<PAGE>

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


                                   FORM 10-KSB


                                    ---------



(Mark One)


[X] Annual Report to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year ended December 31, 2004.

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

For the transition period from _____________to______________

                           Commission File No. 0-23416


                      MODERN MEDICAL MODALITIES CORPORATION
                      -------------------------------------

(Exact name of registrant as specified in its charter)

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

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Yes [X] No [ ].


The issuer's net sales for the most recent fiscal year were $7,249,220.

The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on April 25, 2005 was approximately $252,463.

As of April 25, 2005 there were 14,706,471 shares of Common Stock, par value
$.0002 per share, outstanding.

PART I

Item 1. Business

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

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

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

Modern Medical presently provides equipment and manages one Diagnostic Imaging
ambulatory center site located in Manalapan, New Jersey, 3 Diagnostic Imaging
ambulatory centers in Union, New Jersey and one free standing MRI center in
Metairie, Louisiana. One of the 3 centers in Union is a joint venture which
Modern Medical owns 80%.

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

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

UNION JOINT VENTURE

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

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

Modern Medical shall continue to serve as managing joint venturer until Modern
Medicals liability under the Union joint venture's equipment debt is satisfied.
Thereafter, Modern Medical shall continue to serve as the managing joint
venturer until the earlier to occur of: (a) Modern Medicals resignation upon 60
days notice to Union Imaging or (b) 60 days after receipt of notice from Union
Imaging that the holders of at least 80% of Union Imaging's stock had voted to
terminate Modern Medical as managing joint venturer. Modern Medical owned 50% of
the Union Joint Venture at the end of 2003 and acquired additional 30% equity
position in the Union joint venture during 2004.

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 consists
of one Open MRI and primarily serves the personal injury market. It operates
under the names of two wholly owned subsidiaries, Open MRI & Imaging of
Metairie, LLC and Independence Imaging Center, LLC.

TSI Billing Service Inc.

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

Union Imaging Center LLC.

In February 2004, Modern Medical established Union Imaging Center LLC, a wholly
owned subsidiary, to facilitate a management contract with Park Imaging
Associates.

February 1, 2004 a wholly owned subsidiary entered into a management contract
with Park Imaging Associates, P.A., a multi-modality imaging center, in Union,
NJ. There is a $225,000 note with $25,000 down and a monthly payment of
$6,666.67 for 30 months beginning 90 days after closing. Park Imaging Associates
does approximately $2,500,000 in revenues per year. It is adjacent to our Union
Imaging Associates; the combined radiology practices offer a full range of
imaging services.

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 contains 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.

MRI Imaging at PBI Corporation.

During 2003, Passaic Beth Israel Hospital, Inc. notified the Company that it
would be closing the hospital and selling the building and grounds. The Company
was required to vacate its facility on or before December 31, 2004. In November
2004 the Company shut down the PBI site and ceased doing business at that
location. There were no remaining obligations at year end.

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.
<PAGE>

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 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 Louisiana.

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

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.

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

Delivery of our services:

Modern Medical delivers its services to its customers through either contractual
arrangements with hospitals and clinics or medical technology center
arrangements with hospitals or physician groups, as discussed below. Modern
Medical may form imaging centers utilizing a variety of ownership vehicles.
Presently, Modern Medical operates its sites under joint venture agreements.
Below is a description of Modern 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. A hospital requiring part-time service will engage Modern
Medical to schedule its mobile unit to be on location at the hospital at
prescribed times. Modern Medical maintains a mobile unit, which is a
custom-designed vehicle that is a totally self-contained facility.

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

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.

Our growth strategy and marketing plan

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

Modern Medical is pursuing a strategy of seeking new hospital centers and
physician managed ambulatory centers. Modern Medical will engage in intensive
marketing in areas of specialized physician groups, chiropractors, health
maintenance organizations (HMO), preferred provider organizations (PPO), union
locals, municipalities and insurance companies. Modern Medical currently
negotiates discounts with large suppliers of patients, as allowed by law. Modern
Medical' objective is to respond to the concerns of spiraling health care costs
while maintaining quality of care to the patient. Increased volume results in a
reduction of the cost of each procedure because fixed costs at each facility are
spread over a larger number of procedures. This reduction in cost is passed
along to Modern 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.
<PAGE>

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

Modern 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 General Electric, Toshiba, Siemens, Philips, Picker,
Hitachi, Dupont and Kodak. Modern Medical is not dependent on any one supplier
and believes that it has good relationships with its suppliers.

Equipment acquisition costs can range dramatically depending upon the model and
peripheral equipment acquired. Currently, MRI equipment ranges from $1,000,000
to $2,000,000, extremity MRI and CT equipment currently ranges from $300,000 to
$800,000.

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

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

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

Governmental reimbursement and regulations of our business

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

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;

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

o All physicians who refer in the sites in New Jersey and 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.
<PAGE>

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

Competition

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

Modern Medical believes that few of its competitors provide Modern Medicals
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). 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 Medicals 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.


<PAGE>

Employees

As of December 31, 2004, Modern Medical employed 54 persons on a full-time basis
and 35 persons on a part time basis. The following table reflects the employees
per facility:

                                        Total      Full Time         Part Time
Modern Medical                            5        4       1           0
Metairie, LA                              5        2       3           0
Union Imaging Assoc., Union, NJ          38       24      14           0
Union Imaging Center, Union, NJ          28       15      13           0
TSI Billing, Union, NJ                    7        5       2           0
Manalapan, NJ                             6        4       2           0
Total                                    89       54      35           0

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. 70% of the line of credit can only be used for the purchase of GE
medical equipment. See schedule detailing use of this line and payment schedule.

Union Imaging Associates has entered in a Pacs software purchase agreement,
which consists of 60 payments of $2,000 a month with Neurostar Solutions Inc.

