UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

x	Annual Report to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year ended December 31, 2008.

¨	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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

Check if there is no disclosure of delinquent filers in response to Item 405 contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

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

The issuer's net sales for the most recent fiscal year were $ 7,333,904.

The aggregate market value of the voting stock held by non-affiliates based upon the last sale price on March 20, 2009 was approximately $189,454.66.

As of March 20, 2009 there were 25,673,385 shares of Common Stock, par value $.0002 per share, outstanding.

FORWARD LOOKING STATEMENTS

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

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

PART I

Item 1. Business

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

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

As of December 31, 2008, we own, operate, and manage three diagnostic imaging centers located in New Jersey. The Company's ownership interests range from 50% to 100%. On January 30, 2009, we and our wholly-owned subsidiaries, Union Imaging Associates, Inc., a New Jersey corporation, Union Imaging Center, LLC, a New Jersey limited liability company, and PET Scan at Union Imaging, LLC, a New Jersey limited liability company, entered into an Asset Purchase Agreement (the “Agreement”) with Health Diagnostics of New Jersey, L.L.C. (“HD”), a New Jersey limited liability company, pursuant to which HD agreed to purchase substantially all of the assets used by or in connection with the Seller Companies’ Imaging Centers, for cash consideration in the amount of $8,800,000 (the “Purchase Price”) minus (a) any liabilities paid off or assumed by HD on the Closing Date of the Asset Sale, not to exceed $1,600,000 in the aggregate, (b) a $1,200,000 credit to HD for capital expenditures and leasehold improvements, and (c) the amount, if any, by which the Closing Date working capital (the “Closing Date Working Capital”) of the Seller Companies falls short of $525,000 in the aggregate (a “Closing Date Working Capital Shortfall”). If the Closing Date Working Capital exceeds $525,000 then HD will pay us such excess amount. HD will determine the Closing Date Working Capital within 90 days of the Closing Date. We will have the right to dispute and propose adjustments to HD’s calculation of the Closing Date Working Capital in accordance with the procedures set forth in the Agreement. Assuming we satisfy the conditions to completing the Asset Sale, the Closing Date is estimated to be on or before March 31, 2009. If the Closing Date does not occur on or prior to that date or if any of the conditions to the closing are not satisfied on or prior to that date, we, the Seller Companies and HD shall each have the right to terminate the Agreement. If the Closing does occur, we intend to focus on providing more outsourced information and administrative services through our wholly-owned subsidiary HealthIXS, in order to expand into the more profitable information and administrative services markets. In addition, we may invest the proceeds of the Asset Sale in businesses or ventures that may or may not be synergistic with our past operations or our remaining information and administrative services business operated by HealthIXS. HealthIXS has not generated any revenues thus far. We have not identified any proposed investments at this time.

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. As we are in the process of selling our diagnostic imaging business, 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 if the Asset Sale does not occur, 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. If the Asset Sale does not occur, we expect to continue to better integrate the optimal mix of managed care and traditional insurance covered services and reimbursements with consumer driven on-demand services and payments while maximizing the ratio of effective diagnostic imaging utilization over capacity in each center, and maintaining high quality patient outcomes and overall service.

We have also positioned ourselves to expand our business and participate more in outsourced management services and the expanding, more profitable information and administrative services markets, and intend to seek out more networks of clinics and other outpatient facilities through joint ventures and collaborative contractual arrangements with hospitals, physician managed ambulatory centers, payers, and other key participants in the industry. In order to support our business expansion, we acquired advanced software assets and added customizations to produce an integrated information system that will allow us to provide better management and related services and improve overall profitability.

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

On September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement") with MTI Partners II, L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin Software Asset (the "Asset") in exchange for 500,000 shares of our common stock ("Common Stock"), warrants ("Warrants") for 900,000 shares of our common stock with an exercise price of $0.70 per share, and $250,000 to be paid within 12 months from the date of the Agreement. The transaction closed in October, 2007. The Asset consists of healthcare payer admin computer software that helps organize, manage, and maintain health plans, membership, eligibility, claims administration, and includes other customized components. The shares of Common Stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. Paul Harrison, a member of the Board of Directors of MODM, is the President of INEX Group, Inc., which serves as the General Partner of MTI-II. Mr. Harrison will be entitled to receive 281,250 shares of our Common Stock, and a Warrant for 506,250 of our Common Stock with an exercise price of $0.70 per share issuable to MTI-II pursuant to this Agreement. On February 28, 2008, we filed a Certificate of Incorporation for HealthIXS Corporation, a newly formed subsidiary of Modern Medical Corporation. HealthIXS was formed to focus on using our health information system to provide information and administrative services to healthcare organizations. Our health information system is based on the integration of the software assets acquired on February 28, 2007 and September 14, 2007 and value-added customizations that has culminated into a health common system platform with a comprehensive array of software applications that can be used to provide web-based information and administrative services.

UNION JOINT VENTURE

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

o Hiring of personnel;

o Leasing equipment;

o Budgeting;

o Contracting;

o Billing;

o Paying debts;

o Making lease payments;

o Information services; and

o Making distributions to the joint venturers.

Initially Modern Medical owned 10% and Union Imaging Associates Inc. owned 90% of the Joint Venture. Starting in 2003 Modern Medical began acquiring shares of Union Imaging Associates, Inc. and as a result increased its ownership to 50% of the Union Joint Venture at the end of 2003 and acquired additional shares in Union Imaging Associates, Inc., further increasing its interest in Union Imaging Associates, Joint Venture during 2004, from 50% to 80%. On September 1, 2006, we purchased Dr. Wolkstein's share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 350,000 shares of the Company's common stock with a valuation of $154,000 at the time of purchase, and a note for $27,000 to be paid in 18 payments of $1500.00 per month. The 350,000 shares of common stock were issued on October 20, 2006. As a condition of the purchase, the Company agreed to re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any consecutive 20 day period commencing September 1, 2008 through the last day of February 2009, the stock price was below $1.00 per share. The purchase of Dr. Wolkstein's ownership interest brings the Company's total ownership in UIA, Inc. to 88.98 %. On June 20, 2008, we purchased Dr. Haidri’s share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 150,000 shares, of the Company's common stock with a valuation of $15,000 at the time of purchase, and a note for $36,000 to be paid in 18 payments of $2,000.00 per month. The 150,000 shares of common stock were issued on August 28, 2008. As a condition of the purchase, the Company agreed to re-purchase the 150,000 shares from Dr. Haidri for $45,000 if for any consecutive 20 day period during the first 90 day period commencing at the end of the fifteenth month subsequent to June 20, 2008, the stock price was below $0.30 per share. The purchase of Dr. Haidri’s ownership interest brings the Company's total ownership in UIA, Inc. to 100%.

The assets of Union Imaging Associates Joint Venture are being sold to HD as part of the Asset Sale.

Union Imaging Center, LLC

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

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. The assets of PET Scan at Union Imaging, LLC are being sold to HS as part of the Asset Sale.

Modern Medical Imaging at Atrium LLC

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

Medical imaging industry and systems:

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

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

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

Our services:

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

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

Equipment and related services.

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

Technical and support staffing.

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

Marketing.

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

Patient scheduling, billing and collection at the medical technology centers.

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

Delivery of our services:

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

Medical technology centers. Modern Medical will establish a medical technology center within a hospital or with a physician group through which Modern Medical will offer its full range of services. A hospital center is located on hospital campus, is affiliated with that hospital and provides both inpatient and outpatient services.

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

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

In most cases Modern Medical is approached by a group of physicians or hospitals 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. We entered into an Asset Purchase Agreement (the “Agreement”) with HD. The Agreement with HD included a non-competition provision. The non-competition provision calls for a period commencing on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, no Seller Company nor Parent shall, without the prior written consent of Purchaser, (a) directly or indirectly, own, manage, operate, control or participate in any manner in the ownership, management, operation or control of, or serve as a partner, director, employee, manager, principal, agent, consultant or otherwise contract with, or have any financial interest in or with, or aid or assist any other person or entity that operates imaging equipment or an imaging facility or competes with an Imaging Center or the Business within a twenty five (25) mile radius of any Imaging Center or any other imaging centers managed by Purchaser, and (b) in any capacity, either separately, jointly or in association with others, directly or indirectly do any of the following: (i) employ or seek to employ any Person or agent who is then employed or retained by the Business, Purchaser or its Affiliates (or who was so employed or retained at any time within the two (2) years prior to the date a Seller Company or Parent employs or seeks to employ such Person); (ii) solicit, induce, or influence any proprietor, partner, stockholder, lender, director, officer, manager, employee, joint venturer, investor, consultant, agent, lessor, supplier, customer or any other Person that has a business relationship with the Business, Purchaser or its Affiliates, to discontinue or reduce or modify the extent of such relationship with the Business, Purchaser or its Affiliates; or (iii) submit, solicit, encourage or discuss any proposal, plan or offer to acquire an interest in any of the Business’, Purchaser’s or its Affiliates’ identified potential acquisition candidates. The clinics and medical centers may include complimentary multi-specialty healthcare centers that enhance the network of services being provided by us. The direct marketing methods include telemarketing, direct solicitation, direct mail, and sponsorship of in service education programs for physicians and technical staff, and personal visits to physician offices. Modern Medicals management also attends many of the large radiology and other selected healthcare shows throughout the country.

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

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

Modern Medical’s plan of operation will be to continue to expand the equipment use of its current customers, and Modern Medical has entered into an Asset Purchase Agreement, which may change its plan of operation (see Part 1 - Item 1 in the Business section above). 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.

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

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

Regulations.

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

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

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

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

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

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

Competition

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

Modern Medical believes that few of its competitors provide the same comprehensive range of services. Modern Medical maintains close working relationships with two major equipment manufacturers (Siemens and General Electric). From time-to-time, representatives of these manufacturers introduce Modern Medical to various clients in an effort to arrange joint ventures between Modern Medical and physician groups, or hospitals, in an effort to sell their equipment to the joint venture. Modern Medical's imaging centers compete for patients with other hospitals and radiology groups in their area. These centers and hospital customers compete on the basis of efficiency and service.

