Dear Stockholders:

I am pleased to report to you that FONAR is finally becoming the success that our stockholders have patiently been waiting for and our employees have been so diligently working towards.

Booming Sales and Installations

In last year’s shareholder letter, I reported to you that we had at that point sold 38 Stand-Up™ MRIs and installed 18. Now I am pleased to deliver the good news that we have, in just one year's time, doubled those numbers. As of the March 31, 2004, the end of the 3rd Quarter of Fiscal 2004, we had sold 76 Stand-Up™ MRIs and installed 40. Some of these sales have not been previously announced.

A chart and table of the Stand-Up™ MRI sales is provided. Notice the cyclical nature of sales during the year with the April 1 to June 30 quarter being greatest, followed by the January 1 to March 31 quarter.

FONAR CORPORATION
Stand-Up™ MRI Unit Sales per Quarter
	2000-'01	2001-'02	2002-'03	2003-'04
July - Sept.	**	1	6	8
Oct. - Dec.	1	2	2	5
Jan. - Mar.	1	4	4	16
April - June	6	9	11	***
** This period is prior to commencement of Stand-Up™ MRI sales *** Current period

The Stand-Up™ MRI - The World’s Only Position Imaging MRI Scanner

Seeing Pathology that Lie-Down MRIs Miss

There are three major reasons for the success of the Stand-Up™ MRI product. First, the Stand-Up™ MRI detects pathology that lie-down MRI scanners can miss. The importance of this feature to physicians must not be underestimated. Certain medical problems manifest themselves only when patients are in a particular position. Every one of our competitors' whole-body MRI scanners can only scan patients lying down. If the problem can only be seen, say, when the patient is sitting up, then a recumbent-only scanner will miss it. Only the Stand-Up™ MRI will detect it. With the Stand-Up™ MRI, patients can be scanned in any position, including sitting, standing, bending, in flexion and extension, or lying down. We call this unique ability Position Imaging™ (pMRI™). The ability of the Stand-Up™ MRI to scan a patient in a weight-bearing position, or in any other position in which the patient experiences pain or other symptoms, has enabled it to detect pathology that went undetected on conventional lie-down (recumbent) MRI scanners.

Dr. Francis Smith, a researcher at the University of Aberdeen in Scotland, scanned 63 patients with unexplained low back pain on the University's Stand-Up™ MRI. In the scientific paper he delivered at the November 2003 meeting of the Radiological Society of North America in Chicago, Dr. Smith reported that he found that 10% of the patients had a previously unsuspected spinal instability. He also discovered "in 56 cases there was obvious prolapse of the intervertebral disc, whose degree of prolapse changed between the neutral position and either flexion or extension."

This is key information. The National Center for Health Statistics reports that "14% of new patient visits to physicians each year are due to low back pain, and almost 13 million physician visits per year occur because of chronic low back pain." Back pain is second only to the common cold as a cause of lost time from work. Accordingly, it comes as no surprise that roughly half of all MRI scans performed today are of the spine. Thus Position Imaging™ provides a very important contribution to the practice of medicine.

Regarding surgeons and lie-down-only MRIs, multiple Stand-Up™ MRI owner Dr. Manuel Rose said, "Relying solely on an MRI exam of a supine patient is inadequate. Through no fault of their own, surgeons are at a serious disadvantage that could consequently result in failed surgeries. With the Stand-Up™ MRI, the surgeon can, for the first time, visualize pathology in both the supine and upright positions, allowing him to accurately evaluate the full extent of the problem."

It is no wonder that the Stand-Up™ MRI continues to be the most exciting and talked-about advancement in the field of MRI.

Extraordinary Quality

The second reason for the success of this product is that the Stand-Up™ MRI is built upon a proven platform of 0.6 Tesla technology, which means the Stand-Up™ MRI produces images of exceptional quality. FONAR introduced high-field Open MRI and remains the most experienced provider of this technology.

Our R&D scientists and engineers constantly strive to improve the product. For example, tremendous strides have been made over the past year in the development of RF receiver coils. Our ever-expanding offering of quadrature and planar receiver coils improves the quality of images and allow for more accurate diagnoses. I am pleased that our staff of scientists and engineers is equipped and eager to continue to advance the opportunities offered by the only whole-body diagnostic machine in the world that is capable of scanning patients in virtually any position.

An Unparalleled Level of Patient Comfort

The third reason for the success of this product is that it is simply the most Patient-Friendly™ MRI scanner in the world. We hear it from our users all the time, "Patients love the Stand-Up™ MRI." What a welcome difference from the highly claustrophobic and noisy "tube," or "tunnel," MRIs that the public has unfortunately become accustomed to!

Stand-Up™ MRI patients typically sit and watch a 42-inch flat screen TV throughout their scans. Patients anxious about the confining space of MRI scanners and their noise, who had repeatedly failed to tolerate other MRIs, including "open" MRIs, are regularly scanned at Stand-Up™ MRI centers. These patients are invariably relieved and extremely grateful to finally have their problems addressed and to be able to proceed with their treatment plans. Moreover, the rising obesity problem in the U.S. has generated a remarkable increase in patients that are too large to be scanned in any MRI other than the FONAR Stand-Up™ MRI. The record to date for a FONAR upright scan is 492 lbs.

