MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

JUNE 30, 2010

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009		3 - 4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009 (unaudited)		5
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2010 and 2009 (unaudited)		6
	Notes to Interim Condensed Consolidated Financial Statements		7 - 10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11 - 15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15
Item 4.	Controls and Procedures		15
PART II.   OTHER INFORMATION
Item 1.	Legal Proceedings		16
Item 1A.	Risk Factors		16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		16
Item 3.	Defaults Upon Senior Securities		16
Item 4.	(Removed and Reserved)		16
Item 5.	Other Information		17
Item 6.	Exhibit   Index		17
SIGNATURES			18

 

PART 1 – FINANCIAL INFORMATION

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY		June 30, 2010				December 31, 2009
		(Unaudited)
Current liabilities
Accounts payable		$	10,350			$	94,014
Accrued expenses			274,791				382,555
Note payable			167,000				250,000
Current portion long term debt			2,168				9,097
Liabilities of discontinued operations			808,587				2,348,143
Total Current Liabilities			1,262,896				3,083,809
Other Liabilities
Long term debt			3,199				4,342
Total Other Liabilities			3,199				4,342
Total Liabilities			1,266,095				3,088,151
Commitments and contingencies
Stockholders’ equity:
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 25,313,385 shares at June 30, 2010 and issued – 26,527,051 shares and outstanding 25,323,385 shares at December 31, 2009			5,305				5,305
Additional paid-in capital			11,944,866				11,944,866
(Deficit)			(10,664,004	)			(9,764,531	)
Treasury stock, 1,213,666 and 1,203,666 shares, at June 30, 2010 and December 31, 2009, respectively, at cost			(137,900	)			(137,500	)
Total stockholders’ equity			1,148,267				2,048,140
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,414,362			$	5,136,291

 

See notes to financial statements

 

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF OPERATIONS

		For the six months ended								For the three months ended
		June 30,								June 30,
		2010					2009*			2010					2009	*
Net revenues from services		$	197,087			$	21,950			$	121,576			$	3,512
Cost of services provided			146,540				105,209				66,783				1,808
Total operating income (loss)			50,547				(83,259	)			54,793				1,704
Operating Expenses:
Selling, general and administrative			441,315				94,107				301,632				(52,024	)
Depreciation and amortization			169,991				8,519				10,004				3,999
Total operating expenses			611,306				102,626				311,636				(48,025	)
(Loss) income from continuing operations before interest
expense, other income and income taxes.			(560,759	)			(185,885	)			(256,843	)			49,729
Other income (expense):
Interest expense			(21,308	)			(40,544	)			(6,652	)			(40,070	)
Gain on sale of automobile			4,000				0				4,000				0
Total other income (expense)			(17,308	)			(40,544	)			(2,652	)			(40,070	)
(Loss) income from continuing operations before
income taxes			(578,067	)			(226,429	)			(259,495	)			9,659
Provision for income taxes			13,959				7,071				3,951				1,131
(Loss) income from continuing operations			(592,026	)			(233,500	)			(263,446	)			8,528
Discontinued operations:
Loss (income) from operations Union Imaging Associates,
less applicable income taxes of $0 & $0			(208,226	)			172,425				(123,142	)			272,158
Loss from operations of PET Scan at Union
Imaging less applicable income taxes of $0 & $0			(2,707	)			(2,329	)			(2,664	)			(2,329	)
Loss (income) from operations Union Imaging Center,
less applicable income taxes of $0 & $0			(96,514	)			88,670				(96,514	)			173,528
(Loss) income from discontinued operations, net of taxes			(307,447	)			258,766				(222,320	)			443,357
Net (loss) income		$	(899,473	)		$	25,266			$	(485,766	)		$	451,885
(Loss) per share, basic and diluted
(Loss) from continuing operations		$	(0.023	)		$	(0.009	)		$	(0.010	)		$	0.000
(Loss) income from discontinued operations			(0.012	)			0.010				(0.009	)			0.018
Net (loss) income available for common stockholders		$	(0.035	)		$	0.001			$	(0.019	)		$	0.018
Number of weighted average shares outstanding			25,319,635				25,520,260				25,322,135				25,323,385

 

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* = restated to conform to 2010 presentation.

