<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, 2001.

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

          For the transition period from _____________to_____________

                           Commission File No. 0-23416


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


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


          1719 Route 10, Suite 117, Parsippany, NJ       07054
          ----------------------------------------       -----
          (Address of principal executive offices)     (Zip code)


       Registrant's telephone number, including area code: (973) 538-9955
       ------------------------------------------------------------------

          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)

                     Class A Common Stock Purchase Warrants
                     --------------------------------------
                                (Title of Class)

                     Class B Common Stock Purchase Warrants
                     --------------------------------------
                                (Title of Class)



                                        1
<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 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Yes  X  No    .
                      ---    ---

The issuer's net sales for the most recent fiscal year were $3,855,506.

The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on March 29, 2002 was approximately $22,964.

As of March 29, 2002 there were 2,506,471 shares of Common Stock, par value
$.0002 per share, outstanding.

















                                        2
<PAGE>

                                     PART I

Item 1. Business

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

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

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

Modern Medical presently provides equipment and manages one hospital based MRI
site located in Passaic, New Jersey, and four free standing MRI and CT Scan and
Diagnostic Imaging ambulatory centers in Louisiana (1) and New Jersey (3).
Modern Medical also receives a management fee of 11.25% of gross cash
collections from the site in Union, New Jersey, for performing management
functions. Modern Medical's relationship with its joint ventures, range from 2%
through 84% equity interest.

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

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

Our joint ventures

UNION JOINT VENTURE

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

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

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

PLAINFIELD JOINT VENTURE

In July 1991, Modern Medical entered into a joint venture agreement with
Plainfield MRI Associates, Inc. for the purpose of providing magnetic resonance
imaging services and equipment to radiologists and other medical professionals,
including leasing and financing equipment for use in such business. The
Plainfield joint venture shall terminate upon the earlier of (a) July 30, 2011;
(b) the sale of the subject business; (c) termination of the Agreement dated
April 25, 1991 with Muhlenberg Regional Medical Center, Inc., and the Plainfield
joint venture being unable to relocate the subject business to another
profitable site; (d) the subject business being determined unprofitable for 3
consecutive calendar months at the sole discretion of Modern Medical; (e) the
repossession of equipment pursuant to the equipment lease with DVI Financial
dated December 1, 1993; or (f) mutual consent of the joint venturers.



                                       3
<PAGE>

Modern Medical serves as the managing joint venturer pursuant to the Plainfield
joint venture agreement. As managing joint venturer, Modern Medical has the
following managerial responsibilities:

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

Modern Medical shall continue to serve as managing joint venturer until Modern
Medical's liability associated with the subject business to DVI Financial is
satisfied. Thereafter, Modern Medical shall continue to serve as managing joint
venturer until Modern Medical's resignation upon 60 days notice to Plainfield
MRI, Inc.

The interests of Modern Medical and Plainfield MRI, Inc. in the profits and
obligations and liabilities under the Plainfield joint venture agreement are 84%
and 16% respectively.

OPEN MRI OF MORRISTOWN, INC.

During February of 1996, Open MRI of Morristown, Inc., under the terms of a
joint venture with RMC Consulting Inc. and Barbara Krasnica, developed an MRI
facility located in Morristown, New Jersey. Under the terms of the agreement,
dated October 31, 1995, Modern Medical has the responsibility to make all
day-to-day decisions on behalf of the joint venture "Open MRI of Morristown".
The term of the joint venture shall terminate October 15, 2015 unless the
business is sold, or the joint venture is terminated by mutual consent of the
participants. The term of the joint venture may be extended by mutual written
consent of the participants. Under the terms of the joint venture the profit
distribution is as follows: Open MRI of Morristown, Inc. 72%, RMC Consulting
Inc. 18% and Barbara Krasnica 10%.

On September 30, 1998, Open MRI of Morristown, Inc., sold all but 2 of its 72%
interest in Open MRI for $300,000 and the purchaser's agreement to provide
Modern Medical's creditor, DVI Business Credit personal guaranties of the
principals of purchaser in an amount not to exceed $150,000. A gain on this
transaction in the amount of $30,171, was recorded in the consolidated financial
statements of Modern Medical Modalities Corporation.

Our wholly owned sites:

METAIRIE MEDICAL EQUIPMENT LEASING

In June 1997, Metairie Medical Equipment Leasing Corp. was incorporated in the
state of New Jersey, as a 100% owned subsidiary of Modern Medical. In October
1997, Metairie Medical Equipment Leasing Corp. was registered as a corporation
doing business in the State of Louisiana. Under the terms of the venture
agreement Modern Medical will receive 100% of the profits and equity of Open MRI
& Imaging Center of Metairie, LLC. The site opened for business in February of
1998. There was an agreement with Southern Medical Consultants LLP, which
provided that if they raised $250,000 and provided marketing and management
services, they would receive 34% of the site. To date the $250,000 has not been
raised and in September 1998, Modern Medical terminated the management contract
with Southern Medical Consultants LLP for the management of Open MRI & Imaging
Center of Metairie. Accordingly pursuant to the agreement, if Southern Medical
is not active in marketing or managing the site through the end of the lease
payments, then no stock transfers will be made and none have been made to date.

MRI IMAGING AT PBI CORPORATION

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



                                        4
<PAGE>

SOUTH JERSEY MEDICAL EQUIPMENT LEASING CORPORATION

On October 12, 1994, Modern Medical Modalities Corporation formed a New Jersey
corporation, South Jersey Medical Equipment Leasing Corp.

On December 29, 1994, South Jersey Medical, which is 100% owned by Modern
Medical Modalities Corporation, purchased for $1,550,000 certain assets and
liabilities of NMR Imaging Associates, Partnership, an entity that leases MRI
and CT equipment. South Jersey Medical will provide space, equipment (MRI and CT
Scanner) and non-professional services, including management and billing and
collection functions to South Jersey Imaging Associates, P.A.

Medical imaging industry and systems:

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

Medical diagnostic imaging systems facilitate the diagnosis of disease and
disorders at an early stage, often minimizing the amount and cost of care needed
to stabilize or cure the patient and frequently obviating the need for invasive
diagnostic procedures, such as exploratory surgery. Diagnostic imaging systems
are based on the ability of energy waves to penetrate human tissue and generate
images of the body, which can be displayed either on film or on a video monitor.
Imaging systems have evolved from conventional x-ray to the advanced
technologies of MRI and CT Scan.

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

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

Our services:

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

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

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

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



                                       5
<PAGE>

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

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

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

Delivery of our services:

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

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

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

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

In most cases Modern Medical is approached by a group of physicians or a
hospital who are looking to install a MRI or CT scanner. Modern Medical first
reviews the location that the equipment is to be placed in and reviews a general
outline or business plan. Information that is presented includes other centers
in the area, patient financial class, patient demographics in the area served,
and potential referring physicians. In the case of a hospital, Modern Medical
requests the number of MRI and CT scans that the hospital sends to other
facilities. Modern Medical also contacts neighboring sites to determine the
waiting time for scheduling an exam to see if patients are waiting an excessive
amount of time for an exam. Modern Medical contacts potential referring
physicians to determine if they are experiencing problems with existing
facilities and if they would support a new facility. Managed care groups and
HMO's are contacted to determine if contracts for providing service are
available and to ascertain the membership in their service area of the potential
new sites. If the site is considered to be positive a request is made to the
various equipment manufacturers for a bid on the equipment Modern Medical deems
necessary. Modern Medical then makes a determination as to the financial
viability of the project. Based on the criteria above, Modern Medical reviews
each site to determine whether the site can generate revenues to support the
costs associated with the operation of the site.