Insurance

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

Employees

As of December 31, 2008 Modern Medical employed 42 persons on a full-time basis and 21 persons on a part time basis. The following table reflects the equivalent full and part-time employees per facility:

	Total		Full Time		Part Time
Modern Medical		3		3		0
Metairie, LA		1		1		0
Union Imaging Assoc., Union, NJ		26		16		10
Union Imaging Center, Union, NJ		31		21		10
PET Scan at Union Imaging		2		1		1
Total		63		42		21

Equipment lease agreements:

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

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

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

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

Payments schedule listed in table below:

Equipment	Operating/ Financial	Start	End	No. of Pymts		Recurring Payments		Leased/Loan Amount
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
		04/30/08	07/31/08		03	$	0.00
		08/01/08	06/01/09		11	$	23,903.35	$	1,155,000.00
GE-Dell Hardware	Financing	01/01/04	03/01/09		63	$	1,184.38	$	61,199.53
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	04/17/08		49	$	6,041.08
		05/17/08	07/17/08		03	$	0.00
		08/17/08	11/17/09		16	$	6,492.71	$	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	04/17/08		19	$	9,539.44
		05/17/08	07/17/08		03	$	0.00
		08/17/08	01/17/09		19	$	8,671.76	$	398,500.00
GE-iCAD SL GE V5.1	Financing	12/05/05	11/05/09		48	$	1,067.93	$	42,503.90
CIT Tech - Mas90	Financing	10/30/04	09/30/09		60	$	430.36	$	20,000.00
Dell Financial Ser –Eq	Operating	01/31/07	04/30/11		48	$	3,619.91	$	173,755.68
Dell	Financing	06/01/06	05/01/09		36	$	334.96	$	9,191.23
Marcap-PET Scan	Financing	02/07/04	01/15/09		60	$	11,449.40	$	530,000.00
Siemens/Spur MRI	Financing	04/01/06	06/01/07		63	$	22,684.00
		07/01/07	09/01/08		15	$	35,634.00
		10/01/08	08/01/11		36	$	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	$	913.00
		01/01/11	01/01/11		01	$	913.01	$	42,399.91
IBM-Hard/Software	Operating	07/01/06	10/31/10		48	$	7,144.00	$	216,926.70
CCA Financial	Operating	07/01/06	10/31/10		48	$	2,156.00	$	103,488.00
DocuTeam-copiers	Operating	01/03/07	12/31/12		60	$	1,056.00	$	55,000.00
Verizon Credit, Inc.	Operating	11/01/07	10/01/12		60	$	3,424.61	$	205,476.60
KEY Eq. – Chili PACS	Financing	09/25/07	10/25/12		60	$	1,518.06	$	59,180.36
AEL – Disc BU/X-ray	Financing	12/01/07	11/01/12		60	$	1,810.56	$	70,364.00
AEL – Radwhere	Financing	03/11/08	02/11/11		36	$	1,001.85	$	36,066.60
MES – Automobile	Financing	07/10/07	06/10/10		36	$	1,226.00	$	48,000.00

LONG TERM DEBT TABLE.

Balance at
December 31, 2008		Debt holder	Commencement date	Final payment date

Notes payable:

$	104,120.75	Union Imaging Associates, PA	March 18, 2005	May 1, 2009
$	71,834.24	Union Imaging Associates, PA	December 8, 2008	March 6, 2009
$	100,000.00	Union Imaging Associates, PA	December 8, 2008	March 6, 2009
$	160,899.08	Two founding shareholders	Various	Open
$	130,750.27	Union Imaging Associates,Inc.	Various (1)	Various (1)
$	75,000.00	Jacov Hayut	February 11, 2006	February 11, 2010
$	59,178.88	Irit & Yosef Azoulai	November 10, 2006	May 9, 2008
$	118,246.58	Irit & Yosef Azoulai	March 6, 2007	September 5, 2008
$	29,453.67	Complete Flooring	November 1, 2006	October 1, 2008
$	116,166.03	Complete Flooring	December 6, 2006	December 5, 2010
$	250,000.00	MTI Partners II, L.P.	September 14, 2007	September 13, 2008
$	100,000.00	Moseh & Aliza Lazarian	October 3, 2008	October 1, 2009
$	100,000.00	Issak Hayut	November 6, 2008	November 5, 2009

Capitalized lease obligations:

$	3,518.26	GE Financial Services	April 1, 2004	March 1, 2009
$	11,207.81	GE Financial Services	December 5, 2005	November 5, 2009
$	20,290.32	GE Financial Services	February 1, 2006	January 01, 2011
$	14,212.39	MARCAP Financial Services	November 7, 2003	January 15, 2009
$	3,534.29	CIT Technology	October 30, 2004	September 30, 2009
$	235,000.00	Spur Imaging (Siemens)	April 1, 2006	October 1, 2011
$	1,599.53	Dell Financial Services	June 1, 2006	May 1, 2009
$	49,025.17	Key Equip. Leasing	September 25, 2007	October 25, 2012
$	60,098.17	AEL Financial, LLC	December 1, 2007	November 1, 2012
$	20,627.20	AEL Financial, LLC	March 11, 2008	February 11, 2011
$	19,363.19	Medical Equipment Solutions	July 10, 2007	June 10, 2010
$	1,854,125.25	Total long-term debt
$	1,406,840.08	Less current portion
$	447,285.75	Long-term debt net of current portion

(1)

= Represents a series of notes used to acquire an additional 90% of the ownership of Union Imaging Associates, JV (UIA, JV), commencing March 2003 through June 2008. The purchase of additional ownership interest in UIA, JV brings the Company's total ownership in its related company UIA, Inc. to 100%. Average monthly payments are $7,573 (2009), $2,459 (2010) and $864 (2011).

Available Information

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

Item 2. Properties

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

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

In February 2001 Modern Medical and Union Imaging Associates, JV entered into a five (5) year lease agreement for approximately 960 square feet on 418 Chestnut St. in Union, NJ for approximately $1,760 per month. Effective September 1, 2004, Union Imaging Associates, JV and Modern Medical took an additional 600 square feet for an additional $1,000 per month and extending the lease to February 1, 2007 and obtained an option to renew the lease for an additional 3 years upon 180 days prior written notice of the Company's intent to exercise its option. The Company exercised its option to extend the lease for 3 years, extending the lease through February 1, 2010. The Company returned the additional 600 square feet to the landlord, effective October 31, 2008 and negotiated a release from the original 960 square feet upon two calendar months written notice to the landlord.

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

Item 3. Legal Proceedings

On September 29, 2008, we were served with a legal complaint and summons by Burgio Enterprises, Ltd. (“Burgio”) for breach of contract and other related claims. Burgio is seeking a judgment, and awards for contract damages in an amount in excess of $10,000, compensatory damages in an amount in excess of $10,000, punitive damages in an amount in excess of $10,000, and recovery of attorney fees and costs of court and other expenses. We intend to vigorously defend this claim.

On April 9, 2008, a complaint was filed by Spur Imaging Service, L.L.C. against Modern Medical and Union Imaging Associates for breach of contract and other related matters. The complaint was related to a Sub-Lease Agreement that we entered into with Spur on or about May 18, 2005 for using certain MRI equipment that was leased from Siemens Medical Solutions, USA, Inc. by Spur Imaging Service, LLC. We agreed to make 63 payments of $21,400 totaling $1,348,200. We also entered into a Forbearance Agreement with Spur that modified the Sub-Lease Agreement payment terms. Spur filed the complaint claiming we owe them for payments not made per the Sub-Lease and Forbearance Agreements, and for other costs, fees, and expenses, and declared that we should return the MRI equipment. On September 16, 2008, we negotiated a settlement whereby Parent agreed to pay Siemens Medical Solutions, USA, Inc. $525,000 and Spur Imaging Service, LLC $25,000, in exchange for full settlement of the sub-lease. In October 2008, in exchange for Siemens Medical Solutions, USA, Inc. (“Siemens Medical”) and Spur Imaging Service, LLC (“Spur”) agreeing to forbear from exercising their enforcement rights under the Consent Judgment through February 15, 2009. We paid Siemens Medical $525,000 between October 6, 2008 and February 15, 2009 and paid Spur $25,000 between October 6, 2008 and February 28, 2009 in full payment of the $550,000 settlement of a sub-lease involving Siemens.

On July 9, 2008, we received copies of a lawsuit from Antoinette Gregoire. The lawsuit claims that on or about July 11, 2006, Plaintiff Antoinette Gregoire underwent a mammography at the facilities of Park Imaging Associates, P.A. and Union Imaging Associates P.A. and that at such time, a suspicious abnormality of the left breast was noted, consisting of a nodule requiring biopsy and it was later determined that such nodule constituted ductal carcinoma. We are defending against any claims being made.

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

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

No matters were submitted to a vote of security holders during the fourth quarter of 2008.

PART II

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

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

Common Stock:

Fiscal 2008	High		Low
First Qtr	$	0.42	$	0.12
Second Qtr		0.15		0.02
Third Qtr		0.07		0.02
Fourth Qtr		0.06		0.03

Fiscal 2007
First Qtr	$	0.96	$	0.61
Second Qtr		0.81		0.53
Third Qtr		0.65		0.30
Fourth Qtr		0.45		0.40

On March 20, 2009, there were approximately 278 holders of record of Modern Medical's 25,673,385 outstanding shares of Common Stock.

On March 20, 2009, the last sale price of the Common Stock as reported on the OTC Bulletin Board was $0.02.

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.

Equity Compensation Plan Information

The following table sets forth certain information, as of March 20, 2009, concerning shares of common stock authorized for issuance under the Company’s existing equity compensation plans.