On September 1, 2003, Metairie Medical Equipment Leasing Corporation entered
into a 36-month lease, which provided for the rental of a Siemens Open Viva MRI
imaging system. Payments are $5,000 per month and began on October 03, 2003.

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

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

Total $1,102,887

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

On April 15, 2005 the Citicorp lease was settled with a lump sum of $175,000 and
25 $1,000 monthly payments.

In June of 2001 Modern Medical consolidated all of its preexisting debt with DVI
Financial Services, Inc. into one note with 48 equal monthly payments of
$47,200. This resulted in a reduction of its monthly debt service of
approximately $20,000 or $240,000 per year. This debt was settled for $300,000
and was paid off March 18, 2005.
<PAGE>

Modern Medical entered into a lease with Commerce Commercial Leasing Corp for
the purchase of the MRI unit in Manalapan, NJ. The amount financed is $265,000
for 5 years. Payments schedule listed in table below.

<TABLE>
<CAPTION>
                  Operating         Start         End           # Of      Recurring         Leased/Loan
                  /Financial                                    Pymts     Payments          Amount
<S>               <C>               <C>           <C>           <C>       <C>               <C>
GE-CT             Operating         12/31/03      02/28/04         3      $0
                                    03/31/04      05/31/04         3      $5,879.59
                                    06/30/04      03/31/09         57     $19,782.52       $1,155,000.00
GE-Pacs           Financing         01/14/04      12/14/08         60     $1,184.38           $58,867.71
GE-Dell           Operating         05/11/04      04/11/09         60     $1,987.12           $99,167.81
GE-               Operating         04/17/04      07/17/04         3      $0
US & Dexa                           08/17/04      07/17/09         60     $6,041.08          $295,500.00
GE-US                               04/17/04      07/17/04         3      $0
                  Operating         08/17/04      07/17/09         60     $1,622.98           $79,500.00
GE-Mammo                            12/17/04      02/17/05         3      $0
                  Operating         03/03/05      11/17/09         60     $8,320.46          $398,500.00
Toyota            Financing         03/01/03      02/01/08         60     $343.04             $18,000.00
Mas90             Financing         11/01/04      10/01/07         36     $430.36             $20,000.00
Docuteam          Operating         04/16/03      05/16/08         60     $1,041.45           $50,000.00
STI-Software      Financing         11/01/03      01/01/09         60     $824.68             $38,648.00
Neurostar         Financing         02/01/04      01/01/09         60     $2000.00           $120,000.00
Dell              Financing         04/01/03      05/01/09         60     $474.76             $14,299.00
Toshiba           Financing         02/18/03      03/18/08         60     $417.63             $18,561.50
Citicorp          Financing         04/15/05      05/01/07         25     $1,000.00           $25,000.00
Commerce                                                           3      $0
Bank MRI          Financing         04/04/05      03/04/10         57     $5,116.45          $265,000.00
MES               Operating         10/01/03      09/01/06         36     $5,000.00          $115,000.00
</TABLE>

Item 2. Properties

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

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

In April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 7,150 square feet on 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 expires on April 1, 2010.

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.

In February 2003 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.
<PAGE>

April 1, 2004 the company 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 space was previously an imaging center,
consisting of the following modalities: a MRI, Ultrasound, RF room, and
Mammography. The previous tenant had abandoned the space. We also negotiated
with the equipment financing company for the purchase of all the equipment
except the MRI unit for $22,000. We purchased the MRI unit for $250,000 from
Philips and financed it with Commerce Commercial Leasing Corp. The facility is
operating in a limited basis.

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


Item 3. Legal Proceedings

Modern Medical Modalities Corporation was 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 and the plaintiff was given an opportunity to
amend its complaint if it desired. Motion to Dismiss was granted on July 26,
2004. We have not heard from plaintiffs since. There is still a chance for a
revised complaint and we are therefore regarding this as an active legal
proceeding.

The Company is party to a lawsuit regarding disputed vendor invoices of
approximately $80,000. We have settled $40,000, to be paid within a year of the
settlement.

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.

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

<PAGE>

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.

PART II

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



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

Fiscal 2003                High             Low
First Qtr                  $0.015           $0.01
Second Qtr                 0.01             0.005
Third Qtr                  0.01             0.005
Fourth Qtr                 0.0075           0.0025
Fiscal 2004
First Qtr                  $0.25            $0.10
Second Qtr                 0.25             0.10
Third Qtr                  0.14             0.02
Fourth Qtr                 0.19             0.05

On April 25, 2005, there were approximately 50 holders of record of Modern
Medical's 14,706,471 outstanding shares of Common Stock.

On April 25, 2005, the last sale price of the Common Stock as reported on the
OTC Bulletin Board was $0.08.

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.

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

Forward-looking Statements

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

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

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

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

Modern Medical presently provides equipment and manages five free-standing MRI
and CT Scan and Diagnostic Imaging ambulatory centers in Louisiana (1) and New
Jersey (4). One of the 4 New Jersey facilities is a Joint Venture, Modern
Medical is the managing partner in the Joint Venture and owns an 80% equity
interest.

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

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

Management's Discussion and Analysis.

Results of Operations:

For the year ended December 31, 2004 compared to the year ended December 31,
2003

Net Revenues from Services:

Net revenue from services has increased approximately $4,200,000 to $7,249,000
for the year ended December 31, 2004 from approximately $3,037,000 for the same
period in 2003. This increase resulted from Union Imaging Center approximately
$2,468,000, $258,000 from the Manalapan, NJ location, the PET center generating
$195,000, Metairie, LA location contributed approximately $600,000 and full year
of consolidation of Union Imaging Associates versus 4 months the prior year. The
increase in revenues was offset by the closing of the Passaic Beth Israel
location at the end of 2004 of approximately $900,000.
<PAGE>

Cost of services provided:

For the year ended December 31, 2004, cost of services provided totaled
approximately $5,495,000 as compared to approximately $2,061,000 for the same
period in 2003, resulting in an increase of approximately $3,434,000. This
increase relates to the changes in volume and service mix, which resulted in
higher costs related to medical supplies, pay roll, and facility costs. The Park
Imaging Contract business is a lower paying higher volume business and thus
their margin is smaller than other centers that we operate.