Our growth strategy and marketing plan

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

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



                                        6
<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 Medical's plan of operation will be to continue to expand the equipment
use of its current customers. Modern Medical will, with its direct marketing
efforts, continue to seek new clients, either through the acquisition of
complementary businesses or the establishment of new centers. Modern Medical
currently does not have any agreements to acquire complementary businesses.

Equipment and supplies

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

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

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

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

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

Governmental reimbursement and regulations of our business

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

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

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

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




                                        7
<PAGE>

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

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

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

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

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

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

Competition

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

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

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

Insurance

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





                                        8
<PAGE>

Employees

As of January 1, 2002, Modern Medical employed 35 persons on a full-time basis
and 28 persons on a part time basis. The following table reflects the employees
per facility:

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

Modern Medical (Corporate)                   11             10              1

Marlton, NJ                                   4              2              2

Passaic, NJ                                   4              4              0

JOINT VENTURES

South Plainfield, NJ                          6              2              4

Metairie, LA                                  5              4              1

Union, NJ                                    34             12             22
                                   ------------   ------------   ------------

Total:                                       64             34             30
                                   ============   ============   ============

Equipment lease agreements

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

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:

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

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

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

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

Item 2. Properties

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

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

Modern Medical leases 1,765 square feet located at 1719 Route 10, Suite 117,
Parsippany, New Jersey, which is comprised of Modern Medical's executive
offices. Modern Medical is party to a lease covering the facility that expires
on February 28, 2004, and provides for monthly rental payments of $2,721.82.
Modern Medical believes that its facilities are adequate for its current and
future operations.



                                        9
<PAGE>

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

Item 3. Legal Proceedings

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

In 1999, Stephen Findlay, former president of Prime Contracting Corp., named the
Company in a suit making various assertions regarding the sale of Prime
Contracting. This action is in the early stages and, therefore, no determination
as to the possible outcome can be made. This case is being settled in
conjunction with the Prime Contracting Corp., Case 00-3602, discussed below.

In a related matter, Stephen Findlay named the Company as a defendant in
arbitration. The arbitrator ruled that the Company should not have been named
and awarded legal fees to be paid by Stephen Findlay. The Company has filed an
action in the U.S. District Court for the District of New Jersey to enforce the
arbitration award. During the first quarter of 2001, a court order was entered
instructing Stephen Findlay to pay legal fees in the amount of $18,627.00 plus
lawful interest from the date of the filing of the complaint. This case is being
settled in conjunction with the Prime Contracting Corp., Case 00-3602, discussed
below.

The Company and certain of its officers and directors (Messrs. Findlay, Maccia,
Goldberg and Gedeon) are named as defendants in an adversary proceeding brought
by the unsecured creditors committee in the bankruptcy proceeding involving
Prime Contracting Corp., Case No. 00-34073 (DS), US Bankruptcy Court (NJ), the
Official Committee of Unsecured Creditors on Behalf of the Bankruptcy Estate of
Prime Contracting Corp. v. Hamilton McGregor, et al, Adversary Proceeding No.
00-3602. The Company is named in five counts of the twenty count Complaint
alleging (i) a conspiracy to defraud plaintiffs and other creditors of Prime
pursuant to the RICO Act of 1970, (ii) breach of fiduciary duty and duty of
loyalty, theft of corporate business opportunity and corporate assets, and (iii)
conversion. The complaint also seeks to extend the bankruptcy proceeding to the
company and other corporate defendants named in the Complaint. The Company is a
participant along with a number of affiliated entities, and past and present
officers and directors, in a combined settlement of this litigation and the
related litigations above. The settlement provides for a cash payment to the
reorganized debtor upon Bankruptcy Court approval of the settlement scheduled
for March 26, 2002, along with a note to be executed which for quarterly
payments over two years with interest at 6%. The Company is jointly and
severally liable for both the cash payment and the note along with a number of
the other defendants in the case. Under this settlement the Company is required
to make eight quarterly payments of $12,500 each plus 6% interest commencing
July 2002. The full amount of the Company's portion of the settlement has been
accrued in the 2001 financial statements.

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

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

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

Modern Medical did not submit any matters to a vote of its security holders
during the fourth quarter of 2001.






                                       10
<PAGE>


                                     PART II

Item 5. Market for Modern Medical's Common Stock

On March 12, 1999, we effected a 1 for 2 reverse split of our authorized and
outstanding shares of common stock. As of March 31, 2002, we had 2,506,471
shares of common stock outstanding. Our common stock is traded on the Pink
Sheets under the symbol "MODM." The following table sets forth the high and low
closing bid prices for the common stock as reported on the Nasdaq SmallCap
during 2000 through March 29, 2002. On May 26, 2000, the common stock began
trading on the Pink Sheets. The high and low bid prices reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions. All bid prices for the periods prior to our 1-for-2 reverse
stock split effected on March 12, 1999, have been adjusted to reflect the
reverse stock split.

                                                            Common Stock
                                                    ---------------------------
Fiscal 2000                                             High           Low
                                                    ------------   ------------

First                                               $      2.75    $      1.375
Second                                                     1.50           0.350
Third                                                      0.35           0.120
Fourth                                                     0.07           0.020

Fiscal 2001

First                                               $      0.03    $      0.01
Second                                                     0.03           0.011
Third                                                      0.015          0.011
Fourth                                                     0.015          0.011

Fiscal 2002

First (through March 29, 2002)                      $      0.015          0.01

On March 29, 2002, there were 49 holders of record of Modern Medical's 2,506,471
outstanding shares of Common Stock.

On March 29, 2002, the last sale price of the Common Stock as reported on the
Pink Sheets was $0.01.

Dividend Policy

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

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

Forward-looking Statements

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

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

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

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

Modern Medical presently provides equipment and manages one hospital based MRI
site located in Passaic, New Jersey, and four free standing MRI and CT Scan and
Diagnostic Imaging ambulatory centers in Louisiana (1) and New Jersey (3).
Modern Medical also receives a management fee of 11.25% of gross cash
collections from the site in Union, New Jersey, for performing management
functions. Modern Medical's relationship with its joint ventures, range from 2%
through 84% equity interest.

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

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

                                       11
<PAGE>

Results of Operations:

For the year ended December 31, 2001 compared to the year ended December 31,
2000

Net Revenues from Services:

When comparing the year ended December 31, 2001 to the same period in 2000, the
net revenue from services increased $274,827 from $3,580,679 in 2000 to
$3,855,506 in 2001. The increase resulted from increased marketing at both the
Plainfield and Passaic imaging centers resulting in additional net revenues of
$329,000 and $447,000, respectively. These gains were partially offset by the
sale of the West Paterson center in March of 2000 and increased competition in
the area of our Marlton resulting in net revenue decreases of $136,000 and
$374,000, respectively. All other operations resulted in a net increase of net
revenues for 2001 of approximately $8,000.





                                       12
<PAGE>

Cost of Services Provided/Selling, General and Administrative:

Cost of Services Provided/Selling, General and Administrative has decreased
approximately $72,000 from 2000 to 2001. This decrease resulted from increased
volumes at the Plainfield and Passaic imaging centers of approximately $242,000
offset by volume related cost reduction of approximately $206,000 at the Marlton
center and approximately $108,000 resulting from the sale in March of 2000 of
the West Paterson center.

Miscellaneous Income

Miscellaneous Income for the year ended December 31, 2001 was $154,785 as
compared to $92,991 for the same period in 2000. The increase of $61,794 result
from the rental of an ultra sound unit approximately $20,000, transcription work
for third parties of approximately $27,000 and increased rental time of the
mobile mammography unit of approximately $15,000.

Loss on Sale of Subsidiary

On March 13, 2000, the Company sold its West Paterson imaging center to Advanced
Imaging and Radiology Associates P.A. and incurred a loss of $160,208.

Gain on Disposal of Equipment

During the year 2000 the company sold two CT Scanners and recognized a gain of
$187,928.

