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, 2006.

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

For the transition period from _____________to______________

                           Commission File No. 0-23416

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

(Exact name of registrant as specified in its charter)

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

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

       Registrant's telephone number, including area code: (908) 687-8840
       -------------------------------------------------------------------
          Securities registered pursuant to Section 12(b) of the Act:

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

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

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter 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 { }. Indicate by check mark whether registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ( ) No (X)

<PAGE>

The issuer's net sales for the most recent fiscal year were $6,854,024

The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on March 19, 2006 was approximately $4,613,235.

As of March 19, 2007 there were 22,678,218 shares of Common Stock, par value
$.0002 per share, outstanding.

PART I

Item 1. Business

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

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

As of December 31, 2006, we own, operate, and manage three diagnostic imaging
centers located in New Jersey. The Company's ownership interests range from 50%
to 100%. We intend to continue to expand through a combination of joint
ventures, acquisitions, and targeted marketing activities.

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

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

<PAGE>

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

In addition, we are creating the infrastructure to expand our revenues through
management services contracts with an increasing emphasis on providing
web-based, comprehensive information services as the healthcare outpatient
services and related markets to continue to grow and operate within larger
networks. We have positioned ourselves to participate in the expanding managed
health care market and intend to seek out more joint ventures and collaborative
contractual arrangements with hospitals, physician managed ambulatory centers,
and other key participants in the industry.

On February 28, 2007 Modern Medical Modalities Corporation entered into an Asset
Purchase Agreement (the "Agreement") with MTI Partners II, L.P. ("MTI-II") to
acquire MTI-II's Medical Software Assets (the "Assets") in exchange for 1
million shares of the Company's common stock. The transaction closed on March
23, 2007. The Assets consist of medical computer software that organizes,
manages, and maintains patient scheduling, registration, medical records,
billing, and includes other customized components. The shares of Common stock
were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Paul Harrison, a member of the Company's Board of Directors, is the President of
INEX Group, Inc., which serves as the General Partner of MTI-II. Mr. Harrison
will be entitled to receive 562,500 shares of the Company's common stock
issuable to MTI-II pursuant to this Agreement.

UNION JOINT VENTURE

In July 1990, Modern Medical entered into a Joint Venture Agreement with Union
Imaging Associates, Inc. for the purpose of providing magnetic resonance and CT
Scan imaging services to radiologists and other medical professionals, including
leasing and financing equipment for use in such business. Modern Medical serves
as the managing joint venture pursuant to the Union joint venture agreement and
provides a comprehensive range of management services for the business
including:

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

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

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

<PAGE>

purchase of Dr. Wolkstein's ownership interest brings the Company's total
ownership in UIA, Inc. to 88.88%.

METAIRIE MEDICAL EQUIPMENT LEASING

In June 1997, Metairie Medical Equipment Leasing Corp. was incorporated in the
state of New Jersey, as a 100% owned subsidiary of Modern Medical. It consists
of one Open MRI and primarily serves the personal injury market. It operates
under the names of two wholly owned subsidiaries, Open MRI & Imaging of
Metairie, LLC and Independence Imaging Center, LLC.

TSI Billing Service Inc.

In November 2003, we entered into an agreement to purchase 50% of TSI Billing
Service (TSI Billing). TSI Billing is a billing company that has been providing
billing services for various medical practices since 1994. Modern Medical also
out-sources its billing services to TSI Billing. Effective January 1, 2006, the
Company reversed the transaction it entered into with two of the shareholders of
TSI Billing Services, Inc in November 2003. The shareholders of TSI Billing
Services, Inc. returned the 200,000 shares of Modern Medical Modalities
Corporation common shares issued to them for return of their 50% interest in TSI
Billing Services, Inc. These shares were retired by Modern Medical Modalities
Corporation, no gain or loss was recorded by Modern Medical Modalities
Corporation.

Union Imaging Center, LLC

In February 2004, Modern Medical established Union Imaging Center LLC, a wholly
owned subsidiary, to acquire and manage a multi-modality imaging center, in
Union, NJ. There was a $225,000 note with $25,000 down and a monthly payment of
$6,666.67 for 30 months beginning 90 days after closing. Union Imaging Center,
LLC, does approximately $2,207,000 in revenues per year. It is adjacent to our
Union Imaging Associates; the combined radiology practices offer a full range of
imaging services.

PET Scan at Union Imaging, LLC

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

Modern Medical Imaging at Atrium LLC

Modern Medical established Modern Medical Imaging at Atrium LLC, a wholly owned
subsidiary, to own and operate the Manalapan, NJ location.

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

In July, 2006, we entered into a Letter of Intent to divest its ownership
interests in Modern Medical Imaging at Atrium, L.L.C., a Limited Liability
Company ("the L.L.C."). The transaction was structured in the form of a sale of
the L.L.C. whereby 100% of the membership interest is acquired, in exchange for
$250,000 in cash with specific provisions included for the timing of payments
with the majority of payment due at closing. In addition, assignments will be
included for the Company to assume certain accounts receivables and accounts
payables as of the closing date of the transaction. On September 1, 2006, we
entered into a definitive

<PAGE>

agreement with a privately-held organization and sold its ownership interests in
Modern Medical Imaging at Atrium, L.L.C. for $250,000 under essentially the same
terms and conditions as described above and outlined in the Letter of Intent.
Even though the new owners of the Imaging Center at Atrium assumed the
liabilities of the business, the Company is contingently liable for a long term
facility lease, and medical equipment contracts that currently total
approximately $1.3 million in potential obligations until the Company obtains
releases from its guarantees related to the contracts.


DISCONTINUANCE OF METAIRIE, LOUISIANA BUSINESS:

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

Medical imaging industry and systems:

Modern Medical has focused on the advanced imaging technologies of MRI and CT
Scan. Management believes that the use of these technologies has grown
significantly in the U.S. during the last several years. This growth is
attributable to physicians' beliefs that diseases can be detected in their early
stage, in a non-invasive manner, through the use of MRI and CT Scan. Hospitals
are facing competitive pressures to provide technology and related services
despite strict budgetary limitations. Changes in third party reimbursement
systems have resulted in declining profit margins for many hospitals, thus
reducing capital available to hospitals and the traditional incentives to
purchase or lease equipment and pass such costs through to third parties. By
leasing equipment and purchasing services from third parties, hospitals are able
to conserve their limited capital resources for other purposes and reduce the
risks associated with technological obsolescence and under-utilization of
equipment and services. As a result hospitals are increasingly utilizing
companies that provide MRI and CT Scan equipment, such as Modern Medical, in
order to decrease their equipment and personnel costs. Medical diagnostic
imaging systems facilitate the diagnosis of disease and disorders at an early
stage, often minimizing the amount and cost of care needed to stabilize or cure
the patient and frequently obviating the need for invasive diagnostic
procedures, such as exploratory surgery. Diagnostic imaging systems are based on
the ability of energy waves to penetrate human tissue and generate images of the
body, which can be displayed either on film or on a video monitor. Imaging
systems have evolved from conventional x-ray to the advanced technologies of MRI
and CT Scan.

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

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

Our services:

Modern Medical provides full managerial responsibility and control over facility
operations at our medical technology centers, and offers the full range of
services discussed below. The needs of a particular hospital or physician group
determine the extent of the services offered

<PAGE>

in each instance, which Modern Medical can deliver either on a limited basis or
through a full service medical technology center. In addition, a physician and a
physician group provide professional services and interpret MRI or CT Scans.
Modern Medical does not engage in the practice of medicine. Such physicians are
not employees of Modern Medical. However, the most significant cost of operating
an imaging center is the capital and finance costs of equipment.

Modern Medical provides equipment and related services, technical and support
staffing, marketing, patient scheduling, billing and collection and management
in all of Modern Medicals sites located throughout New Jersey, and has
positioned itself to expand the information based side of the business by
providing more information services with the support of its web-based,
enterprise-wide information system.

Equipment and related services.

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

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

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

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

Delivery of our services:

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

Medical technology centers. Modern Medical will establish a medical technology
center within a hospital or with a physician group through which Modern Medical
will offer its full range of

<PAGE>

services. A hospital center is located on hospital campus, is affiliated with
that hospital and provides both inpatient and outpatient services.

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

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

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

Our growth strategy and marketing plan

We expect to grow through a combination of acquisitions and direct marketing of
our services to physicians and hospitals through various methods. The
acquisitions targeted are expected to include diagnostic imaging centers, or
management services companies that already have contracts with the same types of
centers, and may include complimentary multi-specialty healthcare centers that
enhance the network of services being provided by us. The direct marketing
methods include telemarketing, direct solicitation, direct mail, and sponsorship
of in service education programs for physicians and technical staff, and
personal visits to physician offices. Modern Medicals management also attends
many of the large radiology and other selected healthcare shows throughout the
country.

Modern Medical is pursuing a strategy of building a network of more participants
using its enterprise-wide information system, which will include additional
hospital centers and physician managed ambulatory centers. In addition to
acquiring new business, we expect to continue to engage in intensive marketing
in areas of specialized physician groups, chiropractors, health maintenance
organizations (HMO), preferred provider organizations (PPO), union locals,
municipalities and insurance companies. Modern Medical currently negotiates
discounts with large suppliers of patients, as allowed by law. Modern Medical's
objective is to respond to the concerns of spiraling health care costs while
maintaining quality of care to the patient. Increased volume and improved
information management results in a reduction of the cost of each procedure
because fixed costs at each facility are spread over a larger number of
procedures. This reduction in cost is passed along to Modern Medicals contracted
clients. In addition, in order to increase patient volume, Modern Medical has
expanded its hours of operations, including extended hours during the week and
weekend scheduling.