Selling, general and administrative expenses:

For the year ended December 31, 2004, selling, general and administrative
expenses totaled approximately $1,003,000 as compared to $683,000 for the same
period in 2003, resulting in an increase of approximately $320,000. Relative to
revenues S, G and A actually went down reflecting some of the expenses being
distributed to more revenues. The absolute increase related to variable costs
that were increased due to the new contract and full year consolidation of Union
Imaging Associates.

Extraordinary Item:

Gain of $910,000 from an extinguishment of debt. The DVI loan was paid in full
for $300,000 and the Citicorp loan was paid in full for $175,000 plus 25 monthly
installments of $1,000. Between the two loans the company had approximately
$1,410,000 in total debt.

Liquidity and Capital Resources:

Modern Medical has a working capital deficiency of $758,956 at December 31, 2004
as compared to a working capital deficiency of $1,034,509 at December 31, 2003.

Debt
Effective December 9, 2003, the Company entered into a 36 month note with Ronnie
Antebi in the amount of $260,000.This note bears an interest rate of 12% per
annum and is payable in 36 equal installments of $8,635.72, commencing January9,
2004. The proceeds of this note were used to retire the Bridge View Bank line of
credit, the balance was used for working capital purposes.

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 over 12 months in
$8,333 monthly payments, 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. This loan funded the
settlement of the DVI/US Bank loan settlement.
<PAGE>

On April 15, 2005 Modern Medical entered into a 13 month unsecured loan
agreement Ronnie Antebi in the amount of $175,000 which bears interest at a rate
of 15% per annum. The first 6 payments are in the amount of $10,000 each and
commence on May 15, 2005, the second 6 monthly payments are at $20,000 each and
the final payment on June 15, 2005 is in the amount of $12,621.85. This loan was
utilized to fund the settlement of the CitiCorp note.

CONVERTIBLE DEBT:

In October 1999, the Company issued an aggregate of $500,000 principal amount of
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,
2004, the total principal and interest outstanding was $489,213.

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

Between June 2002 and July 2004 the company has issued an aggregate of $930,000
principal amount of 9.25% convertible secured promissory notes with conversion
rates detailed in the table below:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Issued to:            Issue Date           Expiration Date      Principal Amount $  Conversion Price $
                                                                                    Per Share
---------------------------------------------------------------------------------------------------------
<S>                   <C>                  <C>                 <C>                 <C>
Jacov Hayut           June 2002            June 2007            140,000             0.179
---------------------------------------------------------------------------------------------------------
Motti Sharon          June 2002            June 2007            100,000             0.179
---------------------------------------------------------------------------------------------------------
Motti Sharon          June 2003            June 2008            45,000              0.179
---------------------------------------------------------------------------------------------------------
Motti Sharon          June 2002            June 2007            80,000              0.179
---------------------------------------------------------------------------------------------------------
Yossef and Irit       July 2002            June 2007            65,000              0.179
Azoulai
---------------------------------------------------------------------------------------------------------
M E S                 August 2002          June 2007            100,000             0.143
---------------------------------------------------------------------------------------------------------
M E S                 February 2003        February 2008        150,000             0.143
---------------------------------------------------------------------------------------------------------
M E S                 March 2003           March 2008           50,000              0.143
---------------------------------------------------------------------------------------------------------
M E S                 May 2003             May 2008             50,000              0.143
---------------------------------------------------------------------------------------------------------
M E S                 August 2003          August 2008          100,000             0.143
---------------------------------------------------------------------------------------------------------
M E S                 February 2004        June 2009            25,000              0.143
---------------------------------------------------------------------------------------------------------
M E S                 July 2004            June 2009            25,000              0.143
---------------------------------------------------------------------------------------------------------
</TABLE>

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.
<PAGE>

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

Going Concern

Modern Medical's December 31, 2004 and 2003 financial statements have been
presented on a basis that it is a going concern. Due to significant losses
during the years ended December 31, 2004 and 2003, 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 F-25

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

None.

Item 8A. Controls and Procedures

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

Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial reporting (as defined
in Rules 13a-15(f) and15d-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.
<PAGE>



                                    PART III

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

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

Name Age Position

Baruh Hayut 42 Chairman of the Board of Directors and CEO

Jacov Hayut 37 President, Secretary and Director

Minesh Patel 33 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.

JACOV HAYUT was appointed Chairman of the Board of Directors, Chief Executive
Officer and Acting Chief Financial Officer of the Company in June 2003 and
served in these capacities until March 31, 2004. Mr. Hayut has however retained
the positions of Director, President, and Secretary.
From 1995 to present, Mr. Hayut has been President and Chief Operating Officer
of AA Flooring based in Atlanta, Georgia. From 1993 to 1995, Mr. Hayut was a
registered representative with H.J. Meyers & Co. and Argent Securities Corp.

MINESH PATEL was appointed to the Board of Directors of the Company in June 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.