Liquidity and Capital Resources:

Modern Medical has a working capital deficiency of $ 1,186,024 at December 31,
2001 as compared to a working capital deficiency of $1,299,537 at December 31,
2000.

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. In addition Plainfield equipment
note was paid off in July of 2001 further reducing the monthly debt service by
approximately $13,500 per month or $162,000 per year.

In addition, for the year ended December 31, 2001, Modern Medical reduced the
balance of the outstanding accounts receivable working capital line of credit by
approximately $100,461 ($430,821 to $330,360) and for the three months ended
March 31, 2002 the outstanding balance has been further reduced to $311,713.
Modern Medical intends to continue to reduce the outstanding principal balance
on this line of credit at a rate of 10% of the cash receipts of the applicable
imaging centers.

In July 1999, Modern Medical sold 148,702 shares of its common stock to
accredited investors in a private placement transaction pursuant to Regulation D
Rule 506 of the Securities Act of 1933, as amended. Modern Medical received
gross proceeds of $283,000, before offering expenses of approximately $78,000,
which Modern Medical intends to use for working capital and general corporate
purposes.

In October 1999, Modern Medical issued an aggregate of $500,000 principal amount
of its 10% convertible notes to two investors, which were due on October 18,
2000. The notes are convertible at anytime while any portion of the notes are
outstanding into shares of Modern Medical's common stock at the lower of: (a)
72.5% of the lowest closing bid price of Modern Medical's common stock for the
thirty (30) trading days immediately preceding the date of conversion, or (b)
$2.0625. Modern Medical has the right, subject to conditions, to require the
purchasers of the $500,000 note to purchase up to an additional $2,000,000
principal amount of convertible notes on the same terms and conditions as the
$500,000 note. As of March 31, 2002, the notes were not converted into Modern
Medical's common stock and Modern Medical has agreed to repay the loan at
$15,000 per month. See "Note 8 of the Notes to Consolidated Financial
Statements".

During the fourth quarter of 1999, the Company entered into an agreement whereby
Dr. Bahlia through June 30, 2000 would run Amherst Imaging Center. The Company
would not be affiliated with the center beyond the term of the facility lease
and all assets at corresponding to the center were written down to their net
realizable value, which was estimated to be zero. The debt to DVI was written
down to $45,000, the rent through July 31, 2000 was accrued and a close down
cost of approximately $22,000 was established.

On March 3, 2000, the Company established a commercial line of credit in the
amount of $300,000 from Bridge View Bank in Englewood, New Jersey. Pursuant to
the terms of the line of credit, Roger Findlay, Gregory Maccia and Jan Goldberg,
each of whom are executive officers and directors of Modern Medical are
guarantors on the loan. The loan is for a one-year period and the interest rate
on the loan is based on Bridge View's Base/Prime commercial lending rate plus
one (1) percent floating for the term of the loan. On March 21, 2001, the line
of credit was extended one year to March 21, 2002 and is currently being
extended for an additional six months.


                                       13
<PAGE>

On March 13, 2000, West Paterson Equipment Leasing Corporation and Modern
Medical entered into an agreement with Advanced Imaging and Radiology
Associates, P.A. pursuant to which all functions of the West Paterson office
will be turned over to Advanced Imaging. Advanced Imaging will be responsible
for all operational expenses, including but not limited to payroll, rent,
medical supplies, marketing materials, and maintenance of equipment and lease
payments on the equipment beginning on March 13, 2000. Additionally, both
Advanced Imaging and its principals have guaranteed the remaining twenty-six
payments of $11,858 on the leased equipment. All accounts receivable and
accounts payable will remain with Modern Medical.

During the first quarter of 2000 the Company retired its Line of Credit with
Summit Bank in the amount of $600,000. This line was secured by a certificate of
deposit at Summit, which was used to payoff the line.

Modern Medical believes that its current operations along with its current
capital resources will provide it adequate working capital for the next twelve
months.

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

Going Concern

Modern Medical's 2001 and 2000 financial statements have been presented on a
basis that it is a going concern. Due to significant losses during the years
ended December 31, 2001 and 2000, the accountants' reports have an explanatory
paragraph stating that Modern Medical's continued existence is in doubt.

As described above, during 2001 and 2000 Modern Medical debt service by
approximately $402,000 per year and raised approximately $783,000 through the
issuance of equity and debt securities. Management believes that its current
operations along with its current capital resources will provide Modern Medical
sufficient cash resources to support its operations for the next twelve months.

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-18


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

On January 5, 2001, the Company dismissed Lazar, Levine & Felix LLP, located at
350 Fifth Avenue, New York, New York 10118-0170, as its independent accountants.
The Company engaged Liebman, Goldberg & Drogin, LLC., located at 591 Stewart
Avenue, Suite 450, Garden City, New York 11530, as its new independent certified
public accountants. In connection with the most recent fiscal year and
subsequent interim periods preceding Lazar, Levine & Felix LLP's dismissal,
there were no disagreements with Lazar, Levine & Felix LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. Lazar, Levine & Felix LLP's report on the financial
statements of Modern Medical contained a going concern opinion.










                                       14
<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

Roger Findlay      55        Chairman of the Board of Directors and President

Jan Goldberg       51        Vice President, Acting Principal Accounting
                             Officer, Treasurer and Director

Gregory Maccia     47        Vice President, Secretary and Director

Fred Mancinelli    60        Director

Carl Gedeon        58        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.

ROGER FINDLAY is a co-founder and has been Chairman of the Board of Directors of
the Company since its inception in June 1990. In March 1999, Mr. Findlay was
appointed President of the Company. Since 1989, Mr. Findlay has also been
co-founder of Technology Services, Inc., a software support company for medical
offices and commercial accounts. Since 1986, he has also been founder and
President of Northern New Jersey Medical Management, a general partner of a
diagnostic imaging center. From 1986 to 1989, Mr. Findlay was President of
Advacare, Inc., a practice management and physician billing company. He was
co-founder and President of Effective Management Services, Inc., from 1984 to
1986, which provided facilities management and custom programming for hospitals,
universities and physician groups. Mr. Findlay, from 1984 to 1986, was also
co-founder and President of Medical Accounts Management Services, a software
development company. From 1984 to 1986, Mr. Findlay was chief operating officer
of NMR of America, Inc., a publicly traded company engaged in operating MRI
sites. Mr. Findlay, from 1972 to 1986, was President and co-owner of Medical
Billing Services, Inc. From June 1995 to the present, Mr. Findlay has served as
Chairman of the Board of Directors of RF Management, a publicly held company.

JAN GOLDBERG is a co-founder and was Secretary, Treasurer and Director of the
Company until November 1992. Since November 1992, Mr. Goldberg has been the Vice
President, Treasurer and Director of the Company. From 1989 to 1990, Mr.
Goldberg was founder and President of GPM, Inc., a physician billing
organization with offices in Florida and New York. From 1987 to 1988, Mr.
Goldberg was operations manager for Advacare, Inc., a practice management and
physician billing company. From 1984 to 1987, Mr. Goldberg was manager of a
multi-specialty radiology practice, BBS Billing, Inc. an east coast diagnostic
physician group which had contracts with hospitals in New York as well as their
own private offices and outpatient facilities. From 1974 to 1984, Mr. Goldberg
held various positions with Blue Cross as well as with hospitals in the New York
area. Mr. Goldberg was involved in setting up fee-for-service reimbursement
systems and was involved in various aspects of hospital administration.

