle:
            Chief
                Executive Officer




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





Name
            
            Title
            
            Date/s/
                Baruh Hayut
            
            Chairman
                and Chief Executive
            
            April
                15, 2008Baruh
                Hayut
            
            Officer/s/
                Minesh Patel
            
            Chief
                Financial Officer, Chief
            
            April
                15, 2008Minesh
                Patel
            
            Operating
                Officer and Director


31





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM





Board
      of
      Directors Modern Medical Modalities Corporation and Subsidiaries Union, New
      Jersey





We
      have
      audited the accompanying consolidated balance sheet of Modern Medical Modalities
      Corporation and Subsidiaries as of December 31, 2007, and the related
      consolidated statements of income and operations, changes in stockholders'
      deficit, and cash flows for the years ended December 31, 2007 and 2006. 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 consolidated financial position of Modern Medical
      Modalities Corporation and Subsidiaries as of December 31, 2007, and the
      consolidated results of income and operations and their cash flows for each
      of
      the years ended December 31, 2007 and 2006, 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


April
      15,
      2008


F-1





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


December
      31, 2007





2007ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            52,425Accounts
                receivable (less contractual allowances of $3,112,000)
            
            
            1,269,767Prepaid
                expenses
            
            
            11,098Total
                current assets
            
            
            1,333,290Property
                and equipment, net of accumulated depreciation of
                $3,081,470
            
            
            1,274,421Other
                assets:Purchased
                software
            
            
            1,224,480Note
                receivable
            
            
            15,884Deposits
            
            
            39,661Total
                other assets
            
            
            1,280,025TOTAL
                ASSETS
            
            $
            3,887,736




See
      notes
      to consolidated financial statements.


F-2





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


December
      31, 2007





2007LIABILITIES
                AND STOCKHOLDERS' (DEFICIENCY)Current
                liabilitiesAccounts
                payable
            
            $
            970,990Accrued
                expenses
            
            
            1,125,977Current
                portion long term debt
            
            
            1,335,276Total
                current liabilities
            
            
            3,432,242Other
                liabilities:Long
                term debt, net of current portion
            
            
            937,433Loans
                payable shareholders
            
            
            235,899Total
                other liabilities
            
            
            1,173,332Total
                liabilities
            
            
            4,605,574Minority
                interest
            
            
            65,622Commitments
                and contingenciesStockholders'
                (deficiency):Preferred
                stock, $0.0002 par value, authorized - 1,000,000 shares, issued and
                outstanding - 0 shares
            
            
            -Common
                stock, $0.0002 par value, authorized - 99,000,000 shares, issued
                -
                24,594,051shares and outstanding - 24,234,051 shares
            
            
            4,918Additional
                paid-in capital
            
            
            10,109,415Accumulated
                (deficit)
            
            
            (10,897,793
            )Treasury
                common stock, $0.0002 par value, 360,000 shares at cost
            
            
            -Total
                stockholders' (deficiency)
            
            
            (783,460
            )TOTAL
                LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
            
            $
            3,887,735





See
      notes
      to consolidated financial statements.


F-3




MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS


For
      the
      Years Ended December 31,





2007
            
            2006Operating
                income:Net
                revenues from services
            
            $
            7,712,216
            
            $
            6,854,024Cost
                of services provided
            
            
            5,796,880
            
            
            5,493,858Total
                operating income
            
            
            1,915,346
            
            
            1,360,166Operating
                Expenses:Selling,
                general and administrative
            
            
            4,498,875
            
            
            981,679Depreciation
                and amortization
            
            
            568,186
            
            
            463,111Total
                operating expenses
            
            
            5,067,061
            
            
            1,444,790(Loss)
                from operations
            
            
            (3,151,715
            )
            
            (84,624
            )Other
                (expenses) income:Interest
                expense
            
            
            (251,768
            )
            
            (327,791
            )Loss
                from litigation settlement -
            
            
            
            
            
            (20,000
            )Loss
                on abandoned site
            
            
            -
            
            
            (320,000
            )Gain
                on sale of property asset
            
            
            -
            
            
            185,669Gain
                from insurance recoveries
            
            
            -
            
            
            20,000Net
                other (expenses)
            
            
            (251,768
            )
            
            (462,122
            )(Loss)
                before income taxes andminority
                interests
            
            
            (3,403,483
            )
            
            (546,746
            )Provision
                for income taxes
            
            
            51,193
            
            
            79,255(Loss)
                before minority interests
            
            
            (3,454,676
            )
            
            (626,001
            )Minority
                interests
            
            
            (31,330
            )
            
            95,094Net
                loss
            
            $
            (3,486,006
            )
            $
            (530,907
            )(Loss)
                per share, basic and diluted
            
            $
            (0.15
            )
            $
            (0.03
            )Number
                of weighted average shares outstanding
            
            
            23,134,342
            
            
            15,425,992





See
      notes
      to consolidated financial statements.





F-4





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)


FOR
      THE
      YEARS ENDED DECEMBER 31, 2007 AND 2006


Number
                  of
                Shares
              
              Common
                Stock
              
              Additional
                Paid-In
                Capital
              
              Treasury
                Stock
                at
                  Cost
              
              Retained
                Earnings
                (Deficit)
              
              TotalBalance
                  at January 1, 2006
              
              
              14,706,471
              
              $
              2,941
              
              $
              4,515,715
              
              $
              0
              
              $
              (6,880,880
              )
              $
              (2,362,224
              )Shares
                  issued during 2006
              
              
              6,490,996
              
              
              1,298
              
              
              1,535,228
              
              
              -
              
              
              -
              
              
              1,536,526Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              213,428
              
              
              -
              
              
              -
              
              
              213,428Net
                  loss for the year ended December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (530,907
              )
              
              (530,907
              )Balance
                  at January 1, 2007
              
              
              21,197,468
              
              
              4,239
              
              
              6,264,371
              
              
              -
              
              
              (7,411,787
              )
              
              (1,143,177
              )Shares
                  issued during 2007
              
              
              3,036,583
              
              
              679
              
              
              2,175,849
              
              
              -
              
              
              -
              
              
              2,175,849Value
                  associatedStock
                  based compensation
              
              
              -
              
              
              -
              
              
              1,802,395
              
              
              -
              
              
              -
              
              
              1,802,395Return
                  of shares
              
              
              (360,000
              )
              
              -
              
              
              (133,200
              )
              
              -
              
              
              -
              
              
              (133,200
              )Net
                  loss for the year ended December 31, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,486,006
              )
              
              (3,486,006
              )Balance
                  at December 31, 2007
              
              
              24,234,051
              
              $
              4,918
              
              $
              10,109,415
              
              $
              0
              
              $
              (10,574,410
              )
              $
              (783,460
              )
  See
        notes
        to consolidated financial statements.




F-5


MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
      the years ended December 31,





2007
              
              2006Cash
                  flows from operating activitiesNet
                  loss
              
              $
              (3,486,006
              )
              $
              (530,907
              )Adjustments
                  to reconcile net loss to net cash (used) provided by operating
                  activities:Depreciation
                  and amortization
              
              
              568,186
              
              
              463,111Contractual
                  allowances
              
              
              (761,200
              )
              
              645,697Increase
                  (decrease) in minority interest
              
              
              60,695
              
              
              (276,094
              )Increase
                  in Common Stock from issuance of shares and conversion of
                  debt
              
              
              679
              
              
              1,298Increase
                  in Additional Paid in Capital from issuance of shares and conversion
                  of
                  debt
              
              
              2,042,649
              
              
              1,535,228Increase
                  in Additional Paid in Capital from stock-based
                  compensationResulting
                  from the issuance of employee stock options and warrants
              
              
              1,802,395
              
              
              213,428Increase
                  (decrease) in cash attributable to changes in operating assets
                  and
                  liabilities:Accounts
                  receivable
              
              
              1,128,350
              
              
              (514,048
              )Notes
                  receivable - current portion
              
              
              -
              
              
              19,096Prepaid
                  expense
              
              
              109,652
              
              
              (120,750
              )Other
                  current assets
              
              
              7,106
              
              
              139Deposits
                  and other assets
              
              
              (234
              )
              
              26,439Accounts
                  payable
              
              
              627,540
              
              
              (516,619
              )Accrued
                  expenses
              
              
              (628,808
              )
              
              900,581Total
                  adjustments
              
              
              4,957,010
              
              
              2,371,315Net
                  cash (used) provided by operating activities
              
              
              1,471,004
              
              
              1,840,408Cash
                  flows from investing activities:Fixed
                  asset acquisitions
              
              
              (175,324
              )
              
              (204,536
              )Fixed
                  asset dispositions
              
              
              -
              
              
              352,070Purchased
                  software
              
              
              (1,224,480
              )
              
              -Net
                  cash (used) by investing activities
              
              
              (1,339,804
              )
              
              147,534Cash
                  flows from financing activities:(Decrease)
                  increase in shareholder loans
              
              
              (75,000
              )
              
              70,799Increase
                  long term debt
              
              
              405,909
              
              
              306,263(Reduction)
                  long term debt
              
              
              (493,595
              )
              
              (2,232,564
              )Net
                  cash provided(used) by financing activities
              
              
              (162,686
              )
              
              (1,855,502
              )Net
                  (decrease) increase in cash and cash equivalents
              
              
              (91,487
              )
              
              132,440Cash
                  and equivalents, beginning of year
              
              
              143,912
              
              
              11,472Cash
                  and equivalents, end of year
              
              $
              52,426
              
              $
              143,912Supplemental
                  cash flow information:Interest
                  paid
              
              $
              250,703
              
              $
              267,329Income
                  taxes paid
              
              $
              -
              
              $
              -Common
                  shares issued for conversion of debt
              
              
              -
              
              
              5,845,996Common
                  shares issued for purchased software
              
              
              1,500,000
              
              
              -Common
                  shares issued for private placement
              
              
              770,000
              
              
              -Common
                  shares issued in payment of consulting agreements
              
              
              766,583
              
              
              645,000




See
      notes
      to consolidated financial statements.