Under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any persons holding ten percent or
more of the Company's Common Stock must report on their ownership of the
Company's Common Stock and any changes in that ownership to the Securities and
Exchange Commission and to the National Association of Securities Dealers,
Inc.'s Automated Quotation System. Specific due dates for these reports have
been established. During the year ended December 31, 2004, the Company believes
all reports, required to be filed, by Section 16(a) were filed on a timely
basis.
<PAGE>

Item 10. Executive Compensation

The following table sets forth all cash compensation for services rendered in
all capacities to the Company, for the year ended December 31, 2004 (referred
toast "2004" in this table), the year ended December 31, 2004 (referred to
as"2003" in this table), and for the year ended December 31, 2001 (referred to
as"2001" in this table), paid to the Company's Chief Executive Officer.

Summary Compensation Table

Name and Principal, All Other Position
Year Salary Compensation

---------------------
Jacov Hayut President
2003     $ 12,436
2004     $ 30,025

Baruh Hayut Chairman, CEO
2003     $ 22,531
2004     $ 158,772

Minesh Patel, COO and CFO
2003     $35,000
2004     $42,770

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

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.

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.
<PAGE>

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.

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.
<PAGE>

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.

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

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

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

Name and Address Number of Shares Percentage of Beneficial Owner Beneficially
Owned (1) Common Stock

Jacov Hayut       11,254,008        76.5%
Barry Hayut       -0-               0.0%
Minesh Patel      -0-               0.0%

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

Equity Compensation Plan Information

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Plan Category          Number of Securities to be   Weighted-average          Number of Securities
                       issued upon exercise of      exercise price of         remaining available for
                       outstanding options          outstanding options,      future issuance under
                                                    warrants and rights       equity compensation
                                                                              plans (excluding
                                                                              securities reflected in
                                                                              column (a))
-------------------------------------------------------------------------------------------------------
<S>                                 <C>                         <C>                  <C>
Equity compensation                -0-                         -0-                   2,500,000
plans approved by
security holders
-------------------------------------------------------------------------------------------------------
Equity compensation                -0-                         -0-                      -0-
plans not approved by
security holders
-------------------------------------------------------------------------------------------------------
</TABLE>

Item 12. Certain Relationships and Related Transactions

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

Medical Equipment Solutions LLC., which consists of Ronnie Antebi, Yossef
Azoulai, and Shimon Elmalem 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. Ronnie Antebi has provided term financing
for various loan restructurings.

<PAGE>

Item 13. Exhibits, List and Reports on Form 8-K.

(a)  Exhibits


         31* 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.

         32.1* 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.

         32.2* 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.


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, 2004, and December 31, 2003, 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. Since we do not
currently have an audit committee, our board of directors approved the audit
services provided by Liebman Goldberg & Drogin, LLP and the fees incurred in
connection therewith.

                                December 31, 2003          December 31, 2004
                                -----------------          -----------------
         Audit Fees                  $30,000                   $35,000
         Audit Related Fees          $11,250                   $12,000
         Tax Fees                    $ 8,000                   $ 9,000
         All Other Fees              $     0                   $     0


<PAGE>



                                   SIGNATURES

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

                                         Modern Medical Modalities Corporation

Date:  May 11, 2005                      By: /s/ Baruh Hayut
                                             --------------------
                                             Name:  Baruh Hayut
                                             Title: 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.


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Name                                 Title                              Date
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
<S>                                                                     <C>
/s/ Baruh Hayut                      Chairman and Chief Executive       May 11, 2005
-------------------                  Officer
Baruh Hayut
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
/s/ Jacov Hayut                      President, Secretary and Director  May 11, 2005
-------------------
Jacov Hayut
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
/s/ Minesh Patel                     Chief Financial Officer, Chief     May 11, 2005
-------------------                  Operating Officer and Director
Minesh Patel
-----------------------------------------------------------------------------------------------------------

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


<PAGE>

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, 2004, and the related
consolidated statements of income and operations, changes in stockholders'
deficit, and cash flows for the years ended December 31, 2004 and 2003. 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, 2004, and the
consolidated results of income and operations and their cash flows for each of
the years ended December 31, 2004 and 2003, 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 28, 2005

                                      F-1
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2004

<TABLE>
<CAPTION>
                                      ASSETS

<S>                                                                             <C>
Current assets:

        Cash and cash equivalents                                               $     6,239
        Accounts receivable (less contractual allowances of
            $3,837,814)                                                           1,581,568
        Notes receivable - current portion                                           32,001
        Other current assets                                                         35,322
                                                                                -----------

                                   Total current assets                           1,655,130
                                                                                -----------

Property and equipment, net of accumulated depreciation of $4,137,006             1,217,836
                                                                                -----------

Other assets:
        Note receivable,net of current portion                                       15,884
        Deposits                                                                     42,556
                                                                                ------------

                                    Total other assets                               58,440
                                                                                -----------

                                       TOTAL ASSETS                             $ 2,931,406
                                                                                ===========
</TABLE>



                 See notes to consolidated financial statements.


                                      F-2
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2004

<TABLE>
<CAPTION>

               LIABILITIES AND STOCKHOLDERS' (DEFICIT)

<S>                                                                             <C>
Current liabilities:
        Accounts payable                                                        $   467,343
        Accrued expenses                                                            850,216
        Current portion long term debt                                              876,676
        Loans payable - shareholders, current portion                               119,851
        Provision for site closings                                                 100,000
                                                                                ------------

                                 Total current liabilities                        2,414,086
                                                                                ------------

Other liabilities:
        Long term debt, net of current portion                                    1,302,747
        Convertible debt                                                          1,419,213
        Loans payable shareholders, net of current portion                          120,250
                                                                                ------------

                                  Total other liabilities                         2,842,210
                                                                                ------------

                                     Total liabilities                            5,256,296
                                                                                ------------

Minority interest                                                                   232,783
                                                                                ------------

Commitments and contingencies

Stockholders' deficit:
        Common stock, $0.0002 par value, Authorized - 100,000,000 shares
             Issued and outstanding - 14,706,471 shares                               2,942
        Additional paid-in capital                                                4,515,715
        Accumulated (deficit)                                                    (7,076,330)
                                                                                ------------

                               Total stockholders' (deficit)                     (2,557,673)
                                                                                ------------

                   TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                $ 2,931,406
                                                                                ===========
</TABLE>



                 See notes to consolidated financial statements.