 

See notes to financial statements.

 

MODERN MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		For the six months ended June 30,
		2010				2009*
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net (loss) income		$	(899,473	)		$	25,266
Less: net (loss) income from discontinued operations			(307,447	)			258,766
Net (loss) from continuing operations			(592,026	)			(233,500	)
Adjustments to reconcile net (loss) to net cash
provided by continuing operations:
Depreciation and amortization			169,991				8,519
Changes in current assets and liabilities:
Accounts receivable			-				(3,721	)
Escrow funds – sale of assets			100,000				-
Prepaid Expenses			28,302				24,516
Note receivable			(812,793	)			-
Accounts payable			(83,663	)			482,917
Accrued expenses			(107,764	)			251,052
			(705,927	)			763,283
Net cash provided by (used in) operating activities			(1,297,953	)			529,783
Cash flows from financing activities:
(Increase) in Treasury Stock at cost, from purchase of the Company's common shares			(400	)			(75,000	)
Increase in Additional Paid In Capital from stock-based compensation
resulting  from issuance of employee stock options and warrants			-				67,390
(Decrease) increase in long term debt			(91,072	)			(5,414	)
Net cash (used in ) financing activities			(91,472	)			(13,024	)
Net cash (used in) provided by operating activities from continuing operations			(1,389,425	)			516,759
Net cash (used in) operating activities from discontinued operations			(1,249,131	)			(510,799	)
Net cash(used in) provided by operating activities			(2,638,556	)			5,960
Cash and equivalents, beginning of the period			2,733,343				46,518
Cash and equivalents, at end of period		$	94,787			$	52,478
Supplemental cash flow information
Cash items:
Interest paid		$	21,308			$	182,232
Income taxes paid		$	13,959			$	65,318

 

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* = Restated to conform to 2010 representation.

 

See notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - BASIS OF PRESENTATION:

 

The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period.  The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year.  The accompanying unaudited consolidated financial statements and footnotes have been condensed and, therefore, do not contain all required disclosures.  Reference should be made to the Company's annual report filed on Form 10-K for the year ended December 31, 2009.

NOTE 2 – SHARE-BASED PAYMENTS IN ACCORDANCE WITH ASC 718:

 

On January 1, 2006, we adopted ASC 718, Share-Based Payment , which requires companies to expense the grant date fair value of employee stock options and other forms of share-based awards. ASC 718 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 ASC 718, we recognize compensation expense for awards granted and awards modified, repurchased, or cancelled after the adoption date.  Under ASC 718, we estimate the fair value of stock options and share-based awards using the Simple Black-Scholes European Option Pricing Model.

For the three and six month periods ended June 30, 2010 and 2009, we conducted an outside independent analysis and our own review, and based on the results, we recognized $0 and $0, respectively, in 2010 and $8,714 and 58,619, respectively, in 2009, in share-based payments related to warrants and stock options issued with the rights to exercise zero shares in 2010 and 1,390,000 shares in 2009 of our common stock.

At June 30, 2010, the Company had no unrecognized compensation cost related to unvested stock options.

NOTE 3 – LOAN AGREEMENTS:

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 an annual interest rate of 15%, with monthly payments of interest only and with a lump sum payment of $150,000 due in 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 lender’s option upon the first equity capital raise or February 2010, whichever 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 a term of  5 years and an exercise price of $0.75 per share as part of the payment for the February 2006 unsecured note which was originally due for full payment in February 2007.  On March 11, 2010, we paid the $75,000 note balance plus $937.50 in accrued interest and thus the note was paid in full.

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’s term was for a period of 24 months with an annual interest rate of 15%.  The payments were to be made on the 26th of each month in 23 equal installments of $3,151.63 and 1 final installment of $3,151.67.  The payments commenced on November 26, 2006.  On January 7, 2010, we paid the $29,453.67 note balance plus $8,836.08 in accrued interest, and thus this note was paid in full.