GREGORY MACCIA is a co-founder of the Company and was Vice President and
Director until November 1992. Since November 1992, Mr. Maccia has been the Vice
President, Secretary and a Director of the Company. Mr. Maccia has also been
President of Technology Services, Inc., a software design and facilities
management company for medical and commercial accounts since 1989. From 1986-
1989, Mr. Maccia was Vice President of Advacare, Inc., a national practice
management and physician billing company. Since 1986, Mr. Maccia has been
co-founder of Northern New Jersey Medical Management, Inc. He was co-founder and
Vice President of Medical Accounts Management Services, Inc. (MAMS) from 1984 to
1986 which developed and sold physician, outpatient and clinical billing
software systems. Mr. Maccia, from 1984 to 1986, was co-founder and Vice
President of Effective Management Services, Inc. (EMS), which provided custom
programming and facilities management with contracts to hospitals and
universities in the tri-state area as well as collection agencies and
non-medical entities. From 1977 to 1984, Mr. Maccia owned and managed his own
consulting company. Mr. Maccia currently serves on the Board of Directors of RF
Management, a publicly-held company.

FRED J. MANCINELLI was appointed to the Board of Directors of Modern Medical
Modalities on March 3, 1998. Since 1988 Mr. Mancinelli has been President of CBS
Business Forms and Printing, Inc., a privately owned marketing, printing and
forms corporation located in Cedar Knolls, New Jersey. From 1971 to 1988, Mr.
Mancinelli was Vice President of Sales for New Jersey for Computer Business
Supplies, Inc. He purchased the New Jersey Branch office in 1988 and has
concentrated on meeting the total business forms and printing requirements of
over 350 customers. He is responsible for the administrative management,
marketing, cash flow analysis and sales for the Company. From 1962 to 1971,
Autographic Business Forms, serving as Communications Manager from 1962-1964,
salesman from 1964-1968 and the New Jersey regional sales manager from
1968-1971, employed him.



                                       15
<PAGE>


CARL GEDEON was appointed to the Board of Directors of Modern Medical Modalities
on March 3, 1998. Mr. Gedeon has over twenty years of experience in the medical
support business, concentrating on sales with an emphasis on unique design,
financing and problem solving for diagnostic imaging centers. Currently Mr.
Gedeon is founder and president of MedSpace, Inc., a company that specializes in
the design and manufacture of state of the art building systems utilized to
house diagnostic imaging equipment. Previously, Mr. Gedeon was vice president of
a major modular office company specializing in medical systems throughout the
United States. Mr. Gedeon also serves on the Board of Directors of Hamilton
McGregor International, Inc.

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, 1998, the Company believes
all reports required to be filed by Section 16(a) were filed on a timely basis.

Item 10. Executive Compensation

The following table sets forth all cash compensation for services rendered in
all capacities to the Company, for the year ended December 31, 2001 (referred to
as "2001" in this table), the year ended December 31, 2000 (referred to as
"2000" in this table), and for the year ended December 31, 1999 (referred to as
"1999" in this table), paid to the Company's Chief Executive Officer. Roger
Findlay was appointed President of the Company in March 1999.

Summary Compensation Table

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

Roger Findlay                  2001       $ 69,275           -0-
Chairman, President
and CEO                        2000       $ 90,658           -0-
                               1999       $148,431        $4,200(1)

(1) Includes a car allowance paid by Modern Medical.

Employment Agreements

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

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

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

Stock Option Plan

In July 1999, the board of directors and shareholders adopted the 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. To
date, 300,000 options have been granted under the plan.

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




                                       16
<PAGE>

The plan is effective for a period of ten years, expiring in 2009. Options may
be granted to officers, directors, consultants, key employees, advisors and
similar parties who provide their skills and expertise to us. The plan is
designed to enable our management to attract and retain qualified and competent
directors, employees, consultants and independent contractors. Options granted
under the plan may be exercised for up to ten years, and shall be at an exercise
price all as determined by our board. Options are non-transferable except by the
laws of descent and distribution or a change in control of us, as defined in the
plan, and are exercisable only by the participant during his or her lifetime.
Change in control includes (a) the sale of substantially all of the assets of us
and merger or consolidation with another company, or (b) a majority of the board
changes other than by election by the stockholders pursuant to board
solicitation or by vacancies filled by the board caused by death or resignation
of such person.

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

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

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

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of April 11, 2002 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 1719 Route 10, Suite 117, Parsippany,
New Jersey 07054.

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

Roger Findlay(2)                       188,048                        7.2%

Jan Goldberg(3)                        138,846                        5.4%

Gregory Maccia(4)                      143,202                        5.4%

Fred Mancinelli(5)                      20,000                          *

Carl Gedeon(6)                          20,000                          *

All officers and directors             510,096                       18.0%
as a group (5 persons)(2)-(6)

* Less than one percent

(1) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the
table.

(2) Includes: (i) 68,048 shares of common stock; and (ii) options to purchase
120,000 shares which are currently exercisable.

(3) Includes: (i) 68,846 shares of common stock; and (ii) options to purchase
70,000 shares which are currently exercisable.

(4) Includes: (i) 73,198 shares of common stock; and (ii) options to purchase
70,000 shares which are currently exercisable.

(5) Includes options to purchase 20,000 shares of common stock of all which are
currently exercisable.

(6) Includes options to purchase 20,000 shares of common stock all of which are
currently exercisable.




                                       17
<PAGE>


Item 12. Certain Relationships and Related Transactions

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

On March 3, 2000, the Company received a commercial line of credit in the amount
of $300,000 from Bridge View Bank in Englewood, New Jersey. Pursuant to the
terms of the line of credit, Roger Findlay, Gregory Maccia and Jan Goldberg,
each of who are executive officers and directors of Modern Medical are
guarantors on the loan. The loan is for a one-year period and the interest rate
on the loan is based on Bridge View's Base/Prime commercial lending rate plus
one (1) percent floating for the term of the loan. On March 21, 2001, the line
of credit was extended one year to March 21, 2002 and is currently being
extended for an additional six months.

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

(a) Exhibits

None.

(b) Reports on Form 8-K.

There were no reports filed on Form 8-K during the quarter ended December 31,
2001.







                                       18
<PAGE>


                                   SIGNATURES

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

                          MODERN MEDICAL MODALITIES CORPORATION

                          By: /s/ ROGER FINDLAY
                              --------------------
                              Roger Findlay, President and Chairman of the Board

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

<TABLE>
<CAPTION>
Signature                                Title                                           Date
                                         -----                                           ----

<S>                                      <C>                                             <C>
/s/ ROGER FINDLAY                        President and Chairman of the Board             April 16, 2002
-----------------------
Roger Findlay

/s/ JAN GOLDBERG                         Vice President, Acting Principal                April 16, 2002
-----------------------                   Accounting Officer, Treasurer
Jan Goldberg                              and Director

/s/ GREGORY MACCIA                       Vice President, Secretary                       April 16, 2002
-----------------------                   and Director
Gregory Maccia

                                         Director                                        April 16, 2002

Fred Mancinelli

                                         Director                                        April 16, 2002
Carl Gedeon
</TABLE>











                                       19
<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Modern Medical Modalities Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheet of Modern Medical
Modalities Corporation Subsidiaries (a New Jersey corporation) and Subsidiaries
(the "Company") as of December 31, 2001, and the related consolidated statements
of operations, changes in stockholders' deficit, and cash flows for the years
ended December 31, 2001 and 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Modern Medical Modalities
Corporation and Subsidiaries as of December 31, 2001, and the results of
operations and their cash flows for each of the years ended December 31, 2001
and 2000, in conformity with accounting principles generally accepted in the
United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
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 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
March 22, 2002





                                       F-1
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001

<TABLE>
<CAPTION>
                                     ASSETS

<S>                                                                                           <C>
Current assets:

        Cash and cash equivalents                                                             $         9,175
        Accounts receivable (less contractual allowances of $2,305,564)                             2,138,053
        Account receivable - other                                                                     29,471
        Notes receivable from affiliate - current portion (less estimated
            reserve for collectibility of $267,000)                                                   115,320
        Other current assets                                                                           25,172
                                                                                              ---------------

                                   Total current assets                                             2,317,191
                                                                                              ---------------

Property and equipment, net of accumulated depreciation of $6,252,944                               2,458,139
                                                                                              ---------------

Other assets:
        Deferred tax asset                                                                            484,718
        Notes receivable from affiliate, net of current portion                                       338,821
        Investment in joint ventures                                                                   34,377
        Deposits                                                                                       17,100
                                                                                              ---------------

                                    Total other assets                                                875,016
                                                                                              ---------------

                                    Total assets                                              $     5,650,346
                                                                                              ===============
</TABLE>






                       See notes to financial statements.

