0000355019-21-000009.txt : 20210216 0000355019-21-000009.hdr.sgml : 20210216 20210216150339 ACCESSION NUMBER: 0000355019-21-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20201231 FILED AS OF DATE: 20210216 DATE AS OF CHANGE: 20210216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FONAR CORP CENTRAL INDEX KEY: 0000355019 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 112464137 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10248 FILM NUMBER: 21636746 BUSINESS ADDRESS: STREET 1: 110 MARCUS DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 6316942929 MAIL ADDRESS: STREET 1: 110 MARCUS DRIVE CITY: MELVILLE STATE: NY ZIP: 11747 10-Q 1 fonar_10q-final.htm FONAR CORPORATION 10-Q ENDED DECEMBER 31, 2020

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 DECEMBER 31, 2020

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 _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 _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_

 

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 February 5, 2021
Common Stock, par value $.0001  6,554,210
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

 

  

 

FONAR CORPORATION AND SUBSIDIARIES

 

 

INDEX

 

 

PART I - FINANCIAL INFORMATION  PAGE
Item 1. Financial Statements
   
Condensed Consolidated Balance Sheets - December 31, 2020 (Unaudited) and June 30, 2020
  3
Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2020 and December 31, 2019 (Unaudited)
  6
Condensed Consolidated Statements of Income for the Six Months Ended December 31, 2020 and December 31, 2019 (Unaudited)
  7
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended December 31, 2020 and December 31, 2019 (Unaudited)
  8
Condensed Consolidated Statements of Changes in Equity for the Six Months Ended December 31, 2020 and December 31, 2019 (Unaudited)
  9
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2020 and December 30, 2019 (Unaudited)
  10
Notes to Condensed Consolidated Financial Statements (Unaudited)
  11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
  26
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
  36
Signatures  37

 

 

 

 Page 2 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

ASSETS

 

   December 31,
2020
  June 30,
2020 *
Current Assets:          
 Cash and cash equivalents  $40,579   $36,802 
 Short term investments   32    32 
 Accounts receivable – net   4,171    4,313 
 Accounts receivable - related party   72    6 
 Medical receivable – net   16,373    16,172 
 Management and other fees receivable – net   29,808    27,438 
Management and other fees receivable – related medical practices – net   7,262    6,896 
 Inventories   1,844    1,649 
Costs and estimated earnings in excess of billings on uncompleted contracts   153    153 
 Income tax receivable   —      671 
 Prepaid expenses and other current assets   1,302    1,758 

 

 Total Current Assets

   101,596    95,890 
           
Accounts receivable   2,594    2,730 
 Deferred income tax asset   16,848    18,810 
 Property and equipment – net   21,683    21,364 
 Right-of-use Asset – operating lease   29,570    31,392 
 Right-of-use Asset – financing lease   1,226    1,326 
 Goodwill   3,985    3,985 
 Other intangible assets – net   4,014    4,109 
 Other assets   632    653 

  

Total Assets

  $182,148   $180,259 

 

*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

 

   December 31,
2020
  June 30,
2020 *
Current Liabilities:          
Current portion of long-term debt and capital leases  $222   $108 
Accounts payable   2,198    1,965 
Other current liabilities   5,584    8,185 
 Unearned revenue on service contracts   4,029    4,105 
 Unearned revenue on service contracts – related party   55    —   
 Operating lease liability - current portion   3,403    3,370 
 Financing lease liability - current portion   200    75 
Customer deposits   1,232    855 
           
Total Current Liabilities   16,923    18,663 
           
Long-Term Liabilities:          
 Unearned revenue on service contracts   2,528    2,656 
 Deferred income tax liability   234    234 
 Due to related medical practices   93    93 
 Operating lease liability – net of current portion   28,415    30,105 
 Financing lease liability – net of current portion   1,151    1,251 
 Long-term debt and capital leases, less current portion   780    865 
 Other liabilities   148    150 
           
Total Long-Term Liabilities   33,349    35,354 

 

Total Liabilities

   50,272    54,017 

 

*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:  December 31, 2020  June 30,
2020 *
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2020 and June 30, 2020, 313 issued and outstanding at December 31, 2020 and June 30, 2020  $—     $—   
Preferred stock $.001 par value; 567 shares authorized at December 31, 2020 and June 30, 2020, issued and outstanding – none   —      —   
Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2020 and June 30, 2020, 6,566 and 6,459 issued at December 31, 2020 and June 30, 2020, 6,554 and 6,447 outstanding at December 31, 2020and June 30, 2020   1    1 
Class B Common Stock (10 votes per share) $.0001 par value; 227 shares authorized at December 31, 2020 and June 30, 2020; .146 issued and outstanding at December 31, 2020 and June 30, 2020   —      —   
 Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2020 and June 30, 2020, 383 issued and outstanding at December 31, 2020 and June 30, 2020   —      —   
 Paid-in capital in excess of par value   185,101    183,076 
 Accumulated deficit   (50,596)   (56,215)
Treasury stock, at cost - 12 shares of common stock at December 31, 2020 and June 30, 2020   (675)   (675)
 Total Fonar Corporation’s Stockholders’ Equity   133,831    126,187 
 Noncontrolling interests   (1,955)   55 
 Total Stockholders' Equity   131,876    126,242 
 Total Liabilities and Stockholders' Equity  $182,148   $180,259 

 