7

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On November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai for $50,000.  The terms of the Loan Agreement included an annual interest rate of 20% and the loan was 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 to these lenders for the right to purchase 50,000 shares of the Company's common stock with a term of 5 years and 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 11, 2010, we paid the $50,000 note plus $18,057.89 in accrued interest, and thus this note was paid in full.

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 was for a period of 48 months with an annual interest rate of 12%.  The payments were to be made on the 6th of each month in 48 equal installments of $3,950.08.  The payments commenced on January 6, 2006.  On January 7, 2010, we paid the $116,166.03 note balance plus $26,805.88 in accrued interest, and thus this note was paid in full.

On March 6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for $100,000.  The terms of this Loan Agreement included an annual interest rate of 20% and the loan was 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 to these lenders for the right to purchase 100,000 shares of the Company's common stock with a term of 5 years and an exercise price $0.82 based on the closing market price of the Company's common stock on 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 March 11, 2010, we paid the $100,000 note plus $35,932.61 in accrued interest, and thus this note was paid in full.

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 at   the end of September 2007.  The Asset consists of healthcare payer admin computer software that helps organize, manage, and maintain health plans, membership, eligibility, claims administration, and includes other customized components. The shares of Common stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.  Paul Harrison, a member of the Company’s Board of Directors, is the President of INEX Group, Inc., which serves as the General Partner of MTI-II.  Mr. Harrison  received 281,250 shares of our Common Stock, and a Warrant for the right to purchase up to 506,250 shares of our Common Stock with a term of 5 years at an exercise price of $0.70 per share which were issuable to MTI-II pursuant to this Agreement. We renegotiated the $250,000 note, paying $83,000 on January 14, 2010 and extending the balance to December 31, 2010.  Starting February 1, 2010, we are paying $1,113.33 in monthly interest or an 8% annual rate of interest.

On October 3, 2008, we entered into a Loan Agreement with Moseh and Aliza Lazarian for $100,000.  The terms of this Loan Agreement included an annual interest rate of 12% and the loan was 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 to these lenders for the right to purchase up 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.  The February 1, 2009, payment was not made by the Company and under the terms of the loan agreement, the interest rate on the note increased from 12% to 15% until the $50,000 payment is made.  On January 5, 2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus the note was paid in full.

On November 6, 2008, we entered into a Loan Agreement with Issak Hayut for $100,000.  The terms of this Loan Agreement included an annual interest rate of 12% and the loan was to be paid in full on or before November 5, 2009.  In addition, the Company issued a warrant for the right to purchase up 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 January 7, 2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus this note was paid in full.

 

On January 15, 2009, we entered into a Loan Agreement with Issak Hayut for $112,500.  The terms of this Loan Agreement included interest payments of $10,000 per month for 3 months and the loan was to be paid in full on or before April 15, 2009.  In addition, the Company issued a warrant for the right to purchase up 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. This Loan Agreement was entered into in order to have sufficient funds to meet a deadline on a debt settlement payment due and to help realize a gain on the restructured debt with Siemens Medical Solutions, USA, Inc.  On January 7, 2010, we paid the $112,500 note plus $20,000 in accrued interest, and thus this note was paid in full.

On February 15, 2009, we entered into a Loan Agreement with Issak Hayut for $112,500.  The terms of this Loan Agreement included interest payments of $10,000 per month for 3 months and the loan was to be paid in full on or before May 15, 2009.  In addition, the Company issued a warrant for the right to purchase up 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. The loan agreement was entered into in order to have sufficient funds to meet a deadline on a debt settlement payment due and to help realize a gain on the restructured debt with Siemens Medical Solutions, USA, Inc.  On January 7, 2010 we paid the $112,500 note plus $30,000 in accrued interest, and thus this note was paid in full.

NOTE 4 – DR. WOLKSTEIN PUT 350,000 COMMON SHARES TO THE COMPANY.