                                      F-2
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2001

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
<S>                                                                                           <C>
Current liabilities:
        Line of credit                                                                        $       296,895
        Cash overdraft                                                                                 64,138
        Accounts payable                                                                              730,710
        Accrued expenses                                                                              316,453
        Loan payable - joint venturer, current portion                                                 58,709
        Convertible debt, current portion                                                             180,000
        Current portion long term debt                                                              1,169,087
        Due to affiliate                                                                              219,223
        Provision for site closings and other assets                                                  468,000
                                                                                              ---------------

                                Total current liabilities                                           3,503,215
                                                                                              ---------------

Other liabilities:
        Long term debt, net of current portion                                                      1,585,704
        Loan payable - joint venturer, net of current portion                                         150,196
        Convertible debt, net of current portion                                                      110,000
        Loans payable shareholders                                                                    335,391
                                                                                              ---------------

                                Total other liabilities                                             2,181,291
                                                                                              ---------------

                                Total liabilities                                                   5,684,506
                                                                                              ---------------

Minority interest                                                                                     (17,160)
                                                                                              ---------------

Commitments and contingencies

Stockholders' deficit:
        Common stock, $0.0002 par value, Authorized - 15,000,000 shares
             Issued and outstanding - 2,506,471 shares                                                    502
        Additional paid-in capital                                                                  4,460,223
        Accumulated (deficit)                                                                      (4,477,725)
                                                                                              ---------------

                                Total stockholders' deficit                                           (17,000)
                                                                                              ---------------

                                Total liabilities and stockholders' deficit                   $     5,650,346
                                                                                              ===============
</TABLE>



                       See notes to financial statements.

                                      F-3
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           For the Years Ended December 31,
                                                                                         -----------------------------------
                                                                                              2001                2000
                                                                                         ---------------     ---------------
<S>                                                                                      <C>                 <C>
Operating income:
     Net revenues from services                                                          $     3,855,506     $     3,580,679
     Cost of services provided                                                                 2,430,910           2,537,476
                                                                                         ---------------     ---------------

Total operating income                                                                         1,424,596           1,043,203
                                                                                         ---------------     ---------------

Operating Expenses:
     Selling, general and administrative                                                         845,892             810,906
     Bad debts                                                                                    80,147             126,702
     Depreciation and amortization                                                               732,154           1,205,295
                                                                                         ---------------     ---------------

Total operating expenses                                                                       1,658,193           2,142,903
                                                                                         ---------------     ---------------

(Loss) from operations                                                                          (233,597)         (1,099,700)
                                                                                         ---------------     ---------------

Other income (expenses):
     Interest income                                                                              57,016              66,941
     Interest expense                                                                           (453,868)           (634,467)
     Rental and service income                                                                   154,785              92,991
     Income from joint ventures                                                                  132,223              72,588
     Gain on disposal of equipment                                                                  --               187,928
     (Loss) on sale/disposal of subsidiaries                                                        --              (160,208)
     Net gain on restructuring of debt                                                              --                  --
                                                                                         ---------------     ---------------

Total other income(expense)                                                                     (109,844)           (374,227)
                                                                                         ---------------     ---------------

(Loss) before income taxes and minority interest                                                (343,441)         (1,473,927)

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

(Loss) before minority interest                                                                 (343,441)         (1,473,927)

Minority interests                                                                                (2,589)            226,125
                                                                                         ---------------     ---------------

Net (loss)                                                                               $      (346,030)    $    (1,247,802)
                                                                                         ===============     ===============

(Loss) per share, basic and diluted                                                      $         (0.14)    $         (0.50)
                                                                                         ===============     ===============

Number of weighted average shares outstanding                                                  2,506,471           2,506,471
                                                                                         ===============     ===============
</TABLE>



                       See notes to financial statements.

                                      F-4
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<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, 1999            2,506,471                 502     $     4,460,223    ($     2,883,893)    $     1,576,832

Net loss for the year ended
     December 31, 2000                       --                  --                  --            (1,247,802)         (1,247,802)
                                  ---------------     ---------------     ---------------     ---------------     ---------------

Balance at December 31, 2000            2,506,471                 502           4,460,223          (4,131,695)            329,030

Net loss for the year ended
     December 31, 2001                       --                  --                  --              (346,030)           (346,030)
                                  ---------------     ---------------     ---------------     ---------------     ---------------

Balance at December 31, 2001            2,506,471                 502     $     4,460,223    ($     4,477,725)   ($        17,000)
                                  ===============     ===============     ===============     ===============     ===============
</TABLE>





                       See notes to financial statements.

                                      F-5
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           For the years Ended December 31,
                                                                                         -----------------------------------
                                                                                              2001                 2000
                                                                                         ---------------     ---------------
<S>                                                                                      <C>                 <C>
Cash flows from operating activities
        Net (loss)                                                                       $      (346,030)    $    (1,247,802)
                                                                                         ---------------     ---------------
        Adjustments to reconcile net loss to net cash provided (used) by
        operating activities:
               Depreciation and amortization                                                     732,154           1,205,295
               Contractual allowances                                                           (502,248)            298,267
               Bad debts                                                                          80,147             126,702
               Income from an unconsolidated joint venture                                      (132,223)            (72,588)
               Minority interest                                                                   2,589            (226,125)
               Gain on sale/disposal of equipment                                                   --              (187,928)
               Loss on sale/disposal of subsidiaries                                                --               160,208
Increase(decrease) in cash attributable to changes in operating assets and
        liabilities:
               Accounts receivable                                                               282,344              18,261
               Accounts receivable - joint venturer                                              124,814            (118,952)
               Affiliate receivables                                                             202,012            (185,938)
               Other current assets                                                                4,656              96,656
               Deposits and other assets                                                            (300)             (8,849)
               Accounts payable                                                                 (318,271)           (278,886)
               Accrued expenses                                                                 (105,781)            131,579
               Affiliate payables                                                                157,705             (48,679)
                                                                                         ---------------     ---------------
        Total adjustments                                                                        527,598             909,023
                                                                                         ---------------     ---------------
Net cash provided (used) by operating activities                                                 181,568            (338,779)
                                                                                         ---------------     ---------------
Cash flows from investing activities:
               Net increase in provision for site closings and other assets                      468,000                --
               Fixed asset acquisitions                                                         (439,732)               --
               Fixed asset dispositions                                                           71,877             787,554
               Proceeds from note receivable                                                        --               133,628
               Investment in joint venture                                                       125,000                --
               Increase in minority interest                                                     (11,195)            (48,710)
                                                                                         ---------------     ---------------
Net cash provided by investing activities                                                        213,950             872,472
                                                                                         ---------------     ---------------
Cash flows from financing activities:
               Increase in notes receivable - affiliates                                        (259,906)               --
               Proceeds from loan payable joint venturer                                         208,905                --
               Proceeds form shareholder loans                                                   140,903             194,487
               Line of credit (payments)                                                            (105)           (302,750)
               Net reduction long term debt                                                     (547,169)         (1,018,539)
                                                                                         ---------------     ---------------
Net cash (used) by financing activities                                                         (457,372)         (1,126,802)
                                                                                         ---------------     ---------------
Net decrease in cash and cash equivalents                                                        (61,854)           (593,109)
Cash and equivalents, beginning of year                                                            6,891             600,000
                                                                                         ---------------     ---------------
Cash and equivalents, end of year                                                        $       (54,963)    $         6,891
                                                                                         ===============     ===============

Supplemental cash flow information
        Interest paid                                                                    $       378,824     $       552,063
                                                                                         ===============     ===============
        Income taxes paid                                                                $          --       $          --
                                                                                         ===============     ===============
</TABLE>



                       See notes to financial statements.