F-6





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





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 was Modern Modalities Corporation and was renamed Modern Medical
      Modalities Corporation.





Basis
      of
      Presentation:





The
      consolidated financial statements include the accounts of the Company, its
      wholly-owned subsidiaries, Union Imaging Center, LLC, Medical Marketing and
      Management, Inc., Somerset Imaging Corporation, 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 PET Scan at Union Imaging, LLC and
      Union Imaging Associates, Inc., owned 50% and 88.9%, respectively and its joint
      ventures, Plainfield MRI Associates, JV and Union Imaging Associates, JV, owned
      84% and 90% 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 services are completed and billed,
      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 Physician(s):





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.


F-7





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





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





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.





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





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.





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.


F-8





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





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





Cash
      and
      Cash Equivalents:





The
      Company considers all highly liquid debt instruments purchased with an original
      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.





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.





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.


F-9





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





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





Stock-based
      Compensation:





The
      analysis and computation was performed based on our adoption of Statement of
      Financial Accounting Standards No. 123R, share-based payment (SFAS 123R), which
      requires the recognition of the fair value of stock-based compensation at the
      beginning of our next fiscal year (January 1, 2006) that followed the reporting
      effective date of December 15, 2005 for small business issuers.





For
      the
      twelve month periods ended December 31, 2007 and 2006, we conducted an outside
      independent analysis and our own review, and based on the results, we recognized
      $1,802,395 and $213,428, respectively, in share-based payments related to
      warrants and stock options issued with the rights to exercise 6,215,198 shares
      in 2007 and 2,043,000 shares in 2006 of our common stock.





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.





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, 2007 and 2006,
      such costs aggregated $75,135 **** and
      $116,000, respectively.





Retirement
      Plan:





The
      Company maintains a qualified 401-(k) wage deferral plan. Employees may defer
      a
      portion of their salary. The Company did not contribute to the plan during
      2007
      however, for 2006 the Company agreed to match 50% of employee contributions
      up
      to 6% of the employee’s compensation. For 2006 the Company portion of the
      matching program was $ 34,371, this amount was accrued for in 2006 and paid
      in
      2007.





Impairment
      or Disposal of Long-Lived Assets:





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 impact of adoption of SFAS No. 142 will not be
      material.


F-10





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





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





Purchased
      Software Asset and FASB 144 Financial Valuation and Analysis:





On
      February 28, 2007 and September 14, 2007, we purchased two software assets
      and
      combined them into one software asset. The software asset has been enhanced
      through customizations to meet a broader range of needs, and is key to our
      web-based, enterprise-wide, healthcare information system (HIS). We recorded
      at
      cost the HIS software asset for the period ending December 31, 2007 based on
      the
      combined purchase prices of the two software assets and certain costs related
      to
      the customizations made in 2007.





In
      order
      to validate the value of the HIS software asset as recorded in our financial
      statements and to determine if there is any impairment or reduction in value,
      we
      hired an independent Company to perform financial valuation consulting and
      calculation analysis services using guidance provided in FASB 144 by applying
      the fair value standard as defined in FASB pronouncements and business valuation
      calculations and consultation analysis. These services were performed in
      accordance with the standards and definitions of the American Institute of
      Certified Public Accountants’ (AICPA’s) Code of Professional Conduct and
      Statement on Standards for Valuation Services (SSVS) and all standards of the
      National Association of Certified Valuation Analysts (NACVA).





The
      result of the independent FASB 144 business valuation calculations and
      consultation analysis conducted for us was that our HIS software asset shows
      no
      indication of impairment based on current market conditions and its projected
      net cash flow - undiscounted. Therefore, based on the result we determined
      that
      the HIS software asset is worth at the least the value recorded in our financial
      statements, and that we do not need to reduce the recorded value of the HIS
      software asset at this time. Amortization will be recognized when the asset
      is
      placed in service and over its useful life.





Instruments
      with Characteristics of Both Liabilities and Equity:





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 adopted 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.





NOTE
      2 -
      GOING CONCERN UNCERTAINTY:





The
      accompanying consolidated 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
      $2,098,952  as
      of
      December 31, 2007, and has sustained significant losses from operations, which
      raised 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 consolidated 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 continue to 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.


F-11





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      3 -
      MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS:





Commencing
      March 20, 2003 through April 11, 2004, the Company acquired an additional 70%
      interest in Union Imaging Associates, JV. This additional 70% brought the
      Company's ownership of Union Imaging Associates, JV to 80%. It was acquired
      for
      varying prices totaling $1,525,000, payable in monthly installments over
      approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's
      share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.")
      in exchange for 350,000 shares, of the Company's common stock with a valuation
      of $154,000 at the time of purchase, and a note for $27,000 to be paid in 18
      payments of $1,500.00 per month. The 350,000 shares of common stock were issued
      on October 20, 2006. As a condition of the purchase, the Company agreed to
      re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any
      consecutive 20 day period commencing September 1, 2008 through the last day
      of
      February 2009, the stock price was below $1.00 per share. The purchase of Dr.
      Wolkstein's ownership interest brings the Company's total ownership in UIA,
      Inc.
      to 90%. The cash portion of the purchases were paid monthly through April 2011.
      The remaining average monthly payments are $11,223 (2008), $4,855 (2009), $2,636
      (2010) and $879 (2011).





In
      July,
      2006, we entered into a Letter of Intent to divest its ownership interests
      in
      Modern Medical Imaging at Atrium, L.L.C., a Limited Liability Company ("the
      L.L.C."). The transaction is to be structured in the form of a sale of the
      L.L.C. whereby 100% of the membership interest is acquired, in exchange for
      $250,000 in cash with specific provisions included for the timing of payments
      with the majority of payment due at closing. In addition, assignments will
      be
      included for the Company to assume certain accounts receivables and accounts
      payables as of the closing date of the transaction. On September 1, 2006, we
      entered into a definitive agreement with a privately-held organization and
      sold
      its ownership interests in Modern Medical Imaging at Atrium, L.L.C. for $250,000
      under essentially the same terms and conditions as described above and outlined
      in the Letter of Intent. Even though the new owners of the Imaging Center at
      Atrium assumed the liabilities of the business, the Company remained
      contingently liable for a long term facility lease, and MRI equipment lease.
      Subsequent to us selling the facility, the purchaser also acquired the
      condominium space covered by this facility lease, terminating our contingent
      liability under the lease. We remain contingently liable on the MRI lease that
      was approximately $170,000 at December 31, 2007.





On
      February 28, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P. ("MTI-II") to acquire MTI-II's Medical Software
      Assets (the "Assets") in exchange for 1 million shares of our common stock
      ("Common Stock") valued at $730,000 based on $0.73 per share. The transaction
      closed in March of 2007. The Assets consist of medical computer software that
      organizes, manages, and maintains patient scheduling, registration, medical
      records, billing, and includes other customized components. The shares of Common
      stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as
      amended. Paul Harrison, a member of our Board of Directors, is the President
      of
      INEX Group, Inc., which serves as the General Partner of MTI-II. Mr. Harrison
      received 562,500 shares of our Common Stock of the total 1 million shares issued
      to MTI-II pursuant to this Agreement. The Assets purchased are expected to
      be
      used to bring new web-based, information system solutions to help automate
      and
      provide expanded outsourced management and business process services to our
      existing clinics and to the large market of other outpatient clinics that are
      owned or operated by physicians (including radiologists), hospitals, employers,
      and health insurers .


F-12




MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENT


DECEMBER
      31, 2007 AND 2006





NOTE
      3 -
      MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS (continued):





On
      September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin
      Software Asset (the "Asset") in exchange for 500,000 shares of our common stock
      ("Common Stock"), warrants ("Warrants") for 900,000 shares of our common stock
      with an exercise price of $0.70 per share, and $250,000 to be paid within 12
      months from the date of the Agreement. The transaction is expected to close
      by
      the end of September 2007. The Asset consists of healthcare payer admin computer
      software that helps organize, manage, and maintain health plans, membership,
      eligibility, claims administration, and includes other customized components.
      The shares of Common stock were issued pursuant to Section 4(2) of the
      Securities Act of 1933, as amended. Paul Harrison, a member of the Board of
      Directors of MODM, is the President of INEX Group, Inc., which serves as the
      General Partner of MTI-II. Mr. Harrison will be entitled to receive 281,250
      shares of our Common Stock, and a Warrant for 506,250 of our Common Stock with
      an exercise price of $0.70 per share issuable to MTI-II pursuant to this
      Agreement.





NOTE
      4 -
      PROPERTY AND EQUIPMENT.





Property
      and equipment are summarized by major classification as follows:





December
                31,Useful
                lives
            
            2007Medical
                Equipment
            
            
            5
                - 10 years
            
            $
            3,385,258Furniture
                and Fixtures
            
            
            3
                - 5 years
            
            
            39,040Automobiles
            
            
            5
                years
            
            
            67,865Computer
                equipment and software
            
            
            3
                - 5 years
            
            
            260,969Leasehold
                improvements
            
            
            5
                - 10 years
            
            
            602,7594,355,891Less:
                Accumulated Depreciation and Amortization
            
            
            
            
            
            3,081,470$
            1,274,421Depreciation
                expense for the year ended December 31, 2007
            
            
            
            
            $
            568,186





NOTE
      5 -
      CONVERTIBLE DEBT





In
      May
      2006 Jacov Hayut agreed to amend the terms of the 10% Notes from October 1999
      by
      implementing a minimum conversion price of $0.179 per share. The minimum
      conversion price was set by reference to the terms of the original October
      1999
      issuance of the convertible debt agreement. The original debt agreement set
      the
      price at 72.5% the lowest bid price of the Common stock as reported on the
      OTC
      Bulletin for the 30 days prior to conversion, that price was $0.249. On December
      21, 2006, Mr. Hayut converted the remaining outstanding balance of $129,156
      into
      339,886 shares at a conversion price of $0.38 per share.