Plan Category	Number of Securities to be issued upon exercise of outstanding options		Weighted-average exercise price of outstanding options, warrants and rights plans (excluding securities reflected in column (a))		Number of Securities remaining available for future issuance under equity compensation
Equity compensation plans approved by security holders		1,241,000	$	0.4801		1,259,000

Equity compensation plans not approved by security holders		8,640,198	$	0.5248		-0-

2003 Stock Option Plan

In October 2003, the board of directors and shareholders adopted the 2003 stock option plan. The plan will be administered by the compensation committee or our board of directors, who will determine among other things, those individuals who shall receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock issuable upon the exercise of the options and the option exercise price. The options may be granted as either or both of the following: (a) incentive stock options, or (b) non-qualified stock options. 2,000,000 shares may be issued under this plan. The shares issuable pursuant to this plan were registered on Form S-8, Registration No. 333-143-653.

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

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

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

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

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

1999 Stock Option Plan

The plan will be administered by the compensation committee or our board of directors, who will determine among other things, those individuals who shall receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock issuable upon the exercise of the options and the option exercise price. The options may be granted as either or both of the following: (a) incentive stock options, or (b) non-qualified stock options. 500,000 shares may be issued under this plan. 300,000 options were previously issued under this plan to former officers and directors of the Company, which by their terms expired and such 300,000 options are available for reissuance under the 1999 Stock Option Plan.

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.

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.

Recent Sales of Unregistered Securities

During the years ended December 31, 2008 and 2007, we did not issue any securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”) except as disclosed in previous SEC filings.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

There were no repurchases of equity securities by the issuer or affiliated purchasers during the fourth quarter of the year ended December 31, 2008.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

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

Management's Discussion and Analysis.

As of December 31, 2008, 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. We have also positioned ourselves to expand our business and participate more in outsourced management services and the expanding, more profitable information and administrative services markets.

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

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

Results of Operations:

For the year ended December 31, 2008 compared to the year ended December 31, 2007:

Net revenue from services has decreased approximately $378,300 to approximately $7,333,900, for the year ended December 31, 2008 from approximately $7,712,200 for the same period in 2007. The decrease resulted from reduced reimbursements for procedures being performed at both the Union Imaging Associates and Union Imaging Center sites decreasing net revenues by approximately $243,300 and $135,000, respectively.

Cost of services provided:

For the year ended December 31, 2008, cost of services provided totaled approximately $5,773,900 as compared to approximately $5,796,900 for the same period in 2007, resulting in a decrease of approximately $23,000. These costs are affected by changes resulting from a decrease in net revenues and in equipment service cost, medical supplies, payroll, and facility costs.

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

For the year ended December 31, 2008, selling, general and administrative expenses totaled approximately $2,750,400 as compared to approximately $4,498,900 for the same period in 2007, resulting in a decrease of approximately $1,748,500. This decrease related primarily to a decrease in stock-based expenses of approximately $1,287,500 and approximately $331,100, in cash related to cash payments for investment banking advisory contracts. The decrease balance of approximately $129,900 related to various other expenses ($55,000 in legal fees related to acquisition activities, $9,600 in marketing expenses, $44,300 in management fees and $32,000 software maintenance costs, all off-set by a $11,000 reduction in accounting fees) related to decreases in net revenues.

Results of Operations:

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

Net Revenues from Services:

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

Cost of services provided:

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

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

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

Liquidity and Capital Resources:

Modern Medical has a working capital deficiency of $2,340,720 at December 31, 2008 as compared to a working capital deficiency of $2,098,952 at December 31, 2007, resulting in an additional working capital deficiency of $241,768, due primarily to a decrease in net accounts receivable of $280,000, increase in accrued expenses $176,863 net of decrease in accounts payable of $262,079 and a increase in net other assets and liabilities of approximately $46,757.

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.

Effective October 1, 2005 Union Imaging Associates entered into a 63 month financing lease with Siemens Medical Systems/Spur Imaging to acquire a Siemens 1.5T Symphony MRI unit. The amount financed is $1,050,000, payable at $22,684.00 per month commencing April 2006. Union Imaging Associates has the option to purchase the unit for $100 at the end of the lease. On June 13, 2007 we paid Siemens Medical Systems $100,000 on the lease. We paid Spur Imaging $12,950.00 leaving a balance on the lease of $954,772.94. On September 16, 2008, we negotiated a settlement whereby Parent agreed to pay Siemens Medical Solutions, USA, Inc. $525,000 and Spur Imaging Service, LLC $25,000, in exchange for full settlement of the sub-lease. In October 2008, in exchange for Siemens Medical Solutions, USA, Inc. (“Siemens Medical”) and Spur Imaging Service, LLC (“Spur”) agreeing to forbear from exercising their enforcement rights under the agreement. We paid Siemens Medical $525,000 between October 6, 2008 and February 15, 2009 and paid Spur $20,000 between October 6, 2008 and February 28, 2009 in full payment of the $550,000 settlement of a sub-lease involving Siemens

Commencing March 2003 through June 2008, the Company acquired an additional 90% interest in Union Imaging Associates, JV. This additional 90% brought the Company's ownership of Union Imaging Associates, JV to 100%. It was acquired for varying prices totaling $1,757,000, inclusive of 365,000 shares of Modern Medical Modalities common stock valued at $169,000. The cash portions of the purchases were paid monthly through April 2011. The remaining average monthly payments are $7,573 (2009), $2,459 (2010) and $864 (2011).

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

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.

On November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai for $50,000. The terms of the Agreement include an annual interest rate of 20% and the loan is to paid, in a lump sum with accrued interest, at the earlier of 6 months from the effective date of the Agreement, or the closing date of an equity based financing by the Company. In addition, the Company issued 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. Irit and Yosef Azoulai have waived the 6 month payment terms and effective January have changed the interest rate from 20% to 10% annually.

On March 6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for $100,000. The terms of the Agreement include an annual interest rate of 20% and the loan is to be paid, in a lump sum with accrued interest, at the earlier of 6 months from the effective date of the Agreement, or the closing date of an equity based financing by the Company. In addition, the Company issued a Warrant for the rights to 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. Irit and Yosef Azoulai have waived the 6 month payment terms and effective January have changed the interest rate from 20% to 10% annually.

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

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

On February 11, 2008, Union Imaging Associates entered into a financing lease agreement with AEL Financial, LLC to fund the purchase of a structured speech reporting system. The amount financed was $26,853.44, payable in 36 equal installments of $1,001.85, commencing March 11, 2008, at the end of the lease the Company can purchase the system for $1.

On October 3, 2008, we entered into a Loan Agreement with Moseh & Aliza Lazarian for $100,000. The terms of the Agreement include an annual interest rate of 12% and the loan is to be paid in amounts of $50,000 on or before February 1, 2009 and $50,000 on or before October 1, 2009. In addition, the Company issued a Warrant for the rights to 500,000 shares of the Company’s common stock with a term of 5 years and an exercise price of $0.10 per share.

On November 6, 2008, we entered into a Loan Agreement with Issak Hayut for $100,000. The terms of the Agreement include an annual interest rate of 12% and the loan is to be paid in full on or before November 5, 2009. In addition, the Company issued a Warrant for the rights to 500,000 shares of the Company’s common stock with a term of 5 years and an exercise price of $0.10 per share.

On December 8, 2008, we entered into a Loan Agreement with Union Imaging Associates, P.A., for $71,834.24. The terms of the Agreement include monthly interest payments of $718.34 (12% per annum) starting January 9, 2009, and the loan is to be paid in full March 6, 2009. The note maybe extended by mutual written agreement of the Note Holder and the Borrower.

On December 8, 2008, we entered into a Loan Agreement with Union Imaging Associates, P.A., for $100,000.00. The terms of the Agreement include monthly interest payments of $1,000.00 (12% per annum) starting January 9, 2009, and the loan is to be paid in full March 6, 2009. The note maybe extended by mutual written agreement of the Note Holder and the Borrower.

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

Going Concern

Modern Medical's December 31, 2008 and 2007 financial statements have been presented on a basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses of $1,217,753 and $3,486,006 for the years ended December 31, 2008 and 2007. In addition the Company had working capital deficiencies at those year ends of $2,340,726 and $2,098,952, respectively. Also, as of December 31, 2008 and 2009 the Company had stockholder deficiencies of $3,273,525 and $783,460. These factors raise doubt about the Company’s ability to continue as a going concern. Although the Company has experienced financial gains for fiscal years ended December 31, 2008 and 2007 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 7A. Quantitative and Qualitative Disclosure About Market Risk.

Not Applicable.

Item 8. Financial Statements

See Pages F-1 to F-33

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Management’s Report on Internal Control Over Financial Reporting

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

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

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

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

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

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.

Identified Material Weaknesses

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Management did not identify any internal control deficiencies during its assessment of our internal control over financial reporting as of December 31, 2008.

A regionally-recognized independent consulting firm assisted management with its assessment of the effectiveness of our internal control over financial reporting, including scope determination, planning, staffing, documentation, testing, remediation and retesting and overall program management of the assessment project. In conclusion, our Chief Executive Officer and Chief Financial Officer surmised that Modern Medical did maintain effective internal control over financial reporting as of December 31, 2008.

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.

Item 9B. Other Information

None.

PART III

Item 10. 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	46	Chairman of the Board of Directors and CEO

Paul W. Harrison	54	Lead Director

Minesh Patel	37	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.

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

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.

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:

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, 2008, beneficial owners complied with Section 16(a) filing requirements applicable to them with the exception of the following:

Issak Hayut had a late Form 3 reflecting beneficial ownership of common stock acquired on December 8, 2006 and a late Form 4 reflecting common stock acquired on May18, 2007 and a stock warrant to purchase common stock acquired on October 9, 2007 (both Forms were filed April 11, 2008).

On August 29, 2008, we issued Minesh Patel 1,000,000 shares of our common stock at $.02 per share based on the last trading closing price of the Company’s common stock as of August 29, 2008 to compensate him for working with the Company at a reduced salary for several years as a key manager. Mr. Patel filed the Form 4 required pursuant to this issuance late (Form 4 was filed on March 27, 2009).

Code of Ethics

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

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

None.

Audit Committee and Financial Expert

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

We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. However, as part of implementing Sarbanes Oxley, we plan to appoint a qualified audit committee financial expert to our Board of Directors to strengthen and improve our internal disclosure controls and procedures during the fiscal year ended December 31, 2009.