                                      F-6
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Organization and Business:

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

Basis of Presentation:

The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Medical Marketing and Management, Inc., Somerset
Imaging Corporation, South Plainfield Imaging, Inc., South Jersey Medical
Equipment Leasing Corp., 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.,
and its 84% owned joint venture, Plainfield MRI Associates, by contract manages
the joint venture, is the managing joint venturer and has unilateral control.
Investment in an unconsolidated joint venture, Union Imaging Associates, Joint
Venture in which the Company has a 10% interest and significant influence, is
accounted for under the equity method. All significant inter-company
transactions and accounts have been eliminated in consolidation.

Operating Revenue:

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:

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.








                                       F-7
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



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

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

Contractual Allowances:

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

Use of Estimates:

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

Concentration of Credit Risk/Fair Value:

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

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

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

Cash and Cash Equivalents:

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

Accounts Receivable:

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

Property and Equipment:

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



                                       F-8
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



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

Deferred Financing Costs:

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

Revenue and Cost Recognition:

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

Income Taxes:

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

Net Income (Loss) Per Share:

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

Stock-based Compensation:

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

Advertising and Promotion Costs:

Advertising and promotion costs, which are included in general and
administrative expenses, are expensed as incurred. For the two years ended
December 31, 2001 and 2000, such costs aggregated $532,205 and $137,677,
respectively.

Retirement Plan:

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

Comprehensive Income:

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

Recently Issued Accounting Pronouncements:

Goodwill and Other Intangible Assets:

In July 2001, the FASB issued Statements of Financial Accounting Standards No.
141, "Business Combinations" and No. 142, "Goodwill and other Intangible
Assets". SAFS No. 141 requires all business combinations initiated after June
30, 2001, to be



                                       F-9
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



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

accounting for using the purchase method. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized but are reviewed
annually (or more frequently, if impairment indicators arise) for impairment.
Separable intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives (but with no maximum life).

The company has adopted this standard effective October 1, 2001 and,
accordingly, those intangible assets that will continue to be classified as
goodwill or as other intangibles with indefinite lives will no longer be
amortized. Additionally, in accordance with SFAS No. 142, intangible assets,
including purchased goodwill, will be evaluated periodically for impairment. The
impact of adoption of SFAS No. 142 will not be material.

Long-Lived Assets

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

NOTE 2 - GOING CONCERN UNCERTAINTY.

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has a working capital deficiency of
$1,186,024 as of December 31, 2001, and has continuously sustained significant
losses from operations, which raise substantial doubt about the Company's
ability to continue as a going concern. In view of these matters, realization of
the assets of the Company is dependent upon the Company's ability to meet its
financing requirements and the success of future operations. The financial
statements do not include adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.

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

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS.

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

On November 1, 1994, the Company acquired Prime Contracting Corp. ("Prime") in a
business combination accounted for as a pooling of interests. Prime, a full
service contractor providing turnkey design and construction services, became a
wholly-owned subsidiary of the Company, through the exchange of 112,457 shares
of the Company's common stock (market value of $650,000) for all of the shares
of the outstanding stock of Prime. On December 27, 1995, the Company entered
into an agreement with a related party to sell all of the common stock of Prime
for $1,200,000, payable as follows: $100,000 upon execution, $100,000 at closing
and a promissory note bearing interest at prime plus one percent, payable in two
installments, $600,000 after six months, and $400,000 after one year. If Prime's
gross annual revenue for the calendar year 1996 falls below $3,000,000, then the
final payment of $400,000 shall be forfeited. The Agreement was modified in 1996
to extend the note payments of $600,000 to October 1997 and $400,000 to April
1998. Additionally, the modified agreement required the Company to charge
$358,000 of receivables from Prime to additional paid-in capital in 1996 as an
adjustment to the sale price. On March 3, 1998, the agreement was restructured,
resulting in a write-down of the receivable from the related party in the amount
of $747,650 (see Note 4).



                                      F-10
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



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

On December 27, 1996, the Company entered into a stock purchase agreement with a
related party to sell 65% of the capital stock of its' subsidiary, Empire State
Imaging Associates, Inc. ("Empire") for $250,000, payable as follows: $25,000 at
the closing and nine equal monthly installments of 425,000 plus interest at
prime plus one percent.. The Company recorded an increase of $165,631 to
stockholders' equity, which represents the excess of the sale price over the net
assets of Empire. On June 30, 1998, the Company and its affiliate sold all the
outstanding stock of Empire to MID Rockland Imaging Partners, Inc., an unrelated
party, for the principal sum of $2,500,000. The Company recorded a loss on this
transaction in the amount of $742,619.

In July 1996, the Company, through Ohio Medical Equipment Leasing Corporation,
("OME"), entered into a purchase and consulting agreement with Medical Advances,
Inc. ("Medical") to acquire an interest as a general (managing) partner of
Sylvania Diagnostics ("Sylvania"), an Ohio Limited Partnership, for one dollar.
The interest acquired represents 50.2% of the total units outstanding. Sylvania
is a diagnostic imaging center located in Sylvania, Ohio.

As a result of this acquisition, the Company recorded the difference between the
acquisition price of one dollar and the allocated percentage of the cumulative
deficit as goodwill and the cumulative allocated losses in excess of basis of
the limited partners of Sylvania as an intangible asset as of July 1, 1996, the
date of acquisition. The Company records its allocated portion of profits and
losses based upon its 50.2% ownership percentage. The Company also entered into
an agreement with DVI, which provides for $135,000 of working capital advances,
which are only to be used for operating Sylvania. If the Company determines that
operating Sylvania is not profitable, DVI will purchase either Sylvania or OME
for one dollar. In August 1996, Sylvania entered into an agreement with DVI to
refinance equipment and related leasehold improvements in the aggregate amount
of $2,127,366. The amount was payable in 64 monthly installments commencing in
March 1997 of $20,000 for the first four months and $44,968 over the remaining
60 months. DVI, an equipment finance company who is the lessor of Sylvania
medical equipment, indemnifies the Company for all prior liabilities and
obligations of the limited partnership. On June 30, 1998, the Company exercised
its option and sold Sylvania back to DVI for one dollar. As a result of this
disposition, the Company recorded a loss in the amount of $168,064.

In July 1996, the Company, through its wholly owned subsidiary West Paterson
Medical Equipment Leasing Corp. ("WPMEL"), entered into a lease and management
services agreement with Advanced Imaging & Radiology Associates, P.A. ("M.D.").
The agreement provides that WPMEL will lease office space, fixtures and
equipment and will provide management services to M.D. over an initial term of
five years with a five-year renewal option. The site located in West Paterson,
New Jersey, is a medical practice specializing in diagnostic imaging. On March
13, 2000, the Company entered into an agreement with Advanced Imaging and
Radiology Associates, P.A. to sell the operating assets and related liabilities
of its wholly owned subsidiary, West Paterson Equipment Leasing Corporation. All
accounts payable and accounts receivable incurred prior to March 13, 2000 shall
remain with the Company.