Modern Medical applies a variety of criteria in evaluating each prospective
customer. These criteria include: (a) the extent of the hospitals' present
diagnostic imaging services; (b)

<PAGE>

its competitive environment; (c) the size and type of facility; (d) the number
of referring physicians and their specialties; (e) patient volume; and (f) the
nature of the payors (private insurance programs, government reimbursement
programs or other health or medical organizations).

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

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

Equipment acquisition costs can range dramatically depending upon the model and
peripheral equipment acquired.

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

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

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

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

<PAGE>

prohibit the payment or receipt for referring patients to a healthcare provider
if such payments may be made in whole or in part by the Medicare or Medicaid
programs. New Jersey and some other states have enacted similar laws.

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

In 1991, New Jersey enacted the Health Care Cost Reduction Act, or so-called
"Codey Bill", (N.J.S.A. 45: 9-22.4 et seq.) which provided that: a medical
practitioner shall not refer a patient, or direct one of its employees to refer
a patient, to a health care service in which the practitioner and/or the
practitioner's immediate family has any beneficial interest;

For beneficial interests, which were created prior to the effective date of the
Act, July 31, 1991, the practitioner could continue to refer patients, or direct
an employee to do so, if the practitioner disclosed such interest to his
patients. The disclosure must take the form of a sign posted in a conspicuous
place in the practitioner's office. It must inform the patients of the
beneficial interest and state that a list of alternative health care service
providers could be found in the telephone directory, and All physicians who
refer in the sites in New Jersey and also have a financial interest in those
sites must have a signposted as mandated by the law.

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

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

Competition

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

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

<PAGE>

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

Insurance

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

Employees

As of December 31, 2006 Modern Medical employed 44 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                            5            4              1
Metairie, LA                              1            1              0
Union Imaging Assoc., Union, NJ          36           24             12
Union Imaging Center, Union, NJ          28           15             13
PET Scan at Union Imaging                 2            0              2
                                         --           --             --
Total                                    72           44             28
                                         ==           ==             ==

Equipment lease agreements:

Union Imaging Associates and Modern Medical Modalities Corporation entered into
a line of credit with GE Healthcare Financial Services in the amount of
$2,500,000. This line of credit has been fully utilized in acquiring new medical
equipment. See schedule detailing use of this line and payment schedule below.

On January 2, 2004, Union Imaging Associates has entered in a Pacs software
purchase agreement, which consists of 60 payments of $2,000 a month with
Neurostar Solutions Inc.

On September 1, 2003, Metairie Medical Equipment Leasing Corporation entered
into a 36-month lease, which provided for the rental of a Siemens Open Viva MRI
imaging system. Payments are $5,000 per month and began on October 03, 2003.
This equipment was destroyed in August 2005 during hurricane Katrina, the
leasing company agreed to waive the rental payments subsequent to hurricane
Katrina in exchange for all insurance proceeds related to the Siemens Open Viva
MRI imaging system.

Modern Medical entered into a lease with Commerce Commercial Leasing Corp for
the purchase of the MRI unit in Manalapan, NJ. The amount financed is $265,000
for 5 years. Payments schedule listed in table below. This lease was assumed by
Atrium Diagnostic Center, LLC in August 2006, when it acquired the Company's
facility in Manalapan, NJ. The Company remains contingently liable on this
lease.

Union Imaging Associates as sub-lessee entered into a lease with Spur Imaging
for a Siemens 1.5T Symphony MRI, located in Union, NJ. Spur Imaging is the
lessee of the equipment from Siemens financial Services. The amount financed is
$1,000,000 for 5 years with an option to purchase the MRI for $100.

<PAGE>

Payments schedule listed in table below:

<TABLE>
<CAPTION>

                        Operating/                               # Of      Recurring        Leased/Loan
                        Financial       Start          End       Pymts      Payments           Amount
                        ----------     --------      --------    -----     ----------      -------------
<S>                     <C>            <C>           <C>           <C>     <C>             <C>
GE-CT                   Operating      12/31/03      02/28/04      03      $     0.00      $
                                       03/31/04      05/31/04      03      $ 5,879.69      $
                                       06/30/04      06/30/06      24      $19,782.52      $
                                       07/31/06      09/30/06      03      $     0.00      $
                                       10/31/06      09/30/08      24      $23,062.61      $
                                       10/31/08      09/30/09      12      $19,782.52      $1,155,000.00
GE-Dell Hardware        Financing      01/14/04      12/14/08      60      $ 1,184.38      $   58,867.71
GE-Medrad Injector      Operating      05/11/04      04/11/09      60      $ 1,987.12      $   99,167.81
GE-Ultrasound &         Operating      04/17/04      07/17/04      03      $     0.00      $
  Bone Density                         08/17/04      07/17/09      60      $ 6,041.08      $  295,500.00
GE-Digital Mammo        Operating      12/17/04      02/17/05      03      $     0.00      $
                                       03/17/05      06/17/06      16      $ 8,320.46      $
                                       07/17/06      09/17/06      03      $     0.00      $
                                       10/17/06      07/17/08      22      $ 9,539.44      $
                                       08/17/08      11/17/09      16      $ 8,320.46      $  398,500.00
GE-iCAD SL GE V5.1      Financing      12/15/05      11/15/09      48      $ 1,067.93      $   42,503.90
Toyota                  Financing      03/01/03      02/01/08      60      $   343.04      $   18,000.00
Mas90                   Financing      11/01/04      10/01/07      36      $   430.36      $   20,000.00
Neurostar               Financing      02/01/04      01/01/09      60      $ 2,000.00      $  120,000.00
Dell                    Financing      04/01/03      05/01/09      60      $   474.76      $   14,299.00
Toshiba                 Financing      02/18/03      03/18/08      60      $   417.63      $   18,561.50
Citicorp                Financing      04/15/05      05/01/07      25      $ 1,000.00      $    5,000.00
Dell                    Financing      03/01/04      02/01/08      48      $   188.10      $    5,721.92
Marcap-PET Scan         Financing      02/07/04      02/07/09      60      $11,449.40      $  530,000.00
Siemens/Spur MRI        Financing      04/01/06      07/01/11      63      $22,684.00      $1,050,000.00
GE-Konica CR Sys        Financing      02/01/06      02/28/06      01      $   964.72      $
                                       03/01/06      12/31/10      58      $   913.01      $
                                       01/01/11      01/31/11      01      $   913.51      $   42,399.91
IBM-Hard/Software       Operating      07/01/06      10/31/10      48      $ 9,300.00      $  320,414.70
DocuTeam-copiers        Operating      01/03/07      12/31/12      60      $ 1,056.00      $   55,000.00

</TABLE>

<PAGE>

LONG TERM DEBT TABLE.

Capitalized leases: Union Imaging has a restrictive covenant relating to a
master lease agreement with GE Healthcare Financial Services. This restrictive
covenant requires Union Imaging Associates to be current in its lease payments
before making any payments or distributions to Modern Medical Modalities
Corporation.

<TABLE>
<CAPTION>

Balance at
December 31, 2006     Debt holder                      Commencement date      Final payment date
-----------------    -----------------------------     -----------------      ------------------

Notes payable:

<C>                  <C>                               <C>                    <C>
$  198,937.20        Howard Kessler, MD                March 18, 2005         April 1, 2007
$    5,000.00        Citicorp                          April 15, 2005         May 15, 2007
$  160,899.08        Two founding shareholders         Various                Open
$   68,901.04        Marvin Titelbaum                  January 1, 2006        January 1, 2008,
$   33,600.72        Medical Development Concepts      February 1, 2004       December 1, 2006
$  350,542.03        Union Imaging Associates,Inc.     Various (1)            Various (1)
$  150,000.00        Jacov Hayut                       February 9, 2006       February 9, 2007
$   50,000.00        Irit & Yossef Azulai              November 10, 2006      May 9,2010
$   62,660.87        Complete Flooring                 November 1, 2006       October 1, 2008
$  150,000.00        Complete Flooring                 December 6, 2006       November 5, 2010

Capitalized lease obligations:

$   29,833.20        GE Financial Services             April 1, 2004          March 1, 2009
$   32,532.33        GE Financial Services             December 5, 2005       November 5, 2009
$   35,824.64        GE Financial Services             January 27, 2006       December 27, 2010
$  270,835.46        MARCAP Financial Services         November 7, 2003       February 7, 2009
$   11,983.15        CitiCapital                       October 30, 2004       September 30,2009
$1,039,000.00        Spur Imaging (Siemens)            April 1, 2006          September 1, 2011
$    5,771.89        Toshiba Finance                   January 18, 2004       March 18, 2008
$    4,925.48        Toyota Financial Services         April 18, 2003         March 18, 2008
$    2,270.53        Dell Financial Services           March 1, 2004          February 1, 2008
$    7,778.29        Dell Financial Services           June 1, 2006           May 1, 2009
-------------


$2,671,295.96       Total long-term debt
$  929,367.37       Less current portion
-------------
$1,741,928.59       Long-term debt net of current portion
=============

</TABLE>

(1)   = Represents a series of notes used to acquire an additional 80% of the
      ownership of Union Imaging Associates, JV (UIA, JV), commencing March 2003
      through April 2004. The purchase of additional ownership interest in UIA,
      JV brings the Company's total ownership in its related company UIA, Inc.
      to 88.88%. The final payments range from August 2006 through February
      2009, the average payments are between $12,000 and $17,000 per month.

(2)   - See subsequent events footnote # 30.

<PAGE>

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 April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 7,150 square feet on 445 Chestnut St. in Union, NJ for
approximately $15,000 per month. This lease is renewable for an additional
5-year term at no more than $17,875 per month, which expires on April 1, 2010.