Compensation Committee

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

Nominating Committee

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

Securities Authorized for Issuance Under Equity Compensation Plans

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

Item 11. EXECUTIVE COMPENSATION

The following executive compensation disclosure reflects all compensation awarded to, earned by or paid to the executive officers below for the fiscal years ending December 31, 2007 and December 31, 2008. The following table summarizes all compensation for fiscal years 2007 and 2008 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 s 2007 and 2008.

SUMMARY COMPENSATION TABLE

Name and Principal Position (A)	Year (B)	Salary ($) (C)			Bonus ($) (D)		Stock Awards ($) (E)			Options/ Option Awards ($) (F)			Non-Equity Incentive Plan Compensation ($) (G)		Non-Qualified Deferred Compensation Earnings ($) (H)		All Other Compensation ($) (I)		Total ($) (J)

Baruh Hayut, Chairman & CEO	2007	$	178,784	(1)	$	0	$	0		$	460,728	(3)	$	0	$	0	$	15,870	$	655,382

Baruh Hayut, Chairman & CEO	2008	$	163,000	(1)	$	0	$	0		$	0		$	0	$	0	$	33,384	$	196,384

Minesh Patel, COO & CFO	2007	$	89,315	(1)	$	0	$	0		$	259,160	(4)	$	0	$	0	$	6,500	$	354,975

Minesh Patel, COO & CFO	2008	$	94,218	(1)	$	0	$	20,000	(2)	$	0		$	0	$	0	$	16,480	$	130,698

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

(2)	= Represents the total fair value of 1,000,000 shares of common stock granted during the year ended December 31, 2008.

(3)	= Represents the total fair value of 720,000 warrants granted during the year ended December 31, 2007. In September of 2008 the performance criteria was removed and all 720,000 warrants were vested.

(4)	= Represents the total fair value of 400,000 warrants granted during the year ended December 31, 2007. In September of 2008 these warrants were canceled.

Warrants are also included in the Option Award Chart above.

Narrative to Summary Compensation Table

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

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, 2008.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END DECEMBER 31, 2008

OPTION AWARDS

STOCK AWARDS

Name

Number of

securities

underlying

unexercised

options (#)

Exercisable

Number of

securities

underlying

unexercised

options (#)

Un-exercisable

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

options (#)

Option

Exercise

price ($)

Option

expiration

date

Number

units

stock

that

have

not

vested

(#)

Market

value

units

stock

that

have

not

vested

($)

Equity

incentive

plan

awards:

number

unearned

shares,

units

other

rights

that

have

Not

Vested

(#)

Equity

incentive

plan

awards:

Market

payout

value

unearned

shares,

units

other

rights

that

have

not

vested

($)

Baruh Hayut

720,000

0.75

10/07/12

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, 2008.

Name	Fees Earned or Paid in Cash ($)			Stock Awards ($)		Option Awards ($)		Non- Equity Incentive Plan ($)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)

Baruh Hayut (1)		0			0		0		0		0		0		0

Minesh Patel (1)		0			0		0		0		0		0		0

Paul Harrison	$	60,000	(2)		0		0		0		0	$	14,714	$	74,714

(1) = Serves as a Director, receives no additional compensation for being a director, and only receives compensation as an Executive Officer as shown in the Summary Compensation Table above.

(2) = Director Fee with no written agreement or special arrangements

Warrants are also included in the Option Awards chart above.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information as of March 19, 2009 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.

		Percentage of
		Beneficial
		Number		Ownership of
Name	Address	of Shares		Common Stock
BIBY Family Partners, LLC (1)	439 Chestnut St, Union, NJ		8,435,000		32.86	%
Issak Hayut (2)	135 Nautica Way, Roswell, GA		4,600,028		17.53	%
Paul W. Harrison (3)	439 Chestnut St, Union, NJ		4,290,666		16.71	%
Ronnie Antebi (4)	552 Decatur St SE, Atlanta, GA		2,062,286		8.03	%
Jacov Hayut (5)	5281 Marston Rd, Atlanta, GA		1,898,918		7.40	%
Minesh Patel	439 Chestnut St, Union, NJ		1,000,000		3.90	%

All officers and directors 13,725,666 and 53.47% as a group (3 persons)

(1)

Mr. Barry Hayut, our Chairman and CEO, is the managing member of BIBY Family Partners, LP, and has shared voting and dispositive power over the shares of common stock owned by BIBY Family Partners, LLC. Includes: (i)7,715,000 shares of Common Stock directly owned, and (ii) 720,000 shares of Common Stock issuable upon the exercise of outstanding options.

(2)

Includes: (i) 3,285,028 shares of Common Stock owned jointly with Mr. Issak Hayut’s spouse, and (ii) 1,215,000 shares of common stock issuable upon exercise of certain outstanding warrants held in the name of Complete Flooring & Renovation, Inc., an entity owned by Mr. Issak Hayut. Mr. Issak Hayut has sole voting and shared dispositive power over the shares.

(3)

Includes: (i) 888,750 shares of Common Stock directly owned, and (ii) 3,401,916 shares of Common Stock issuable upon the exercise of outstanding options. Does not include 33,333 shares of Common Stock issuable upon the exercise of outstanding options that have not yet vested or are not exercisable within 60 days.

(4)	Includes: (i) 2,012,286 shares of Common Stock directly owned, and (ii) 50,000 shares of Common Stock issuable upon exercise of a warrant held in the name of Medical Equipment Solutions, an entity of which Mr. Antebi is a principal owner.

(5)	Includes: (i) 1,748,918 shares of Common Stock directly owned, and (ii) 150,000 shares of Common Stock issuable upon the exercise of outstanding options.

Item 13. Certain Relationships and Related Transactions and Director Independence:

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

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

On September 2, 2008, we cancelled Minesh Patel’s Option & Warrant Agreements that represented 717,000 shares of our common stock since he was issued the stock bonus as described above, and to reduce the total number of shares outstanding on a fully-diluted basis.

On September 2, 2008, we removed performance criteria that is not time based criteria in all previously issued Option & Warrant Agreements that included applicable performance criteria for Baruh Hayut and Paul W. Harrison, and other key managers in the company. This action was taken since the hurdle of meeting an exercise price that is much higher price than the common share price as of September 02, 2008 requires substantial positive performance, and to provide incentives to fundamentally increase the value of the company.

Director Independence

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

Item 14. Principal Accountant Fees and Services.

Our board of directors appointed Liebman Goldberg & Hymowitz, LLP to serve as our independent auditors for 2008.

The following table sets forth fees billed to us by our independent registered public accounting firm, Liebman Goldberg & Hymowitz, LLP, during the fiscal years ended December 31, 2008, and December 31, 2007, for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

Fee Category	Year Ended December 31, 2008		Year Ended December 31, 2007
Audit fees	$	49,500	$	49,500

Audit-related fees	$	0	$	0

Tax fees	$	5,500	$	5,500

All other fees	$	0	$	0

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

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

Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of our interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit fees.” These services include employee benefit plan audits, accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice, and tax planning. These services include assistance regarding federal, state and local tax compliance, tax audit defense, mergers and acquisitions, and tax planning.

All Other Fees. No other fees have been billed for products and services billed by our accountants.

Part IV

Item 15. Exhibits:

3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form SB-2, Registration No. 333-86931)
3.2	Restated and Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form SB-2, Registration No. 333-86931)
3.3	By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form SB-2, filed in February, 1994)
4.1	Form of Warrant – Cash Exercise Format. (Incorporated by reference to Exhibit 4.1 to the Company's Report on Form 10KSB dated April 15, 2008).
4.2	Form of Warrant – Cashless Exercise Format. (Incorporated by reference to Exhibit 4.1 to the Company's Report on Form 10KSB dated April 15, 2008).
10.2	Agreement for Purchase and Sales of Assets between the Company and MTI Partners II, L.P., dated September 14, 2007 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 20 2007).
10. 3	Agreement for Purchase and Sales of Assets between the Company and MTI Partners II, L.P., dated February 28, 2007 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 12, 2007).
10.4	2003 Stock Option Plan, dated September 19, 2003, incorporated herein by reference to Form 14A filed with the U.S. Securities and Exchange Commission on October 1, 2003.
10.5	Performance for Stock Options Agreement between the Company and Paul W. Harrison dated September 27, 2006 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.6	Performance for Stock Options Agreement between the Company and Minesh Patel dated September 27, 2006 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.7	Performance for Stock Options Agreement between the Company and Bruce Phillips dated September 27, 2006 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.8	Performance Bonus Agreement between the Company and Paul W. Harrison dated September 27, 2006 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.9	Performance Bonus Agreement between the Company and Minesh Patel dated September 27, 2006 (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.10	Performance Bonus Agreement between the Company and Bruce Phillips dated September 27, 2006 (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K dated October 3, 2006)
10.11	Agreement for Purchase and Sale of Assets between the Company and Medical Equipment Solutions, Inc. dated January 27, 2009, (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated February 02, 2009).
21	Subsidiaries (Incorporated by reference to Exhibit 4.1 to the Company's Report on Form 10KSB dated April 15, 2008).
31.1	* Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	* Certification of the Company's Chief 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

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: March 31, 2009	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, Chief Executive	March 31, 2009
Baruh Hayut	Officer and Director
	(Principal Executive Officer)

/s/ Minesh Patel	Chief Financial Officer, Chief	March 31, 2009
Minesh Patel	Operating Officer and Director
	(Principal Financial Officer)

/s/ Paul Harrison	Lead Director	March 31, 2009
Paul Harrison

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Modern Medical Modalities Corporation and Subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the years ended December 31, 2008 and 2007. 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, 2008 and 2007, and the consolidated results of income and operations and their cash flows for each of the years ended December 31, 2008 and 2007, 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 & HYMOWITZ, LLP

Garden City, New York

March 27, 2009

F-1

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

ASSETS

	2008		2007
Current assets:

Cash and cash equivalents	$	46,518	$	52,425
Accounts receivable (less contractual allowances of $2,813,800 and $3,112,000, respectively)		989,544		1,269,767
Prepaid expenses		41,808		11,098

Total current assets		1,077,870		1,333,290


Property and equipment, net of accumulated depreciation of $3,351,672 and $3,081,470, respectively		1,088,894		1,274,421

Other assets:

Purchased software		1,287,917		1,224,480
Note Receivable		-		15,884
Deposits		37,670		39,661

Total other assets		1,325,587		1,280,025

TOTAL ASSETS	$	3,492,351	$	3,887,736

See notes to consolidated financial statements.