Between
      June 2002 and July 2004 the company has issued an aggregate of $950,000 in
      principal amount of convertible secured promissory notes bearing interest at
      a
      rate of 9.25% per annum. On March 30, 2006, Motti Sharon converted a total
      of
      $57,280 of the convertible notes into 320,000 shares of common stock. On April
      20, 2006, Motti Sharon converted an additional $89,500, of the convertible
      notes
      into 500,000 shares of common stock. On December 21, 2006, the Company converted
      the remaining $803,220 of the 9.25% convertible notes remaining outstanding.
      The
      conversion rate was $0.179 per share, resulting in 4,487,262 shares of common
      stock being issued.


F-13





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      6 -
      EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS





The
      purpose of the 2003 and 1999 Option Plans 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 and 1999 Option Plans, the Company
      is
      authorized to issue options for a total of 2,000,000 and 500,000 shares of
      Common Stock, respectively.





On
      September 27, 2006 the Board of Directors of Modern Medical Modalities
      Corporation (the "Company") approved the grant of a total of 1,168,000 stock
      options pursuant to the Company's 2003 Stock Option Plan ("2003 Plan") to two
      employees and one non-employee director. Specifically, the Company issued
      performance-based stock options pursuant to Performance for Stock Options
      Agreements equal to a potential of 868,000 shares of the Company's common stock
      exercisable at $0.50 per share, based primarily on the Company achieving certain
      amounts of new revenue upon the successful completion of strategic acquisition
      opportunities ("Performance Based Stock Options"), and stock options to purchase
      300,000 shares of the Company's common stock at an exercise price of $0.50
      per
      share that vest one-third (1/3) annually from the date of grant ("Three-Year
      stock Options").





Mr.
      Paul
      W. Harrison, a non-employee director of the Company, received Performance Based
      Stock Options to purchase a potential of 434,000 shares, and Three-Year Stock
      Options to purchase 100,000 shares. Mr. Minesh Patel, the Company's Chief
      Financial Officer, and Mr. Bruce Phillips, the Company's Controller, each
      received Performance Based Stock Options to purchase a potential of 217,000
      shares, and Three-Year Stock Options to purchase 100,000 shares.





On
      October 17, 2006 the Board of Directors of Modern Medical Modalities Corporation
      (the "Company") approved the grant of a total of 200,000 stock options pursuant
      to the Company's 2003 Stock Option Plan ("2003 Plan") to two employees.
      Specifically, the Company issued Stock Option Agreements for stock options
      to
      purchase 200,000 shares of the Company's common stock at an exercise price
      of
      $0.50 per share that vest one-third (1/3) annually from the date of grant
      ("Three-Year stock Options"). Ms. Elli Pittas, a manager in the Company,
      received Three-Year Stock Options with vesting provisions to purchase 100,000
      shares at an exercise price of $0.50 per share. Mr. John Lentini, a manager
      in
      the Company, received Three-Year Stock Options with vesting provisions to
      purchase 100,000 shares at an exercise price of $0.50 per
      share.


F-14


MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      6 -
      EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS continued:





In
      addition to the stock option grants, the Board of Directors approved Performance
      Bonus Agreements for Messrs. Harrison, Patel, and Phillips whereby Mr. Harrison
      was allocated a total of $226,500 cash bonus, and Messrs. Patel and Phillips
      were each allocated a total of $113,250 cash bonus, upon the Company achieving
      certain amounts of new revenue pursuant to the successful completion of
      strategic acquisition opportunities.





On
      June
      1, 2007, we entered into performance-based stock agreements with certain
      directors and management to encourage extraordinary efforts in key categories
      in
      a short time frame and provide incentives based on defined performance criteria.
      The Company believes that Paul Harrison will be very instrumental in providing
      growth strategy and guidance and in using his experience, contacts, and track
      record to help rapidly grow the Company through acquisitions, and certain
      management will be important to helping integrate the acquisitions and the
      Modern Medical Network System on a profitable basis. We issued Paul Harrison
      a
      performance based stock warrant agreement for 1,800,000 shares at $0.65 per
      share (using the June 1, 2007 closing price) based on the following criteria
      and
      allocations: 360,000 stock warrants upon execution of the Agreement, 360,000
      stock warrants upon the Company closing profitable acquisitions with aggregate
      revenues of $10,000,000 (pro-rata award if revenues are less) within 12 months,
      360,000 stock warrants after the Modern Medical Network System is used by an
      acquisition, and 720,000 stock warrants after the Company achieves 4 quarters
      of
      positive Income from Operations (following the date of the Agreement). We issued
      Minesh Patel a performance based stock option agreement for 400,000 shares
      at
      $0.65 per share (using the June 1, 2007 closing price) based on the following
      criteria and allocations: 100,000 stock options upon execution of the Agreement,
      100,000 stock options upon the Company closing profitable acquisitions with
      aggregate revenues of $10,000,000 (pro-rata award if revenues are less) within
      12 months, 100,000 stock options after the Modern Medical Network System is
      used
      by an acquisition, 100,000 stock options after the Company achieves 4 quarters
      of positive Income from Operations (following the date of the Agreement). We
      issued Bruce Phillips a performance based stock option agreement for 400,000
      shares at $0.65 per share (using the June 1, 2007 closing price) based on the
      following criteria and allocations: 100,000 stock options upon execution of
      the
      Agreement, 100,000 stock options upon the Company closing profitable
      acquisitions with aggregate revenues of $10,000,000 (pro-rata award if revenues
      are less) within 12 months, 100,000 stock options after the Modern Medical
      Network System is used by an acquisition, 100,000 stock options after the
      Company achieves 4 quarters of positive Income from Operations (following the
      date of the Agreement). We issued Elli Pittas performance based stock warrant
      agreement for 100,000 shares at $0.65 per share (using the June 1, 2007 closing
      price) based on the following criteria and allocations: 50,000 stock warrants
      upon execution of the Agreement and 50,000 stock


warrants
      after the Company achieves 4 quarters of positive Income from Operations
      (following the date of the Agreement). We issued John Lentini a performance
      based stock warrant agreement for 100,000 shares at $0.65 per share (using
      the
      June 1, 2007 closing price) based on the following criteria and allocations:
      50,000 stock warrants upon execution of the Agreement and 50,000 stock warrants
      after the Company achieves 4 quarters of positive Income from Operations
      (following the date of the Agreement).





On
      June
      11, 2007, we filed an S-8 registration statement for securities related to
      our
      2003 Stock Option Plan. Descriptions of our 2003 Stock Option Plan and the
      securities are contained in our filing of the S-8 registration statement, which
      includes 2,000,000 shares of common stock to cover stock options for up to
      2,000,000 shares with a proposed maximum offering price of $0.67 per share
      and a
      proposed maximum aggregate offering price of $1,340,000. On November 6, 2007,
      we
      entered into incentive stock option agreements with employees of the Company
      to
      provide incentives for remaining with the Company and to encourage extra efforts
      and increased performance. We issued stock options for 190,000 shares of our
      common stock at an exercise price of $0.37 per share. The stock options have
      a
      10 year term and the vesting criteria is based on a 3 year period, whereby
      1/3
      of the shares are vested each year for the periods November 5, 2008, November
      5,
      2009, and November 5, 2010.





F-15


MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      6 -
      EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS continued:





On
      October 9, 2007, we entered amended, cancelled, and issued new Performance
      Stock
      Agreements with certain directors and management to encourage extraordinary
      efforts in key categories that better fit our expanded growth strategy, which
      now includes obtaining new direct sales of our information system and
      administrative services to other healthcare organizations in addition to
      obtaining new business through acquisitions and to provide incentives based
      on
      new performance criteria. The Company believes that Paul Harrison will be very
      instrumental in providing growth strategy and guidance and in using his
      experience, contacts, and track record to help rapidly grow the Company through
      direct sales of its systems and services and through acquisitions, and certain
      management will be important to helping integrate the acquisitions and the
      Modern Medical Network System on a profitable basis. On October 9, 2007, we
      amended Paul Harrison’s performance based stock warrant agreement with the same
      number of 1,800,000 shares at the same exercise price of $0.65 per share based
      on the following new criteria and allocations: 360,000 stock warrants upon
      execution of the Agreement; 360,000 stock warrants awarded for each $1,000,000,
      up to an aggregate award of 1,080,000 stock warrants based on up to $3,000,000
      in aggregate revenues, contracted for, or generated by, the Company (including
      its subsidiaries and affiliates) in information systems and services related
      sales or transactions and in related administrative services sales or
      transactions using the Company’s information system; and 360,000 stock warrants
      after the Company’s Information System is used by another organization. We
      cancelled Minesh Patel’s performance based stock option agreement for 400,000
      shares at $0.65 per share issued on June 1, 2007 and on October 9, 2007, issued
      him a performance based warrant agreement for the same number of 400,000 shares
      at the same price of $0.65 per share based on the following criteria and
      allocations: 200,000 stock warrants upon execution of the Agreement; 50,000
      stock warrants awarded for each $1,000,000, up to an aggregate award of 150,000
      stock warrants based on up to $3,000,000 in aggregate revenues, contracted
      for,
      or generated by the Company (including its subsidiaries and affiliates) in
      information systems and services related sales or transactions and in related
      administrative services sales or transactions using the Company’s information
      system; 50,000 stock warrants after the Company’s Information System is used by
      another organization. We cancelled Bruce Phillips’ performance based stock
      option agreement for 400,000 shares at $0.65 per share issued on June 1, 2007
      and on October 9, 2007, issued him a performance based warrant agreement for
      the
      same number of 400,000 shares at the same price of $0.65 per share based on
      the
      following criteria and allocations: 200,000 stock warrants upon execution of
      the
      Agreement; 50,000 stock warrants awarded for each $1,000,000, up to an aggregate
      award of 150,000 stock warrants based on up to $3,000,000 in aggregate revenues,
      contracted for, or generated by the Company (including its subsidiaries and
      affiliates) in information systems and services related sales or transactions