In April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 2,250 square feet on 439 Chestnut St. in Union, NJ for
approximately $3,844 per month.

In February 2001 Modern Medical and Union Imaging Associates, JV entered into a
five (5) year lease agreement for approximately 960 square feet on 418 Chestnut
St. in Union, NJ for approximately $1,760 per month. Effective September 1,
2004, Union Imaging Associates, JV and Modern Medical took an additional 600
square feet for an additional $1,000 per month and extending the lease to
February 1, 2007 and obtained an option to renew for an additional 3 years upon
180 days prior written notice of the Company's intent to exercise its option.
The Company exercised its option to extend the lease for 3 years, extending the
lease through February 1,2010.

On April 1, 2004 Modern Medical entered into a 10-year lease with an option for
an additional 5 years, in Manalapan NJ. The lease is for approximately 5,620
square feet, the monthly rental is $11,240. The space was previously an imaging
center, consisting of the following modalities: a MRI, Ultrasound, RF room, and
Mammography. The previous tenant had abandoned the space. We also negotiated
with the equipment financing company for the purchase of all the equipment
except the MRI unit for $22,000. We purchased the MRI unit for $250,000 from
Philips and financed it with Commerce Commercial Leasing Corp.

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

Item 3. Legal Proceedings

On October 12, 2006, we were served with a lawsuit by MARCAP seeking $350,000
for amounts MARCAP claims is owed by the Company under an Agreement for the PET
medical equipment. The Company is in the process of negotiating payments in
order to cure any defaults that may exist and to settle the complaints brought
by MARCAP.

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

Other than the matters described above, we are not involved in any material
legal proceedings.

<PAGE>

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

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

PART II

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

Our common stock is traded on the over-the-counter market on the OTC Bulletin
Board under the symbol MODM. The following table sets forth the high and low bid
information for our common stock for each quarter within the last two fiscal
years.

Common Stock:
-------------
Fiscal 2006                High             Low
First Qtr                 $0.14            $0.06
Second Qtr                 0.35             0.09
Third Qtr                  0.50             0.08
Fourth Qtr                 0.95             0.36

Fiscal 2005
First Qtr                 $0.16            $0.10
Second Qtr                 0.51             0.06
Third Qtr                  0.51             0.15
Fourth Qtr                 0.22             0.06

On March 19, 2007, there were approximately 58 holders of record of Modern
Medical's 22,678,218 outstanding shares of Common Stock.

On March 19, 2007, the last sale price of the Common Stock as reported on the
OTC Bulletin Board was $0.80.

Dividend Policy

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

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

Forward-looking Statements

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

<PAGE>

Management's Discussion and Analysis.

We provide a comprehensive range of leading edge diagnostic imaging services
through a combination of our owned, operated, and managed centers. The
comprehensive imaging services include magnetic resonance imaging (MRI),
computerized axial tomography (CT Scan), positron emission tomography (PET),
ultrasound, mammography, nuclear medicine, and general radiography (X-ray). We
believe that each of our centers, and network of centers in close proximity of
each other, are being optimized by providing a full array of imaging services to
better meet the varied needs of its customers and participating providers of
care. In addition, we are seeking to maximize each center's productivity by
providing shared management services that include marketing, procurement of
imaging systems and upgrades of related equipment, facilities construction and
maintenance, recruitment and training of technical and support staff,
information services, and financial services such as leasing, administration of
contracts, and billing and collections.

As of December 31, 2006, the Company owns, operates, and manages three
diagnostic imaging centers located in New Jersey. The Company currently operates
and manages three centers in Union, New Jersey. The Company's ownership
interests range from 50% to 100%. We intend to continue to expand through a
combination of joint ventures, acquisitions, and targeted marketing activities.

On a consolidated basis, the Company derives all of its revenues from multiple
diagnostic imaging modalities and procedures that allow it to leverage the
variety of imaging systems in each center, or in the shared network of centers,
in order to potentially increase its operating income once fixed costs are more
rapidly covered with higher volumes of procedures performed.

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

Results of Operations:

For the year ended December 31, 2006 compared to the year ended December 31,
2005:

Net Revenues from Services:

Net revenue from services has decreased approximately $924,000 to approximately
$6,854,000 for the year ended December 31, 2006 from approximately $7,778,000
for the same period in 2005. This decrease resulted from a reduction in revenues
of approximately $407,000 resulting from the Metairie, LA location that was
closed due to Hurricane Katrina for the full year of 2006. A reduction of
$137,000 revenues from MMM Imaging at Atrium was included only through August 1,
2006 when this center was sold. The balance of the reduction resulted from
additional competition, $283,000 in reduced revenues at the Union Imaging
Associates Center and $97,000 in reduced revenues at the PET Scan facility.

Cost of services provided:

For the year ended December 31, 2006, cost of services provided totaled
approximately $5,494,000 as compared to approximately $5,530,000 for the same
period in 2005, resulting in a decrease of approximately $36,000. These costs
are affected by changes in volume and service

<PAGE>

mix, medical supplies, payroll, and facility costs. This decrease was primarily
related to reduced film usage which was off-set by service contracts being
acquired for our newer equipment as it aged out of the first year warranty
phase.

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

For the year ended December 31, 2006, selling, general and administrative
expenses totaled approximately $982,000 as compared to $1,044,000 for the same
period in 2005, resulting in a decrease of approximately $62,000. This decrease
related to reduced administrative payroll costs as a result of reduced volume.
This reduction was off set by increased marketing for the Union Imaging
Associates' and PET Scan at Union Imaging centers of approximately $60,000.

Liquidity and Capital Resources:

Modern Medical has a working capital deficiency of $1,239,668 at December 31,
2006 as compared to a working capital deficiency of $1,118,917 at December 31,
2005, resulting in an additional working capital deficiency of $324,175, due
primarily to an increase in short term debt utilized to pay off some long-term
debt, and additional cash needs for the closing of the Metairie, LA location.

Debt:

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

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

Effective October 1, 2005 Union Imaging Associates entered into a 63 month
financing lease with Siemens Medical Systems/Spur Imaging to acquire a Siemens
1.5T Symphony MRI unit. The amount financed is $1,050,000, payable at $22,684.00
per month commencing April 2006. Union Imaging Associates has the option to
purchase the unit for $100 at the end of the lease.

Commencing March 20, 2003 through April 11, 2004, the Company acquired an
additional 70% interest in Union Imaging Associates, JV. This additional 70%
brought the Company's ownership of Union Imaging Associates, JV to 80%. It was
acquired For varying prices totaling $1,525,000, payable in monthly installments
over approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's
share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.")
in exchange for 350,000 shares of the Company's common stock with a valuation of
$75,000 at the time of purchase, and a note for $27,000 to be paid in 18
payments of $1,500.00 per month. The 350,000 shares of common stock were issued
on October 20, 2006. As a condition of the purchase, the Company agreed to
re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any
consecutive 20 day period commencing September 1, 2008 through the last day of
February 2009, the stock price was below $1.00 per share. The purchase of Dr.
Wolkstein's ownership interest brings the Company's total ownership in UIA, Inc.
to 88.89%. The current combined monthly installments were $16,200 at December
31, 2006, these monthly payments will average approximately $9,972 in 2007,
$9,722 in 2008 and $4,855 in 2009.

In February 2006, the Company entered into an unsecured note with Jacov Hayut in
the amount of $150,000. The loan was for 12 months with interest at 15%, monthly
payments are interest only with lump sum payment of $150,000 February 2007. This
note was extended for 36 months under

<PAGE>

the same terms and conditions, except that the Company agreed to pay the note in
full or in part at the lenders option upon the first equity capital raise or
February 2010, which ever comes first.

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

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

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

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

CONVERTIBLE DEBT:

In October 1999, the Company issued an aggregate of $500,000 principal amount of
it's 10% convertible notes to two investors which were due on October 18, 2000.
The notes are convertible at anytime while any portion of it is outstanding into
shares of the Company's common stock at the lower of: (a) 72.5% of the lowest
closing bid price of the Company's common stock for the thirty (30) trading days
immediately preceding the date of conversion, or (b) $2.0625. At December 31,
2006, the total principal and interest outstanding was zero.

In June 2002, Jacov Hayut purchased each of the notes and intends to convert
each Note into shares of the Company's common stock. On July 29, 2002, Mr. Hayut
formally notified the Company that he intends to convert $43,500 principal
amount of the Notes into shares of the Company's common stock. Pursuant to the
terms of the conversion of the Note, Mr. Hayut is required to give the company
seventy-five (75) days prior written notice of his intention to convert the Note
into more than 9.9% of the Company's outstanding shares of common stock.

Therefore, 250,000 shares of common stock were issued immediately and the
remaining 11,750,000 shares were issued approximately 75 days later on October
15, 2002. Based on conversion price of $.003625, $43,500 principal amount of the
Notes converts into 12,000,000 shares of common stock. Mr. Hayut is required to
transfer 2% of such shares received upon conversion to the previous Noteholder.
After the issuance of the 11,750,000 shares of common stock, Mr. Hayut owned
approximately 82% of the Company's issued and outstanding common stock at that
time.