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 repurchase 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.  On January 22, 2009, Dr. Wolkstein exercised his put option requiring the Company to repurchase the 350,000 shares in accordance with the purchase agreement.  In March 2010, we agreed to pay Dr. Wolkstein $75,000 in 3 equal installments of $25,000 each.  The first installment was paid on April 2, 2010, with the 2 remaining installments due June 30, 2010 and September 30, 2010.

NOTE 5 – BEST PLASTICS, LLC:

On March 21, 2010, we entered into discussions with Best Plastics, LLC (“Best Plastics”) to pursue a new business opportunity in order to grow our revenues and potentially increase our value.  This action was taken since we sold our medical clinics and are pursuing new sources of revenues.  As part of these discussions and our due diligence process, we entered into a six month Convertible Promissory Note (“March 2010 Promissory Note”) in the amount of $500,000 at a 6% annualized rate of interest on the outstanding principal.  The Convertible Promissory Note includes a provision for the right to increase the amount due under the Note, and includes a provision to convert the outstanding balance due under the Note into specified ownership interest in Best Plastics.  As part of our provision for the right to increase the amount of the Convertible Promissory Note, effective April 9, 2010, we entered into a new Convertible Promissory Note for $600,000 (“April 9, 2010 Promissory Note”) that replaced the March 2010 Promissory Note.  Effective April 22, 2010, we entered into another new Convertible Promissory Note for $700,000 that replaced the April 9, 2010 Promissory Note.  In addition, effective April 23, 2010, we entered into a Business Services Agreement with Best Plastics.  Pursuant to the Business Services Agreement, we will provide management, information, and other services in exchange for a service fee equal to: (1) one and one-half percent (1.5%) of the first $25,000,000 of Best Plastics’ gross revenues earned during the term of the Business Services Agreement, with a minimum fee of $300,000 per calendar year; (2) one and one-quarter percent (1.25%) of Best Plastics’ gross revenues earned during the term of the Business Services Agreement for amounts between $25,000,000 and $50,000,000 of Best Plastics’ gross revenues; and (3) one percent (1%) of Best Plastics’ gross revenues earned during the term of this Agreement for the amounts of $50,000,000 of Best Plastics’ gross revenues and above.   As of June 30, 2010, we have advanced Best Plastics, LLC, $812,793 of the $1,000,000 authorized under the April 22, 2010 Convertible Promissory Note.  

 

 

NOTE 6 – TSI BILLING SERVICES, INC LAWSUIT:

 

On May 3, 2010, we were served with a complaint filed by TSI Billing Service, Inc. against the Company in the Superior Court of New Jersey, law division, county of Union on March 31, 2010.  The complaint involves breach of contract claims made by TSI in connection with certain amounts that are allegedly owed for billing and other services provided to the Company, and for other costs that were incurred by TSI.  The relief sought by TSI that were alleged in the complaint include monetary damages of $511,842.33, together with interest, attorney’s fees, and costs of suit for the TSI claims related to billings services, tax penalties, and incurred and paid legal fees.  We intend to vigorously defend this lawsuit.  On June 4, 2010, we filed a counterclaim alleging breach of duty of loyalty, breach of implied covenant of good faith and fair dealing, tortious interference with an employment relationship and tortious interference with prospective economic advantage.

 

NOTE 7 – SUBSEQUENT EVENTS:

 

On July 25, 2010, our board of directors approved a non-cash bonus for Mr. Paul W. Harrison, our Lead Director of the Board of Directors. The non-cash bonus is a transfer and assignment of a company automobile with a net book value of approximately $4,008. The non-cash bonus was paid to preserve cash and was issued to compensate Mr. Harrison for performing substantial extra work beyond his regular board duties for several years without receiving any increases in fees.

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-looking Statements

 

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Item 2 of Part I of this Quarterly Report include 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.  You should be aware that the occurrence of any of the events described in this Quarterly 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.  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 Quarterly Report to conform these statements to actual results.

