FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ For the quarterly period ended MARCH 31, 2023

Commission file number 0-10248

FONAR CORPORATION

(Exact name of registrant as specified in its charter)

delaware		11-2464137
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

110 Marcus Drive Melville, New York		11747
Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (631) 694-2929

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 YES _X_ NO ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit such files Yes YES _X_ NO ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of accelerated filer, large accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer___ Accelerated filer ___ Non-accelerated filer _X_ Smaller reporting company _X_ Emerging growth company ___☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ___ NO _X_

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

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock		FONR		NASDAQ Capital Market

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date.

Class		Outstanding at May 5, 2023
Common Stock, par value $.0001		6,538,148
Class B Common Stock, par value $.0001		146
Class C Common Stock, par value $.0001		382,513
Class A Preferred Stock, par value $.0001		313,438

Page 1

FONAR CORPORATION AND SUBSIDIARIES

INDEX

PART I - FINANCIAL INFORMATION		PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2023 (Unaudited) and June 30, 2022		3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2023 and March 31, 2022 (Unaudited)		6
Condensed Consolidated Statements of Income for the Nine Months Ended March 31, 2023 and March 31, 2022 (Unaudited)		7
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2023 and March 31, 2022 (Unaudited)		8
Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended March 31, 2023 and March 31, 2022 (Unaudited)		9
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and March 31, 2022 (Unaudited)		10
Notes to Condensed Consolidated Financial Statements (Unaudited)		11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		34
PART II - OTHER INFORMATION		34
Item 1. Legal Proceedings		34
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		36
Item 4. Mine Safety Disclosures		36
Item 5. Other Information		36
Item 6. Exhibits		37
Signatures		37

Page 2

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)

ASSETS


	March 31, 2023		June 30, 2022 *
Current Assets:
Cash and cash equivalents	$	49,640	$	48,723
Short term investments		32		32
Accounts receivable – net		3,720		4,336
Accounts receivable - related party		30		—
Medical receivable – net		20,460		20,109
Management and other fees receivable – net		35,201		33,419
Management and other fees receivable – related medical practices – net		9,088		8,603
Inventories		2,661		2,360
Prepaid expenses and other current assets		1,166		1,104
Total Current Assets		121,998		118,686

Accounts receivable – long term		1,003		1,872
Deferred income tax asset - net		10,911		12,843
Property and equipment – net		22,775		22,282
Right-of-use Asset – operating lease		33,581		34,232
Right-of-use Asset – financing lease		779		928
Goodwill		4,269		4,269
Other intangible assets – net		3,494		3,704
Other assets		526		526
Total Assets	$	199,336	$	199,342

*Condensed from audited financial statements.

See accompanying notes to condensed consolidated financial statements.

Page 3

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	March 31, 2023		June 30, 2022 *
Current Liabilities:
Current portion of long-term debt	$	43	$	40
Accounts payable		1,719		1,552
Other current liabilities		3,496		6,417
Unearned revenue on service contracts		3,615		4,289
Unearned revenue on service contracts – related party		28		—
Operating lease liability - current portion		3,981		3,880
Financing lease liability - current portion		217		210
Customer deposits		826		361
Total Current Liabilities		13,925		16,749

Long-Term Liabilities:
Unearned revenue on service contracts		1,015		1,857
Deferred income tax liability		216		216
Due to related medical practices		93		93
Operating lease liability – net of current portion		32,630		33,091
Financing lease liability – net of current portion		657		838
Long-term debt less current portion		126		155
Other liabilities		57		107
Total Long-Term Liabilities		34,794		36,357
Total Liabilities		48,719		53,106

*Condensed from audited financial statements.

See accompanying notes to condensed consolidated financial statements.

Page 4

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY (Continued)

STOCKHOLDERS' EQUITY:	March 31, 2023			June 30, 2022*
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at March 31, 2023 and June 30, 2022, 313 issued and outstanding at March 31, 2023 and June 30, 2022	$	—		$	—
Preferred stock $.001 par value; 567 shares authorized at March 31, 2023 and June 30, 2022, issued and outstanding – none		—			—
Common Stock $.0001 par value; 8,500 shares authorized at March 31, 2023 and June 30, 2022, 6,607 and 6,566 issued at March 31, 2023 and June 30, 2022, respectively 6,538 and 6,554 outstanding at March 31, 2023 and June 30, 2022 respectively		1			1
Class B Common Stock (10 votes per share) $.0001 par value; 227 shares authorized at March 31, 2023 and June 30, 2022, .146 issued and outstanding at March 31, 2023 and June 30, 2022		—			—
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at March 31, 2023 and June 30, 2022, 383 issued and outstanding at March 31, 2023 and June 30, 2022		—			—
Paid-in capital in excess of par value		184,130			184,531
Accumulated deficit		(25,428	)		(33,567	)
Treasury stock, at cost - 69 shares of common stock at March 31, 2023 and 12 shares of common stock at June 30, 2022		(1,522	)		(675	)
Total Fonar Corporation’s Stockholders’ Equity		157,181			150,290
Noncontrolling interests		(6,564	)		(4,054	)
Total Stockholders' Equity		150,617			146,236
Total Liabilities and Stockholders' Equity	$	199,336		$	199,342

*Condensed from audited financial statements.