and
      in
      related administrative services sales or transactions using the Company’s
      information system; 50,000 stock warrants after the Company’s Information System
      is used by another organization. On October 9, 2007, the Company entered into
      a
      warrant agreement with Baruh Hayut and granted him a stock warrant for 720,000
      shares at $0.75 per share based on the following criteria: 720,000 stock
      warrants awarded once $3,000,000 in aggregate revenues have been contracted
      for,
      or generated by, the Company (including its subsidiaries and affiliates) in
      information systems and services related sales or transactions and in related
      administrative services sales or transactions using the Company’s information
      system.





There
      are
      no other material relationships between the Company or its affiliates and any
      of
      the parties that were granted the Performance Based Stock Options, Three-Year
      Stock Options and Cash Performance Bonus other than those described
      herein.





F-16




MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      6 -
      EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS continued:


A
        summary
        of stock option activity as of December 31, 2007 and 2006and changes during
        the
        years ended on those dates is presented below:
 2007
                
                2006Weighted
                
                
                
                WeightedAverage
                
                
                
                AverageExercise
                
                
                
                ExerciseStock
                    Options
                
                Shares
                
                Price
                
                
                Shares
                
                PriceOutstanding
                    at beginning of year
                
                
                1,368,000
                
                $
                0.5000
                
                
                0
                
                $
                0.0000Granted
                
                
                190,000
                
                $
                0.3700
                
                
                1,368,000
                
                $
                0.5000Exercised
                
                
                0
                
                $
                0.0000
                
                
                0
                
                $
                0.0000Forfeited
                    or expired
                
                
                0
                
                $
                0.0000
                
                
                0
                
                $
                0.0000Outstanding
                    at end of year
                
                
                1,558,000
                
                $
                0.4841
                
                
                1,368,000
                
                $
                0.5000
  The
        following table summarizes the status of nonvested shares of stock options
        as of
        December 31, 2007:
 WeightedAverageGrant
                    DateNonvested
                    Shares
                
                
                Shares
                
                Fair
                    ValueNonvested
                    at beginning of year
                
                
                1,268,000
                
                $
                0.3108Granted
                
                
                190,000
                
                $
                0.5473Vested
                
                
                (166,665
                )
                $
                0.3274Forfieted
                    or expired
                
                
                0
                
                $
                0.0000Nonvested
                    at end of year
                
                
                1,291,335
                
                $
                0.3435
  The
        following table summarizes information about stock options outstanding at
        December 31, 2007:
 WeightedAverage
                
                Weighted
                
                
                
                WeightedRemaining
                
                Average
                
                
                
                AverageExercise
                
                Number
                
                Contractual
                
                Exercise
                
                Number
                
                ExercisePrices
                
                Outstanding
                
                Life
                    in Years
                
                Price
                
                Exercisable
                
                Price$
                0.3000
                
                
                1,168,000
                
                
                3.7
                
                $
                0.5000
                
                
                200,000
                
                $
                0.5000$
                0.3687
                
                
                200,000
                
                
                3.8
                
                $
                0.5000
                
                
                66,666
                
                $
                0.5000$
                0.5473
                
                
                190,000
                
                
                9.8
                
                $
                0.3700
                
                
                0
                
                $
                0.0001,558,000
                
                
                5.1
                
                $
                0.4841
                
                
                266,000
                
                $
                0.000





The
      weighted average remaining life of the options/warrants outstanding at December
      31, 2007 is 4.74 years.





Note
      7 -
      SHARE-BASED PAYMENTS IN ACCORDANCE WITH SFAS 123(R)





For
      the
      twelve month periods ended December 31, 2007 and 2006, we conducted an outside
      independent analysis and our own review, and based on the results, we recognized
      $1,802,395 and $213,428, respectively, in share-based payments related to
      warrants and stock options issued with the rights to exercise 6,215,198 shares
      in 2007 and 2,043,000 shares in 2006 of our common stock. The analysis and
      computation was performed based on our adoption of Statement of Financial
      Accounting Standards No. 123R, share-based payment (SFAS 123R), which requires
      the recognition of the fair value of stock-based compensation.





F-17




MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      8 -
      LONG-TERM DEBT.





Long-term
      debt consists of the following:





December 31, 2007Notes
                payable
            
            $
            1,158,976Capitalized
                lease obligations
            
            
            1,349,632Less
                current portion
            
            
            (1,335,276
            )Long-term
                debt, net of current portion
            
            $
            1,173,332





Notes
      Payable:





The
      future principal payments for long-term notes payable obligations are as
      follows:





December 31, 20072008
            
            $
            712,3472009
            
            
            126,3942010
            
            
            148,9662011
            
            
            10,3702012
                & Beyond
            
            
            160,899$
            1,158,976





On
      March
      18, 2005 Modern Medical entered into an unsecured loan agreement with Dr. Howard
      Kessler MD PA, in the amount of $300,000 payable in 12 monthly payments of
      $8,333 with a lump sum due on the 13th month in the amount of $221,826.71 and
      bears an interest rate of 8% per annum. In March 2006, this note was extended
      under the same terms as the first 12 months and is currently payable through
      February 2009. This loan funded the settlement of the DVI/US Bank loan
      settlement.





Commencing
      March 20, 2003 through April 11, 2004, the Company acquired an additional 70%
      interest in Union Imaging Associates, JV. This additional 70% brought the
      Company's ownership of Union Imaging Associates, JV to 80%. It was acquired
      for
      varying prices totaling $1,525,000, payable in monthly installments over
      approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's
      share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.")
      in exchange for 350,000 shares of the Company's common stock with a valuation
      of
      $154,000 at the time of purchase, and a note for $27,000 to be paid in 18
      payments of $1,500.00 per month. The 350,000 shares of common stock were issued
      on October 20, 2006. As a condition of the purchase, the Company agreed to
      re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any
      consecutive 20 day period commencing September 1, 2008 through the last day
      of
      February 2009, the stock price was below $1.00 per share. The purchase of Dr.
      Wolkstein's ownership interest brings the Company's total ownership in UIA,
      Inc.
      to 90%. ****




In
      February 2006, the Company entered into an unsecured note with Jacov Hayut
      in
      the amount of $150,000. The loan was for 12 months with interest at 15%, monthly
      payments are interest only with lump sum payment of $150,000 February 2007.
      This
      note was extended for 36 months under the same terms and conditions, except
      that
      the Company agreed to pay the note in full or in part at the lenders option
      upon
      the first equity capital raise or February 2010, which ever comes first. On
      June
      13, 2007 we paid $50,000 on the unsecured note, and on June 20, 2007 we paid
      $25,000 on the unsecured note.


F-18





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      8 -
      LONG-TERM DEBT (continued):





On
      October 25, 2006, we entered into an unsecured promissory note with Complete
      Flooring and Renovation, Inc. in the principal amount of $65,000. The loan
      is
      for a period of 24 months with an annual interest rate of 15%. The payments
      are
      to be made on the 26th of each month in 23 equal installments of $3,151.63
      and 1
      final installment of $3,151.67. The payments commenced on November 26, 2006
      and
      goes through November 10, 2008.





On
      December 6, 2006, we entered into an unsecured promissory note with Complete
      Flooring and Renovation, Inc. in the principal amount of $150,000. The loan
      is
      for a period of 48 months with an annual interest rate of 12%. The payments
      are
      to be made on the 6th of each month in 48 equal installments of $3,950.08.
      The
      payments commenced on January 6, 2006 and goes through December
      2010.





On
      November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai
      for $50,000. The terms of the Agreement include an annual interest rate of
      20%
      and the loan is to paid, in a lump sum with accrued interest, at the earlier
      of
      6 months from the effective date of the Agreement, or the closing date of an
      equity based financing by the Company. In addition, the Company is to issue
      a
      Warrant for the rights to 50,000 shares of the Company's common stock with
      an
      exercise price $0.70, the closing market price of the Company's common stock
      on
      November 10, 2006.





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, 2006 aggregated $665,938. The interest rates on these
      capital leases vary between 4.0% and 15.0% per annum. Monthly payments for
      these
      leases are approximately $39,000 for interest and principal. On November 1,
      2006, the Company was notified that it was in default of meeting certain terms
      and conditions of an equipment agreement with Siemens. The Company owes Siemens
      approximately $180,000 plus penalties at December 31, 2006 and is working to
      negotiate a revised agreement or settlement with Siemens, and is seeking to
      refinance the equipment with another organization.