*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 DECEMBER 31,
REVENUES  2020  2019
Patient fee revenue – net of contractual allowances and discounts  $5,238   $5,996 
Product sales – net   3    3 
Service and repair fees – net   1,862    2,038 
Service and repair fees - related parties – net   28    28 
Management and other fees – net   11,340    10,996 
Management and other fees - related medical practices – net   2,693    2,390 
Total Revenues – Net   21,164    21,451 
COSTS AND EXPENSES          
Costs related to patient fee revenue   2,649    2,958 
Costs related to product sales   192    120 
Costs related to service and repair fees   608    772 
Costs related to service and repair fees - related parties   9    10 
Costs related to management and other fees   6,237    6,203 
Costs related to management and other fees – related medical practices   1,522    1,621 
Research and development   424    583 
Selling, general and administrative   4,541    4,163 
Total Costs and Expenses   16,182    16,430 
Income From Operations   4,982    5,021 
Interest Expense   (16)   (19)
Investment Income   75    139 
Income Before Provision for Income Taxes and Noncontrolling Interests   5,041    5,141 
Provision for Income Taxes   (1,113)   (932)
Net Income   3,928    4,209 
Net Income - Noncontrolling Interests   (817)   (1,105)
Net Income – Attributable to FONAR  $3,111   $3,104 
Net Income Available to Common Stockholders  $2,923   $2,914 
Net Income Available to Class A Non-Voting Preferred Stockholders  $140   $142 
Net Income Available to Class C Common Stockholders  $48   $48 
Basic Net Income Per Common Share Available to Common Stockholders  $0.45   $0.45 
Diluted Net Income Per Common Share Available to Common Stockholders  $0.44   $0.44 
Basic and Diluted Income Per Share – Class C Common  $0.12   $0.13 
Weighted Average Basic Shares Outstanding – Common Stockholders   6,465    6,447 
Weighted Average Diluted Shares Outstanding - Common Stockholders   6,593    6,575 
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 SIX MONTHS ENDED DECEMBER 31,
REVENUES  2020  2019
Patient fee revenue – net of contractual allowances and discounts  $10,330   $12,041 
Product sales – net   31    195 
Service and repair fees – net   3,788    4,102 
Service and repair fees - related parties – net   55    55 
Management and other fees – net   22,554    22,024 
Management and other fees - related medical practices – net   5,386    4,780 
Total Revenues – Net   42,144    43,197 
COSTS AND EXPENSES          
Costs related to patient fee revenue   5,169    5,820 
Costs related to product sales   325    450 
Costs related to service and repair fees   1,234    1,522 
Costs related to service and repair fees - related parties   18    20 
Costs related to management and other fees   11,788    12,208 
Costs related to management and other fees – related medical practices   2,950    3,157 
Research and development   824    1,055 
Selling, general and administrative   10,704    8,458 
Total Costs and Expenses   33,012    32,690 
Income From Operations   9,132    10,507 
Other Expenses   (140)   —   
Interest Expense   (38)   (40)
Investment Income   187    287 
Income Before Provision for Income Taxes and Noncontrolling Interests   9,141    10,754 
Provision for Income Taxes   (1,962)   (2,039)
Net Income   7,179    8,715 
Net Income - Noncontrolling Interests   (1,560)   (2,313)
Net Income – Attributable to FONAR  $5,619   $6,402 
Net Income Available to Common Stockholders  $5,281   $6,010 
Net Income Available to Class A Non-Voting Preferred Stockholders  $252   $292 
Net Income Available to Class C Common Stockholders  $86   $100 
Basic Net Income Per Common Share Available to Common Stockholders  $0.82   $0.93 
Diluted Net Income Per Common Share Available to Common Stockholders  $0.80   $0.92 
Basic and Diluted Income Per Share – Class C Common  $0.23   $0.26 
Weighted Average Basic Shares Outstanding – Common Stockholders   6,456    6,440 
Weighted Average Diluted Shares Outstanding - Common Stockholders   6,584    6,568 
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 STATEMENTS OF CHANGES IN EQUITY

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

(UNAUDITED)

 

 

For the Three Months Ending December 31, 2020

 

   Common Stock  Paid in capital in excess of par value  Accumulated Deficit  Treasury Stock  Non Controlling Interests  Total
Balance - September 30, 2020  $1   $183,076   ($53,707)  ($675)  ($642)  $128,053 
Issuance of Common Stock   —      2,025    —                2,025 
Net income   —      —      3,111    —      —      3,111 
Distributions - Non controlling   —      —      —      —      (2,130)   (2,130)
Income - Non controlling interests   —      —      —      —      817    817 
Balance - December 31, 2020  $1   $185,101   ($50,596)  ($675)  ($1,955)  $131,876 

 

 

For the Three Months Ending December 31, 2019

 

   Common Stock  Paid in capital in excess of par value  Accumulated Deficit  Treasury Stock  Non Controlling Interests  Total
Balance - September 30, 2019  $1   $183,076   ($61,157)  ($675)  $1,609   $122,854 
Net income   —      —      3,104         —      3,104 
Distributions - Non controlling   —      —      —      —      (1,980)   (1,980)
Income - Non controlling interests   —      —      —      —      1,105    1,105 
Balance - December 31, 2019  $1   $183,076   ($58,053)  ($675)  $734   $125,083 
 Page 8 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(UNAUDITED)

 

 

For the Six Months Ending December 31, 2020

 

   Common Stock  Paid in capital in excess of par value  Accumulated Deficit  Treasury Stock  Non Controlling Interests  Total
Balance - June 30, 2020  $1   $183,076   ($56,215)  ($675)  $55   $126,242 
Issuance of Common Stock   —      2,025    —           —      2,025 
Net income   —      —      5,619    —           5,619 
Distributions - Non controlling   —      —      —      —      (3,570)   (3,570)
Income - Non controlling interests   —      —      —      —      1,560    1,560 
Balance - December 31, 2020  $1   $185,101   ($50,596)  ($675)  ($1,955)  $131,876 
                               