                                      F-3
<PAGE>


             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF INCOME AND OPERATIONS

<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31,
                                                                                ----------------------------------
                                                                                    2004                  2003
                                                                                -----------          -------------
<S>                                                                             <C>                  <C>
Operating income:
     Net revenues from services                                                 $ 7,249,220          $  3,036,976
     Cost of services provided                                                    5,494,813             2,060,507
                                                                                -----------          -------------

Total operating income                                                            1,754,407               976,469
                                                                                -----------          -------------

Operating Expenses:
     Selling, general and administrative                                          1,002,873               682,710
     Bad debts                                                                            -             1,499,078
     Depreciation and amortization                                                1,190,191               583,737
                                                                                -----------          -------------

Total operating expenses                                                          2,193,064             2,765,525
                                                                                -----------          -------------

(Loss) from operations                                                             (438,657)           (1,789,056)
                                                                                -----------          -------------

Other income (expenses):
     Interest income                                                                 12,267                11,893
     Interest expense                                                              (187,048)             (246,366)
     Miscellaneous income                                                            46,284                43,376
     Loss from abandonment of site                                                 (138,929)                    -
     Loss on disposal of equipment                                                   (5,286)                    -
     Loss from write-off of investment in JV                                                             (116,643)
     Income/(loss) from joint ventures                                                    -                  (977)
                                                                                -----------          -------------

Total other (expense)                                                              (272,712)             (308,717)
                                                                                -----------          -------------

(Loss) before income taxes, minority interests and extraordinary item              (711,369)           (2,097,773)

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

(Loss) before minority interests and extraordinary item                            (711,369)           (2,097,773)

Minority interests                                                                   (4,836)              287,154
                                                                                -----------          -------------

(Loss) before extraordinary item                                                   (716,205)           (1,810,619)

Extraordinary item (less applicable income taxes of $ 0 )                           910,469                     -
                                                                                -----------          -------------

Net income/(loss)                                                               $   194,264          $ (1,810,619)
                                                                                ===========          =============

Income/(loss) per share, basic and diluted                                      $      0.01          $      (0.12)
                                                                                ===========          =============

Number of weighted average shares outstanding                                    14,706,471            14,556,471
                                                                                ===========          =============
</TABLE>



                 See notes to consolidated financial statements.


                                      F-4
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                           Additional          Retained
                                            Number of         Common         Paid-In           Earnings
                                              Shares          Stock          Capital          (Deficit)            Total
                                          ---------------   -----------  ----------------  -----------------  ----------------

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

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

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

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

Net income for the year ended
     December 31, 2004                                 -             -                 -            194,264           194,264
                                          ---------------   -----------  ----------------  -----------------  ----------------

Balance at December 31, 2004                  14,706,471         2,942        $4,515,715        ($7,076,330)      ($2,557,673)
                                          ===============   ===========  ================  =================  ================
</TABLE>



                 See notes to consolidated financial statements.


                                      F-5
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            For the years Ended December 31,
                                                                                           -----------------------------------
                                                                                               2004                   2003
                                                                                           ------------           ------------
<S>                                                                                        <C>                    <C>
Cash flows from operating activities
        Net income/(loss)                                                                   $   194,264            $(1,810,619)
                                                                                           ------------           ------------
        Adjustments to reconcile net loss to net cash provided by operating
        activities:
               Depreciation and amortization                                                  1,190,191                583,737
               Contractual allowances                                                         1,875,579               (138,676)
               Bad debts                                                                              -              1,499,078
               Income from an unconsolidated joint venture                                            -                    977
               Minority interest                                                                  4,836               (287,154)
               Loss from abandonment of site                                                    138,929                      -
               Loss on diposal of equipment                                                       5,286                      -
              Loss on write-off of investment in JV                                                   -                116,643
Increase (decrease) in cash attributable to
        changes in operating assets and liabilities:
               Accounts receivable                                                           (1,972,859)               215,535
               Notes receivable - current portion                                                42,547                 48,420
               Other current assets                                                              23,606                 19,444
               Deposits and other assets                                                         18,648                 (5,642)
               Accounts payable                                                                 169,802                179,200
               Accrued expenses                                                                (348,751)               306,765
                                                                                           ------------           ------------
        Total adjustments                                                                     1,147,814              2,538,327
                                                                                           ------------           ------------
Net cash provided by operating activities                                                     1,342,078                727,708
                                                                                           ------------           ------------
Cash flows from investing activities:
               Net (decrease)increase in provision for site closings & other assets                   -               (287,847)
               Fixed asset acquisitions                                                         563,205             (4,498,377)
               Fixed asset dispositions                                                         109,666              2,992,128
               Investment in joint venture                                                            -                 34,377
               Increase in minority interest                                                   (220,163)               509,608
                                                                                           ------------           ------------
Net cash provided by investing activities                                                       452,708             (1,250,111)
                                                                                           ------------           ------------
Cash flows from financing activities:
               Extinguishment of debt                                                          (910,469)                     -
               Decrease in notes receivable - affiliates                                        (23,116)              (169,599)
               Proceeds from loan payable joint venture                                               -               (219,618)
               Increase in shareholder loans                                                     70,899                      -
               Decrease in deferred tax asset                                                         -               (484,718)
               Due to Affiliates                                                               (200,000)               200,000
               Line of credit (payments)                                                        (70,899)                  (281)
               Net increase(reduction) long term debt                                          (752,223)             1,286,828
                                                                                           ------------           ------------
Net cash (used) by financing activities                                                      (1,885,808)               612,612
                                                                                           ------------           ------------
Net (decrease)/increase in cash and cash equivalents                                            (91,022)                90,209
Cash and equivalents, beginning of year                                                          97,261                  7,052
                                                                                           ------------           ------------
Cash and equivalents, end of year                                                           $     6,239            $    97,261
                                                                                           ============           ============

Supplemental cash flow information
        Interest paid                                                                       $   210,712            $   265,708
                                                                                           ============           ============
        Income taxes paid                                                                   $         -            $         -
                                                                                           ============           ============
        Convertible shares issued (12,000,000 in 2002)                                      $         -            $         -
                                                                                           ============           ============
</TABLE>

                 See notes to consolidated financial statements.