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

Between June 2002 and July 2004 the company has issued an aggregate of $950,000
in principal amount of convertible secured promissory notes bearing interest at
a rate of 9.25% per annum. On March 30, 2006, Motti Sharon converted a total of
$57,280 of the convertible notes into

<PAGE>

320,000 shares of common stock. On April 20, 2006, Motti Sharon converted an
additional $89,500, of the convertible notes into 500,000 shares of common
stock. On December 21, 2006, the Company converted the remaining $803,220 of the
9.25% convertible notes remaining outstanding. The conversion rate was $0.179
per share, resulting in 4,487,262 shares of common stock being issued. Modern
Medical does not believe that its cash flow from operations will be sufficient
to fund its ongoing operations and it will continue to have to raise capital to
fund its operations. Modern Medical may raise additional capital through the
issuance of debt, equity or a combination thereof. There can be no assurance
that any additional financing will be available on terms acceptable to the
Company, if at all. These are the only trends, commitments, events and/or
material uncertainties known to Modern Medical.

Going Concern

Modern Medical's December 31, 2006 and 2005 financial statements have been
presented on a basis that it is a going concern. Although the Company has
experienced financial gains for fiscal years ended December 31, 2006 and 2005
and has made improvements since last recording losses, the audit reports have an
explanatory paragraph stating that Modern Medicals continued existence is in
doubt.

Valuation of Accounts Receivable

Modern Medical values its uncollected accounts receivable as part of its
determination of profit. Modern Medical constantly reviews the accounts
receivable valuation. The continuing monthly review, gathering of additional
information, as well as changing reimbursement rate, may cause adjustments to
the accounts receivable valuation. Item 7. Financial Statements

See Pages F-1 to F-29

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

None.

Item 8A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

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

Changes in Internal Control Over Financial Reporting.

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

<PAGE>

Item 8B.  Other Information

None.

                                    PART III

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

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

Name                Age    Position

Baruh Hayut         44     Chairman of the Board of Directors and CEO

Paul W. Harrison    52     Lead Director

Minesh Patel        35     Chief Operating Officer, Chief Financial
                           Officer and Director

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

BARUH HAYUT was appointed Chairman of the Board of Directors and Chief Executive
Officer on March 31, 2004. From June 2003 through March 31, 2004, Mr. Hayut
served as a financial consultant to the Company. Prior thereto, Mr. Hayut served
as a corporate finance and investment banker with Thornhill Group and Joseph
Charles and Associates. From 1992 to 1997, Mr. Hayut was a registered
representative with H.J. Meyers & Co. Mr. Hayut received his Bachelors degrees
in Business Administration and Economics from Hebrew University in Jerusalem,
Israel.

MINESH PATEL was appointed to the Board of Directors of the Company in June 2003
and on November 2003 was appointed Chief Financial Officer. In November 2004,
Mr. Patel was appointed Chief Operating Officer. From February 2001 through
November 2003, Mr. Patel was an Investment Broker with the firm of JP Turner &
Company LLC. From October 1998 through February 2001, Mr. Patel was an
Investment Broker with the firm of JW Genesis. Mr. Patel received his Masters in
Business Administration with a concentration in Finance from Georgia State
University.

PAUL W. HARRISON was appointed to the Board of Directors of the Company in June
2006, and was subsequently appointed Lead Director of the Company in February
2007. From August 2005 to June 2006, Mr. Harrison was a consultant to the
Company. Since 1994, he has been the Chairman and President of INEX Group, Inc,
a technology holding company, and since 2004, the CEO of INEX's software
subsidiary Attune, Inc. From 1998 to 2003, he was the Chairman and CEO of
HealthWatch, a publicly-traded medical equipment and software company. From 1996
to 1998, he was the Chairman and CEO of Halis, Inc, a publicly-traded healthcare
information systems company that was acquired by HealthWatch in 1998. From 1994
to 1998, Mr. Harrison was the CEO of PHE, Inc. and several other privately-held
technology companies that were acquired. From 1993 to 1994, he was a Corporate
Vice President with McKesson Corporation, a publicly-traded Fortune 500
healthcare company. From 1991 to 1993, he was the CEO of Biven, Inc., which was
acquired by McKesson in 1993. From 1989 to 1991, Mr. Harrison was President of
an information systems subsidiary with Lincoln National Corporation, a
publicly-traded Fortune 500 financial services and insurance company. From 1986
to 1989, he was the President of Sotriss Corporation which was acquired by
Lincoln National in 1989. He has a Business Degree (BBA) from Georgia State

<PAGE>

University. He also has many professional certifications, including a Chartered
Financial Consultant (ChFC), a Chartered Life Underwriter (CLU), a Fellow of the
Life Management Institute (FLMI), an Associate in Life and Health Claims (ALHC),
a Health Insurance Associate (HIA), and is also Certified in Commercial Real
Estate Appraisal (CCRA), is Certified in Homeland Security (CHS), and is a
Certified Forensics Consultant (CFC).

Family Relationships

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

Involvement in Certain Legal Proceedings

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

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

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

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

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

Compliance with Section 16(a) of the Exchange Act

Except as otherwise set forth herein, based solely on review of the copies of
such forms furnished to the Company, or written representations that no reports
were required, the Company believes that for the fiscal year ended December 31,
2006, beneficial owners complied with Section 16(a) filing requirements
applicable to them, except: Baruh Hayut had a late Form 3 reflecting shares
acquired from Jacov Hayut on July 10, 2006 (filed August 24, 2006); Minesh Patel
had a late Form 3 reflecting a stock option granted on November 15, 2002 (filed
October 10, 2006); Paul Harrison had a late Form 3 reflecting his appointment on
June 8, 2006 (filed August 24, 2006) as well as one late Form 4 reflecting an
option granted on September 24, 2006 (filed October 10, 2006). In addition,
Issak Hayut did not file a Form 3 reflecting his purchase of shares on December
8, 2006.

Code of Ethics

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

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

None.

Audit Committee

<PAGE>

We are not a "listed company" under SEC rules and are therefore not required to
have an audit committee comprised of independent directors. We do not currently
have an audit committee, however, for certain purposes of the rules and
regulations of the SEC, the Company's board of directors is deemed to be its
audit committee. The Company's board of directors has determined that its
members do not include a person who is an "audit committee financial expert"
within the meaning of the rules and regulations of the SEC. The board of
directors has determined that each of its members is able to read and understand
fundamental financial statements and has substantial business experience that
results in that member's financial sophistication. Accordingly, the board of
directors believes that each of its members has sufficient knowledge and the
experience necessary to fulfill the duties and obligations that an audit
committee would have. Our board of directors intends, however, to review our
governance structure and institute board committees as necessary and advisable
in the future, to facilitate the management of our business.

Item 10. EXECUTIVE COMPENSATION

The following executive compensation disclosure reflects all compensation
awarded to, earned by or paid to the executive officers below for the fiscal
year ended December 31, 2006. The following table summarizes all compensation
for fiscal year 2006 received by our Chief Executive Officer, and the Company's
two most highly compensated executive officers who earned more than $100,000 in
fiscal year 2006.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                              Non-Equity     Non-Qualified
                                                                               Incentive       Deferred
Name and                                               Stock       Option        Plan        Compensation     All other
Principal                       Salary        Bonus    Awards      Awards    Compensation      Earnings      Compensation     Total
Position           Year           ($)          ($)      ($)         ($)           ($)             ($)            ($)           ($)
(A)                (B)            (C)          (D)      (E)         (F)           (G)             (H)            (I)           (J)
------------       ----       -----------     ----     -----       ------    ------------    -------------   ------------   --------
<S>                <C>        <C>              <C>      <C>      <C>              <C>             <C>          <C>          <C>
Baruh Hayut,       2006       $171,600(1)      $0       $0       $     0          $0              $0           $15,864      $187,464
Chairman
& CEO

Minesh Patel       2006       $ 66,690(1)      $0       $0       $95,000(2)       $0              $0           $ 6,500      $168,190

</TABLE>

(1)   = Does not receive any Director fees, the amount shown above is executive
      compensation.

(2)   = Incentive options (100,000) & Performance options (217,000) at fair
      value of $0.30. These options are also included in the Option Award Chart
      above. (See page F-15, Footnote 6).

Narrative to Summary Compensation Table

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

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

The following table sets forth certain information concerning unexercised
options, stock that has not vested, and equity incentive plan awards for each of
our named executive officers outstanding as of December 31, 2006.

<PAGE>

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END DECEMBER 31, 2006 (See footnote
15):

<TABLE>
<CAPTION>

OPTION AWARDS                                                                   STOCK AWARDS

Name         Number of    Number of       Equity                                                Equity     Equity
             securities   securities      Incentive                             Number  Market  incentive  incentive
             underlying   underlying      Plan                                  of      value   plan       plan
             unexercised  unexercised     Awards:                               shares  of      awards:    awards:
             options (#)  options (#)     Number of                             or      shares  number     Market
             Exercisable  Un-exercisable  Securities   Option      Option       units   or      of         or
                                          Underlying   Exercise    expiration   of      units   unearned   payout
                                          Unexercised  price ($)   date         stock   of      shares,    value
                                          Unearned                              that    stock   units      of
                                          options (#)                           have    that    or         unearned
                                                                                not     have    other      shares,
                                                                                vested  not     rights     units
                                                                                (#)     vested  that       or
                                                                                        ($)     have       other
                                                                                                Not        rights
                                                                                                Vested     that
                                                                                                (#)        have
                                                                                                           not
                                                                                                           vested
                                                                                                           ($)
<S>            <C>           <C>              <C>        <C>         <C>          <C>     <C>     <C>         <C>
Minesh Patel   25,000        192,000          0          $0.50       9/26/11      0       0       0           0
Minesh Patel        0        100,000          0          $0.50       9/26/11      0       0       0           0

</TABLE>

DIRECTOR COMPENSATION

The following director compensation disclosure reflects all compensation awarded
to, earned by or paid to the directors below for the fiscal year ended December
31, 2006.