 

The following discussion should be read in conjunction with Modern Medical Modalities Corporation’s (“Modern Medical”, the “Company”, “we”, or “us”) unaudited condensed consolidated financial statements and notes included herein.  The results described below are not necessarily indicative of the results to be expected in any future period.  Certain statements in this discussion and analysis, including statements regarding our strategy, financial performance and revenue sources, are forward-looking statements based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.  Readers are referred to our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

 

Overview

We   provide internet driven, healthcare administrative and information services that are supported by our advanced, web-based, enterprise-wide information system.  Our healthcare administrative and information services have the capacity to service multi-specialty healthcare markets.  The healthcare administrative and information services include human resources, supply management, medical customer relationship management (CRM), electronic health records, patient billing and accounts receivables services, claims adjudication services, and business intelligence services.

We intend to focus on providing outsourced administrative and information services through our wholly-owned subsidiary HealthIXS Corporation, in order to expand into the more profitable information and administrative services markets.  

 

We may also diversify and invest 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 Corporation in order to pursue other new sources of revenue.   On March 21, 2010, we entered into discussions with Best Plastics, LLC (“BPL”) to pursue a new business opportunity in order to grow our revenues and potentially increase our value.  As part of these discussions and our due diligence process, we entered into a six month Convertible Promissory Note (“March 2010 Promissory Note”) in the amount of $500,000 at a 6% annualized rate of interest on the outstanding principal.  The Convertible Promissory Note includes a provision for the right to increase the amount due under the Note, and includes a provision to convert the outstanding balance due under the Note into specified ownership interest in Best Plastics.  As part of our provision for the right to increase the amount of the Convertible Promissory Note, effective April 9, 2010, we entered into a new Convertible Promissory Note for $600,000 (“April 9, 2010 Promissory Note”) that replaced the March 2010 Promissory Note.  Effective April 22, 2010, we entered into another new Convertible Promissory Note for $700,000 that replaced the April 9, 2010 Promissory Note and which is attached as Exhibit 10.12 to this Quarterly Report.  In addition, effective April 23, 2010, we entered into a Business Services Agreement with Best Plastics.  Pursuant to the Business Services Agreement, which is attached hereto as Exhibit 10.13, we will provide management, information, accounting and other related services in exchange for a service fee equal to: (1) one and one-half percent (1.5%) of the first $25,000,000 of Best Plastics’ gross revenues earned during the term of the Business Services Agreement, with a minimum fee of $300,000 per calendar year; (2) one and one-quarter percent (1.25%) of Best Plastics’ gross revenues earned during the term of the Business Services Agreement for amounts between $25,000,000 and $50,000,000 of Best Plastics’ gross revenues; and (3) one percent (1%) of Best Plastics’ gross revenues earned during the term of this Agreement for the amounts of $50,000,000 of Best Plastics’ gross revenues and above.  As of June 30, 2010, we have advanced Best Plastics, LLC, $812,793 of the $1,000,000 authorized under the April 22, 2010 Convertible Promissory Note.  

We have also positioned ourselves to expand our business and participate more in outsourced management services and the expanding, more profitable administrative and information services markets.  In order to support our business expansion, we have added customizations to our acquired information system and derivative software obtained through special licensing terms to produce a more comprehensive integrated information system that will allow us to provide better administrative and information services and improve overall profitability.

On a consolidated basis, we currently recognize the majority of our revenues from a range of healthcare administrative and information services that are supported by our advanced, web-based, enterprise-wide information system that allow us to leverage our common information system platform, in order to potentially increase operating income once fixed costs are more rapidly covered with higher volumes of administrative and information services performed as the healthcare outpatient services and related markets to continue to grow and operate within larger networks.

Results of Operations:

 

FOR THE SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2009.

 

Net Revenues from Services:

 

For the six months ended June 30, 2010, net revenues from services totaled $197,087 as compared to $21,050 for the same period in 2009, a net increase of $176,037.  This increase in net revenues is attributable primarily to the start up of HealthIXS’ first collaboration agreement for its advanced, web-based, enterprise-wide information system.

 

Cost of services provided:

 

For the six months ended June 30, 2010, cost of services provided totaled $146,540 as compared to $105,209 for the same period in 2009, a decrease of $41,331. This increase is attributable to costs associated to the start up of HealthIXS’ first collaboration agreement for its advanced, web-based, enterprise-wide information system.