 

 

For the Six Months Ending December 31, 2019

 

   Common Stock  Paid in capital in excess of par value  Accumulated Deficit  Treasury Stock  Non Controlling Interests  Total
Balance - June 30, 2019  $1   $181,086   ($64,455)  ($675)  $2,156   $118,113 
Issuance of Common Stock   —      1,990    —           —      1,990 
Net income   —      —      6,402    —      —      6,402 
Distributions - Non controlling   —      —      —      —      (3,735)   (3,735)
Income - Non controlling interests   —      —      —      —      2,313    2,313 
Balance - December 31, 2019  $1   $183,076   ($58,053)  ($675)  $734   $125,083 

 

 Page 9 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(UNAUDITED)

 

  

FOR THE SIX MONTHS

ENDED DECEMBER 31,

   2020  2019
Cash Flows from Operating Activities:          
 Net income  $7,179   $8,715 
 Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   2,009    2,003 
Amortization on right-of-use assets   1,922    1,656 
Provision(Recovery) for bad debts   2,825    (978)
Deferred income tax – net   1,962    1,816 
Compensatory element of stock issuances   83    —   
Stock issued for costs and expenses   1,941    1,990 
Abandoned patents   1    —   
(Increase) decrease in operating assets, net:          
Accounts, medical and management fee receivable(s)   (5,549)   (4,300)
Notes receivable   25    11 
Costs and estimated earnings in excess of billings on uncompleted contracts   —      372 
Inventories   (195)   47 
Income tax receivable   671    —   
Prepaid expenses and other current assets   452    330 
Other assets   (1)   (45)
Increase (decrease) in operating liabilities, net:          
Accounts payable   233    (576)
Other current liabilities   (2,748)   430 
Operating lease liabilities   (1,657)   (1,447)
Financing lease liabilities   24    —   
Customer deposits   378    28 
Billings in excess of costs and estimated earnings on uncompleted contracts   —      12 
Other liabilities   (3)   123 
Net cash provided by operating activities   9,552    10,187 
 Cash Flows from Investing Activities:          
Purchases of property and equipment   (2,143)   (4,656)
Purchase of short term investment   —      (199)
Cost of patents   (90)   (62)
Net cash used in investing activities   (2,233)   (4,917)
 Cash Flows from Financing Activities:          
 Repayment of borrowings and capital lease obligations   (35)   (24)
 Proceeds from debt   63    —   
 Distributions to noncontrolling interests   (3,570)   (3,735)
Net cash used in financing activities   (3,542)   (3,759)
 Net Increase in Cash and Cash Equivalents   3,777    1,511 
Cash and Cash Equivalents - Beginning of Period   36,802    13,882 
Cash and Cash Equivalents - End of Period  $40,579   $15,393 

 

See accompanying notes to condensed consolidated financial statements.  

 

 Page 10 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Description of Business

 

Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name “Health Management Company of America”.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended December 31, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed on October 1, 2020 for the fiscal year ended June 30, 2020.

 

During March 2020 the global pandemic of COVID-19 has caused turbulence and uncertainty in the United States and international markets and economies which has adversely effected our workforce, liquidity, financial conditions, revenues, profitability and business operations. Generally COVID-19 had caused us to require that much of our workforce work from home and has restricted the ability of our personnel to travel for marketing purposes or to service our customers. The Company experienced a sudden drop in scan volume for a short term period and while the Company is not back to pre-COVID-19 levels, the volume has risen. At the end of fiscal year ending June 30, 2020, the Company was able to enact certain decisions to allow the Company to survive during the global pandemic and from further losses or additional decreases in scan volume. The Company immediately enacted wide scale furloughs, deferment of up to 50% of management salaries, halted variable compensation plans and rent deferrals we negotiated with the majority of all landlords. The Company also received some government stimulus funds from the Paycheck Protection Program (“PPP”) and Medicare advances/stimulus payments. Although we are unable to predict if there will be additional consequences on our operations from the continuing global pandemic of COVID-19, the Company believes with positive cash flows, low debt and cash on hand, it will be able to continue operations going forward.

 Page 11 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Revenues

 

On July 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

 

Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

 

Earnings Per Share

 

Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the if converted method in calculating diluted income per share for the three and six months ended December 31, 2020 and 2019.

 

Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and six months ended December 31, 2020 and 2019, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

 

 Page 12 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Earnings Per Share (Continued)

 

   Three months ended
December 31, 2020
  Three months ended
December 31, 2019
   Total  Common Stock  Class C Common
Stock
  Total  Common Stock  Class C Common
Stock
Basic                  
Numerator: 
Net income available to common stockholders
  $3,111   $2,923   $48   $3,104   $2,914   $48 
Denominator:                              
Weighted average shares outstanding   6,465    6,465    383    6,447    6,447    383 
Basic income per common share  $0.48   $0.45   $0.12   $0.48   $0.45   $0.13 
Diluted                              
Denominator:
Weighted average shares outstanding
        6,465    383         6,447    383 
Convertible Class C Stock        128    —           128    —   
Total Denominator for diluted earnings per share        6,593    383         6,575    383 
Diluted income per common share       $0.44   $0.12        $0.44   $0.13 

 

 

   Six months ended
December 31, 2020
  Six months ended
December 31, 2019
   Total  Common Stock  Class C Common
Stock
  Total  Common Stock  Class C Common
Stock
Basic                  
Numerator: 
Net income available to common stockholders
  $5,619   $5,281   $86   $6,402   $6,010   $100 
Denominator:                              
Weighted average shares outstanding   6,456    6,456    383    6,440    6,440    383 
Basic income per common share  $0.87   $0.82   $0.23   $0.99   $0.93   $0.26 
Diluted                              
Denominator:
Weighted average shares outstanding
        6,456    383         6,440    383 
Convertible Class C Stock        128    —           128    —   
Total Denominator for diluted earnings per share        6,584    383         6,568    383 
Diluted income per common share       $0.80   $0.23        $0.92   $0.26 

  

 

 Page 13 

 

 FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 will be effective beginning in the first quarter of 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We are current evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of the adoption.