Marketing Events

In the past, our major marketing event has been our exhibition at the November/December annual meeting of the Radiological Society of North America (RSNA) in Chicago. Attended by 60,000, it is the largest medical meeting in the world. Our targeted customers at RSNA are primarily independent radiology groups and hospitals.

Surgeons, particularly spine surgeons, comprise another very important market for our product because the Stand-Up™ MRI is the only diagnostic modality that can give surgeons the complete picture of their patients’ problems. Only the Stand-Up™ MRI can enable the evaluation of pathology in different positions and under weight-bearing and non-weight-bearing conditions, providing key information that surgeons need to optimize their surgical results and reduce the risk of failed surgeries.

Accordingly, we are actively addressing the surgical marketplace by presenting the Stand-Up™ MRI at surgery and surgery-related meetings throughout the year. In October, 2003, we attended the 18th annual meeting of the North American Spine Society (NASS) in San Diego, California. Attended by 2,500 spine surgeons, the FONAR’s first-time exhibit was the 5th largest of the 130 exhibits on the floor of the show. In March, 2004, we exhibited at the 71st annual meeting of the American Academy of Orthopedic Surgeons (AAOS) in San Francisco, California. Attended by 30,000, including 14,000 orthopedic surgeons and related healthcare professionals, FONAR’s 2nd-time exhibit was among the larger of some 400 technical exhibits. Our attendance at RSNA, NASS and AAOS has produced a substantial number of qualified sales leads. In May, 2004, we will be attending, for the first time, the annual meeting of the America Association of Neurological Surgeons (AANS) in Orlando, Florida. Estimated attendance for that meeting is approximately 3,000 neurosurgeons and related healthcare professionals.

HMCA

Health Management Corporation of America (HMCA), our wholly-owned physician and diagnostic services management subsidiary, has undergone some very positive changes. With the opening of Stand-Up™ MRI of Boca Raton, Florida, P.A., we now have four HMCA-managed Stand-Up™ MRI scanning centers in operation. In March, 2004, our Islandia, New York facility, the first HMCA-managed Stand-Up™ MRI facility, completed over 450 scans. This center produced $1.1 million in operating income in fiscal 2003. Our Bensonhurst, New York facility, the second HMCA-managed Stand-Up™ MRI facility, completed over 400 scans for the first time; and the Staten Island, New York facility, our third, completed over 200 scans.

Our plan is to complete Stand-Up™ MRI upgrades at as many HMCA-managed sites as possible. At present, HMCA manages 10 diagnostic imaging centers, primarily in New York and Florida, and plans to expand the number of its Stand-Up™ MRI centers as quickly as capital allows. We are now in the process of installing a Stand-Up™ MRI in East Elmhurst, New York, which will become the HMCA's 5th Stand-Up™ MRI facility.

HMCA has completed the process of closing poor-performers, including some multi-specialty practices and MRI scanning facilities, and we are planning to upgrade all the remaining HMCA scanning centers with new FONAR scanners. While the closing down of poor performers results in a temporary loss of management revenues, the savings in expenses will more than compensate and thereby ultimately add to FONAR’s profitability.

Revenues Growing

FONAR has also experienced eight (8) consecutive years of growth in total revenue, from under $14M in Fiscal 1996 to approximately $52.9M in Fiscal 2003. I am pleased to report that results from the first two quarters of Fiscal 2004 show that the trend is continuing.

Total Revenues Table for the Past 3 1/2 Years
Fiscal 2001	$42,273,000
Fiscal 2002	$43,161,000
Fiscal 2003	$52,892,000
1st 6 Months of Fiscal 2004	$31,191,000

My Sincere Thanks to Our Stockholders and Employees

We are becoming successful. Revenues are on the increase and sales are up. We now have over 76 Stand-Up™ MRI sales, more than twice the number we had at this time last year. Most of our sales have been to multiple-unit purchasers, perhaps the most potent endorsement of our product.

I believe that our decision to focus our time, energy and resources on the development, sales and marketing of the Stand-Up™ MRI is finally delivering the results that we have all so diligently been working towards.
I remain grateful to FONAR employees and stockholders, especially the ones who have stood by us for so many years.

It has been said, “A rising tide lifts all boats.” I see Upright Imaging™, which only the Stand-Up™ MRI can provide, on the rise. Interest is continually growing among physicians of all specialties, orthopedic surgeons, neurosurgeons, radiologists and hospitals and independent diagnostic centers. I believe as the tide of Upright Imaging™ continues to rise, it will be FONAR customers and their patients, FONAR employees, and FONAR stockholders that will rise along with it.

Sincerely,

Raymond V. Damadian
President and Chairman

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MRI Specialist, Stand-Up, Upright, Position Imaging and PMRI are trademarks of FONAR Corporation.

This release may include forward-looking statements from the company that may or may not materialize. Additional information on factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.
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