Selling, general and administrative expenses:

 

For the six months ended June 30, 2010, selling, general and administrative expenses totaled $441,315 as compared to $94,107 for the same period in 2009, an increase of $347,208.  This increase resulted primarily from corporate administrative expenses no longer being allocated to the operations sold at December 31, 2009.  We expect that this should turn around as revenues from business services generated through HealthIXS’ and other sources starts to grow.

 Loss from continuing operations:

 

Loss from continuing operations for the six months ended June 30, 2010 was $442,026 as compared to a loss of $233,500 for the same period in 2009, an increase in the loss from continuing operations of $208,526.   This increase in loss from continuing operations relates directly to the sale of the imaging centers sold at December 31, 2009.  We expect that this should be reduced as revenues from business services generated through HealthIXS’ and other sources starts to develop.

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Results of Operations:

 

FOR THE THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009.

 

Net Revenues from Services:

 

For the three months ended June 30, 2010, net revenues from services totaled $121,576 as compared to $3,512 for the same period in 2009, a net increase of $118,64.  This increase in net revenues is attributable primarily to the start up of HealthIXS’ first collaboration agreement for its advanced, web-based, enterprise-wide information system.

 

Cost of services provided:

 

For the three months ended June 30, 2010, cost of services provided totaled $66,783 as compared to $1,808 for the same period in 2009, a increase of $64,975. This increase is attributable to costs associated to the start up of HealthIXS’ first collaboration agreement for its advanced, web-based, enterprise-wide information system.

Selling, general and administrative expenses:

 

For the three months ended June 30, 2010, selling, general and administrative expenses totaled $301,632 as compared to $(52,024) for the same period in 2009, an increase of $353,656.  This increase resulted primarily from corporate administrative expenses no longer being allocated to the operations sold at December 31, 2009.  We expect that this should turn around as revenues from business services generated through HealthIXS’ and other sources starts to grow.

Loss from continuing operations:

 

Loss from continuing operations for the three months ended June 30, 2010 was $263,446 as compared to income of $8,528 for the same period in 2009, a increase in the loss from continuing operations of $271,974.   This increase in loss from continuing operations relates directly to the sale of the imaging centers sold at December 31, 2009.  We expect that this should be reduced as revenues from business services generated through HealthIXS’ and other sources starts to develop.

Liquidity and Capital Resources:

 

As of June 30, 2010, we had a working capital deficiency of $152,976, as compared to working capital deficiency of $2,203,612 as of June 30, 2009. This positive shift in working capital was a result of the sale at December 31, 2009 of substantially all the assets of the Union Imaging centers assets.  We do not believe that our cash flow from operations will be sufficient to fund our continuing operations and we will continue to have to raise capital to fund those operations.  We may raise additional capital through the issuance of debt, equity or a combination thereof. There can be no assurance that any additional financing will be available on terms acceptable to us, if at all.

 

Debt:

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 an annual interest rate of 15%, with monthly payments of interest only and with a lump sum payment of $150,000 due in 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 lender’s option upon the first equity capital raise or February 2010, whichever 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 a term of 5 years and an exercise price of $0.75 per share as part of the payment for the February 2006 unsecured note which was originally due for full payment in February 2007.  On March 11, 2010, we paid the $75,000 note balance plus $937.50 in accrued interest and thus the note was paid in full.

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’s term was for a period of 24 months with an annual interest rate of 15%.  The payments were to be made on the 26th of each month in 23 equal installments of $3,151.63 and 1 final installment of $3,151.67.  The payments commenced on November 26, 2006.  On January 7, 2010, we paid the $29,453.67 note balance plus $8,836.08 in accrued interest, and thus this note was paid in full.

On November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai for $50,000.  The terms of the Loan Agreement included an annual interest rate of 20% and the loan was 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 to these lenders for the right to purchase 50,000 shares of the Company's common stock with a term of 5 years and 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 11, 2010, we paid the $50,000 note plus $18,057.89 in accrued interest, and thus this note was paid in full.