<TABLE>
<CAPTION>

Name                      Fees Earned or     Stock    Option      Non-       Change           All Other
                          Paid in Cash ($)   Awards   Awards     Equity      in Pension       Compensation
                                              ($)      ($)      Incentive    Value and           ($)
                                                                  Plan       Non-Qualified                      Total
                                                                   ($)       Deferred                             ($)
                                                                             Compensation
                                                                             Earnings
                                                                             ($)
<S>                         <C>               <C>   <C>             <C>         <C>               <C>         <C>
Paul Harrison               $60,000(1)        $0    $160,000(2)     0           0                      0      $220,000

Minesh Patel                $66,690(3)        $0    $ 95,000(4)     0           0                 $6,500      $168,190

</TABLE>


(1)=  Director fee with no written agreement or special arrangements.

(2)=  Incentive (100,000) & Performance (434,000) Options at fair value of
      $0.30.

<PAGE>

(3)=  Does not receive any Director fees, the amount shown above is executive
      compensation.

(4)=  Incentive (100,000) & Performance (217,000) Options at fair value of
      $0.30.

These options are also included in the Option Awards chart above.

2003 Stock Option Plan

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

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

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

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

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

The plan may be terminated or amended at any time by our board of directors,
except that the number of shares of common stock reserved for issuance upon the
exercise of options granted under the plan may not be increased without the
consent of our stockholders.
1999 Stock Option Plan

The plan will be administered by the compensation committee or our board of
directors, who will determine among other things, those individuals who shall
receive options, the time period during which the options may be partially or
fully exercised, the number of shares of common stock issuable upon the exercise
of the options and the option exercise price. The options may be granted as
either or both of the following: (a) incentive stock options, or (b)
non-qualified stock options. 500,000 shares may be issued under this plan.
300,000 options were

<PAGE>

previously issued under this plan to former officers and directors of the
Company, which by their terms expired and such 300,000 options are available for
reissuance under the 1999 Stock Option Plan.

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

The plan is effective for a period of ten years, expiring in 2009. Options maybe
granted to officers, directors, consultants, key employees, advisors and similar
parties who provide their skills and expertise to us. The plan is designed to
enable our management to attract and retain qualified and competent directors,
employees, consultants and independent contractors. Options granted under the
plan may be exercised for up to ten years, and shall be at an exercise price all
as determined by our board. Options are non-transferable except by the laws of
descent and distribution or a change in control of us, as defined in the plan,
and are exercisable only by the participant during his or her lifetime.

Change in control includes (a) the sale of substantially all of the assets of us
and merger or consolidation with another company, or (b) a majority of the board
changes other than by election by the stockholders pursuant to board
solicitation or by vacancies filled by the board caused by death or resignation
of such person.

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

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

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

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

The following table sets forth certain information as of March 15, 2007 with
respect to each beneficial owner of five percent (5%) or more of the outstanding
shares of common stock of Modern Medical, each officer and director of Modern
Medical and all officers and directors as a group. The table does not include
securities exercisable into common stock that have not yet vested or are not
exercisable within 60 days of the date hereof. Unless otherwise indicated, the
address of each such person or entity is 439 Chestnut Street, 2nd Floor, Union,
New Jersey 07083.

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

BIBY Family Partners, LLC(1)      8,625,000     36.84%

<PAGE>

Issak Hayut                       2,905,028     12.41%
Ronnie Antebi                     2,172,000      9.28%
Jacov Hayut                       1,576,018      6.73%
Paul W. Harrison(2)               1,072,500      4.58%
Minesh Patel(3)                      25,000      0.11%

All officers and directors 9,722,500  41.53% as a group (3 persons)

(1)   Mr. Barry Hayut, our Chairman and CEO, is the managing member of BIBY
      Family Partners, LLC, and has shared voting and dispositive power over the
      shares of common stock owned by BIBY Family Partners, LLC.

(2)   Does not include 539,000 shares of common stock issuable upon the exercise
      of outstanding options which are not exercisable within 60 days from the
      date hereof.

(3)   Does not include 292,000 shares of common stock issuable upon the exercise
      of outstanding options which are not exercisable within 60 days from the
      date hereof.

<TABLE>
<CAPTION>

Equity Compensation Plan Information
----------------------------------------------------------------------------------------------
Plan Category      Number of Securities to be   Weighted-average      Number of Securities
                      issued upon exercise of   exercise price of     remaining available for
                       outstanding options      outstanding options,  future issuance under
                                                warrants and rights   equity compensation
                                                                      plans (excluding
                                                                      securities reflected in
                                                                      column (a))
-----------------------------------------------------------------------------------------------
<S>                       <C>                        <C>                     <C>
Equity compensation       1,368,000                  $0.50                   1,132,000
plans approved by
security holders
-----------------------------------------------------------------------------------------------
Equity compensation         875,000                  $0.27                        -0-
plans not approved by
security holders
-----------------------------------------------------------------------------------------------

</TABLE>

Item 12. Certain Relationships and Related Transactions

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

In June 2003, the Company issued an aggregate of $140,000 principal amount of
its 9.25% convertible secured promissory notes to Jacov Hayut, which is due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.
Jacov Hayut was a director and officer of Modern Medical at the time such loan
was made. On June 8, Mr. Hayut resigned as an officer and director of Modern
Medical. Jacov Hayut is the brother of Baruh Hayut, our Chairman and CEO.

<PAGE>

Medical Equipment Solutions LLC., which consists of Ronnie Antebi, Yossef
Azulai, and Shimon Elmalem, has a management agreement with Modern Medical. MES
provides services in selecting, providing, and installing medical equipment. For
these services, they are compensated 5% of Union Imaging Centers' collections
and 6.5% for the Manalapan site collections. Ronnie Antebi has provided term
financing for various loan restructurings and Mr. Antebi beneficially owns more
than 5% of our outstanding shares of common stock.

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

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

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

(a) Exhibits

      31* Certification of the Company's Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

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

      32.2* Certification of the Company's Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

--------------------
* filed herewith

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

Item 14. Principal Accountant Fees and Services.

<PAGE>

      The following table sets forth fees billed to us by our independent
registered public accounting firm, Liebman Goldberg & Drogin, LLP, during the
fiscal years ended December 31, 2006, and December 31, 2005, for: (i) services
rendered for the audit of our annual financial statements and the review of our
quarterly financial statements; (ii) services by our independent registered
public accounting firms that are reasonably related to the performance of the
audit or review of our financial statements and that are not reported as Audit
Fees; (iii) services rendered in connection with tax compliance, tax advice and
tax planning; and (iv) all other fees for services rendered. The Company's board
of directors has elected Minesh Patel as an audit committee member, which is to
approve the audit services provided by Liebman Goldberg & Drogin, LLP and the
fees incurred in connection therewith.

                     December 31, 2006          December 31, 2005
                     -----------------          -----------------
Audit Fees                $ 58,650                  $53,250
Tax Fees                  $  7,821                  $24,886
All Other Fees            $      0                  $     0



                                   SIGNATURES

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

                  Modern Medical Modalities Corporation

Date:  April 20, 2007                       By: /s/ Baruh Hayut
                                      --------------------------------
                                      Name:  Baruh Hayut
                                      Title: Chief Executive Officer



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

--------------------------------------------------------------------------------
 Name                        Title                                 Date
--------------------------------------------------------------------------------

   /s/ Baruh Hayut             Chairman and Chief Executive     April 20, 2007
---------------------         Officer
      Baruh Hayut
--------------------------------------------------------------------------------

/s/ Minesh Patel            Chief Financial Officer, Chief      April 20, 2007
---------------------         Operating Officer and Director
Minesh Patel
--------------------------------------------------------------------------------

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM

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

We have audited the accompanying consolidated balance sheet of Modern Medical
Modalities Corporation and Subsidiaries as of December 31, 2006, and the related
consolidated statements of income and operations, changes in stockholders'
deficit, and cash flows for the years ended December 31, 2006 and 2005. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Modern
Medical Modalities Corporation and Subsidiaries as of December 31, 2006, and the
consolidated results of income and operations and their cash flows for each of
the years ended December 31, 2006 and 2005, in conformity with accounting
principles generally accepted in the United States.

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

/s/ LIEBMAN GOLDBERG & DROGIN, LLP

Garden City, New York
April 11, 2007


                                       F-1
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2006


                                     ASSETS

                                                                         2006
                                                                         ----
Current assets:

Cash and cash equivalents                                             $  143,912
Accounts receivable (less contractual allowances of $3,837,200)        1,636,917

Prepaid expenses                                                         120,750
Other current assets                                                       7,106
                                                                      ----------

               Total current assets                                    1,908,685
                                                                      ----------

Property and equipment, net of accumulated depreciation
  of $2,513,284
                                                                       1,667,284
                                                                      ----------

Other assets:

Note receivable                                                           15,884
Deposits                                                                  39,427
                                                                      ----------

                Total other assets                                        55,311
                                                                      ----------

                   TOTAL ASSETS                                       $3,631,280
                                                                      ==========


                 See notes to consolidated financial statements.

                                       F-2
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2006


               LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)

                                                                        2006
                                                                        ----
Current liabilities
Accounts payable                                                    $   343,450
Accrued expenses                                                      1,754,785
Current portion long term debt                                          929,367
                                                                    -----------

             Total current liabilities                                3,027,602
                                                                    -----------

Other liabilities:
Long term debt, net of current portion                                1,431,028
Loans payable shareholders
                                                                        310,900
                                                                    -----------

              Total other liabilities                                 1,741,928
                                                                    -----------

                 Total liabilities                                    4,769,530
                                                                    -----------

Minority interest                                                         4,927
                                                                    -----------

Commitments and contingencies

Stockholders' (deficiency):
Preferred stock, $0.0002 par value, authorized - 1,000,000
  shares, Issued and outstanding - 0 shares
Common stock, $0.0002 par value, authorized - 99,000,000
  shares, issued and outstanding - 21,197,468 shares                      4,239
Additional paid-in capital                                            6,264,371
Accumulated (deficit)                                                (7,411,787)
                                                                    -----------

          Total stockholders' (deficiency)                           (1,143,177)
                                                                    -----------
           TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)         $ 3,631,280
                                                                    ===========

                 See notes to consolidated financial statements.