F-2

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)

	2008			2007

Current liabilities:
Accounts payable	$	708,911		$	970,990
Accrued expenses		1,302,839			1,125,976
Current portion long term debt		1,406,840			1,335,276

Total current liabilities		3,418,590			3,432,242

Other liabilities:
Long term debt, net of current portion		211,387			937,433
Loans payable shareholders		235,899			235,899

Total other liabilities		447,286			1,173,332

Total liabilities		3,865,876			4,605,574

Minority interest		-			65,622

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 – 26,527,051 shares and outstanding – 25,673,385 shares at December 31, 2008 and issued - 24,594,051 shares and outstanding 24,234051 at December 31, 2007		5,305			4,918
Additional paid-in capital		11,799,216			10,109,415
Accumulated (deficit)		(12,115,546	)		(10,897,793	)
Treasury common stock, $0.0002 par value, 853,666 shares at cost		(62,500	)		-

Total stockholders' (deficiency)		(373,525	)		(783,460	)

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)	$	3,492,351		$	3,887,736

See notes to consolidated financial statements.

F-3

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31,

	2008			2007
Operating income:

Net revenues from services	$	7,333,904		$	7,712,216
Cost of services provided		5,773,937			5,796,880

Total operating income		1,559,967			1,915,336

Operating Expenses:
Selling, general and administrative		2,750,368			4,498,875
Depreciation and amortization		269,379			568,186

Total operating expenses		3,019,747			5,067,061

(Loss) from operations		(1,459,780	)		(3,151,725	)

Other (expenses) income:
Interest expense		(141,930	)		(251,768	)
Gain from renegotiation of debt		529,293			-

Net other income (expenses)		387,363			(251,768	)

(Loss) before income taxes and minority interests		(1,072,417	)		(3,403,493	)

Provision for income taxes		145,336			51,183

(Loss) before minority interests		(1,217,753	)		(3,454,676	)

Minority interests		-			(31,330	)

Net loss	$	(1,217,753	)	$	(3,486,006	)

(Loss) per share, basic and diluted	$	(0.05	)	$	(0.15	)

Number of weighted average shares outstanding		24,737,648			23,134,342

See notes to consolidated financial statements.

F-4

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007

	Number of					Additional			Treasury			Retained
	Shares			Common		Paid-In			Stock			Earnings
	Outstanding			Stock		Capital			at Cost			(Deficit)			Total

Balance at January 1, 2007		21,197,468			4,239		6,264,371			-			(7,411,787	)		(1,143,177	)

Shares issued during 2007		3,396,583			679		2,175,849			-			-			2,176,528

Value associated with SFAS 123(R) compensation		-			-		1,802,395			-			-			1,802,395

Shares surrendered to Treasury		(360,000	)		-		(133,200	)		-			-			(133,200	)

Net loss for the year ended December 31, 2007		-			-		-			-			(3,486,006	)		(3,486,006	)

Balance at January 1, 2008		24,234,051			4,918		10,109,415			-			(10,897,793	)		(783,460	)

Shares issued during 2008		1,933,000			387		90,273			-			-			90,660

Value associated with SFAS 123(R) compensation		-			-		1,599,528			-			-			1,599,528

Shares surrendered to Treasury		(493,666	)		-		-			(62,500	)		-			(62,500	)

Net loss for the year ended December 31, 2008		-			-		-			-			(1,217,753	)		(1,217,753	)

Balance at December 31, 2008		25,673,385		$	5,305	$	11,799,216		$	( 62,500	)	$	(12,115,546	)	$	(373,525	)

See notes to consolidated financial statements.

F-5

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,

	2008			2007
Cash flows from operating activities
Net loss	$	(1,217,753	)	$	(3,486,006	)

Adjustments to reconcile net loss to net cash (used) provided by operating activities:
Depreciation and amortization		269,379			568,186
Contractual allowances		(298,200	)		(761,200	)
(Decrease) increase in minority interest		(65,622	)		60,695
Increase in Common Stock from issuance of shares and conversion of debt		387			379
Increase in Additional Paid in Capital from issuance of shares and conversion of debt		90,273			1,137,949
Increase in Additional Paid in Capital from stock-based compensation resulting from the issuance of employee stock options and warrants		1,599,528			1,802,395
(Increase) in Treasury Stock at cost, from purchase of the Company’s shares		(62,500	)		-
Increase (decrease) in cash attributable to changes in operating assets and liabilities:
Accounts receivable		578,422			1,128,350
Prepaid expense		(30,710	)		109,652
Other current assets and deposits		1,991			6,871
Accounts payable		(262,080	)		627,540
Accrued expenses		176,862			(628,808	)

Total adjustments		1,997,730			4,052,009

Net cash provided by operating activities		779,977			566,003

Cash flows from investing activities:
Fixed asset acquisitions		(83,851	)		(175,324	)
Purchased software		(63,437	)		(319,480	)

Net cash (used) by investing activities		(147,288	)		(494,804	)

Cash flows from financing activities:
(Decrease) in shareholder loans		-			(75,000	)
Decrease in Note Receivable		15,884			-
Increase long term debt		397,582			405,909
(Reduction) long term debt		(1,052,062	)		(493,595	)

Net cash (used) in financing activities		(638,596	)		(162,686	)

Net (decrease) in cash and cash equivalents		(5,907	)		(91,487	)
Cash and equivalents, beginning of year		52,425			143,912

Cash and equivalents, end of year	$	46,518		$	52,425

See notes to consolidated financial statements.

F-6

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,

	2008		2007
Supplemental cash flow information:

Cash items:
Interest paid	$	189,324	$	250,703
Income taxes paid	$	91,235	$	-

Non-cash items:
Common shares issued for purchased share in subsidiary		150,000		-
Common shares issued for conversion of debt		-		-
Common shares issued for compensation		. 1,283,000		-
Common shares issued for purchased software		-		1,500,000
Common shares issued for private placement		500,000		770,000
Common shares issued in payment of consulting agreements		-		766,583

See notes to consolidated financial statements.

F-7

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

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., Metairie Medical Equipment Leasing Corp., Ohio Medical Equipment Leasing Corp., Union Imaging Associates, Inc. Union Imaging Associates, JV and its subsidiary PET Scan at Union Imaging, LLC owned 50% and its joint venture, Plainfield MRI Associates, JV owned 84. By contract the Company manages the joint ventures, is the managing joint venturer and has unilateral control. All significant inter-company transactions and accounts have been eliminated in consolidation.

Revenue recognition:

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

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

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

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

F-8

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

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

Contractual Allowances:

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

Use of Estimates:

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

Concentration of Credit Risk/Fair Value:

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

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

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

Cash and Cash Equivalents:

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

Accounts Receivable:

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

F-9

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Property and Equipment:

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

Deferred Financing Costs:

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

Income Taxes:

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

Net Income (Loss) Per Share:

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

potential dilution from the exercise of stock options and warrants.

Stock-based Compensation:

Under the provisions of SFAS 123(R), employee stock awards under the Company’s compensation plan, the Company measures compensation expense for cost of services received from employees in a share-based payment transaction using fair market value of the underlying stock award on the date of grant net of any employees pay (or obligated to pay) for the stock granted.

The Company measures compensation expense for its non-employee stock-based compensation under the Financial Accounting Standards Board (FASB) Emerging Issued Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments that are issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the stock awarded is used to measure the transaction, as this is more reliable than the fair value of services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the stock award is charged directly to compensation expense and additional-paid-in-capital.

The Company uses the most recent closing price in valuing common stock used in financial transactions. This policy is used for both employee and non-employee transactions involving common stock and the setting of exercise prices for options or warrants.

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, 2008 and 2007, such costs aggregated $45,022 and $75,135, 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 2008 or 2007. However, for 2006 the Company agreed to match 50% of employee contributions up to 6% of the employee’s compensation. For 2006 the Company portion of the matching program was $34,371, this amount was accrued for in 2006 and paid in 2007.

F-10

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

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.

Purchased Software Asset and FASB 144 Financial Valuation and Analysis:

On February 28, 2007 and September 14, 2007, we purchased two software assets and combined them into one software asset. The software asset has been enhanced through customizations to meet a broader range of needs, and is key to our web-based, enterprise-wide, healthcare information system (HIS). We recorded at cost the HIS software asset for the period ending December 31, 2007 based on the combined purchase prices of the two software assets and certain costs related to the customizations made in 2008.

In order to validate the value of the HIS software asset as recorded in our financial statements and to determine if there is any impairment or reduction in value, we hired an independent Company in 2007 to perform financial valuation consulting and calculation analysis services using guidance provided in FASB 144 by applying the fair value standard as defined in FASB pronouncements and business valuation calculations and consultation analysis. These services were performed in accordance with the standards and definitions of the American Institute of Certified Public Accountants’ (AICPA’s) Code of Professional Conduct and Statement on Standards for Valuation Services (SSVS) and all standards of the National Association of Certified Valuation Analysts (NACVA).

The result of the independent FASB 144 business valuation calculations and consultation analysis conducted for us in 2007 was that our HIS software asset shows no indication of impairment based on current market conditions and its projected net cash flow - undiscounted. We determined that based on the independent FASB 144 business valuation calculations and consultation analysis conducted for us in 2007 and the on-going enhancements made to the software in 2008, that the HIS software asset is worth at the least the value recorded in our financial statements, and that we do not need to reduce the recorded value of the HIS software asset at this time. Amortization will be recognized when the asset is placed in service and over its useful life.

Instruments with Characteristics of Both Liabilities and Equity:

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

Classification

Certain items of 2007 have been reclassified to conform to 2008 classification.