The
      future principal payments for long-term capital lease obligations are as
      follows:





December 31, 20072008
            
            $
            622,9292009
            
            
            279,6802010
            
            
            238,1902011
            
            
            190,6532012
                & Beyond
            
            
            18,180$
            1,349,632





F-19





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      9 -
      RESTRUCTURING OF LONG-TERM DEBT





In
      April
      2005 the Company completed buyout of the balance of CitiCorp lease for a lump
      sum payment of $175,000 made on April 15, 2005 plus 25 equal monthly
      installments of $1,000, which were completed in April 2007. As a result of
      this
      negotiated settlement the Company recorded a gain of $211,171 on the settlement
      of this debt as of December 31, 2004. We have a contingent liability of $130,000
      with CitiCorp who has notified us of past due late fees on this note. The
      Company is currently disputing this charge with CitiCorp and believes it was
      forgiven as part of the overall settlement.





NOTE
      10 -
      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, 2007
      and
      2006 of $51,757, and $79,255, respectively. The Company has a net operating
      loss
      carry-forward for federal income tax purposes of approximately $13,661,763,
      available to offset income taxes through 2016 - 2023.





The
      components of the Company's provision (benefit) for income taxes, for the fiscal
      years ended 2007 and 2006 are as follows:




2007
            
            2006Current:Federal
            
            $
            -
            
            $
            -State
                and local
            
            
            51,193
            
            
            79,255Deferred:Federal
            
            
            -
            
            
            -State
                and local
            
            
            -
            
            
            -Provision
                for income taxes
            
            $
            51,193
            
            $
            79,255





A
      reconciliation of income tax computed at the federal and state statutory rates
      of 35% and 3%, respectively to income tax expense (benefit) is as
      follows:





2007
            
            2006U.S.
                Federal statutory rate
            
            $
            (4,527,797
            )
            $
            (3,562,000
            )State
                taxes
            
            
            (388,097
            )
            
            (305,000
            )Effective
                tax rate
            
            $
            (4,915,894
            )
            $
            (3,867,000
            )





F-20





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      10 -
      INCOME TAXES continued:





The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and deferred tax liabilities at December 31, 2007 and 2006
      are presented below:





2007
            
            2006Deferred
                tax assets:Net
                operating loss carryforward
            
            $
            (4,915,894
            )
            $
            (3,867,000
            )Less
                valuation allowance
            
            
            4,915,894
            
            
            3,867,000Net
                deferred tax asset
            
            $
            -
            
            $
            -





The
      valuation reserve increased by $1,048,894.





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 carry forwards 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 carry forwards are subject
      to these limitations. Future ownership changes could also further limit the
      utilization of any net operating loss carry forwards as of that
      date.





NOTE
      11 -
      Equity Compensation Plan Information





Plan
      category Number of Securities to Weighted-average Number of securities be issued
      upon 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))





Equity
      Compensation Plan Information




Plan Category
            
            Number of Securities to beissued upon exercise ofOutstanding options
            
            Weighted-averageexercise price ofoutstanding options,warrants and rightsplans (excludingsecurities reflected incolumn (a))
            
            Number of Securitiesremaining available forfuture issuance underequity compensationEquity compensation Plans approved by
                Security holders
            
            
            1,558,000
            
            $
            0.48
            
            
            942,000Equity
                compensation Plans not approved by Security holders
            
            
            6,655,198
            
            $
            0.68
            
            
            -0-


F-21





MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2007 AND 2006





NOTE
      12 -
      RELATED PARTY 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 Medicals 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
      2003, the Company issued an aggregate of $140,000 principal amount of its 9.25%
      convertible secured promissory notes to Jacov Hayut, which is 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. Jacov Hayut
      was
      a Director and Officer of the Company until June 8, 2006.





Medical
      Equipment Solutions, which is controlled by Ronnie Antebi and Yosef Azoulai,
      has
      a management agreement with the company and also are investors in the company
      either individually or collectively. MES provides services in selecting,
      providing, and installing medical equipment. For these services, they are
      compensated 5% of Union Imaging Centers' collection and 6% for the Manalapan
      site collections. The Company charged operations $184,140 in 2007 and $143,762
      in 2006 under these agreements. Ronnie Antebi and Yosef Azoulai have jointly
      and
      individually provided term financing for various loan restructurings, of which
      approximately $176,000 remains outstanding at December 31, 2007.




In
      June
      2003, the Company issued an aggregate of $225,000 principal amount of its 9.25%
      convertible secured promissory notes to Motti Sharon which is 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.





On
      July
      10, 2006, in connection with his resignation as the Company's President and
      Secretary, Jacov Hayut agreed to transfer 8,625,000 shares of the Company's
      common stock, representing 58.2% of the total shares issued and outstanding,
      to
      BIBY Family Partners, LLC, a Georgia limited liability company (the "Family
      Fund") controlled by Baruh Hayut, our Chairman and CEO - See Note
      18.





On
      August
      23, 2006, we issued a Warrant for the right to buy 100,000 shares of the
      Company's common stock to Paul W. Harrison in connection with his appointment
      as
      a director of the Company. The Warrant Agreement terms include an exercise
      price
      of $0.18 per share, which was above market price at the time of the execution
      of
      the Warrant Agreement. The exercise date is August 23, 2006 and the expiration
      date is August 22, 2011. On August 24, 2006, Paul W. Harrison exercised his
      rights under the August 23, 2006 Warrant Agreement and bought 45,000 shares
      of
      the Company's common stock for $8,100. The 45,000 shares were issued on October
      20, 2006.




F-22





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      12 -
      RELATED PARTY TRANSACTIONS (continued):





In
      May,
      2006, the company entered into an Information Systems Collaboration Agreement
      with Attune, Inc., a software company that also builds customized information
      systems. The Agreement was for special licensing of business software and
      customizations that included computer source code at a cost of $65,200 plus
      support costs of $9,000 per year or $750 per month at the option of the Company.
      Support costs were waived for the first year, and each subsequent year of
      software support starts in April. Paul W. Harrison, a member of the Company's
      Board of Directors is the President of INEX Group, Inc. which has a majority
      ownership interest in Attune, Inc. Subsequently, in December, 2006, the Company
      entered into an Addendum to the Information Systems Collaboration Agreement
      with
      Attune, Inc. to expand the special licensing of business software, obtain
      additional customization services, and secure outsourcing services to help
      manage an enterprise computer network and service center. Attune, Inc. agreed
      to
      skip the first 90 days of costs it had incurred prior to entering into the
      Addendum, and beginning January 1, 2007, the Company agreed to pay Attune,
      Inc.
      an additional fee of $5,373.00 per month for the expanded business software
      and
      services.





On
      February 28, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P. ("MTI-II") to acquire MTI-II's Medical Software
      Assets (the "Assets") in exchange for 1 million shares of our common stock
      ("Common Stock") valued at $730,000 based on $0.73 per share. The transaction
      closed in March of 2007. The Assets consist of medical computer software that
      organizes, manages, and maintains patient scheduling, registration, medical
      records, billing, and includes other customized components. The shares of Common
      stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as
      amended. Paul Harrison, a member of our Board of Directors, is the President
      of
      INEX Group, Inc., which serves as the General Partner of MTI-II. Mr. Harrison
      received 562,500 shares of our Common Stock of the total 1 million shares issued
      to MTI-II pursuant to this  Agreement.





On
      September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
      with MTI Partners II, L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin
      Software Asset (the "Asset") in exchange for 500,000 shares of our common stock
      ("Common Stock"), warrants ("Warrants") for 900,000 shares of our common stock
      with an exercise price of $0.70 per share, and $250,000 to be paid within 12
      months from the date of the Agreement. The transaction is expected to close
      by
      the end of September 2007. The Asset consists of healthcare payer admin computer
      software that helps organize, manage, and maintain health plans, membership,
      eligibility, claims administration, and includes other customized components.
      The shares of Common stock were issued pursuant to Section 4(2) of the
      Securities Act of 1933, as amended. Paul Harrison, a member of the Board of
      Directors of MODM, is the President of INEX Group, Inc., which serves as the
      General Partner of MTI-II. Mr. Harrison will be entitled to receive 281,250
      shares of our Common Stock, and a Warrant for 506,250 of our Common Stock with
      an exercise price of $0.70 per share issuable to MTI-II pursuant to this
      Agreement .





NOTE
      13 -
      CHANGES IN DIRECTORS AND OFFICERS:





On
      June
      8, 2006, Mr. Jacov Hayut informed the Company that effective immediately he
      would step down as President, Secretary and as a member of the Company's board
      of directors.





On
      June
      8, 2006, our board of directors unanimously approved a resolution appointing
      Paul W. Harrison to the board of directors filling the vacancy created by Mr.
      Jacov Hayut's resignation.




F-23


MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      13 -
      CHANGES IN DIRECTORS AND OFFICERS (continued):





On
      February 23, 2007 our board of directors established a Lead Director position,
      and approved Paul W. Harrison to fill the position, and provided a stock bonus
      of 360,000 shares of our common stock, valued at $284,400 based on $0.79 per
      share, to Paul W. Harrison for taking on additional responsibilities of the
      Lead
      Director position and other relevant activities as designated by our board
      of
      directors. Our board of directors has determined that the Lead Director should
      have the following duties and responsibilities: advise the Chairman in
      scheduling board meetings and setting agendas involving the independent
      directors; convene meetings and lead executive sessions of the Company's
      independent directors, promote dialogue between directors; facilitate
      information flow and communications to the Company's shareholders and other
      related pertinent matters; assist the Board in fulfilling its responsibilities
      by meeting with the CEO to review and give input to the Company's strategic
      plan; perform other duties as specified by the board. On October 9, 2007, Paul
      Harrison returned the 360,000 shares of common stock to us, and we issued him
      a
      warrant for 540,000 shares with an exercise price of $0.65 per share for taking
      on additional responsibilities as the Lead Director.





NOTE
      14 -
      COMMITMENTS AND CONTINGENCIES.