                                      F-3
<PAGE>

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

                                                For the Years Ended December,
                                                -----------------------------
                                                    2006           2005
                                                    ----           ----
Operating income:

Net revenues from services                      $  6,854,024    $  7,778,418
Cost of services provided                          5,493,858       5,530,222
                                                ------------    ------------

Total operating income                             1,360,166       2,248,196
                                                ------------    ------------
Operating Expenses:
Selling, general and administrative                  981,679       1,043,848
Depreciation and amortization                        463,111         626,008
                                                ------------    ------------

Total operating expenses                           1,444,790       1,669,856
                                                ------------    ------------

(Loss) income from operations                        (84,624)        578,340
                                                ------------    ------------
Other (expenses) income:
Interest expense                                    (327,791)       (218,124)
Miscellaneous income                                       -          12,371
Loss from litigation settlement                      (20,000)              -
Loss on abandoned site                              (320,000)              -
Gain on sale of property asset                       185,669               -
Gain from insurance recoveries                        20,000               -
                                                ------------    ------------
Net other (expenses)                                (462,122)       (205,754)
                                                ------------    ------------
(Loss) income before income taxes and
 minority interests                                 (546,746)        372,586

Provision for income taxes                            79,255          68,476
                                                ------------    ------------

(Loss) income before minority interests             (626,001)        304,110

Minority interests                                    95,094        (108,660)
                                                ------------    ------------

Net (loss) income                               $   (530,907)   $    195,449

(Loss) income per share, basic and diluted      $      (0.03)   $       0.01
                                                ============    ============

Number of weighted average shares outstanding     15,425,992      14,706,471
                                                ============    ============

                  See notes to consolidated financial statements.


                                      F-4
<PAGE>



             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

<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, 2004                           14,706,471        $     2,941        $ 4,515,715        $(7,076,329)        $(2,557,673)

Net income for the
year ended
December 31, 2005                                   --                 --                 --            195,449             195,449
                                           -----------        -----------        -----------        -----------         -----------

Balance at
December 31, 2005                           14,706,471              2,941        $ 4,515,715        $(6,880,880)        $(2,362,224)

Shares issued
 during 2006                                 6,490,996              1,298          1,535,228                  -           1,536,526

Value associated
 with SFAS 123(R)
 compensation                                       --                 --            213,428                  -             213,428

Net loss for the
year ended
December 31, 2006                                   --                 --                 --           (530,907)           (530,907)
                                           -----------        -----------        -----------        -----------         -----------

Balance at
December 31, 2006                           21,197,467        $     4,239        $ 6,264,371        $(7,411,787)        $(1,143,177)
                                           ===========        ===========        ===========        ===========         ===========

</TABLE>

                 See notes to consolidated financial statements.


                                      F-5
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                   For the years ended December 31,
                                                                                                   --------------------------------
                                                                                                        2006                  2005
                                                                                                   -----------          -----------
<S>                                                                                                <C>                  <C>
Cash flows from operating activities
  Net (loss) income                                                                                $  (530,907)         $   195,449
                                                                                                   -----------          -----------
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
        Depreciation and amortization                                                                  463,111              626,008
        Contractual allowances                                                                         645,697             (646,611)
Increase (decrease) in cash attributable to changes
 in operating assets and liabilities:
        Accounts receivable                                                                           (514,048)             459,313
        Notes receivable - current portion                                                              12,905               19,096
        Prepaid expense                                                                               (120,750)                   -
        Other current assets                                                                               139               28,076
        Deposits and other assets                                                                       26,439              (23,310)
        Accounts payable                                                                              (516,619)             392,726
        Accrued expenses                                                                               900,581                3,988
                                                                                                   -----------          -----------
        Total adjustments                                                                              897,455              859,586
                                                                                                   -----------          -----------
Net cash provided by operating activities                                                              366,548            1,055,035
                                                                                                   -----------          -----------
Cash flows from investing activities:
        Fixed asset acquisitions                                                                      (204,536)          (1,695,110)
        Fixed asset dispositions                                                                       352,070                9,008
        Decrease in provision for site closing                                                               -             (100,000)
        Increase in minority interest                                                                 (276,094)              48,238
                                                                                                   -----------          -----------
Net cash (used) by investing activities                                                               (128,560)          (1,737,864)
                                                                                                   -----------          -----------
Cash flows from financing activities:
  Increase in common stock from conversion of debt                                                       1,129                   --
  Increase in additional paid in capital from
        Conversion of debt                                                                           1,207,189                   --
  Increase in common stock from issuance of shares                                                         169                   --
  Increase in additional paid in capital from
        Issuance of shares                                                                             328,039                   --
  Increase in shareholder loans                                                                         70,799                   --
  Increase in Additional Paid In Capital under SFAS 123R
        from issuance of employee stock
        Options and warrants                                                                           213,428
  Net increase long term debt                                                                          306,263            2,375,110
  Net (reduction) long term debt                                                                    (2,232,564)          (1,687,047)
                                                                                                   -----------          -----------
      Net cash (used) provided by financing activities                                                (105,548)             688,062
                                                                                                   -----------          -----------
Net increase in cash and cash equivalents                                                              132,440                5,233
Cash and equivalents, beginning of year                                                                 11,472                6,239
                                                                                                   -----------          -----------
              Cash and equivalents, end of year                                                    $   143,912          $        --
                                                                                                                             11,472
    Supplemental cash flow information
      Interest paid                                                                                $   267,329          $   179,408
                                                                                                   ===========          ===========
        Income taxes paid                                                                          $        --          $        --
                                                                                                   ===========          ===========
        Shares issued for conversion of debt                                                         5,845,996                   --
                                                                                                   ===========          ===========
        Shares issued in payment of consulting agreements                                              645,000                   --
                                                                                                   ===========          ===========
                 See notes to consolidated financial statements.

</TABLE>

                                      F-6
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Organization and Business:

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

Basis of Presentation:

The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Union Imaging Center, LLC, Medical Marketing and
Management, Inc., Somerset Imaging Corporation, Amherst Medical Equipment
Leasing Corp., MRI Imaging Center at PBI Corporation, Metairie Medical Equipment
Leasing Corp., West Paterson Medical Equipment Leasing Corp., Ohio Medical
Equipment Leasing Corp., its subsidiaries PET Scan at Union Imaging, LLC and
Union Imaging Associates, Inc., owned 50% and 88.9%, respectively and its joint
ventures, Plainfield MRI Associates, JV and Union Imaging Associates, JV, owned
84% and 90% respectively. By contract the Company manages these joint ventures,
is the managing joint venturer and has unilateral control. All significant
inter-company transactions and accounts have been eliminated in consolidation.

Revenue recognition:

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

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


                                      F-7
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

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

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

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

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

Contractual Allowances:

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

Use of Estimates:

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


                                      F-8
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

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

Concentration of Credit Risk/Fair Value:

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

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

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

Cash and Cash Equivalents:

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

Accounts Receivable:

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

Property and Equipment:

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

Deferred Financing Costs:

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


                                      F-9
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

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

Income Taxes:

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

Net Income (Loss) Per Share:

Net income (loss) per common share amounts ("basic EPS") are computed by
dividing net earnings (loss) by the weighted average number of common shares
outstanding, excluding any potential dilution. Net income (loss) per common
share amounts assuming dilution ("diluted EPS") are computed by reflecting
potential dilution from the exercise of stock options and warrants.

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.

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

Advertising and Promotion Costs:

Advertising and promotion costs, which are included in general and
administrative expenses, are expensed as incurred. For the two years ended
December 31, 2006 and 2005, such costs aggregated $116,000 and $128,800,
respectively.


Retirement Plan:

The Company maintains a qualified 401-(k) wage deferral plan. Employees may
defer a portion of their salary. The Company did not contribute to the plan
during 2006 however, for 2005 the Company agreed to match 50% of employee
contributions up to 6% of the employees compensation. For 2005 the Company
portion of the matching program was $34,300, this amount was accrued for in 2005
and paid in 2007.


                                      F-10
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

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

Impairment or Disposal of Long-Lived Assets:

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". The statement supersedes SFAS No. 121 and
Accounting Principles Board Opinion No. 30 "Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Statement
retains the fundamental provisions of SFAS No. 121 for the recognition and
measurement of impairment, but accounting and reporting standards for segments
of a business to be disposed of. The provisions of this statement are required
to be adopted no later than fiscal years beginning after December 31, 2001, with
early adoption encouraged. The impact of adoption of SFAS No. 142 will not be
material.

Instruments with Characteristics of Both Liabilities and Equity:

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

NOTE 2 - GOING CONCERN UNCERTAINTY.

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company has a working
capital deficiency of $1,118,917 as of December 31, 2006, and prior to 2005 had
sustained significant losses from operations, which raised substantial doubt
about the Company's ability to continue as a going concern. In view of these
matters, realization of the assets of the Company is dependent upon the
Company's ability to meet its financing requirements and the success of future
operations. The consolidated financial statements do not include adjustments
relating to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.

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


                                      F-11
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS.