F-11

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2 - GOING CONCERN UNCERTAINTY:

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has a working capital deficiency of $2,340,720 as of December 31, 2008, and has sustained significant losses from operations, which raised substantial doubt about the Company's ability to continue as a going concern. In view of these matters, realization of the assets of the Company is dependent upon the Company's ability to meet its financing requirements and the success of future operations. The consolidated financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

The Company has continued its implementation of a restructuring plan for its subsidiaries and believes this plan will 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. We have also positioned ourselves to expand our business and participate more in outsourced management services and the expanding, more profitable information and administrative services markets, and intend to seek out more networks of clinics and other outpatient facilities through joint ventures and collaborative contractual arrangements with hospitals, physician managed ambulatory centers, payers, and other key participants in the industry. In order to support our business expansion, we acquired advanced software assets and added customizations to produce an integrated information system that will allow us to provide better management and related services and improve overall profitability. Management believes that the steps it is taking will allow the Company to continue in existence.

NOTE 3 - MERGERS, ACQUISITIONS AND MATERIAL DISPOSALS:

Commencing March 20, 2003 through April 11, 2004, the Company acquired an additional 70% interest in Union Imaging Associates, JV. This additional 70% brought the Company's ownership of Union Imaging Associates, JV to 80%. It was acquired for varying prices totaling $1,525,000, payable in monthly installments over approximately 36 months. On September 1, 2006, we purchased Dr. Wolkstein's share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 350,000 shares, of the Company's common stock with a valuation of $154,000 at the time of purchase, and a note for $27,000 to be paid in 18 payments of $1,500.00 per month. The 350,000 shares of common stock were issued on October 20, 2006. As a condition of the purchase, the Company agreed to re-purchase the 350,000 shares from Dr. Wolkstein for $75,000 if for any consecutive 20 day period commencing September 1, 2008 through the last day of February 2009, the stock price was below $1.00 per share (see footnote 47 Subsequent Events). The purchase of Dr. Wolkstein's ownership interest brings the Company's total ownership in UIA, Inc. to 90%. On June 20, 2008, we purchased Dr. Haidri’s share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 150,000 shares, of the Company's common stock with a valuation of $15,000 at the time of purchase, and a note for $36,000 to be paid in 18 payments of $2,000.00 per month. The 150,000 shares of common stock were issued on August 28, 2008. As a condition of the purchase, the Company agreed to re-purchase the 150,000 shares from Dr. Haidri for $45,000 if for any consecutive 20 day period during the first 90 day period commencing at the end of the fifteenth month subsequent to June 20, 2008, if the stock price was below $0.30 per share. The purchase of Dr. Haidri’s ownership interest brings the Company's total ownership in UIA, Inc. to 100%. The cash portions of the purchases are being paid monthly through April 2011. The remaining average monthly payments are $6,855 (2009), $2,636 (2010) and $879 (2011).

F-12

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

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

In July, 2006, we entered into a Letter of Intent to divest its ownership interests in Modern Medical Imaging at Atrium, L.L.C., a Limited Liability Company ("the L.L.C."). The transaction is to be structured in the form of a sale of the L.L.C. whereby 100% of the membership interest is acquired, in exchange for $250,000 in cash with specific provisions included for the timing of payments with the majority of payment due at closing. In addition, assignments will be included for the Company to assume certain accounts receivables and accounts payables as of the closing date of the transaction. On September 1, 2006, we entered into a definitive agreement with a privately-held organization and sold its ownership interests in Modern Medical Imaging at Atrium, L.L.C. for $250,000 under essentially the same terms and conditions as described above and outlined in the Letter of Intent. Even though the new owners of the Imaging Center at Atrium assumed the liabilities of the business, the Company remained contingently liable for a long term facility lease, and MRI equipment lease. Subsequent to us selling the facility, the purchaser also acquired the condominium space covered by this facility lease, terminating our contingent liability under the lease. Effective December 31, 2008, the Company was released of all lease obligations under the MRI lease by TD Equipment Finance, Inc. the successor in interest to Commerce Commercial Leasing, Inc. resulting from a pay-off of lease balance by Atrium Diagnostic Imaging , LLC, the successor in interest to the original lease.

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

F-13

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 4 - PROPERTY AND EQUIPMENT:

Property and equipment are summarized by major classification as follows:

		December 31, .
	Useful lives	2008		2007

Medical Equipment	5 - 10 years	$	3,430,972	$	3,385,258
Furniture and Fixtures	3 - 5 years		39,041		39,040
Automobiles	5 years		67,865		67,865
Computer equipment and software	3 - 5 years		287,860		260,969
Leasehold improvements	5 - 10 years		614,828		602,759

			4,440,566		4,355,891
Less: Accumulated Depreciation and Amortization			3,351,672		3,081,470
		$	1,088,894	$	1,274,421

Depreciation expense for the years ended		$	269,379	$	568,186

NOTE 5 - EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS:

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

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

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

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

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.

F-14

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 5 - EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS, continued:

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

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

F-15

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 5 - EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS continued:

On October 9, 2007, we entered amended, cancelled, and issued new Performance Stock Agreements with certain directors and management to encourage extraordinary efforts in key categories that better fit our expanded growth strategy, which now includes obtaining new direct sales of our information system and administrative services to other healthcare organizations in addition to obtaining new business through acquisitions and to provide incentives based on new performance criteria. The Company believes that Paul Harrison will be very instrumental in providing growth strategy and guidance and in using his experience, contacts, and track record to help rapidly grow the Company through direct sales of its systems and services and through acquisitions, and certain management will be important to helping integrate the acquisitions and the Modern Medical Network System on a profitable basis. On October 9, 2007, we amended Paul Harrison’s performance based stock warrant agreement with the same number of 1,800,000 shares at the same exercise price of $0.65 per share based on the following new criteria and allocations: 360,000 stock warrants upon execution of the Agreement; 360,000 stock warrants awarded for each $1,000,000, up to an aggregate award of 1,080,000 stock warrants based on up to $3,000,000 in aggregate revenues, contracted for, or generated by, the Company (including its subsidiaries and affiliates) in information systems and services related sales or transactions and in related administrative services sales or transactions using the Company’s information system; and 360,000 stock warrants after the Company’s Information System is used by another organization. We cancelled Minesh Patel’s performance based stock option agreement for 400,000 shares at $0.65 per share issued on June 1, 2007 and on October 9, 2007, issued him a performance based warrant agreement for the same number of 400,000 shares at the same price of $0.65 per share based on the following criteria and allocations: 200,000 stock warrants upon execution of the Agreement; 50,000 stock warrants awarded for each $1,000,000, up to an aggregate award of 150,000 stock warrants based on up to $3,000,000 in aggregate revenues, contracted for, or generated by the Company (including its subsidiaries and affiliates) in information systems and services related sales or transactions and in related administrative services sales or transactions using the Company’s information system; 50,000 stock warrants after the Company’s Information System is used by another organization. We cancelled Bruce Phillips’ performance based stock option agreement for 400,000 shares at $0.65 per share issued on June 1, 2007 and on October 9, 2007, issued him a performance based warrant agreement for the same number of 400,000 shares at the same price of $0.65 per share based on the following criteria and allocations: 200,000 stock warrants upon execution of the Agreement; 50,000 stock warrants awarded for each $1,000,000, up to an aggregate award of 150,000 stock warrants based on up to $3,000,000 in aggregate revenues, contracted for, or generated by the Company (including its subsidiaries and affiliates) in information systems and services related sales or transactions and in related administrative services sales or transactions using the Company’s information system; 50,000 stock warrants after the Company’s Information System is used by another organization. On October 9, 2007, the Company entered into a warrant agreement with Baruh Hayut and granted him a stock warrant for 720,000 shares at $0.75 per share based on the following criteria: 720,000 stock warrants awarded once $3,000,000 in aggregate revenues have been contracted for, or generated by, the Company (including its subsidiaries and affiliates) in information systems and services related sales or transactions and in related administrative services sales or transactions using the Company’s information system.

On August 29, 2008, we issued Bruce Phillips 283,000 shares of our common stock at $.02 per share based on the last trading closing price of the Company’s common stock as of August 29, 2008 to compensate him for working with the Company at a reduced salary for several years as a key manager.

On September 2, 2008, we removed performance criteria that is not time based criteria in all previously issued Option & Warrant Agreements that included applicable performance criteria for Baruh Hayut, Paul W. Harrison, Bruce Phillips, John Lentini, and Elli Pittas. This action was taken since the hurdle of meeting an exercise price that is much higher price than the common share price as of September 02, 2008 requires substantial positive performance, and to provide incentives to fundamentally increase the value of the company.

F-16

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 5 - EMPLOYEE STOCK OPTIONS AND RELATED BONUS PLANS continued:

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.

A summary of stock option activity as of December 31, 2008 and 2007 and changes during the years ended on those dates is presented below:

	2008					2007
				Weighted				Weighted
				Average				Average
				Exercise				Exercise
Stock Options	Shares			Price		Shares		Price

Outstanding at beginning of year		1,558,000		$	0.4841		1,368,000	$	0.5000
Granted		0		$	0.0000		190,000	$	0.3700
Exercised		0		$	0.0000		0	$	0.0000
Forfeited or expired		(317,000	)	$	0.5000		0	$	0.0000

Outstanding at end of year		1,241,000		$	0.4801		1,558,000	$	0.4841

The following table summarizes the status of non-vested shares of stock options as of December 31,

				2008 .					2007 .
				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
Non-vested Shares	Shares			Fair Value		Shares			Fair Value

Non-vested at beginning of year		1,291,335		$	0.3435		1,268,000		$	0.3108
Grant		0		$	0.0000		190,000		$	0.5473
Vested		(289,595	)	$	0.3327		(166,665	)	$	0.3274
Forfeited or expired		(317,000	)	$	0.3000		0		$	0.0000

Non-vested at end of year		684,740		$	0.3716		1,291,335		$	0.3435

The following table summarizes information about stock options outstanding at December 31, 2008:

			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
Exercise	Number		Contractual		Exercise		Number		Exercise
Prices	Outstanding		Life in Years		Price		Exercisable		Price

$0.5000		851,000		2.7	$	0.5000		445,460	$	0.5000

$0.5000		200,000		2.8	$	0.5000		88,000	$	0.5000

$0.3700		190,000		8.8	$	0.3700		22,800	$	0.3700

		1,241,000		3.7	$	0.4801		556,260	$	0.4947

F-17

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

Note 6 - SHARE-BASED PAYMENTS IN ACCORDANCE WITH SFAS 123(R):

On January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment, which requires companies to expense the grant date fair value of employee stock options and other forms of share-based awards. SFAS 123(R) addresses accounting for share-based awards, including shares issued under employee stock purchase plans, stock options, and share-based awards, with compensation expense measured using the fair value, for financial reporting purposes, and recorded over the requisite service period of the award. In accordance with SFAS 123(R), we recognize compensation expense for awards granted and awards modified, repurchased, or cancelled after the adoption date. Under SFAS 123(R), we estimate the fair value of stock options and share-based awards using the Simple Black-Scholes European Option Pricing Model.