See accompanying notes to condensed consolidated financial statements.

Page 5

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)


	FOR THE THREE MONTHS ENDED MARCH 31,
REVENUES	2023			2022
Patient fee revenue – net of contractual allowances and discounts	$	8,188		$	7,641
Product sales – net		25			135
Service and repair fees – net		1,831			1,876
Service and repair fees - related parties – net		28			28
Management and other fees – net		12,375			11,904
Management and other fees - related medical practices – net		2,975			2,987
Total Revenues – Net		25,422			24,571
COSTS AND EXPENSES
Costs related to patient fee revenue		4,056			3,306
Costs related to product sales		196			53
Costs related to service and repair fees		801			747
Costs related to service and repair fees - related parties		12			11
Costs related to management and other fees		7,157			6,696
Costs related to management and other fees – related medical practices		1,455			1,698
Research and development		435			354
Selling, general and administrative		7,143			6,068
Total Costs and Expenses		21,255			18,933
Income From Operations		4,167			5,638
Other Expense		(6	)		—
Interest (Expense) Income		(15	)		31
Investment Income		356			58
Income Before Provision for Income Taxes and Noncontrolling Interests		4,502			5,727
Provision for Income Taxes		(17	)		(2,465	)
Net Income		4,485			3,262
Net Income - Noncontrolling Interests		(625	)		(971	)
Net Income – Attributable to FONAR	$	3,860		$	2,291
STATEMENT OF INCOME
Net Income Available to Common Stockholders	$	3,627		$	2,153
Net Income Available to Class A Non-Voting Preferred Stockholders	$	174		$	103
Net Income Available to Class C Common Stockholders	$	59		$	35
Basic Net Income Per Common Share Available to Common Stockholders	$	0.56		$	0.33
Diluted Net Income Per Common Share Available to Common Stockholders	$	0.55		$	0.32
Basic and Diluted Income Per Share – Class C Common	$	0.16		$	0.09
Weighted Average Basic Shares Outstanding – Common Stockholders		6,481			6,554
Weighted Average Diluted Shares Outstanding - Common Stockholders		6,609			6,682
Weighted Average Basic and Diluted Shares Outstanding – Class C Common		383			383

See accompanying notes to condensed consolidated financial statements.

Page 6

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)


	FOR THE NINE MONTHS ENDED MARCH 31,
REVENUES	2023			2022
Patient fee revenue – net of contractual allowances and discounts	$	21,393		$	21,935
Product sales – net		225			481
Service and repair fees – net		5,489			5,720
Service and repair fees - related parties – net		83			83
Management and other fees – net		36,717			35,985
Management and other fees - related medical practices – net		8,962			8,576
Total Revenues – Net		72,869			72,780
COSTS AND EXPENSES
Costs related to patient fee revenue		11,879			9,785
Costs related to product sales		580			352
Costs related to service and repair fees		2,241			2,190
Costs related to service and repair fees - related parties		34			32
Costs related to management and other fees		20,281			20,497
Costs related to management and other fees – related medical practices		4,345			5,024
Research and development		1,126			1,109
Selling, general and administrative		20,074			15,928
Total Costs and Expenses		60,560			54,917
Income From Operations		12,309			17,863
Other (Expense) Income		(203	)		858
Interest Expense		(41	)		(9	)
Investment Income		770			180
Income Before Provision for Income Taxes and Noncontrolling Interests		12,835			18,892
Provision for Income Taxes		(2,889	)		(5,311	)
Net Income		9,946			13,581
Net Income - Noncontrolling Interests		(1,807	)		(3,383	)
Net Income – Attributable to FONAR	$	8,139		$	10,198
STATEMENT OF INCOME
Net Income Available to Common Stockholders	$	7,647		$	9,583
Net Income Available to Class A Non-Voting Preferred Stockholders	$	367		$	458
Net Income Available to Class C Common Stockholders	$	125		$	157
Basic Net Income Per Common Share Available to Common Stockholders	$	1.18		$	1.46
Diluted Net Income Per Common Share Available to Common Stockholders	$	1.16		$	1.43
Basic and Diluted Income Per Share – Class C Common	$	0.33		$	0.41
Weighted Average Basic Shares Outstanding – Common Stockholders		6,487			6,554
Weighted Average Diluted Shares Outstanding - Common Stockholders		6,615			6,682
Weighted Average Basic and Diluted Shares Outstanding – Class C Common		383			383

See accompanying notes to condensed consolidated financial statements.

Page 7

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts and shares in thousands, except per share amounts)

(UNAUDITED)

For the Three Months Ending March 31, 2023

SEC Form 10-Q filed by Fonar Corporation