In June 1997, Metairie Medical Equipment Leasing was incorporated in the state
of New Jersey, as a 100% owned subsidiary of the Company. In October of 1997,
Metairie Medical Equipment Leasing Corporation was registered as a Corporation
doing business in the State of Louisiana. On April 15, 1998, Open MRI & Imaging
Center of Metairie, LLC ("LLC") was organized in the state of Louisiana. Under
terms of the venture agreement, the Company, through its 100% owned corporation,
owns 85% of the LLC. The 15% interest owner, KFC Venture, LLC, made an initial
capital contribution of $250,000. Profits shall be allocated to the interest
holders in proportion to their percentages after such time as KFC Ventures have
been repaid $125,000 of its initial capital contribution without interest. Until
such time, all distributions shall be divided equally with fifty (50%) percent
of said distribution being paid to KFC Ventures, LLC as a return of its initial
capital contribution up to the amount of $125,000 and the other fifty (50%)
percent of said distribution being distributed to the members in accordance with
their percentage interests in the Company.

In February 1999, the Company sold its 50% interest in Doctor's Imaging
Associates, Joint Venture to a separate company with common ownership (an
unrelated party) for $100,000, resulting in a gain of $26,528.








                                      F-11
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 4 - PROPERTY AND EQUIPMENT.

Property and equipment are summarized by major classification as follows:

                                                     Useful         December 31,
                                                     Lives              2001
                                                     ------          -----------
         Medical Equipment                          5-10 yrs         $ 8,625,532
         Building                                    15 yrs              310,860
         Furniture and Fixtures                     3-5 yrs               44,749
         Automobiles                                  5 yrs               28,157
         Leasehold improvements                     5-10 yrs             264,785
                                                                     -----------

                                                                       8,711,083
         Less: Accumulated Depreciation
             and Amortization                                          6,252,944
                                                                     -----------
                                                                     $ 2,458,139
                                                                     ===========

         Depreciation expense for the year ended December 31, 2001   $   607,154
                                                                     ===========

NOTE 5 - INVESTMENT IN JOINT VENTURE.

In 1990, the Company acquired a ten percent (10%) interest in Union Imaging
Associates, Joint Venture, which it accounts for using the equity method of
accounting due to the significant influence it has on the joint venture as its
managing venturer.

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

<TABLE>
<CAPTION>
                                       Total             Long-term            Total                Total
                                       Assets               Debt            Liabilities           Capital
                                  ---------------     ---------------     ---------------     ---------------

<S>                               <C>                 <C>                 <C>                 <C>
         December 31, 2001        $     3,745,422     $     1,083,658     $     1,618,101     $     2,127,321
         December 31, 2000              4,578,384           1,394,010           2,182,096           2,396,287
</TABLE>

<TABLE>
<CAPTION>
                                                                               10%
                                      Gross                                 Allocation
                                     Revenues            Net Income         of Income
                                  ---------------     ---------------     ---------------

<S>                               <C>                 <C>                 <C>
         December 31, 2001        $     4,140,922     $       596,296     $       59,630
         December 31, 2000              4,490,724             725,880             72,588
</TABLE>

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

                                                       Years Ended
                                                12/31/01            12/31/00
                                            ---------------     ---------------

                                                      (in thousands)
         Revenue Received:
           Management fees                  $         483.2     $         502.3
           Partner cash distributions                  86.6                83.2
                                            ---------------     ---------------

                 Total receipts             $         569.8     $         585.5
                                            ===============     ===============

Income generated from other joint ventures that the Company owns an interest in
aggregate $2,400 and $9,000 for the years ended December 31, 2001 and 2000,
respectively.



                                      F-12
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



NOTE 6 - LINE OF CREDIT.

In March 2000, the Company opened a commercial line of credit in the amount of
$300,000 with Bridge View Bank in Englewood, New Jersey. Under the terms of the
agreement, certain Directors of the Company are guarantors of the loan. This
loan was for one year in duration and carries an interest rate of Prime plus one
(1%) percent. On March 21, 2001, this agreement was renewed for one year under
the same terms.

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 are due on October 18, 2000.
The note is 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. The Company has
the right, subject to conditions, to require the purchasers of the $500,000 note
to purchase up to an additional $2,000,000 principal amount of convertible notes
on the same terms and conditions as the $500,000 note. As of October 27, 2000,
the notes were not converted to the Company's common stock and the Company
negotiated the conversion of this note to a long-term note. On November 17,
2000, the Company agreed to repay the loan at $15,000 per month.

NOTE 8 - EMPLOYEE STOCK OPTIONS.

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

A summary of options granted and related information for the years ended
December 31, 2001 and 2000 is as follows:

                                                                Weighted Average
                                                Options          Exercise Price
                                            ---------------     ---------------

         Outstanding, December 31, 1999             300,000     $         2.125

         Granted                                       --                  --

         Exercised                                     --                  --

         Canceled                                      --                  --
                                            ---------------     ---------------

         Outstanding, December 31, 1999             300,000     $         2.125

         Granted                                       --                  --

         Exercised                                     --                  --

         Canceled                                      --                  --
                                            ---------------     ---------------

         Outstanding, December 31, 2000             300,000     $         2.125
                                            ===============     ===============

The weighted-average remaining contractual life of these options is
approximately 6.5 years. Five individuals hold the outstanding options at
December 31, 2001.

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

                                                  2001               2000
                                             ---------------    ---------------

         Net loss:
           As reported                      ($       346,030)  ($     1,247,802)
           Pro forma                        ($       346,030)  ($     1,293,102)
                                             ---------------
         Basic and diluted loss per share:
           As reported                      ($          0.14)  ($          0.50)
           Pro forma                        ($          0.14)  ($          0.52)
                                             ---------------


                                      F-13
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



NOTE 8 - EMPLOYEE STOCK OPTIONS. (Continued)

The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for 2001 and 2000: expected volatility of 50%; risk free interest
rate of 6.0%; and expected lives of 6.5 and 7.5 years, respectively.

Since there was a substantial market decrease in the Company's common stock
price, the option was deemed to be worthless, accordingly there is no Proforma
compensation cost in 2001.

NOTE 9 - LONG-TERM DEBT.

Long-term debt consists of the following:
                                                               December 31, 2001
                                                               ----------------
         Capitalized lease obligations      (a)                 $     2,633,336
         Accounts receivable financing      (b)                         330,360
                                                                ---------------

         Total long-term debt                                         2,963,696

         Current portion                                              1,227,796
                                                                ---------------

         Long-term debt, net of current portion                 $     1,735,900
                                                                ===============

(a) 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, 2001 aggregated $5,976,012. The interest rates on these
capital leases vary between 9.439% and 17.19% per annum.

(b) Accounts Receivable Financing:

The Company entered into an agreement with DVI Business Credit to finance up to
$1,500,000 of the accounts receivable balances from two of the Company's
subsidiaries and one of its joint ventures. The agreements extend for
consecutive one-year terms. The agreement is non-cancelable, except in the event
of default by the Company. At December 31, 2001, the amount financed under these
agreements totaled $330,360.

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


                                                               December 31, 2001
                                                               ----------------
                       2002                                           1,169,087
                       2003                                             778,251
                       2004                                             669,267
                       2005                                             347,091
                                                                ---------------

                                                                $     2,963,696
                                                                ===============


NOTE 10 - RESTRUCTURING OF LONG-TERM DEBT

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

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






                                      F-14
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



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). Each A Warrant entitles the holder to purchase one (1)
share of Common Stock for a period, as extended to February 5, 2001 at a price
of $4.00. Each B Warrant entitles the holder to purchase one (1) share of Common
Stock for a period, as extended to February 5, 2002 at a price of $4.00.

On September 18, 1998, the Company entered into a consulting agreement with
Benson Shore Capital, LLC ("Consultant"), for a period of one year. The
agreement required the consultant to render assistance to the Company as
follows: developing strategic initiatives and related industry partnerships,
including providing assistance with respect to acquisitions, joint ventures, and
strategic business alliances. The Company compensated the consultant by issuing
175,000 shares of its common stock and options to acquire 136,125 shares of
common stock.