For the twelve month periods ended December 31, 2008 and 2007, we conducted an outside independent analysis and our own review, and based on the results, we recognized $1,599,528 and $1,802,395, respectively, in share-based payments related to warrants and stock options issued with the rights to exercise 4,494,000 shares in 2008 and 6,215,198 shares in 2007 of our common stock.

At December 31, 2008, the Company had approximately $96,000 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 1.6 years.

The fair value of our options issued during the years ended December 31, 2008 and 2007, was determined using the Simple Black-Scholes European Option Pricing Model with the following range of assumptions:

	Year Ended December 31,

	2008			2007

Risk-free interest rate		3.5% - 3.9	%		4.8-5.3%	%
Expected dividend yield		0.0	%		0.0	%
Option remaining term (in years)		5.0			5.0
Expected stock volatility		134%-327	%		27%-124	%

NOTE 7 - LONG-TERM DEBT:

Long-term debt consists of the following:

	December 31, 2008
Notes payable	$	1,315,649
Capitalized lease obligations		438,477
Less current portion		( 1,306,840	)

Long-term debt, net of current portion	$	447,286

Notes Payable:

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

	December 31, 2008

2009	$	986,396
2010		318,883
2011		10,370

	$	1,315,649

F-18

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 7 - LONG-TERM DEBT, continued:

On March 18, 2005 Modern Medical entered into an unsecured loan agreement with Dr. Howard Kessler MD PA, in the amount of $300,000 payable in 12 monthly payments of $8,333 with a lump sum due on the 13th month in the amount of $221,826.71 and bears an interest rate of 8% per annum. In March 2006, this note was extended under the same terms as the first 12 months and is currently payable through February 2010. This loan funded the settlement of the DVI/US Bank loan settlement.

On June 20, 2008, we purchased Dr. Haidri’s share of his ownership interest in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 150,000 shares, of the Company's common stock with a valuation of $15,000 at the time of purchase, and a note for $36,000 to be paid in 18 payments of $2,000.00 per month. The 150,000 shares of common stock were issued on August 28, 2008. As a condition of the purchase, the Company agreed to re-purchase the 150,000 shares from Dr. Haidri for $45,000 if for any consecutive 20 day period during the first 90 day period commencing at the end of the fifteenth month subsequent to June 20, 2008, if the stock price was below $0.30 per share. The purchase of Dr. Haidri’s ownership interest brings the Company's total ownership in UIA, Inc. to 100%.

In February 2006, the Company entered into an unsecured note with Jacov Hayut in the amount of $150,000. The loan was for 12 months with interest at 15%, monthly payments are interest only with lump sum payment of $150,000 February 2007. This note was extended for 36 months under the same terms and conditions, except that the Company agreed to pay the note in full or in part at the lenders option upon the first equity capital raise or February 2010, which ever comes first. On June 13, 2007 we paid $50,000 on the unsecured note, and on June 20, 2007 we paid $25,000 on the unsecured note. On October 9, 2007, we issued Jacov Hayut a warrant for 150,000 shares with an exercise price of $0.75 per share as part of the February 2006 unsecured note which was due in February 2007.

On October 25, 2006, we entered into an unsecured promissory note with Complete Flooring and Renovation, Inc. in the principal amount of $65,000. The loan is for a period of 24 months with an annual interest rate of 15%. The payments are to be made on the 26th of each month in 23 equal installments of $3,151.63 and 1 final installment of $3,151.67. The payments commenced on November 26, 2006 and goes through November 10, 2008. On October 9, 2007, we issued Complete Flooring and Renovation, Inc. a warrant for 65,000 shares with an exercise price of $0.75 per share as part of this promissory.

On December 6, 2006, we entered into an unsecured promissory note with Complete Flooring and Renovation, Inc. in the principal amount of $150,000. The loan is for a period of 48 months with an annual interest rate of 12%. The payments are to be made on the 6th of each month in 48 equal installments of $3,950.08. The payments commenced on January 6, 2006 and goes through December 2010. On December 6, 2006, we issued Complete Flooring and Renovation, Inc. a warrant for 150,000 shares with an exercise price of $0.75 per share as part of this promissory.

F-19

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 7 - LONG-TERM DEBT, continued:

On November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai for $50,000. The terms of the Agreement include an annual interest rate of 20% and the loan is to be paid, in a lump sum with accrued interest, at the earlier of 6 months from the effective date of the Agreement, or the closing date of an equity based financing by the Company. In addition, the Company issued a Warrant for the rights to 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. Irit and Yosef Azoulai have waived the 6 month payment terms and effective January have changed the interest rate from 20% to 10% annually.

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

F-20

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 7 - LONG-TERM DEBT, continued:

Capitalized Lease Obligations:

The Company entered into certain leases for the rental of equipment, which have been recorded as capital leases for financial statement reporting purposes and are included in equipment. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market value of the asset. Accumulated depreciation of assets under capital lease at December 31, 2008 aggregated $885,299. 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.

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

	December 31, 2008

2009	$	320,444
2010		53,622
2011		33,563
2012		30,848
2013 & Beyond		0
	$	438,477

NOTE 8 - RESTRUCTURING OF LONG-TERM DEBT:

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

NOTE 9 - 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, 2008 and 2007 of $145,336 and $51,193, respectively. The Company has a net operating loss carry-forward for federal income tax purposes of approximately $14,879,500, available to offset income taxes through 2016 - 2023.

The components of the Company's provision (benefit) for income taxes, for the fiscal years ended 2008 and 2007 are as follows:

	2008		2007
Current:
Federal	$	-	$	-
State and local		145,336		51,193

Deferred:
Federal		-		-
State and local		-		-

Provision for income taxes	$	145,336	$	51,193

F-21

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 9 - INCOME TAXES, continued:

A reconciliation of income tax computed at the federal and state statutory rates of 35% and 9%, respectively to income tax expense (benefit) is as follows:

	2008			2007

U.S. Federal statutory rate	$	(5,207,800	)	$	(4,527,797	)
State taxes		(1,339,200	)		(388,097	)

Effective tax rate	$	(6,547,000	)	$	(4,915,894	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2008 and 2007 are presented below:

	2008			2007
Deferred tax assets:
Net operating loss carry forward	$	(6,547,000	)	$	(4,915,894	)

Less valuation allowance		6,547,000			4,915,894

Net deferred tax asset	$	-		$	-

The valuation reserve increased by $1,631,106.

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

In assessing the ability to realize the 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.

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

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

On April 23, 2008, we offered and the State of New Jersey accepted an agreement to settle past due taxes for Union Imaging Center, LLC in the amount of $35,794. The terms of the agreement include payments of $2,000 paid on each of May 2, 9 and 16, 2008 and 36 equal installments of $1,040 commencing June 23, 2008. As of September 30, 2008, the company is current on all payments related to this agreement.

F-22

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 10 - 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

Weighted-average

exercise price of

outstanding options,

warrants and rights

Number of Securities

Number of Securities to be

plans (excluding

remaining available for

issued upon exercise of

securities reflected in

future issuance under

Plan Category

outstanding options

column (a))

equity compensation

Equity compensation plans approved by security holders

1,241,000

0.4801

1,259,000

Equity compensation plans not approved by security holders

7,640,198

0.5804

-0-

NOTE 11 - RELATED PARTY TRANSACTIONS:

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

Medical Equipment Solutions, which is controlled by Ronnie Antebi and Yosef Azoulai, has a management agreement with the company and also are investors in the company either individually or collectively. MES provides services in selecting, providing, and installing medical equipment. For these services, they are compensated 5% of Union Imaging Centers' site collections. Union Imaging Associates leases a Nuclear Camera from MES for 50% of monthly cash receipts associated directly with the use of this Nuclear Camera. The Company charged operations $203,289 in 2008 and $184,140 in 2007 under these agreements. Ronnie Antebi and Yosef Azoulai have jointly and individually provided term financing for various loan restructurings, of which approximately $127,000 remains outstanding at December 31, 2008.

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

F-23

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 11 - RELATED PARTY TRANSACTIONS, continued:

NOTE 12 - CHANGES IN DIRECTORS AND OFFICERS :

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

NOTE 13 - COMMITMENTS AND CONTINGENCIES:.

(a) Employment Agreements:

The Company has no employment agreements.

(b) Properties:

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

F-24

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 13 - COMMITMENTS AND CONTINGENCIES, continued:

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

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

YEAR	Amount

2009	$	262,215

2010	$	265,009

2011	$	268,500

2012	$	268,500

2013	$	268,500

Thereafter	$	335,625

Facility rental expense charged to operations in 2008, 2007 and 2006 was $291,196, $297,071 and $438,446, respectively.

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

NOTE 14 – LITIGATION:

F-25

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 14 – LITIGATION, continued:

NOTE 15 - INFORMATION TECHNOLOGY LEASE AGREEMENTS WITH IBM:

NOTE 16 – INVESTMENT BANKING AGREEMENTS AND SERVICES:

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.