                                      F-6
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Organization and Business:

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

Basis of Presentation:

The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Modern Medical Imaging at Atrium, LLC, Modern Medical
Imaging Centers, LLC, Union Imaging Center, LLC, Medical Marketing and
Management, Inc., Somerset Imaging Corporation, South Plainfield Imaging, Inc.,
Amherst Medical Equipment Leasing Corp., MRI Imaging Center at PBI Corporation,
Metairie Medical Equipment Leasing Corp., West Paterson Medical Equipment
Leasing Corp., Ohio Medical Equipment Leasing Corp., its subsidiaries PET Scan
at Union Imaging, LLC, Union Imaging Associates, Inc. and TSI Billing Services,
Inc., owned 50%, 77.8% and 50%, respectively and its joint ventures, Plainfield
MRI Associates, JV and Union Imaging Associates, JV, owned 84% and 80%
respectively. By contract the Company manages these joint ventures, is the
managing joint venturer and has unilateral control. All significant
inter-company transactions and accounts have been eliminated in consolidation.

Revenue recognition:

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

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

                                       F-7

<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

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

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

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.


                                       F-8
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

Concentration of Credit Risk/Fair Value:

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

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

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

Cash and Cash Equivalents:

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

Accounts Receivable:

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

Property and Equipment:

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

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.


                                       F-9
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

Income Taxes:

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

Net Income (Loss) Per Share:

Net income (loss) per common share amounts ("basic EPS") are computed by
dividing net earnings (loss) by the weighted average number of common shares
outstanding, excluding any potential dilution. Net income (loss) per common
share amounts assuming dilution ("diluted EPS") are computed by reflecting
potential dilution from the exercise of stock options and warrants. The effect
of dilutive securities is not presented for 2003, as the Company incurred a loss
in 2003 and the inclusion of the effect of dilutive securities would be
anti-dilutive.

Stock-based Compensation:

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

Advertising and Promotion Costs:

Advertising and promotion costs, which are included in general and
administrative expenses, are expensed as incurred. For the two years ended
December 31, 2004 and 2003, such costs aggregated $527,748 and $340,489,
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 2004.

Comprehensive Income:

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

                                      F-10
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

Recently Issued Accounting Pronouncements:

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

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

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

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

                                      F-11
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

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

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance were
recorded as equity, be recorded as liabilities. The financial instruments
affected include mandatorily redeemable stock, certain financial instruments
that require the issuer to buy back some of its shares in exchange for cash or
other assets, and certain obligations that can be settled with shares of stock.
The Company 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 $758,956 as of December 31, 2004, and has continuously
sustained significant losses from operations, which raise substantial doubt
about the Company's ability to continue as a going concern. In view of these
matters, realization of the assets of the Company is dependent upon the
Company's ability to meet its financing requirements and the success of future
operations. The 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 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-12
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS.

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

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

March 5, 2004, the Company acquired an additional 10% interest in Union Imaging
Associates, JV its unconsolidated joint venture. This additional 10% brought the
Company's ownership of Union Imaging Associates, JV to 60%. This was acquired
for $125,000, payable $25,000 at the close and $3,000 monthly installments
commencing 30 days after the closing date.

April 11, 2004, the Company acquired an additional 20% interest in Union Imaging
Associates, JV its unconsolidated joint venture. This additional 20% brought the
Company's ownership of Union Imaging Associates, JV to 80%. This additional 20%
was acquired for $300,000, payable $20,000 on the first anniversary and $10,000
per month for 25 months. The monthly installments commence 30 days after the
initial payment and run consecutively, except for the second anniversary, at
which time the Company is required to make a $30,000 payment.

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

The Company believed it had adequate ownership and control over Union Imaging
Associates, JV and TSI Billing Services, Inc. to consolidate them as part of
Modern Medical Modalities Corporation consolidated financial statements at the
end of 2003. The following selected proforma financial data assumes Union
Imaging Associates, JV and TSI Billing Services, Inc. were consolidated
effective January 1, 2002:

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

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

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

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

                                      F-13
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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

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

Effective April 1, 2004 the Company took over a full service imaging center in
Manalapan, NJ. The center contains a new Open MRI unit, Ultrasound, X-ray,
Mammography and bone density units. The company completed the facility licensing
process with the state of New Jersey in December 2004.

On April 1, 2004 the Company obtained a facility license and opened its first
P.E.T. Scan Unit on Chestnut Street in Union near its Union Imaging Associates
center and Park Imaging Associates center. The Company owns 50% of this center.
This addition completes our ability to be a full service diagnostic out-patient
imaging center in Union.

NOTE 4 - PROPERTY AND EQUIPMENT.