Commencing March 20, 2003 through April 11, 2004, the Company acquired an
additional 70% interest in Union Imaging Associates, JV. This additional 70%
brought the Company's ownership of Union Imaging Associates, JV to 80%. It was
acquired for varying prices totaling $1,525,000, payable in monthly installments
over approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's
share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.")
in exchange for 350,000 shares of the Company's common stock with a valuation of
$75,000 at the time of purchase, and a note for $27,000 to be paid in 18
payments of $1,500.00 per month. The 350,000 shares of common stock were issued
on October 20, 2006. As a condition of the purchase, the Company agreed to
re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any
consecutive 20 day period commencing September 1, 2008 through the last day of
February 2009, the stock price was below $1.00 per share. The purchase of Dr.
Wolkstein's ownership interest brings the Company's total ownership in UIA, Inc.
to 88.89%. The current combined monthly installments are $16,200 at December 31,
2006, these payments will average approximately $14,600 in 2007 and $13,000 in
2008.

Effective October 1, 2003, we acquired 50% of the outstanding shares of TSI
Billing Services, Inc. for two hundred thousand restricted shares of Modern
Medical Modalities Corporation. As part of this transaction the seller had the
right starting November 1, 2004 to put the Company's shares to the Company. The
Company has agreed that if the average selling price of its shares is less than
$0.50 per share for the month of October 2004, that for the 45 day period
starting November 1, 2004 it will reacquire the shares for $0.50 per share. No
shares were put to the Company during that period. Effective January 1, 2006,
the Company reversed the transaction it entered into with two of the
shareholders of TSI Billing Services, Inc in November 2003. The shareholders of
TSI Billing Services, Inc. returned the 200,000 shares of Modern Medical
Modalities Corporation common shares issued to them for return of their 50%
interest in TSI Billing Services, Inc. These shares were retired by Modern
Medical Modalities Corporation, no gain or loss was recorded by Modern Medical
Modalities Corporation.

Effective February 1, 2004, the Company, through a wholly owned subsidiary,
Union Imaging Center, LLC entered into a lease & management agreement to operate
and manage a radiology practice at 441 Chestnut Street, Union, NJ. This Center
does approximately $2,900,000 in revenues per year. It is adjacent to the Union
Imaging Associates center; the combined radiology practices offer a full range
of imaging services.

On April 1, 2004 the Company obtained a facility license and opened its first
PET Scan Unit on Chestnut Street in Union near its Union Imaging Associates
center. It is a partnership between Union Imaging Associates and Medical
Equipment Solutions. The Partnership was formed in 2003 to acquire a Positive
Emission Tomography Unit or PET Scanner. Modern Medical is the managing partner
and owns 50% of this center. This addition completes our ability to be a full
service diagnostic out-patient imaging center in Union.

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


                                      F-12
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENT
                           DECEMBER 31, 2006 AND 2005

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

In relation to the Manalapan imaging center above: in July, 2006, we entered
into a Letter of Intent to divest its ownership interests in Modern Medical
Imaging at Atrium, L.L.C., a Limited Liability Company ("the L.L.C."). The
transaction is to be structured in the form of a sale of the L.L.C. whereby 100%
of the membership interest is acquired, in exchange for $250,000 in cash with
specific provisions included for the timing of payments with the majority of
payment due at closing. In addition, assignments will be included for the
Company to assume certain accounts receivables and accounts payables as of the
closing date of the transaction. On September 1, 2006, we entered into a
definitive agreement with a privately-held organization and sold its ownership
interests in Modern Medical Imaging at Atrium, L.L.C. for $250,000 under
essentially the same terms and conditions as described above and outlined in the
Letter of Intent. Even though the new owners of the Imaging Center at Atrium
assumed the liabilities of the business, the Company is contingently liable for
a long term facility lease, and medical equipment contracts that currently total
approximately $1.3 million in potential obligations until the Company obtains
releases from its guarantees related to the contracts.

NOTE 4 - PROPERTY AND EQUIPMENT.

Property and equipment are summarized by major classification as follows:

                                                         December 31,
                                      Useful lives           2006
                                      ------------       ------------
       Medical Equipment               5 - 10 years      $  3,325,644
       Furniture and Fixtures          3 -  5 years            39,041
       Automobiles                          5 years            19,865
       Computer equipment and software 3 -  5 years           200,653
       Leasehold improvements          5 - 10 years           595,366
                                                         ------------

                                                            4,180,569
       Less: Accumulated Depreciation
           and Amortization                                 2,513,284
                                                         ------------
                                                         $  1,667,284
                                                         ============
             Depreciation expense for the year
       ended December 31, 2006                           $    463,111
                                                         ============


                                      F-13
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005


NOTE 5 - CONVERTIBLE DEBT

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

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

NOTE 6 - EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS

The purpose of the 2003 and 1999 Option Plans is to grant officers, employees
and others who provide significant services to the Company a favorable
opportunity to acquire Common Stock so that they have an incentive to contribute
its success and remain in its employ. Under the 2003 and 1999 Option Plans, the
Company is authorized to issue options for a total of 2,000,000 and 500,000
shares of Common Stock, respectively.

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

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


                                      F-14
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

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

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

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

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

Table of stock options:

            Opening balance January 1, 2006:                    0

            Activity 2006:
                                  Additions:            1,368,000
                                  Deletions:                    0
                                                        ---------
            Closing balance December 31, 2006:          1,368,000
                                                        ---------

The weighted average remaining life of the options outstanding at December 31,
2006 is 4.77 years.

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

For the three month periods ended December 31, and September 30, 2006, we
conducted an outside independent analysis and our own review, and based on the
results, we recognized $145,362 and $68,066, respectively, in share-based
payments related to warrants and stock options issued with the rights to
exercise 2,043,000 shares of our common stock. The analysis and computation was
performed based on our adoption of Statement of Financial Accounting Standards
No. 123R, share-based payment (SFAS 123R), which requires the recognition of the
fair value of stock-based compensation at the beginning of our next fiscal year
(January 1, 2006) that followed the reporting effective date of December 15,
2005 for small business issuers.


                                      F-15
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005


NOTE 8 - LONG-TERM DEBT.

Long-term debt consists of the following:

                                                    December 31, 2006
                                                    -----------------
       Notes payable                                     1,225,541
       Capitalized lease obligations                     1,445,754

       Less current portion                               (929,367)
                                                        ----------

       Long-term debt, net of current portion           $1,741,928
                                                        ==========

Notes Payable:

During December 2002, the Company negotiated a 36 month note payable with Ronnie
Antebi, a related third party. This note was utilized to pay the Bridge View
Bank line of credit in full and provide working capital. The note carried an
annual interest rate of 12% and was payable in 36 equal installments of
$8,635.72, commencing on January 9, 2003 and the final payment December 9, 2005.

On March 18, 2005 Modern Medical entered into an unsecured loan agreement with
Dr. Howard Kessler MD PA, in the amount of $300,000 payable in 12 monthly
payments of $8,333 with a lump sum due on the 13th month in the amount of
$221,826.71 and bears an interest rate of 8% per annum. In March 2006, this note
was extended 12 months through April 2007 and month to month after April 2007
under the same terms as the first 12 months. This loan funded the settlement of
the DVI/US Bank loan settlement.

On April 15, 2005 Modern Medical entered into an unsecured loan agreement with
Mr. Ronnie Antebi in the amount of $175,000 and bears an interest rate of 15%
per annum. The note payments commenced on May 15, 2005. This loan was utilized
to fund the settlement of the CitiCorp lease (see footnote 10). On October 27,
2006, the Company paid Ronnie Antebi $64,545.48 as final payment on his original
$175,000 note.

Commencing March 20, 2003 through April 11, 2004, the Company acquired an
additional 70% interest in Union Imaging Associates, JV. This additional 70%
brought the Company's ownership of Union Imaging Associates, JV to 80%. It was
acquired for varying prices totaling $1,525,000, payable in monthly installments
over approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's
share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.")
in exchange for 350,000 shares of the Company's common stock with a valuation of
$75,000 at the time of purchase, and a note for $27,000 to be paid in 18
payments of $1,500.00 per month. The 350,000 shares of common stock were issued
on October 20, 2006. As a condition of the purchase, the Company agreed to
re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any
consecutive 20 day period commencing September 1, 2008 through the last day of
February 2009, the stock price was below $1.00 per share. The purchase of Dr.
Wolkstein's ownership interest brings the Company's total ownership in UIA, Inc.
to 88.89%. The current combined monthly installments are $16,200 at December 31,
2006; these monthly payments will average approximately $14,600 in 2008 and
$13,000 in 2008.


                                      F-16
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 8 - LONG-TERM DEBT (continued):
In February 2006, the Company entered into an unsecured note with Jacov Hayut in
the amount of $150,000. The loan was for 12 months with interest at 15%, monthly
payments are interest only with lump sum payment of $150,000 February 2007. This
note was extended for 36 months under the same terms and conditions, except that
the Company agreed to pay the note in full or in part at the lenders option upon
the first equity capital raise or February 2010, which ever comes first.

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

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

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

Capitalized Lease Obligations:

The Company entered into certain leases for the rental of equipment, which have
been recorded as capital leases for financial statement reporting purposes and
are included in equipment. The assets and liabilities under capital leases are
recorded at the lower of the present value of the minimum lease payments or the
fair market value of the asset. Accumulated depreciation of assets under capital
lease at December 31, 2006 aggregated $665,938. The interest rates on these
capital leases vary between 4.0% and 15.0% per annum. Monthly payments for these
leases are approximately $39,000 for interest and principal. On November 1,
2006, the Company was notified that it was in default of meeting certain terms
and conditions of an equipment agreement with Siemens. The Company owes Siemens
approximately $180,000 plus penalties at December 31, 2006 and is working to
negotiate a revised agreement or settlement with Siemens, and is seeking to
refinance the equipment with another organization.