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

F-26

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 16 – INVESTMENT BANKING AGREEMENTS AND SERVICES, continued:

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

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

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

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

F-27

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

NOTE 16 – INVESTMENT BANKING AGREEMENTS AND SERVICES, continued:

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

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

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

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

On October 9, 2007, we signed an Investment Banking and Financial Advisor Agreement with Capitol Securities Management, Inc. (the "Advisor") as its exclusive investment banker and financial advisor. During the Term of this Agreement, the Advisor, shall provide advice to, and consult with, us concerning financial planning, corporate organization and structure, public stock relations, financial matters in connection with the operation of the business of the Company, private and public equity and debt financing, acquisitions, mergers and other similar business combinations and shall review and advise us regarding its overall progress, needs and financial condition. The Advisor is not obligated to devote any specific amount of time to providing advice and consultation to us. This Agreement shall remain in full force and effect for a period of thirty-six (36) months after the date hereof; provided, however, that it may be terminated at any time by either the Advisor or us with or without cause upon thirty (30) days prior written notice to the other party (the "Term"). We agreed to pay fees based on individuals or entities introduced to us by Advisor and which have been submitted in writing by Advisor and approved by us, and lead to a completed transaction. We also agreed to pay Advisor a monthly Investment Banking retainer fee of $2,500 starting upon the closing of any equity financing by the Company. Within 30 days from the execution of this Agreement, we also agreed to issue to Advisor 250,000 shares of our restricted common stock with standard piggyback registration rights upon execution of this agreement and an additional 3 equal installment of 83,333 shares to be paid quarterly following the initial payment. Effective October 20, 2008, we mutually agreed with the Advisor to terminate the October 9, 2007 investment banking and financial advisory agreement. The termination agreement required the Company to pay $3,000 to the Advisor to compensate the Advisor for advisor fees and other obligations that may be due or outstanding. As part of the termination agreement, we are no longer obligated to issue 500,000 shares of our common stock.

F-28

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

Note 17 - CLAIM RELATED TO REIMBURSEMENT OF ACQUISITION EXPENSES:

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

Note 18 - CONVERSION OF DEBT AGREEMENT WITH MARVIN TEITELBAUM:

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

Note 19 - PRIVATE PLACEMENT OF OUR COMMON STOCK:

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

Note 20 - FILING OF S-8 REGISTRATION STATEMENT FOR 2003 STOCK OPTION PLAN:

NOTE 21 - ISSUANCE OF ADDITIONAL WARRANTS TO INVESTORS:

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

F-29

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 22 - CERTIFICATE OF INCORPORATION FOR HEALTHIXS CORPORATION:

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

NOTE 23 - SPUR IMAGING SERVICE, LLC:

On April 9, 2008, a complaint was filed by Spur Imaging Service, L.L.C. against the Company and Union Imaging Associates for breach of contract and other related matters. The complaint is related to a Sub-Lease Agreement that the Company entered into with Spur on or about May 18, 2005 for using certain MRI equipment that was leased from Siemens Medical Solutions, USA, Inc. by Spur Imaging Service, LLC. We agreed to make 63 payments of $21,400 totaling $1,348,200. We also entered into a Forbearance Agreement with Spur that modified the Sub-Lease Agreement payment terms. Spur filed the complaint claiming we owe them for payments not made per the Sub-Lease and Forbearance Agreements, and for other costs, fees, and expenses, and declared that we should return the MRI equipment. On September 16, 2008, we negotiated a settlement whereby the Company agreed to pay Siemens Medical Solutions, USA, Inc. $525,000 and Spur Imaging Service, LLC $25,000, in exchange for full settlement of the sub-lease, and have subsequently made payments towards the $550,000. In October 2008, in exchange for Siemens Medical Solutions, USA, Inc. (“Siemens Medical”) and Spur Imaging Service, LLC (“Spur”) agreeing to forbear from exercising their enforcement rights under the Consent Judgment through February 15, 2009. We paid Siemens Medical $525,000 between October 6, 2008 and February 15, 2009 and paid Spur $25,000 between October 6, 2008 and February 28, 2009 in full payment of the $550,000 settlement of a sub-lease involving Siemens Medical and Spur.

In 2008 the Company recorded a gain from restructured debt of $529,293 consisting of $404,773 in debt principal and $124,520 in accrued interest.

NOTE 24 - CONVERSION OF DEBT AGREEMENT WITH MARVIN TEITELBAUM:

On December 20, 2006, we entered into an agreement with Marvin Teitelbaum, restructuring the various construction loans with him. As part of the restructuring he agreed to convert $50,000 of the debt to 77,000 shares of the Company’s $0.0002 par value restricted common stock. As a condition to this conversion the Company agreed that if the average price of its $0.0002 par value common stock was less than $0.65 for any consecutive 20 day period during the first calendar quarter of 2008, Mr. Teitlebaum had the right to put the 77,000 shares to the Company for $50,000. Effective April 1, 2008, Mr. Teitelbaum put the shares to the Company. These shares are being recorded as Treasury shares effective April 1, 2008, in the accompanying balance sheet.

F-30

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 25 - GENERAL ELECTRIC CAPITAL CORPORATION:

In July 2008, General Electric Capital Corporation (“GECC”) sent us a notice of default and a proposal to resolve the defaults and past due contracts related to Union Imaging Associates, Inc. and Modern Medical Modalities Corporation as co-debtors. The proposal offered to cure the defaults with the conditions set forth that we pay $67,326.83 to GECC by July 28, 2008, we resolve accrued late fees of $38,440.86, and we resume making regular monthly payments in August of 2008. The regular monthly payments were adjusted from $40,515.47 to $44,220.25 to include interest and related costs. In addition, GECC offered to defer 3 past due payments to the end of the respective contracts and in order to resolve the $37,046.38 in adjusted accrued late fees, GECC will accept 12 monthly payments of $3,087.20. In response and based on the GECC proposal, we made payments to GECC totaling $67,326.83 and have resumed making regular payments in August, 2008 to cure the defaults. We finalized amendments to the GECC contracts to be in compliance with the agreements, and started making the additional 12 payments of $3,087.20 to resolve the adjusted accrued late fees.

NOTE 26 - NAFTALI SIANI STOCK PURCHASE AGREEMENT:

On August 25, 2008, we entered into a stock subscription agreement with Naftali Siani for 500,000 shares of our common stock in exchange for a $50,000 investment into the Company.

NOTE 27 - SUBSEQUENT EVENTS:

On January 30, 2009, we and our wholly-owned subsidiaries, Union Imaging Associates, Inc., a New Jersey corporation, Union Imaging Center, LLC, a New Jersey limited liability company, and PET Scan at Union Imaging, LLC, a New Jersey limited liability company, entered into an Asset Purchase Agreement (the “Agreement”) with Health Diagnostics of New Jersey, L.L.C (“HD”), a New Jersey limited liability company, pursuant to which HD agreed to purchase substantially all of the assets used by or in connection with the Seller Companies’ Imaging Centers, for cash consideration in the amount of $8,800,000 (the “Purchase Price”) minus (a) any liabilities paid off or assumed by HD on the Closing Date of the Asset Sale, not to exceed $1,600,000 in the aggregate, (b) a $1,200,000 credit to HD for capital expenditures and leasehold improvements, and (c) the amount, if any, by which the Closing Date working capital (the “Closing Date Working Capital”) of the Seller Companies falls short of $525,000 in the aggregate (a “Closing Date Working Capital Shortfall”). If the Closing Date Working Capital exceeds $525,000 then HD will pay us such excess amount. HD will determine the Closing Date Working Capital within 90 days of the Closing Date. We will have the right to dispute and propose adjustments to HD’s calculation of the Closing Date Working Capital in accordance with the procedures set forth in the Agreement. Assuming we satisfy the conditions to completing the Asset Sale, the Closing Date is estimated to be on or before March 31, 2009. If the Closing Date does not occur on or prior to that date or if any of the conditions to the closing are not satisfied on or prior to that date, we, the Seller Companies and HD shall each have the right to terminate the Agreement. If the Closing does occur, we intend to focus on providing more outsourced information and administrative services through our wholly-owned subsidiary HealthIXS, in order to expand into the more profitable information and administrative services markets. In addition, we may invest the proceeds of the Asset Sale in businesses or ventures that may or may not be synergistic with our past operations or our remaining information and administrative services business operated by HealthIXS. HealthIXS has not generated any revenues thus far. We have not identified any proposed investments at this time.

F-31

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 27 - SUBSEQUENT EVENTS, continued:

The following pro-forma consolidated financial statements give effect to the proposed sale to Health Diagnostics of New Jersey, L.L.C. of substantially all of the assets of our Union, NJ imaging centers as if the transaction had been completed at December 31, 2008. See Company’s 8-K filed January 27, 2009 (incorporated by reference) for additional information.

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDARIES

PRO FORMA CONSOLIDATED BALANCE SHEET

	December 31, 2008 (as reported)		Pro Forma Adjustments			Pro Forma As Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	46,518		5,695,986		$	5,740,104
Accounts receivable, less contractual allowances		989,544		(989,544	)		-
Prepaid expenses		41,808		(4,255	)		37,553
Total current assets		1,077,870					5,777,657
Property and equipment, net of accumulated depreciation		1,088,894		(1,064,325	)		24,569
Other assets:
Purchased software		1,287,917		-			1,287,917
Deposits		37,670		(20,778	)		16,892
Escrow		-		650,000			650,000
Total other assets		1,325,587					1,954,809
TOTAL ASSETS	$	3,492,351				$	7,757,035

LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY)
Current liabilities:
Accounts payable	$	708,911		(563,292	)	$	145,620
Accrued expenses		1,302,839		(560,839	)		742,157
Current portion long term debt		1,406,840		(81,059	)		1,325,781
Total current liabilities		3,418,590					2,213,558
Other liabilities:
Long term debt, net of current portion		211,387		(50,182	)		161,205
Loans payable shareholders		235,899					235,899
Total other liabilities		447,286					397,104
TOTAL LIABILITIES		3,865,876

MODERN MEDICAL MODALITIES CORP 10-K