(a)
      Employment Agreements:





The
      Company has no employment agreements.





(b)
      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 was $2,911.00. During 2006 we decided to
      discontinue our business operations in the Greater New Orleans area and to
      abandon our facility in Metairie, Louisiana due to the significant damage caused
      by hurricane Katrina and the negative economic impact that has led to a loss
      from discontinuance of business of approximately ($320,000). We have provided
      for the loss and gain from the insurance recovery in our financial statements
      in
      accordance with SAFS 5.





In
      April
      2005 Modern Medical entered into a five (5) year lease agreement for
      approximately 7,150 square feet on 441-445 Chestnut St. in Union, NJ for
      approximately $15,000 per month. This lease is renewable for an additional
      5-year term at no more than $17,875 per month, which term expires on April
      1,
      2015. On March 19, 2008, Modern Medical exercised its lease option through
      March
      31, 2015 at $17,875 per month and obtained an additional 5 year option through
      March 31, 2020 at $19,067 per month.





In
      April
      2005 Modern Medical entered into a five (5) year lease agreement for
      approximately 2,250 square feet on 439 Chestnut St. in Union, NJ for
      approximately $3,844 per month. This lease is renewable for an additional 5-year
      term at no more than $4,500 per month, which term expires on April 1, 2015.
      On
      March 19, 2008, Modern Medical exercised its lease option through March 31,
      2015
      at $4,500 per month and obtained an additional 5 year option through March
      31,
      2020 at $4,875 per month.





In
      February 2001 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 for approximately $1,760 per month. Effective September 1,
      2004, Union Imaging Associates, JV and Modern Medical took an additional 600
      square feet for an additional $1,000 per month and extending the lease to
      February 1, 2007 and obtained an option to renew the lease for an additional
      3
      years upon 180 days prior written notice of the Company's intent to exercise
      its
      option. The Company exercised its option to extend the lease for 3 years,
      extending the lease through February 1, 2010.




F-24





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      14 -
      COMMITMENTS AND CONTINGENCIES continued:





On
      April
      1, 2004 Modern Medical entered into a 10-year lease with an option for an
      additional 5 years, in Manalapan NJ. The lease is for approximately 5,620 square
      feet, the monthly rental is $11,240. The previous tenant had abandoned the
      space
      which was being used as an imaging center. We reactivated the center and
      completed the state of New Jersey licensing procedure. Subsequently we sold
      the
      facility to a third party who also acquired the condominium space covered by
      this lease, terminating our contingent liability under the lease.





Table
      of
      future rent payments under non-cancelable property leases:





YEAR
            
            
            Amount2008
            
            $
            277,0002009
            
            $
            277,0002010
            
            $
            264,0002011
            
            $
            269,0002012
            
            $
            269,000Thereafter
            
            $
            605,000





Facility
      rental expense charged to operations in 2007 and 2006 was $297,071 and $438,446,
      respectively.





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





NOTE
      15 – LITIGATION:





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. The company filed for a motion
      to dismiss, which was granted on July 2004. The plaintiff was given an
      opportunity to amend its complaint if it desired.





Modern
      Medical Modalities Corporation ("MMM") was served with a "Motion for Summary
      Judgment" on September 23, 2005, related to the above lawsuit. MMM was one
      of
      several defendants, of which certain defendants are unrelated to MMM. The
      summary judgment is seeking $262,750 in contract fees and $525,500 in liquidated
      damages, plus interest and attorneys fees. It is the opinion of management
      that
      there is no legitimate basis for the claim, and MMM intends to continue to
      vigorously defend itself in this lawsuit. On November 4, 2005, the plaintiff
      withdrew its Motion for Summary Judgment, without prejudice.





Open
      MRI
& Imaging Center of Metairie, LLC was served with a lawsuit April 2004 in
      the Civil District Court for the Parish of Orleans, state of Louisiana alleging
      misdiagnosing of a brain tumor on June 27, 2000, resulting in the death of
      a
      patient. Our insurance company was notified it is in the process of settling
      the
      case within the terms of our insurance policy. The insurance company does not
      believe the claim will go to trial. In July, 2006 our insurance company notified
      us that it entered into a settlement agreement on our behalf in the amount
      of
      $20,000, in response to the April 2004 lawsuit referenced above. The company
      has
      provided for the loss and gain from the insurance recovery in its financial
      statements in accordance with SAFS 5.




F-25





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      15 -
      LITIGATION continued:





On
      October 4, 2006, we were served with a lawsuit from Lindgren R.F. Enclosures,
      Inc ("Lindgren"). The lawsuit is for a claim made for payment related to goods
      and services provided to the Company in the amount of $17,764.40 together with
      interest and costs of the lawsuit. The Company believes that Lindgren did not
      finish the project as agreed to and left it unfinished, causing the Company
      to
      find another source to finish the project and incur additional expenses and
      costly business delays due to Lindgren's failure to perform. In December 2006,
      the Company settled the lawsuit for $10,000.





In
      July,
      2006, a dispute arose between the Company and Medical Equipment Solutions
      ("MES") as the lessor of the medical equipment located in the Company's
      Metairie, Louisiana facility. The equipment was damaged as a result of hurricane
      Katrina, and the dispute is over terms of the agreement related to the
      resolution of the damaged equipment and any claim proceeds the insurance carrier
      may pay to the Company. As a result of the dispute, on August 16, 2006 the
      Company was served with a lawsuit by MES. The lawsuit is essentially seeking
      to
      recover monetary payments in the amount of an estimated $77,000 associated
      with
      rents under a lease agreement, plus an amount equal to 5% of the facility's
      gross cash flow to be determined by an accounting, plus other unspecified
      amounts for other expenses and costs related to the complaint. The Company
      also
      expects to assign any claim payments related to medical equipment that may
      be
      recovered from the Company's insurance policy to MES as part of reaching a
      settlement with MES. The Company has answered the lawsuit and has provided
      for
      the loss and gain from the insurance recovery and potential damages as a result
      of the lawsuit in its financial statements in accordance with SAFS 5. In the
      first quarter of 2007 MES withdrew their suit.





On
      October 12, 2006, we were served with a lawsuit by MARCAP seeking $350,000
      for
      amounts MARCAP claims is owed by the Company under an Agreement for the PET
      medical equipment. The Company has cured **** the
      default and settled the complaint brought by MARCAP.





NOTE
      16 -
      SETTLEMENT OF ARCHITECTURAL SERVICES FEES.





During
      the 4th Quarter of 2005 we settled outstanding fees for architectural services
      in the amount of $10,000 with Nick Tsapatsaris by agreeing to issue him 50,000
      shares of the company's common stock. These shares were issued effective April
      20, 2006.





NOTE
      17 -
      TRANSFER OF CONTROLLING INTEREST OF THE COMPANY'S COMMON STOCK.





On
      July
      10, 2006, in connection with his resignation as the Company's President and
      Secretary, Jacov Hayut agreed to transfer 8,625,000 shares of the Company's
      common stock, representing 58.2% of the total shares issued and outstanding,
      to
      BIBY Family Partners, LLC, a Georgia limited liability company (the "Family
      Fund") controlled by Baruh Hayut, our Chairman and CEO. As managing member
      of
      the Family Fund, Mr. Baruh Hayut has sole voting and dispositive power over
      the
      shares and, as such, now controls a majority interest of the voting stock of
      the
      Company. The other members of the Family Fund are Mr. Hayut's spouse and two
      children. Each owns a 25% interest in the Family Fund.





NOTE
      18 -
      DISCONTINUANCE OF METAIRIE, LOUISIANA BUSINESS.





On
      August
      29, 2005, hurricane Katrina caused significant damage to the Greater New Orleans
      area including Metairie, Louisiana. As a result of this hurricane, power and
      access was lost to our center in Metairie. Due to the delays in the adjudication
      of its property and casualty claims submitted to its insurance company, and
      the
      costs and risks associated with repairing or replacing the medical equipment
      and
      running the facility, the Company has decided to discontinue the related
      business operations and has exited the facility in Metairie, Louisiana. While
      we
      have not been notified that the Company owes facility lease payments since
      exiting the building in Metairie, Louisiana, the Company is contingently liable
      for the facility lease payments of approximately $143,300 in potential
      obligations until it obtains a release from the related facility lease contract.
      The negative economic impact that has led to a loss from discontinuance of
      business of approximately ($320,000). The company has provided for the loss
      and
      the gain from the insurance recovery in its financial statements in accordance
      with SAFS 5.


F-26





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      19 -
      INVESTOR AWARENESS CONSULTING AGREEMENT:





On
      June
      1, 2006, we entered into a Consulting Agreement with Investor Awareness, Inc.
      to
      provide financial public relations services. The Company agreed to pay a monthly
      retainer of $8,000 per month for six months with provisions to extend the
      Agreement based on the mutual agreement of the parties. In addition and pursuant
      to the terms of the Agreement, on September 15, the Board of Directors approved
      the issuance of 100,000 shares of its restricted common stock with an estimated
      value of $25,000 based on a June 1, 2006 price per share of $0.25, which payment
      was made as an additional consideration to secure a more favorable and fixed
      monthly fee, from Investor Awareness, Inc. for financial public relations
      services. On October 20, 2006, the 100,000 shares were issued to Investor
      Awareness, Inc.





NOTE
      20 -
      CONCORD EQUITY GROUP, LLC CONSULTING AGREEMENT:





On
      August
      8, 2006, we entered into a Consulting Agreement with Concord Equity Group,
      LLC
      to provide investment banking and financial advisory services on a non-exclusive
      basis in exchange for a Warrant Agreement to purchase 100,000 shares of the
      Company's common stock at $0.30 within five years. In addition, the Company
      agreed to pay $34,000 in the form of an initial retainer fee of $10,000 and
      a
      monthly retainer of $2,000 per month for 12 months.