 

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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 was for a period of 48 months with an annual interest rate of 12%.  The payments were to be made on the 6th of each month in 48 equal installments of $3,950.08.  The payments commenced on January 6, 2006.  On January 7, 2010, we paid the $116,166.03 note balance plus $26,805.88 in accrued interest, and thus this note was paid in full.

On March 6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for $100,000.  The terms of this Loan Agreement included an annual interest rate of 20% and the loan was 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 to these lenders for the right to purchase 100,000 shares of the Company's common stock with a term of 5 years and an exercise price $0.82 based on the closing market price of the Company's common stock on 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 March 11, 2010, we paid the $100,000 note plus $35,932.61 in accrued interest, and thus this note was paid in full.

 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 at   the end of September 2007.  The Asset consists of healthcare payer admin computer software that helps organize, manage, and maintain health plans, membership, eligibility, claims administration, and includes other customized components. The shares of Common stock were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.  Paul Harrison, a member of the Company’s Board of Directors, is the President of INEX Group, Inc., which serves as the General Partner of MTI-II.  Mr. Harrison  received 281,250 shares of our Common Stock, and a Warrant for the right to purchase up to 506,250 shares of our Common Stock with a term of 5 years at an exercise price of $0.70 per share which were issuable to MTI-II pursuant to this Agreement. We renegotiated the $250,000 note, paying $83,000 on January 14, 2010 and extending the balance to December 31, 2010.  Starting February 1, 2010, we are paying $1,113.33 in monthly interest or an 8% annual rate of interest.

On October 3, 2008, we entered into a Loan Agreement with Moseh and Aliza Lazarian for $100,000.  The terms of this Loan Agreement included an annual interest rate of 12% and the loan was 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 to these lenders for the right to purchase up 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.  The February 1, 2009, payment was not made by the Company and under the terms of the loan agreement, the interest rate on the note increased from 12% to 15% until the $50,000 payment is made.  On January 5, 2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus the note was paid in full.

On November 6, 2008, we entered into a Loan Agreement with Issak Hayut for $100,000.  The terms of this Loan Agreement included an annual interest rate of 12% and the loan was to be paid in full on or before November 5, 2009.  In addition, the Company issued a warrant for the right to purchase up 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 January 7, 2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus this note was paid in full.

On January 15, 2009, we entered into a Loan Agreement with Issak Hayut for $112,500.  The terms of this Loan Agreement included interest payments of $10,000 per month for 3 months and the loan was to be paid in full on or before April 15, 2009.  In addition, the Company issued a warrant for the right to purchase up 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. This Loan Agreement was entered into in order to have sufficient funds to meet a deadline on a debt settlement payment due and to help realize a gain on the restructured debt with Siemens Medical Solutions, USA, Inc.  On January 7, 2010, we paid the $112,500 note plus $20,000 in accrued interest, and thus this note was paid in full.

On February 15, 2009, we entered into a Loan Agreement with Issak Hayut for $112,500.  The terms of this Loan Agreement included interest payments of $10,000 per month for 3 months and the loan was to be paid in full on or before May 15, 2009.  In addition, the Company issued a warrant for the right to purchase up 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. The loan agreement was entered into in order to have sufficient funds to meet a deadline on a debt settlement payment due and to help realize a gain on the restructured debt with Siemens Medical Solutions, USA, Inc.  On January 7, 2010 we paid the $112,500 note plus $30,000 in accrued interest, and thus this note was paid in full.

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

 

Off-Balance Sheet Arrangements:

None.

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company's business. Except as otherwise disclosed herein, the Company is currently not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse affect on its business, financial condition or operating results.

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

 

Item 5. Other Information

 

None.

SIGNATURES

 

In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MODERN MEDICAL MODALITIES CORPORATION
Dated: August 16,  2010		/s/  Baruh Hayut
		Baruh Hayut
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)
Dated: August 16, 2010		/s/  Minesh Patel
		Minesh Patel
		Chief Financial Officer
		(Principal Financial and Accounting Officer)