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted the Standard on July 1, 2020 and the impact of adopting this guidance will have no material impact on our Consolidated Financial Statements.

 

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of December 31, 2020 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2020 or 2019, and it does not believe that any of those pronouncements will have a significant impact on our consolidated condensed financial statements at the time they become effective. 

 

Reclassifications 

 

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on reported consolidated net income for any periods presented. 

 

 Page 14 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

 

 

 

NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE

 

Receivables, net is comprised of the following at December 31, 2020, and June 30, 2020:

 

   December 31, 2020
   Gross Receivable 

 

Allowance for doubtful accounts

  Net
Accounts receivable  $4,686   $515   $4,171 
Accounts receivable - related party  $72    —     $72 
Medical receivable  $16,373   $—     $16,373 
Management and other fees receivable  $43,298   $13,490   $29,808 
Management and other fees receivable from related medical practices ("PC’s")  $10,982   $3,720   $7,262 

 

 

   June 30, 2020
   Gross Receivable 

 

Allowance for doubtful accounts

  Net
Accounts receivable  $4,828   $515   $4,313 
Accounts receivable - related party  $6    —     $6 
Medical receivable  $16,172   $—     $16,172 
Management and other fees receivable  $38,501   $11,063   $27,438 
Management and other fees receivable from related medical practices ("PC’s")  $10,218   $3,322   $6,896 

 

The Company's customers are concentrated in the healthcare industry.

 

Accounts Receivable

 

Credit risk with respect to the Company’s accounts receivable related to product sales and service and repair fees is limited due to the customer advances received prior to the commencement of work performed and the billing of amounts to customers as sub-assemblies are completed. Service and repair fees are billed on a monthly or quarterly basis and the Company does not continue providing these services if accounts receivable become past due. The Company controls credit risk with respect to accounts receivable from service and repair fees through its credit evaluation process, credit limits, monitoring procedures and reasonably short collection terms. The Company performs ongoing credit authorizations before a product sales contract is entered into or service and repair fees are provided.

 

 Page 15 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (Continued)

 

Long Term Accounts Receivable

 

The Company will generate revenue from long-term, non-cancellable contracts to provide service and repair services. Future revenue to be recognized over the following four years as of December 31, 2020 is as follows:

 

2022   $853
2023    827
2024    752
2025    96
Total   $2,528

 

Medical Receivables

 

Medical receivables are due under fee-for-service contracts from third party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. The carrying amount of the medical receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. The Company determines allowances for contractual adjustments and uncollectible accounts based on specific agings, specific payor collection issues that have been identified and based on payor classifications and historical experience at each site.

 

Management and Other Fees Receivable

 

The Company's receivables from the related and non-related professional corporations (PC's) substantially consist of fees outstanding under management agreements. Payment of the outstanding fees is dependent on collection by the PC's of fees from third party medical reimbursement organizations, principally insurance companies and health management organizations.

 

Payment of the management fee receivables from the PC’s may be impaired by the inability of the PC’s to collect in a timely manner their medical fees from the third party payors, particularly insurance carriers covering automobile no-fault and workers compensation claims due to longer payment cycles and rigorous informational requirements and certain other disallowed claims. Approximately 66% and 60% of the PCs’ net revenues for the three months ended December 31, 2020 and 2019, respectively, were derived from no-fault and personal injury protection claims. Approximately 66% and 63% of the PCs’ net revenue for the six months ended December 31, 2020 and 2019, respectively, were derived from no-fault and personal injury protection claims. The Company considers the aging of its accounts receivable in determining the amount of allowance for doubtful accounts. The Company generally takes all legally available steps to collect its receivables. Credit losses associated with the receivables are provided for in the condensed consolidated financial statements and have historically been within management's expectations. 

 

 Page 16 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (CONTINUED)

 

Management and Other Fees Receivable (Continued)

 

Net revenues from management and other fees charged to the related PCs accounted for approximately 12.7% and 11.1% of the consolidated net revenues for the three months ended December 31, 2020 and 2019, respectively. Net revenues from management and other fees charged to the related PCs accounted for approximately 12.8% and 11.1% of the consolidated net revenues for the six months ended December 31, 2020 and 2019, respectively.

 

Tallahassee Magnetic Resonance Imaging, PA, Stand Up MRI of Boca Raton, PA and Stand Up MRI & Diagnostic Center, PA (all related medical practices) entered into a guaranty agreement, pursuant to which they cross guaranteed all management fees which are payable to the Company, which have arisen under each individual management agreement. Additional Company managed entities also operate under a guaranty agreement, pursuant to which management fees are payable to the Company.

 

The Company’s patient fee revenue, net of contractual allowances and discounts for the three and six months ended December 31, 2020 and 2019 are summarized in the following table.