NOTE
      21 -
      INFORMATION TECHNOLOGY LEASE AGREEMENTS WITH IBM:





In
      July
      2006, we signed a Lease Agreement with IBM for financing and providing
      information technology. The various contracts signed under the Agreement total
      $320,000. The terms of the Agreements include 48 months at approximately
      $9,200.00 per month. Each component of the information technology is billed
      and
      paid for separately. These leases are being accounted for as operating
      leases.





NOTE
      22 -
      WARRANT AGREEMENTS WITH NON-AFFILIATED PARTIES FOR OUTSIDE
      SERVICES:





We
      entered into Warrant Agreements with 3 non-affiliated parties for the rights
      to
      purchase 225,000 shares of the Company's common stock at an exercise price
      of
      $0.35 per share in return for providing company growth related
      services.





NOTE
      23 -
      CONSULTING AGREEMENT WITH BRETT BRIGGS, INC.





On
      September 1, 2006, we entered into a Consulting Agreement with Brett Briggs,
      Inc. to assist in further developing and expanding the business of the Company,
      and issued 100,000 shares of the Company's restricted stock with an estimated
      value of $35,000 based on a September 1, 2006 price per share of $0.255, in
      lieu
      of cash payments, in return for the services. The 100,000 shares were issued
      on
      October 20, 2006. In addition, the Company issued Fifty Thousand (50,000) Common
      Stock Warrants of the Company (the "Warrants") that are convertible into an
      equal number of shares of Common Stock of the Company as the Consulting Fee
      for
      Consultant's efforts pursuant to the Consulting Agreement. The Warrants shall
      have an exercise price of Seventy-Five Cents ($0.75) per share and shall have
      a
      thirty-six (36) month term. The Common Stock and the Warrants are subject to
      equitable adjustments for stock splits, stock dividends and similar
      events.





NOTE
      24 -
      CONSULTING AGREEMENT WITH John McAuliffe.





On
      November 23, 2006, we entered into a Consulting Agreement with John McAuliffe
      to
      provide financial public relations services. Pursuant to the terms of the
      Agreement, on February 28, 2007, the Board of Directors approved the issuance
      of
      200,000 shares of its restricted common stock with an estimated value of
      $120,000 based on a November 23, 2006 price per share of $0.60, in lieu of
      cash
      payments, to John McAuliffe for financial public relations
      services.


F-27





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006


NOTE
      25 -
      R.J. AUBREY IR SERVICES INVESTOR RELATIONS SERVICES:





On
      January 1, 2007 we entered into an Investor Relations Agreement with R.J. Aubrey
      IR Services to provide financial public relations services. The Company agreed
      to the issuance of 100,000 shares of its restricted common stock with an
      estimated value of $80,000 based on a price per share of $0.80 in lieu of cash
      payments and 50,000 common stock warrants convertible into an equal number
      of
      shares at an exercise price of seventy-five cents ($0.75) per share and have
      a
      36 month term to R.J. Aubrey IR Services, LLC for financial public relations
      services. On July 27, 2007 we entered into a Investor Relations Agreement with
      R.J. Aubrey IR Services to provide financial public relations services. The
      Company agreed to the issuance of 125,000 shares of its restricted common stock
      with an estimated value of $68,750 based on a price per share of $0.55 in lieu
      of cash payments and 75,000 common stock warrants convertible into an equal
      number of shares at an exercise price of seventy-five cents ($0.75) per share
      and have a 6 month term to R.J. Aubrey IR Services, LLC for financial public
      relations services.





NOTE
      26 -
      STRATEGIC GROWTH INTERNATIONAL:





On
      February 27, 2007 we entered into a consulting agreement with Strategic Growth
      International, Inc. (SGI) to provide financial public relations services. The
      Company agreed to pay a monthly retainer of $8,000 per month for six months
      and
      $9,000 per month after the Company completes its contemplated capital raise
      with
      provisions to extend the agreement based on the mutual agreement of the parties.
      In addition and pursuant to the terms of the agreement, on February 27, 2007,
      the Board of Directors approved the issuance of 250,000 shares of the Company’s
      restricted common stock and option for 400,000 shares of the Company's common
      stock to SGI for financial public relations services. The options will have
      a
      five-year duration and are exercisable at $0.80 per share. At the option of
      SGI,
      such options may be exercised on a cashless basis. The Company shall have the
      right to terminate the agreement on August 27, 2007 upon 10 days prior written
      notice. Upon such termination on August 27, 2007, the Company will have the
      right to rescind 125,000 shares of common stock and 200,000 options. On April
      5,
      2007, upon mutual agreement, the Company and SGI agreed to suspend the
      agreement. There are no further fees due SGI unless the agreement is reinstated.
      In consideration of the suspension of the agreement, the parties agreed to
      a
      payment of 1/12 of the option for 400,000 common shares (equal to an option
      for
      33,200 shares), as well as a payment of 1/12 of the 250,000 common shares,
      or
      20,750 shares with an estimated value of $14,733 based on a per share price
      of
      $0.71 on April 5, 2007, which payment was being made as additional consideration
      to secure a more favorable and fixed monthly fee.





NOTE
      27 -
      YOSEF AZOULAI LOAN AGREEMENT:





On
      March
      6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for
      $100,000. The terms of the Agreement include an annual interest rate of 20%
      and
      the loan is to paid, in a lump sum with accrued interest, at the earlier of
      6
      months from the effective date of the Agreement, or the closing date of an
      equity based financing by the Company. In addition, the Company is to issue
      a
      Warrant for the rights to 100,000 shares of the Company's common stock with
      an
      exercise price  $0.82
      based on the closing market price of the Company's common stock as March 6,
      2007.





NOTE
      28 -
      PURCHASE OF EQUIPMENT FROM MEDICAL EQUIPMENT SOLUTIONS, INC:





On
      June
      11, 2007, we purchased an automobile from Medical Equipment Solutions, Inc.
      for
      $57,200. The terms were a $19,200 down payment, $10,000 in cash and $9,200
      by
      issuing a warrant valued at $9,200 with five-year duration for 50,000 shares
      at
      an exercise price of $0.75 per share. The balance is being paid in 36 equal
      monthly payments of $1,226 per month with a 10% annual interest
      rate.


F-28





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      29 -
      INVESTMENT BANKING AGREEMENT WITH NEWBRIDGE SECURITIES:





On
      April
      13, 2007, we entered into an Agreement with Newbridge Securities Corporation,
      a
      Virginia corporation with offices in Ft. Lauderdale, Florida (the "Advisor").
      The Company engaged the Advisor to render financial and business advisory
      consulting advice to the Company as an investment banker relating to financial
      and similar matters. In consideration of the services to be rendered and
      performed by Newbridge during the term of this Agreement, the Company paid
      to
      the Advisor 250,000 shares of its restricted common stock ("Restricted Shares"),
      and will pay an additional 83,333 Restricted Shares on each of the three, six
      and nine month anniversaries of the date of the agreement, unless this Agreement
      has otherwise been terminated in accordance with Section 15 hereof. The
      Restricted Shares will be subject to standard piggyback registration rights.
      If
      this Agreement is terminated by the Advisor in accordance with Section 15 for
      any reason prior to the date that is three (3) months from the date hereof,
      Advisor shall return a prorated amount, prorated on a daily basis, of the
      initial 250,000 Restricted Shares to the Company for cancellation. Additionally,
      in the event that this Agreement is terminated as a result of Advisor no longer
      being a member in good standing of the NASD, Advisor shall return the initial
      250,000 Restricted Shares to the Company for cancellation. As of October 13,
      2007, we have an obligation to issue Newbridge Securities Corporation 166,666
      shares of our restricted common stock, and have been in discussions with
      Newbridge Securities Corporation to rescind the Agreement.





Note
      30 -
      COHEN CONSULTING AGREEMENT:





On
      April
      1, 2007, we entered into an agreement with Cohen Consulting (payable to Mark
      Cohen), for consulting services and agreed to pay $5,000 per month for a period
      of six months. The first month was paid immediately upon execution of this
      agreement. We also agreed to issue to Cohen Consulting (Mark Cohen) warrants
      to
      purchase 100,000 shares of our common stock, exercisable at a price of $0.75
      per
      share. The warrants are to be issued in installments: 5 warrants to purchase
      16,666 common shares each for the first five months and 1 warrant to purchase
      16,670 common shares in the last month. The warrants will be of a five-year
      duration and will have piggy-back registration rights. It is understood that
      the
      warrants may be exercised on a cashless basis at the option of Cohen Consulting
      (Mark Cohen). We made 3 payments totaling $15,000.00 for Cohen’s consulting
      services, and on June 20, 2007, we terminated the agreement with Cohen
      Consulting and made the final cash payment. At the time of the termination,
      Cohen Consulting (Mark Cohen) was entitled to warrants for 49,998 common shares
      at an exercise price of $0.75 per share under the terms of the
      agreement.





Note
      31 -
      OCEAN AVENUE CONSULTING AGREEMENT:





On
      May
      16, 2007, we entered into an agreement with Ocean Avenue for consulting services
      for a period of two months, and agreed to pay $2,500 for the first month (due
      upon execution of the agreement) and $5,000 for the second month. We also agreed
      to issue 30,000 shares of our common stock, and warrants to purchase 30,000
      common shares, exercisable at a price of $0.75 per share. The warrants will
      be
      of a five-year duration, and will have piggy-back registration rights. We made
      both cash payments, the final payment being made on June 20, 2007. The Ocean
      Avenue agreement has expired.