Property and equipment are summarized by major classification as follows:

                                                                    December 31,
                                                   Useful lives        2004
                                                   ------------        ----
       Medical Equipment                          5 - 10 years     $4,334,497
       Furniture and Fixtures                      3 - 5 years         50,620
       Automobiles                                     5 years         19,865
       Computer equipment and software             3 - 5 years        230,467
       Leasehold improvements                     5 - 10 years        719,393
                                                                   ----------

                                                                    5,354,842
       Less: Accumulated Depreciation
           and Amortization                                         4,137,006
                                                                    ---------
                                                                   $1,217,836
                                                                   ==========
       Depreciation expense for the year ended December 31, 2004   $1,190,191
                                                                   ==========

NOTE 5 - INVESTMENT IN JOINT VENTURE.

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

                                      F-14
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 5 - INVESTMENT IN JOINT VENTURE, continued.

bringing it ownership to 50%, See footnote 3 above. At this point the Company
changed it accounting for Union Imaging Associates, JV to the consolidation
method.

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

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

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

                                                                          10%
                                           Gross                      Allocation
                                         Revenues     Net Income      of Income
                                         --------     ----------      ----------

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

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

                                                        January 1, to
                                                   8/20/03         12/31/02

                                                        (in thousands)
      Revenue Received:
        Management fees                             $361.9           $484.3
        Partner cash distributions                     8.8             64.2
                                                      ----             ----

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

During 2004 UIA was consolidated for the full year and the management fees were
eliminated in consolidation, there were no distributions.

The other joint ventures that the Company owns an interest in aggregate $0 and
$0 for the years ended December 31, 2004 and 2003, respectively.

NOTE 6 - LINE OF CREDIT.

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


                                      F-15
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 7 - CONVERTIBLE DEBT

In October 1999, the Company issued an aggregate of $500,000 principal amount of
it's 10% convertible notes to two investors which were due on October 18, 2000.
The notes are convertible at anytime while any portion of it is outstanding into
shares of the Company's common stock at the lower of: (a) 72.5% of the lowest
closing bid price of the Company's common stock for the thirty (30) trading days
immediately preceding the date of conversion, or (b) $2.0625. At December 31,
2004, the total principal and interest outstanding was $489,213.

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

Between June 2002 and July 2004 the company has issued an aggregate of $930,000
principal amount of 9.25% convertible secured promissory notes with conversion
rates per the table below:

<TABLE>
<CAPTION>
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Issued to:                Issue Date              Expiration              Principal               Conversion Price
                                                  Date                    Amount $                $ per share
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
<S>                       <C>                     <C>                     <C>                     <C>
Jacov Hayut               June 2002               June 2007               140,000                 0.179
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Motti Sharon              June 2002               June 2007               100,000                 0.179
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Motti Sharon              June 2003               June 2008               45,000                  0.179
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Motti Sharon              June 2002               June 2007               80,000                  0.179
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Yossef and Irit Azoulai   July 2002               June 2007               65,000                  0.179
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 August 2002             June 2007               100,000                 0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 February 2003           February 2008           150,000                 0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 March 2003              March 2008              50,000                  0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 May 2003                May 2008                50,000                  0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 August 2003             August 2008             100,000                 0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 February 2004           June 2009               25,000                  0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
M E S (1)                 July 2004               June 2009               25,000                  0.143
------------------------- ----------------------- ----------------------- ----------------------- -----------------------
</TABLE>

(1) = Medical Equipment Solutions LLC.

                                      F-16
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 8 - EMPLOYEE STOCK OPTIONS.

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. The Company does not have any current
plans to make grants under the 2003 or 1999 Option Plans at this time.

NOTE 9 - LONG-TERM DEBT.

Long-term debt consists of the following:

                                                         December 31, 2004
                                                         -----------------
       Notes payable                                          1,580,179
       Capitalized lease obligations                            599,244

       Less current portion                                    (876,676)
                                                             ----------

       Long-term debt, net of current portion                $1,302,747
                                                             ==========

Notes Payable:

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

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. This loan funded the
settlement of the DVI/US Bank loan settlement (see footnote 10).

On April 15, 2005 Modern Medical entered into a 13 month unsecured loan
agreement Ronnie Antebi in the amount of $175,000 and bears an interest rate of
15% per annum. The first 6 payments are in the amount of $10,000 each and
commences on May 15, 2005, the second 6 monthly payments are at $20,000 and the
final payment on June 15,2005 is in the amount of $12,621.85. This loan was
utilized to fund the settlement of the CitiCorp lease (see footnote 10).


                                      F-17
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 9 - LONG-TERM DEBT (continued).

Capitalized Lease Obligations:

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

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

                                              December 31, 2004
                                              -----------------
                     2005                          $876,676
                     2006                           894,029
                     2007                           231,059
                     2008                           147,193
                     Beyond                          30,466
                                                 ----------
                                                 $2,179,423
                                                 ==========

NOTE 10 - RESTRUCTURING OF LONG-TERM DEBT

Effective June 30, 2001, the Company refinanced all of its debt with DVI
Financial Services Inc. The refinancing resulted in a monthly reduction of its
debt service of approximately $20,000 per month. The refinanced debt was due in
48 equal installments of $47,200. In March 2005 the Company completed a buyout
of the balance of this debt for a lump sum payment of $300,000 made on March 18,
2005. As a result of this negotiated settlement the Company recorded a gain of
$699,298 on the settlement of this debt.

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

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

     o  $185,500 Marconi Open MRI system upgrade

     o  $301,517 Buyout of the balance of the DVI Financial Services Equipment
        debt

     o  $615,870 DVI Business Credit accounts receivable line
      ----------
Total $1,102,887
      ----------

                                      F-18
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 10 - RESTRUCTURING OF LONG-TERM DEBT (continued)

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

In April 2005 the Company completed buyout of the balance of this debt for a
lump sum payment of $175,000 made on April 15, 2005 plus 25 equal monthly
installments of $1,000. As a result of this negotiated settlement the Company
recorded a gain of $211,171 on the settlement of this debt.