 

  

For the Three Months Ended

December 31,

   2020  2019
Commercial Insurance/ Managed Care  $966   $1,335 
Medicare/Medicaid   206    276 
Workers' Compensation/Personal Injury   3,543    4,112 
Other   523    273 
Patient Fee Revenue, net of contractual allowances and discounts  $5,238   $5,996 

 

 

  

For the Six Months Ended

December 31,

   2020  2019
Commercial Insurance/ Managed Care  $1,912   $2,689 
Medicare/Medicaid   404    542 
Workers' Compensation/Personal Injury   6,930    8,406 
Other   1,084    404 
Patient Fee Revenue, net of contractual allowances and discounts  $10,330   $12,041 

 

 Page 17 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

 

NOTE 4 – OPERATING & FINANCING LEASES

 

During February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based upon the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Lease with a term of 12 months or less will be accounted for similar to existing guidance foOTr operating leases. The standard was effective for us beginning July 1, 2019. We have elected the optional transition method to apply the standard as of the effective date and therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements. We have also elected the transition package of the practical expedients permitted within the standard which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and indirect costs. The adoption of this guidance had a material impact on the Company’s balance sheet by virtue of including the present value of its future operating lease payments as a liability of $33.3 million and related right-to-use lease assets as of July 1, 2019. At the time of adoption of this guidance we had no significant financing leases.

 

The Company accounts for its various operating leases in accordance with Accounting Standards Codification (‘ASC’) 842 – Lease, as updated by ASU 2016-02. At the inception of a lease, the Company recognizes right-of-use lease assets and related lease liabilities measured at present value of future lease payments on its balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. Our most common initial term varies in length from 2 to 10 years. Including renewal options negotiated with the landlord, we have a total span of 2 to 16 years at the facilities we lease. The Company reviewed its contracts with vendors and customers, determining that its right-to-use lease assets consisted of only office space operating leases. In determining the right-to-use lease assets and liabilities, the Company did recognize lease extension options which the Company feels would be reasonably exercised. Also included in other current assets is a $202 receivable from a landlord for tenant improvements. Our incremental borrowing rate (“IBR”) used to discount the stream of operating lease payments is closely related to the interest rates available to the Company.

 

A reconciliation of operating and financing lease payments undiscounted cash flows to lease liabilities recognized as of December 31, 2020 is as follows:

 

Year Ending

December 31,

 

Operating Lease

Payments

  Financing Lease Payments
 2021   $4,960   $244 
 2022    4,877    244 
 2023    4,599    244 
 2024    4,480    244 
 2025    4,301    244 
 Thereafter    17,505    287 
 Present value discount    (8,904)   (156)
 Total lease liability   $31,818   $1,351 

 

 

 Page 18 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

  

NOTE 5 - INVENTORIES

 

Inventories included in the accompanying condensed consolidated balance sheets consist of the following:

 

  

December 31,

2020

 

June 30,

2020

Purchased parts, components and supplies  $1,614   $1,544 
Work-in-process   230    105 
Total Inventories  $1,844   $1,649 

 

 

 

 

NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

 

Information relating to uncompleted contracts is as follows:

 

  

December 31,

2020

 

June 30,

 2020

Costs incurred on uncompleted contracts  $448   $448 
Estimated earnings   309    309 
Subtotal   757    757 
Less: Billings to date   604    604 
Total Costs and estimated earnings in excess of billings on uncompleted contracts  $153   $153 

 

 

 Page 19 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECMEBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 7 – OTHER INTANGIBLE ASSETS

 

Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following:

 

  

December 31,

2020

 

June 30,

2020

Capitalized software development costs  $7,005   $7,005 
Patents and copyrights   5,171    5,082 
Non-compete   4,100    4,100 
Customer relationships   3,800    3,800 
Gross Other intangible assets   20,076    19,987 
Less: Accumulated amortization   16,062    15,878 
Other Intangible Assets  $4,014   $4,109 

 

  

Amortization of patents and copyrights for the three months ended December 31, 2020 and 2019 amounted to $44 and $47, respectively.

 

Amortization of non-compete for the three months ended December 31, 2020 and 2019 amounted to $0 and $147, respectively.

 

Amortization of customer relationships for the three months ended December 31, 2020 and 2019 amounted to $47 and $47, respectively.

 

Amortization of patents and copyrights for the six months ended December 31, 2020 and 2019 amounted to $89 and $94, respectively.

 

Amortization of non-compete for the six months ended December 31, 2020 and 2019 amounted to $0 and $293, respectively.

 

Amortization of customer relationships for the six months ended December 31, 2020 and 2019 amounted to $95 and $95, respectively.

 

 Page 20 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 8 – OTHER CURRENT LIABILITIES

 

Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following:

 

  

December 31,

2020

 

June 30,

2020

Accrued salaries, commissions and payroll taxes  $2,573   $4,492 
Litigation accruals   9    443 
Sales tax payable   1,123    1,353 
Legal and other professional fees   276    113 
Accounting fees   180    120 
Self-funded health insurance reserve   123    87 
Accrued interest and penalty   511    877 
Other   789    700 
Other Current Liabilities  $5,584   $8,185 

 

 

 

 NOTE 9 – STOCKHOLDERS EQUITY

 

Common Stock

 

During the six months ended December 31, 2020, the Company issued 102 shares of common stock for costs and expenses of $1,941 and 4 shares of common stock to employees and consultants as compensation valued at $83.

 

During the six months ended December 31, 2019, the Company issued 90 shares of common stock for costs and expenses of $1,990.

 

 

NOTE 10 - SEGMENT AND RELATED INFORMATION

 

The Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic imaging centers.

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2020. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations.

 

 Page 21 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 10 - SEGMENT AND RELATED INFORMATION (Continued)

 

The Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic imaging centers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2020. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations.