On January 28, 1999, the Company entered into a six month financial consulting
agreement with Mr. Richard Surber to provide consultation services regarding:
potential strategies for generating new business for the Company, structuring of
potential business opportunities for the Company, general corporate filings as
needed, and document preparation as needed to accomplish the aforementioned. The
Company paid Mr. Surber a retainer fee of 20,000 shares of its common stock in
addition to an hourly rate for services rendered.

On March 11, 1999, the Company effectuated a one for two reverse stock split of
the Company's issued and outstanding shares of common stock. The reverse stock
split became effective on March 12, 1999. After the reverse stock split, the
Company had 1,759,144 shares of common stock issued and outstanding and a total
of 2,500,000 shares authorized for issuance.

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.

On April 12, 1999 Benson Shore Capital, LLC, exercised its option to acquire
136,125 shares (adjusted for the one for two reverse stock split of the
company's common stock) at $.0002 per share.

In July 1999, the Board of Directors of the Company passed a resolution
authorizing the management of the Company to initiate steps for a private
placement of the Company's securities in order to raise capital. Management was
granted authority to prepare a Private Placement Memorandum pursuant to
Regulation D Rules governing the Limited Offer and Sale of Securities Without
Registration Under the Securities Act of 1933 (as amended) and to register the
securities in any state jurisdiction that management felt was required and
appropriate. On July 20, 1999, the Company closed $283,000 ($204,910 after
expenses) of its private placement for an aggregate of 148,702 shares of its
common stock. Taking the average closing bid price for the five trading days
prior to July 20, 1999 and deducting 30% from such average determined the number
of shares of common stock. Additionally, 25,000 shares were issued to the
placement agent in connection with the private placement.

In January 1999 the Company issued 330,000 shares of its common stock to Allen
Wolfson, as compensation, as required by the advisor agreement.

In July 1999 the Company issued 37,500 shares of its common stock to two
individuals, as compensation, for services rendered.

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 its $500,000 convertible note. The warrant
holders are entitled to purchase the shares at anytime for a period of three
years, this right expires on October 18, 2002. In connection with the issuance,
the Company issued 60,000 shares of common stock as follows: J. Hyett, 45,000
shares; Libra Finance, S.A., 10,000 shares; Hyett Capital, LTD, 5,000 shares.




                                      F-15
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



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, 2001
and 2000 of $ -, and $ -, respectively. The Company has a net operating loss
carry-forward for federal income tax purposes of approximately $7,200,000, and a
capital loss carry forward approximating $1,068,000 at December 31, 2001
available to offset income taxes through 2016-2021, and 2003 (capital loss),
respectively.

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

                                                       December 31,
                                            -----------------------------------
                                                 2001                2000
                                            ---------------     ---------------
         Current:
             Federal                        $          --       $          --
             State and local                           --                  --
         Deferred:
             Federal                                   --                  --
             State and local                           --                  --
                                            ---------------     ---------------

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

The following is a reconciliation for the U.S. federal statutory tax rate and
the apparent tax rate:

                                                 2001                2000
                                            ---------------     ---------------

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

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

The tax effects of temporary differences and carry-forwards that give rise to
significant portions of deferred tax assets and liabilities are as follows:

     Deferred Tax
     ------------
                                                 Asset            Liabilities
                                            ---------------     ---------------

         Net revenues                       $          --       $       118,176
                                            ---------------     ---------------
         Other receivables                          153,361                --
                                            ---------------     ---------------
         Operating expenses                          15,044                --
                                            ---------------     ---------------
         Depreciation                                  --               203,450
                                            ---------------     ---------------
         Net operating loss carry forward         3,093,348                --
                                            ---------------     ---------------

         Subtotal                                 3,261,753             321,626
                                            ---------------     ---------------

         Net deferred tax asset                   2,940,127
                                            ---------------
         Valuation allowance - 100%              (2,940,127)

         Deferred taxes - subtotal                     --

         Capital loss carry forward                 484,718
                                            ---------------

         Total deferred tax asset           $       484,718
                                            ---------------



                                      F-16
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



NOTE 13 - RELATED PARTY TRANSACTIONS.

On March 3, 2000, the Company received a commercial line of credit in the amount
of $300,000 from Bridge View Bank in Englewood, New Jersey. Pursuant to the
terms of the line of credit, Roger Findlay, Gregory Maccia and Jan Goldberg,
each of who are executive officers and directors of Modern Medical are
guarantors on the loan. The loan is for a one-year period and the interest rate
on the loan is based on Bridge View's Base/Prime commercial lending rate plus
one (1) percent floating for the term of the loan. On March 21, 2001, the line
of credit was extended one year to March 21, 2002 and is currently being
extended for an additional six months.


NOTE 14 - COMMITMENTS AND CONTINGENCIES.

(a) Employment Agreements:

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

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

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

(b) Properties:

The Company leases 1,765 square feet located at 1719 Route 10 East, Suite 117,
Parsippany, New Jersey, which is comprised of the Company's executive offices.
The Company is party to a lease covering the facility that expires on February
28, 2004, and provides for monthly rental payments of $2,722. The Company
believes that its facilities are adequate for its current and future operations.
The Company' directly or through its consolidated subsidiaries is also party to
five additional site leases with a combined monthly rental $23,650, these leases
expire at various times through December of the year 2006 and are renewable for
five year terms at the Company's option.

NOTE 15 - LITIGATION.

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

In 1999, Stephen Findlay, former president of Prime Contracting Corp., named the
Company in a suit making various assertions regarding the sale of Prime
Contracting. This action is in the early stages and, therefore, no determination
as to the possible outcome can be made. This case is being settled in
conjunction with the Prime Contracting Corp., Case 00-3602, discussed below.

In a related matter, Stephen Findlay named the Company as a defendant in
arbitration. The arbitrator ruled that the Company should not have been named
and awarded legal fees to be paid by Stephen Findlay. The Company has filed an
action in the U.S. District Court for the District of New Jersey to enforce the
arbitration award. During the first quarter of 2001, a court order was entered
instructing Stephen Findlay to pay legal fees in the amount of $18,627.00 plus
lawful interest from the date of the filing of the complaint. This case is being
settled in conjunction with the Prime Contracting Corp., Case 00-3602, discussed
below.

The Company and certain of its officers and directors (Messrs. Findlay, Maccia,
Goldberg and Gedeon) are named as defendants in an adversary proceeding brought
by the unsecured creditors committee in the bankruptcy proceeding involving
Prime Contracting Corp., Case No. 00-34073 (DS), US Bankruptcy Court (NJ), the
Official Committee of Unsecured Creditors



                                     F - 17
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



on Behalf of the Bankruptcy Estate of Prime Contracting Corp. v. Hamilton
McGregor, et al, Adversary Proceeding No. 00-3602. The Company is named in five
counts of the twenty count Complaint alleging (i) a conspiracy to defraud
plaintiffs and other creditors of Prime pursuant to the RICO Act of 1970, (ii)
breach of fiduciary duty and duty of loyalty, theft of corporate business
opportunity and corporate assets, and (iii) conversion. The complaint also seeks
to extend the bankruptcy proceeding to the company and other corporate
defendants named in the Complaint. The Company is a participant along with a
number of affiliated entities, and past and present officers and directors, in a
combined settlement of this litigation and the related litigation's above. The
settlement provides for a cash payment to the reorganized debtor upon Bankruptcy
Court approval of the settlement scheduled for March 26, 2002, along with a note
to be executed which for quarterly payments over two years with interest at 6%.
The Company is jointly and severally liable for both the cash payment and the
note along with a number of the other defendants in the case. Under this
settlement the Company is required to make eight quarterly payments of $12,500
each plus 6% interest commencing July 2002. The full amount of the Company's
portion of the settlement has been accrued in the 2001 financial statements.

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

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.









                                      F-18