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

                                              December 31, 2006
                                              -----------------
                     2007                        $  466,737
                     2008                           358,813
                     2009                           266,701
                     2010                           243,675
                     2011 & Beyond                  105,830
                                                 ----------
                                                 $1,440,755
                                                 ==========


                                      F-17
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 9 - RESTRUCTURING OF LONG-TERM DEBT

In April 2005 the Company completed buyout of the balance of CitiCorp lease for
a lump sum payment of $175,000 made on April 15, 2005 plus 25 equal monthly
installments of $1,000. As a result of this negotiated settlement the Company
recorded a gain of $211,171 on the settlement of this debt as of December 31,
2004.

NOTE 10 - INCOME TAXES

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

The Company has recorded an income tax provision (credit) at December 31, 2006
and 2005 of $ 79,255, and $ 68,476, respectively. The Company has a net
operating loss carry-forward for federal income tax purposes of approximately
$10,175,757, available to offset income taxes through [ 2016 - 2023. ]

The components of the Company's provision (benefit) for income taxes, for the
fiscal years ended 2006 and 2005 are as follows:

Current:
Federal                                    $    --       $    --
State and local                             79,255        68,476

Deferred:
Federal                                         --            --
State and local                                 --            --
                                           -------       -------

Net income (loss)                          $79,255       $68,476
                                           =======       =======

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

                                                2006          2005
                                             ----------    ----------
U.S. Federal statutory rate                  $3,562,000    $3,361,000
State taxes                                     305,000       283,000
                                             ----------    ----------

Effective tax rate                           $3,867,000    $3,867,000
                                             ==========    ==========


                                      F-18
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 10 - INCOME TAXES, continued:

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2006 and
2005 are presented below:

                                               2006           2005
                                           -----------     -----------
Deferred tax assets:
       Net operating loss carryforward     $ 3,867,000     $ 3,644,000

       Less valuation allowance             (3,867,000)     (3,644,000)
                                           ------------    ------------
       Net deferred tax asset              $        --     $        --
                                           ============    ============

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

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

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


                                      F-19
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 11 - Equity Compensation Plan Information

Plan category Number of Securities to Weighted-average Number of securities be
issued upon exercise price of remaining available for of outstanding options,
outstanding options, future issuance under warrants and rights warrants and
rights equity compensation plans (excluding securities reflected in column (a))

Equity Compensation Plan Information

<TABLE>
<CAPTION>

-------------- ----------------------------- --------------------   --------------------------
Plan Category   Number of Securities to be    Weighted-average      Number of Securities
                issued upon exercise of       exercise price of     remaining available for
                outstanding options           outstanding options,  future issuance under
                                              warrants and rights   equity compensation
                                                                    plans (excluding
                                                                    securities reflected in
                                                                    column (a))
-------------- ----------------------------- --------------------   --------------------------
<S>                       <C>                        <C>                     <C>
Equity compensation       1,368,000                  $0.50                   1,132,000
plans approved by
security holders
----------------------------------------------------------------------------------------------
Equity compensation         875,000                  $0.27                        -0-
plans not approved by
security holders
------------------ ------------------------- --------------------   -------------------------

</TABLE>

NOTE 12 - RELATED PARTY TRANSACTIONS [See Note 27 Subsequent Events].

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

In June 2003, the Company issued an aggregate of $140,000 principal amount of
its 9.25% convertible secured promissory notes to Jacov Hayut, which is due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.
Jacov Hayut was a Director and Officer of the Company until June 8, 2006 - See
Note 13.

Medical Equipment Solutions, which consist of Ronnie Antebi, Yossef Azulai, and
Shimon Elmalem has a management agreement with the company and also are
investors in the company either individually or collectively. MES provides
services in selecting, providing, and installing medical equipment. For these
services, they are compensated 5% of Union Imaging Centers' collection and 6%
for the Manalapan site collections. Ronnie Antebi has provided term financing
for various loan restructurings. The Company charged operations $143,762 in 2006
and $133,498 in 2005, December 31, 2006 and 2005, $36,109 & $5,126, respectively
remained outstanding.


                                      F-20
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 12 - RELATED PARTY TRANSACTIONS (continued) [See Note 27 Subsequent
Events]:

In June 2003, the Company issued an aggregate of $225,000 principal amount of
its 9.25% convertible secured promissory notes to Motti Sharon which is due on
June 2007. The notes are convertible at anytime while any portion of it is
outstanding into shares of the Company's common stock at the lowest bid price of
the Common Stock as reported on the OTC Bulletin Board during the 30 days prior
to the date a duly executed Notice of Conversion is delivered to the Company.
Motti Sharon was a Director of the Company at the time the notes were issued.

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

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

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

NOTE 13 - CHANGES IN DIRECTORS AND OFFICERS [See Note 30 - Subsequent Events]:

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

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


                                      F-21
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 14 - COMMITMENTS AND CONTINGENCIES.

(a) Employment Agreements:

The Company has no employment agreements.

(b) Properties:

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

In April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 7,150 square feet on 445 Chestnut St. in Union, NJ for
approximately $15,000 per month. This lease is renewable for an additional
5-year term at no more than $17,875 per month, which expires on April 1, 2010.

In April 2005 Modern Medical entered into a five (5) year lease agreement for
approximately 2,250 square feet on 439 Chestnut St. in Union, NJ for
approximately $3,844 per month.

In February 2001 Modern Medical and Union Imaging Associates, JV entered into a
five (5) year lease agreement for approximately 960 square feet on 418 Chestnut
St. in Union, NJ for approximately $1,760 per month. . Effective September 1,
2004, Union Imaging Associates, JV and Modern Medical took an additional 600
square feet for an additional $1,000 per month and extended the lease to
February 1, 2007 and obtained an option to renew for an additional 3 years upon
180 days prior written notice of the Company's intent to exercise its option.

April 1, 2004 the company entered into a 10-year lease with an option for an
additional 5 years, in Manalapan NJ. The lease is for approximately 5,620 square
feet, the monthly rental is $11,240. The space was previously an imaging center,
consisting of the following modalities: a MRI, Ultrasound, X-ray RF room, and
Mammography. The previous tenant had abandoned the space. We also negotiated
with the equipment financing company for the purchase of all the equipment
except the MRI unit for $22,000. We purchased the MRI unit for $250,000 from
Philips and financed it with Commerce Commercial Leasing Corp. The facility is
operating in a limited basis. This facility was sold in August 2006; the Company
remains contingently liable on this lease. See footnote 3.

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

            YEAR                  Amount
            ----                  ------

            2007                  $293,000

            2008                  $276,000

            2009                  $276,000

            2010                  $276,000

            2011                  $ 63,000

            There after           $      0


                                      F-22
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 14 - COMMITMENTS AND CONTINGENCIES, continued:

Facility rental expense charged to operations in 2006 and 2005 was $438,446 and
$424,357, respectively

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

NOTE 15 - LITIGATION.

Modern Medical Modalities Corporation has been served with a lawsuit in May 2004
in the District Court of Clark County, Nevada alleging a breach of contract with
a marketing partner seeking in excess of $40,000 in damages. Modern Medical
intends to vigorously defend itself in this suit. The company filed for a motion
to dismiss, which was granted on July 2004. The plaintiff was given an
opportunity to amend its complaint if it desired.

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

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

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


                                      F-23
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 16 - SETTLEMENT OF ARCHITECTURAL SERVICES FEES.

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

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

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

NOTE 18 - DISCONTINUANCE OF METAIRIE, LOUISIANA BUSINESS.

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

NOTE 19 - INVESTOR AWARENESS CONSULTING AGREEMENT:

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

NOTE 20 - CONCORD EQUITY GROUP, LLC CONSULTING AGREEMENT:

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


                                      F-24
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 21 - INFORMATION TECHNOLOGY LEASE AGREEMENTS WITH IBM:

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

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

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

NOTE 23 - CONSULTING AGREEMENT WITH BRETT BRIGGS, INC.

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

NOTE 24 - CONSULTING AGREEMENT WITH John McAuliffe.

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

NOTE 25 - LINDGREN R.F. Enclosures, Inc. Lawsuit Settlement:

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

                                      F-25
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 26 - MARCAP Lawsuit

On October 12, 2006, we were served with a lawsuit by MARCAP seeking $350,000
covering the full amounts MARCAP claims where owed by the Company under a lease
Agreement for medical equipment. The Company negotiated a settlement by agreeing
to bring the lease current with four equal payments of $5,800, this cured any
defaults that may have existed.

NOTE 27 - SUBSEQUENT EVENTS:

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

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

On February 28, 2007 Modern Medical Modalities Corporation entered into an Asset
Purchase Agreement (the "Agreement") with MTI Partners II, L.P. ("MTI-II") to
acquire MTI-II's Medical Software Assets (the "Assets") in exchange for 1
million shares of the Company's common stock. The transaction closed on March
23, 2007. The Assets consist of medical computer software that organizes,
manages, and maintains patient scheduling, registration, medical records,
billing, and includes other customized components. The shares of Common stock
were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Paul Harrison, a member of the Company's Board of Directors, is the President of
INEX Group, Inc., which serves as the General Partner of MTI-II. Mr. Harrison
will be entitled to receive 562,500 shares of the Company's common stock
issuable to MTI-II pursuant to this Agreement.


                                      F-26
<PAGE>

             MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005

NOTE 27 - SUBSEQUENT EVENTS (continued):

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

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


                                      F-27