 

Summarized financial information concerning the Company's reportable segments is shown in the following table:

 

   Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the three months ended Dec. 31, 2020               
Net revenues from external customers  $1,893   $19,271   $21,164 
Inter-segment net revenues  $219   $—     $219 
(Loss) Income from operations  $(8)  $4,990   $4,982 
Depreciation and amortization  $65   $977   $1,042 
Capital expenditures  $70   $1,728   $1,798 
                
For the three months ended Dec. 31, 2019               
Net revenues from external customers  $2,069   $19,382   $21,451 
Inter-segment net revenues  $219   $—     $219 
(Loss) Income from operations  $(790)  $5,811   $5,021 
Depreciation and amortization  $94   $914   $1,008 
Capital expenditures  $153   $2,116   $2,269 

 

   Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the six months ended Dec. 31, 2020               
Net revenues from external customers  $3,874   $38,270   $42,144 
Inter-segment net revenues  $438   $—     $438 
(Loss) Income from operations  $(569)  $9,701   $9,132 
Depreciation and amortization  $132   $1,878   $2,010 
Capital expenditures  $90   $2,143   $2,233 
                
For the six months ended Dec. 31, 2019               
Net revenues from external customers  $4,352   $38,845   $43,197 
Inter-segment net revenues  $438   $—     $438 
(Loss) Income from operations  $(1,526)  $12,033   $10,507 
Depreciation and amortization  $185   $1,818   $2,003 
Capital expenditures  $1,754   $2,964   $4,718 

 

 

 Page 22 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

 

During the six months ended December 31, 2020 and December 31, 2019, the Company paid $35 and $14 for interest, respectively.

 

During the six months ended December 31, 2020 and December 31, 2019, the Company paid $145 and $228 for income taxes, respectively.

 

 

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

 

There were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2020.

 

Other Matters

 

In September 2020, the Company entered into a settlement agreement with an unrelated third party for a claim made during March 2018 which was scheduled for arbitration. The settlement was for $1.2 million of which $900 was paid by the Company’s insurance in September 2020. The Company paid the remaining balance of $315 in September 2020.

 

The Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. As of December 31, 2020, the Company has recorded tax obligations of approximately $1.1 million plus interest and penalties of approximately $466. The Company is in the process of determining the regulatory requirements in order to become compliant.

 

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $110 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of December 31, 2020 and June 30, 2020, the Company had approximately $123 and $87, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the condensed consolidated balance sheets.

 

The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant adjustments recorded in the periods covered by this report.

 

 Page 23 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 13 - INCOME TAXES

 

In accordance with ASC 740-270, Income Taxes – Interim Reporting, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and apply that rate to year-to-date ordinary income or loss. The resulting tax expense (or benefit) is adjusted for the tax effect of specific events, if any, required to be discretely recognized in the interim period as they occur. For the six months ended December 31, 2020 and 2019, the Company recorded income tax expense of $1,962 in 2020 as compared to $2,039 in 2019. The 2020 provision is comprised of a current income tax component of $0 and a deferred income tax component of $1,962. Obligations for any liability associated with the current income tax provision, has been reduced, primarily resulting from the benefits and utilization of net operating loss carryforwards.

 

ASC topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC topic 740. The Company believes there are no uncertain tax positions in prior years tax filings and therefore it has not recorded a liability for unrecognized tax benefits.

 

In accordance with ASC topic 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as “Interest expense, net”. Penalties if incurred would be recognized as a component of “Selling, general and administrative” expenses.

 

The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2016. 

 

The Company recorded a deferred tax asset of $16,848 and a deferred tax liability of $234 as of December 31, 2020, primarily relating to net operating loss carryforwards of approximately $47,208 available to offset future taxable income through 2031. The net operating losses begin to expire in 2023 for federal tax and state income tax purposes.

 

 Page 24 

 

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 and 2019

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

(UNAUDITED)

 

 

NOTE 13 - INCOME TAXES (Continued)

 

On March 27, 2020 Congress enacted the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding prior and future operation losses, temporary changes to prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections to prior tax legislation for tax depreciation of certain qualified improvement property and enhanced recoverability of AMT tax credits.

 

At the present time, the only impact of the CARES Act to the Company is allowing a full reimbursement of $1,342 of tax credits relating to the alternative minimum tax credits. The Company received the first half payment in June 2020. The balance of alternative minimum tax credits of $671 was received in July 2020. Previously, these credits were to be refunded over a 3 year period.

 

As we continue to monitor tax implications of the CARES Act and other state and federal stimulus tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities.

 

Future ownership changes as determined under Section 382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of December 31, 2020, no such changes in ownership have occurred.

 

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry and tax planning strategies in making this assessment. At present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for the partial value of the deferred tax asset, which principally related to research and development tax credits.

 

A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation.

 

 

NOTE 14 – SUBSEQUENT EVENTS

 

The Company has evaluated events that occurred subsequent to December 31, 2020 and through the date the condensed consolidated financial statements were issued.

 

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Item 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  

 

For the six month period ended December 31, 2020, we reported a net income of $7.2 million on revenues of $42.1 million as compared to net income of $8.7 million on revenues of $43.2 million for the six month period ended December 31, 2019. Operating income decreased from $10.5 million for the six month period ended December 31, 2019 to $9.1 million for the six month period ended December 31, 2020.

 

For the three month period ended December 31, 2020, we reported a net income of $3.9 on revenues of $21.2 as compared to net income of $4.2 million on revenues of $21.5 million for the three month period ended December 31, 2019.

 

The revenue decreased, from $43.2 million for the first six months of fiscal 2020 to $42.1 million for the first six months of fiscal 2021, was primarily due to a decrease in patient fee revenue of $1.7 million, from $12.0 million for the first six months of fiscal 2020 to $10.3 million for the first six months of fiscal 2021. Revenues from product sales and service and repair fees decreased by 11.1% from $4.4 million for the first six months of fiscal 2020 to $3.9 million for the first six months of fiscal 2021.