NOTE 11 - STOCKHOLDERS' EQUITY

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

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

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

In June 2002, Jacov Hayut purchased the Company's $500,000 in convertible notes
and intends to convert the notes into shares of the Company's common stock. On
July 29, 2002, Mr. Hayut formally notified the Company that he intended 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.


                                      F-19
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

Mr. Hayut is required to transfer 2% of such shares received upon conversion to
the previous Noteholder. Upon the issuance of the remaining 11,750,000 shares of
common stock, Mr. Hayut will own approximately 77% of the Company's issued and
outstanding common stock.

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

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

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

NOTE 12 - INCOME TAXES

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

The Company has recorded an income tax provision (credit) at December 31, 2004
and 2003 of $-0-, and $-0-, respectively. The Company has a net operating loss
carry-forward for federal income tax purposes of approximately $9,799,000,
available to offset income taxes through 2016 - 2023 and had a capital loss
carry forward approximating $1,135,000 at December 31, 2002 that expired in
2003.


                                      F-20
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 12 - INCOME TAXES, continued.

The components of the Company's provision (benefit) for income taxes, for the
fiscal years ended 2004 and 2003 are as follows:

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

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

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

                                                      2004             2003
                                                      ----             ----

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

                       Effective tax rate              $-                $-
                                                       ==                ==

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2004 and
2003 are presented below:

                                                      2004             2003
                                                      ----             ----
        Deferred tax assets:
                 Net operating loss carryforward   $3,724,000     $3,797,000

                 Less valuation allowance          (3,724,000)    (3,797,000)
                                                   ----------     ----------

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

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

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax


                                      F-21

<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 12 - INCOME TAXES, continued.

assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of tax liabilities, projected future taxable income and tax
planning strategies in making this assessment.

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

NOTE 13 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

<TABLE>
<CAPTION>
----------------------- ----------------------------- -------------------------- -------------------------
Plan Category           Number of Securities to be    Weighted-average           Number of Securities
                        issued upon exercise of       exercise price of          remaining available for
                        outstanding options           outstanding options,       future issuance under
                                                      warrants and rights        equity compensation
                                                                                 plans (excluding
                                                                                 securities reflected in
                                                                                 column (a))
----------------------- ----------------------------- -------------------------- -------------------------
<S>                                 <C>                          <C>                    <C>
Equity compensation                 -0-                          -0-                    2,500,000
plans approved by
security holders
----------------------- ----------------------------- -------------------------- -------------------------
Equity compensation                 -0-                          -0-                       -0-
plans not approved by
security holders
----------------------- ----------------------------- -------------------------- -------------------------
</TABLE>

NOTE 14 - 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.


                                      F-22
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 14 - RELATED PARTY TRANSACTIONS (continued).

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 is a Director and Officer of the Company.

Medical Equipment Solutions, which consist of Ronnie Antebi, Yossef Azoulai, and
Shimon Elmalem 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. Ronnie Antebi has provided term financing
for various loan restructurings.

In June 2003, the Company issued an aggregate of $100,000 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.

NOTE 15 - COMMITMENTS AND CONTINGENCIES.

(a) Employment Agreements:

The Company has no employment agreements.

(b) Properties:

The Company leases 1,765 square feet located at 1719 Route 10 East, Suite 117,
Parsippany, New Jersey, which is comprised of the Company's executive offices.
The Company is party to a lease covering the facility that expired on February
28, 2004, and provides for monthly rental payments of $2,722. The Company
believes that its facilities are adequate for its current and future operations.

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

In May 2001, MRI Imaging at PBI Corporation entered into a new seven (7) year
lease agreement with Passaic Beth Israel Hospital, Inc., which replaces the
original joint venture agreement dated June 1995. Under the terms of the new


                                      F-23
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

(b) Properties (continued):

agreement the company leases land from the hospital for $300 per month, leases
four exclusive and four non-exclusive parking spaces for $975 per month and pays
a fee of $850 per month for security. The total monthly rent paid to the
hospital is $2,125. Additionally the Company has signed a non-exclusive License
Agreement with Passaic Beth Israel Hospital, Inc. for $5,000 per annum. The
license allows the Company to use the marks "Passaic Beth Israel". "Passaic
Beth" and/or "PBI".

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

In April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 7,150 square feet on 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 expires on April 1, 2010.

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.

In February 2003 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.

April 1, 2004 the company 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 space was previously an imaging center,
consisting of the following modalities: a MRI, Ultrasound, X-ray RF room, and
Mammography. The previous tenant had abandoned the space. We also negotiated
with the equipment financing company for the purchase of all the equipment
except the MRI unit for $22,000. We purchased the MRI unit for $250,000 from
Philips and financed it with Commerce Commercial Leasing Corp. The facility is
operating in a limited basis.

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

NOTE 16 - 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 and the plaintiff was given an opportunity to
amend its complaint if it desired. Motion to Dismiss was granted on July 26,
2004. We have not heard from plaintiffs since. There is still a chance for a
revised complaint and therefore regarding this as an active legal proceeding.


                                      F-24

<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 16 - LITIGATION (continued).

The Company is party to a lawsuit regarding disputed vendor invoices of
approximately $80,000. We have settled $40,000, to be paid within a year of the
settlement.

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.

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

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

NOTE 17 - SUBSEQUENT EVENT

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. This loan funded the
settlement of the DVI/US Bank loan settlement (see footnote 10).

On April 15, 2005 Modern Medical entered into a 13 month unsecured loan
agreement Ronnie Antebi in the amount of $175,000 and bears an interest rate of
15% per annum. The first 6 payments are in the amount of $10,000 each and
commences on May 15, 2005, the second 6 monthly payments are at $20,000 and the
final payment on June 15,2005 is in the amount of $12,621.85. This loan was
utilized to fund the settlement of the CitiCorp lease (see footnote 10).


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