F-29





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





Note
      32 -
      CLAIM RELATED TO REIMBURSEMENT OF ACQUISITION EXPENSES:





On
      or
      about May 4, 2007, we received a letter claiming that we owe another
      organization for outside accounting preparation expenses that they incurred
      in
      connection with a due diligence that was performed by us and as part of a
      potential acquisition. The acquisition did not progress to a definitive
      agreement and the associated letter of intent has expired. We are reviewing
      the
      terms and conditions of the letter of intent, and are reviewing our records
      related to the due diligence in order to evaluate and respond to this matter.
      We
      determined that a commitment was made by us to contribute to certain accounting
      expenses that were incurred by other parties to prepare for an audit as part
      of
      a potential acquisition that was not consummated. On September 4, we reached
      a
      settlement agreement to pay $20,000 with a down payment of $5,000 and three
      payments of $5,000 each. On September 11, 2007 we paid the first payment of
      $5,000. On October 10, 2007 we paid the second payment of $5,000.





Note
      33 -
      CONVERSION OF DEBT AGREEMENT WITH MARVIN TEITELBAUM:





On
      May 9,
      2007 we entered into an agreement with Marvin Teitelbaum. We agreed to pay
      him
      50,000 shares of our restricted common stock in connection with a previous
      conversion of debt, and for construction services provided to us.





Note
      34 -
      CONSULTING AGREEMENT WITH SOUTHERN ADVISORY SERVICES, INC:





On
      May
      10, 2007, we entered into a Consulting Agreement with Southern Advisory
      Services, Inc. for them to provide merger and acquisition services on a
      non-exclusive basis, and introduce us to related opportunities. We agreed to
      pay
      Southern Advisory Services a performance fee equal to 4.25% of the total value
      of the transaction, payable in cash.





Note
      35 – MODERN MEDICAL MODALITIES CORP. NEW JERSEY STATE CORPORATE BUSINESS
      TAXES:





On
      May
      10, 2007, we offered and the State of New Jersey accepted an agreement to settle
      past due taxes for the Company in the amount of $97,116.61. On April 24, 2007,
      we paid a down payment of $31,027.50. The balance of $66,089.11 is to be paid
      over 36 equal installments of $2,381.00 beginning June 27, 2007.





Note
      36 -
      PRIVATE PLACEMENT OF OUR COMMON STOCK:





On
      June
      8, 2007, we entered into an agreement to sell an aggregate of 770,000 shares
      of
      the Company’s restricted common stock to two accredited investors in exchange
      for gross proceeds of $500,500. In connection with the sale of the common stock,
      we also issued warrants to the investors to purchase an aggregate of 462,000
      common shares. The warrants are exercisable for a period of five years from
      the
      date of issuance at an exercise price of $0.85 per share. The securities were
      sold pursuant to Section 4(2) of the Securities Act of 1933, as amended. There
      were no commissions paid in connection with the sale of the securities. The
      securities were subsequently paid for and purchased on June 11, 2007. The gross
      proceeds from the sale of the securities will be used for working capital and
      general corporate purposes.


F-30





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





Note
      37 -
      FILING OF S-8 REGISTRATION STATEMENT FOR 2003 STOCK OPTION PLAN:





On
      June
      11, 2007, we filed an S-8 registration statement for securities related to
      our
      2003 Stock Option Plan. Descriptions of our 2003 Stock Option Plan and the
      securities are contained in our filing of the S-8 registration statement, which
      includes 2,000,000 shares of common stock to cover stock options for up to
      2,000,000 shares with a proposed maximum offering price of $0.67 per share
      and a
      proposed maximum aggregate offering price of $1,340,000. On November 6, 2007,
      we
      entered into incentive stock option agreements with employees of the Company
      to
      provide incentives for remaining with the Company and to encourage extra efforts
      and increased performance. We issued stock options for 190,000 shares of our
      common stock at an exercise price of $0.37 per share. The stock options have
      a
      10 year term and the vesting criteria is based on a 3 year period, whereby
      1/3
      of the shares are vested each year for the periods November 5, 2008, November
      5,
      2009, and November 5, 2010.





NOTE
      38 -
      CONSULTING AGREEMENT WITH STRATEGIC CORPORATE INITIATIVES LTD:





On
      August
      26, 2007 we entered into a Letter of Intent for a Consulting Services Agreement
      with Strategic Corporate Initiatives, Ltd. While negotiating the Letter of
      Intent, we engaged the Consultant to develop key financial and business
      relationships, and paid $2,500 in cash and issued 15,000 shares of our common
      stock for services rendered through September 26, 2007 and paid $2,500 in cash
      and issued 15,000 shares of our common stock for services rendered through
      October 26, 2007.





NOTE
      39 -
      NUMARK CAPITAL CORP:





In
      August, 2007, we entered into a contract with Nu Mark Capital Corp. to provide
      financial and other related services for 2 months for the time period August
      15,
      2007 through October 15, 2007. In consideration of providing the services,
      we
      agreed to pay Nu mark $5,000 in cash and issue 20,000 shares of our common
      stock. The shares of our common stock are to be issued on August 15, 2007 and
      September 15, 2007. On August 15, 2007 we paid Nu mark $5,000 in cash and
      are obligated to issue them 20,000 shares of our common stock.





NOTE
      40 -
      FLAHERTY FINANCIAL NEWS, Inc.





On
      May
      23, 2007, we received an invoice for investor relations and financial conference
      services performed by Flaherty Financial News, Inc. and Wall Street Research
      (Alan Stone and Company, LLC.). We paid $1,500 on June 04, 2007, and $1,500
      on
      August 29, 2007. For the balance of the invoice for services rendered, we issued
      3,750 shares of our common stock to Flaherty Financial News, Inc. and issued
      3,750 shares of our common stock to Alan Stone and Company, LLC.





NOTE
      41 -
      CAPITAL SECURITIES MANAGEMENT, INC. AGREEMENT:





On
      October 9, 2007, we signed an Investment Banking and Financial Advisor Agreement
      with Capitol Securities Management, Inc. (the "Advisor") as its exclusive
      investment banker and financial advisor. During the Term of this Agreement,
      the
      Advisor, shall provide advice to, and consult with, us concerning financial
      planning, corporate organization and structure, public stock relations,
      financial matters in connection with the operation of the business of the
      Company, private and public equity and debt financing, acquisitions, mergers
      and
      other similar business combinations and shall review and advise us regarding
      its
      overall progress, needs and financial condition. The Advisor is not obligated
      to
      devote any specific amount of time to providing advice and consultation to
      us.
      This Agreement shall remain in full force and effect for a period of thirty-six
      (36) months after the date hereof; provided, however, that it may be terminated
      at any time by either the Advisor or us with or without cause upon thirty (30)
      days prior written notice to the other party (the "Term"). We agreed to pay
      fees
      based on individuals or entities introduced to us by Advisor and which have
      been
      submitted in writing by Advisor and approved by us, and lead to a completed
      transaction. We also agreed to pay Advisor a monthly Investment Banking retainer
      fee of $2,500 starting upon the closing of any equity financing by the Company.
      Within 30 days from the execution of this Agreement, we also agreed to issue
      to
      Advisor 250,000 shares of our restricted common stock with standard piggyback
      registration rights upon execution of this agreement and an additional 3 equal
      installment of 83,333 shares to be paid quarterly following the initial
      payment.


F-31





MODERN
      MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2007 AND 2006





NOTE
      42 -
      STATE OF NEW JERSEY TAXES:





On
      October 29, 2007, we offered and the State of New Jersey accepted an agreement
      to settle past due taxes for Union Imaging Associates, Inc. in the amount of
      $103,854.43. The terms of the agreement include payments of $3,935.94 paid
      October 23, 2007 and $1,410.91 due November 15, 2007, a payment of $10,000
      paid
      on October 31, 2007, four $5,000 payments due on November 7, 2007, November
      14,
      2007, November 21, 2007, and November 28, 2007. The balance of $68,507.58 is
      to
      be paid in 36 equal monthly installments due on the 20 th of each
      month starting December 20, 2007. A Judgment has been entered in the Superior
      Court of New Jersey in the amount of $91,136.62 pending final settlement of
      these taxes.





NOTE
      43 -
      COMPLETE FLOORING and RENOVATION, INC. WARRANT AGREEMENT:





On
      October 9, 2007, we issued Complete Flooring and Renovation, Inc. a warrant
      for
      65,000 shares with an exercise price of $0.75 per share as part of the October
      25, 2006 unsecured promissory note with Complete Flooring and Renovation,
      Inc.





NOTE
      44 -
      JACOV HAYUT WARRANT AGREEMENT:





On
      October 9, 2007, we issued Jacov Hayut a warrant for 150,000 shares with an
      exercise price of $0.75 per share as part of the February 2006 unsecured note
      which was due in February 2007 and that was subsequently extended.





NOTE
      47 -
      SUBSEQUENT EVENTS:





On
      February 13, 2008 and in connection with the June 8, 2007 sale of our common
      stock, we issued additional warrants to the investors to purchase an aggregate
      of 385,000 common shares. The warrants are exercisable for a period of five
      years from the date of issuance at an exercise price of $0.25 per share.





On
      February 28, 2008, we filed a Certificate of Incorporation for HealthIXS
      Corporation, a newly formed subsidiary of Modern Medical Corporation. HealthIXS
      was formed to focus on using our health information system to provide
      information and administrative services to healthcare organizations. Our health
      information system is based on the integration of the software assets acquired
      on February 28, 2007 and September 14, 2007 and value-added customizations
      that
      has culminated into a health common system platform with a comprehensive array
      of software applications that can be used to provide web-based information
      and
      administrative services.


F-32