 

While our revenues decreased, our costs and expenses increased, resulting in our operating income decreasing to $9.1 million for the six months ended December 31, 2020 as compared to $10.5 million for the six months ended December 31, 2019. In terms of percentages, costs and expenses increased 1.0% from $32.7 million for the first six months of fiscal 2020 to $33.0 million for the first six months of fiscal 2021, while revenues decreased, from $43.2 million for the first six months of fiscal 2020 to $42.1 million for the first six months of fiscal 2021. The increase in costs and expenses was due to a $2.2 million increase in selling, general and administrative expenses, from $8.5 million to $10.7 million, consisting largely of increases in reserves for management fees.

 

Fonar’s wholly owned subsidiary, Health Management Corporation of America (“HMCA”), has the controlling interest, in Health Diagnostics Management, LLC (“HDM”). HMCA presently has a direct ownership interest of 70.0% in HDM, and the investors in HDM have a 30.0% ownership interest. The management of the diagnostic imaging centers business segment is being conducted by HDM, operating under the name “Health Management Company of America”. For the sake of simplicity, HMCA, and HDM are referred to as “HMCA”, unless otherwise indicated.

 

The most significant adverse impact on our Company in fiscal 2020 and the first two quarters of fiscal 2021 has been the COVID-19 pandemic. Although it had seemed the worst had passed, events in the last months of 2020 and beginning of 2021 have shown a spike in new cases, including mutations. Although a vaccine has been developed, its distribution is still in the early stages. This is by no means a problem confined to our Company, but regardless of our best efforts, the impact on our results of operation and financial condition is potentially volatile and severe.

  

Since March 2020 the global pandemic of COVID-19 has caused turbulence and uncertainty in the United States and international markets and economies which have adversely affected our workforce, liquidity, financial conditions, revenues, profitability and business operations. Generally in the beginning COVID-19 caused us to require that much of our workforce work from home and restricted the ability of our personnel to travel for marketing purposes or to service our customers. The Company experienced a sudden drop in scan volume for a short term period and while the Company is not back to pre-COVID-19 levels, the scan volume has risen. During the fourth quarter of fiscal 2020, the Company was able to enact certain decisions to allow the Company to survive during the global pandemic and prevent further losses or additional decreases in scan volume. Although we are unable to predict if there will be additional consequences on our operations from the continuing global pandemic of COVID-19, particularly in light of recent spikes in new COVID-19 cases, the Company believes with the positive cash flows, low debt and cash on hand, it will be able to continue operations going forward.

 

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Forward Looking Statements

 

Certain statements made in this Quarterly Report on Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of Management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statement included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

 

Results of Operations

 

We operate in two industry segments: the manufacture and servicing of medical (MRI) equipment, which is conducted by Fonar, and diagnostic facilities management services, which is conducted through HMCA.

 

Manufacturing and Service of MRI Equipment

 

Revenues from MRI product sales decreased to $31,000 for the first six months of fiscal 2021 from $195,000 for the first six months of fiscal 2020. Costs related to product sales decreased from $450,000 for the six month period ended December 31, 2019 to $325,000 for the six month period ended December 31, 2020. Economic uncertainty and lower reimbursement rates for MRI scans, have depressed the market for our MRI scanner products, notwithstanding our scanners’ unique technological capabilities (e.g. multi positional scanning). Due to the low sales volumes of our MRI product, period to period comparisons are not necessarily indicative of any trends.

 

Service revenues decreased by 7.6% from $4.1 million for the six month period ended December 31, 2019 to $3.8 million for the six month period ended December 31, 2020. Continuing lower sales volumes have been a factor ultimately contributing to the decrease in service revenues, as the revenue from new scanners being placed under service agreements, following the expiration of their warranties, is insufficient to replace the revenue lost as a result of older scanners being taken out of service.

 

Costs relating to providing service were $1.5 million in the first six months of fiscal 2020 and $1.3 million in the first six months of fiscal 2021. Because of our ability to monitor the performance of customers’ scanners from our facilities in Melville, New York on a daily basis and to detect and repair any irregularities before more serious and costly problems develop, we have been able to control our costs of providing service.

 

There were approximately $205,000 in foreign revenues for the first six months of fiscal 2021 as compared to approximately $307,000 in foreign revenues for the first three months of fiscal 2020, representing an decrease in foreign revenues of 33.2%. We do not regard this as a material trend, but as part of a normal although sometimes volatile variation resulting from low volumes of foreign sales.

 

We recognize MRI scanner sales revenues on the “percentage of completion” basis, which means the revenues are recognized as the scanner is manufactured. Revenues recognized in a particular quarter do not necessarily reflect new orders or progress payments made by customers in that quarter. We build the scanner as the customer meets certain benchmarks in its site preparation in order to minimize the time lag between incurring costs of manufacturing and our receipt of the cash progress payments from the customer which are due upon delivery. Consequently, there can be a disparity between the revenues recognized in a fiscal period and the number of product sales. Generally, the revenues from a scanner sale are recognized in a fiscal quarter or quarters following the quarter in which the sale was made.

 

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Revenues for the medical equipment segment decreased to $3.9 million for the first six months of fiscal 2021 from $4.4 million for the first six months of fiscal 2020. Operating losses for our medical equipment segment decreased to an operating loss of $569,000, for the first six months of fiscal 2021 as compared to an operating loss of $1.5 million for the first six months of fiscal 2020.

  

Diagnostic Facilities Management Services

 

HMCA revenues decreased in the first six months of fiscal 2021 by 1.3% to $38.3 million from $38.8 million for the first six months of fiscal 2020. The percentage of our revenues derived from our diagnostic facilities management segment relative to the percentage of our revenues derived from our medical equipment segment increased slightly to 90.8% for the first six months of fiscal 2021, from 89.9% for the first six months of fiscal 2020.

 

HMCA’s strategy is to counter the effects of lower reimbursement rates by increasing the scan volume of the facilities it owns or manages by adding additional scanners at current centers and increasing our marketing efforts. As a result of the COVID-19 virus, however, the Company has seen its scan volume decrease. Nevertheless, the Company is continuing its program of adding additional scanners, even though the COVID-19 virus may delay the completion of the installation of some of the scanners. If scan volumes decrease further, or remain at lower volumes, the Company, notwithstanding its ample cash reserves, may need to reduce the size of its operations as a last resort.

 

Although the COVID-19 virus had adversely affected our marketing efforts our scan volumes in fiscal 2020, the number of scans performed at our centers and at our client’s centers has still not recovered to pre-COVID-19 levels, decreasing from approximately 89,000 in the first six months of fiscal 2020 to approximately 86,000 in the first six months of fiscal 2021. Our scan volume began to decline in late March 2020 as a result of the impact of the pandemic on referral sources, stay-at-home orders and travel restrictions. The scan volumes going forward in fiscal 2021 may be adversely affected by additional spikes in the COVID-19 virus if sufficiently severe.

 

We now manage/own a total of 37 MRI scanners. Twenty-three (23) MRI scanners are located in New York and fourteen (14) are located in Florida. HMCA experienced an operating income of $9.7 million for the first six months of fiscal 2021 compared to operating income of $12.0 million for the first six months of fiscal 2020, the decrease being due to greater increase in costs and expenses.

 

The ability of HMCA to maintain its profitability is principally due to HMCA’s success in marketing the scanning services of the facilities managed or owned by HMCA, notwithstanding the decrease in reimbursement rates paid for MRI scans by insurers, Medicare and other government programs and the lockdowns imposed as a result of the COVID-19 virus. The reductions in reimbursement rates are not unique to HMCA or HMCA’s clients but are being experienced by the industry in general.

 

HMCA’s cost of revenues for the first six months of fiscal 2021 as compared to the first six months of fiscal 2020 decreased by 6.0% from $21.2 million to $19.9 million primarily as a result of a decrease in scan volume.

 

Consolidated

 

For the first six months of fiscal 2021, our consolidated net revenues decreased by 2.4% to $42.1 million from $43.2 million for the first six months of fiscal 2020, and total costs and expenses increased by 1.0% to $33.0 million from $32.7 million for the first six months of fiscal 2021 and for the first six months of fiscal 2020 respectively. As a result, our operating income decreased to $9.1 million in the first six months of fiscal 2021 as compared to $10.5 million in the first six months of fiscal 2020. An increased selling, general and other administrative costs in particular resulted in the growth of cost and expenses. 

 

Selling, general and administrative expenses increased to $10.7 million in the first six months of fiscal 2021 from $8.5 million in the first six months of fiscal 2020. This increase in selling, general and administrative expenses was due mainly to additional reserves taken on Management Fees. Some of these reserves have been taken in the ordinary course of business and some in connection with the impact of the COVID-19 virus. The compensatory element of stock issuances, which is included in selling, general and administrative expenses, increased from $0 for the first six months of fiscal 2020 to $83,000 for the first six months of fiscal 2021.

 

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Research and development expenses decreased by 21.9% to $824,000 for the first six months of fiscal 2021 from $1.1 million for the first six months of fiscal 2020.

Interest expense in the first six months of fiscal 2021 decreased by 5.0% to $38,000 from $40,000 in the first six months of fiscal 2020.

Inventories increased to $1.8 million at December 31, 2020 as compared to $1.6 million at June 30, 2020.

 

Net management fee and medical receivables increased by 5.8% to $53.4 million at December 31, 2020 from $50.5 million at June 30, 2020 as a result of slower collections. The slower collections were primarily due to an increase in no-fault and workers’ compensation revenue, which typically takes longer to collect.

 

The results of operations for the first six months of fiscal 2021 reflect an decrease in revenues from management, patient and other fees, as compared to the first six months of fiscal 2020 ($38.3 million for the first six months of fiscal 2021 as compared to $38.8 million for the first six months of fiscal 2020), and an decrease in MRI equipment segment revenues ($3.9 million as compared to $4.4 million). Revenues were 9.2% from the MRI equipment segment as compared to 90.8% from HMCA, for the first six months of fiscal 2021, as compared to 10.1% from the MRI equipment segment and 89.9% from HMCA for the first six months of fiscal 2020.

 

On March 27, 2020, the CARES Act was signed into law and is intended to provide over $2 trillion in stimulus benefits for the U.S. economy. The CARES Act provides for certain federal income tax changes, including an increase in the interest expense tax deduction limitation, the deferral of the employer portion of Social Security payroll taxes, refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds and bonus depreciation of qualified improvement property. The federal income tax changes brought about by the CARES Act are complex and further guidance is expected. We received a cash benefit from the ability to receive a full reimbursement of $1.2 million of tax credits relating to the alternative minimum tax credits in the current year plus additional cash benefits from the deferral of the employer portion of Social Security payroll taxes.

 

As a result of the Patient Protection and Affordable Care Act (PPACA) we have experienced a reduction of reimbursement rates and less interest in our MRI equipment. Any changes to the PPACA may result in further changes in the healthcare industry and our business.

 

We are committed to improving our operating results and dealing with the challenges posed by legislative and regulatory requirements. Nevertheless, factors beyond our control, such as the COVID-19 virus, the timing and rate of market growth, economic conditions, the availability of credit and payor reimbursement rates, or unexpected expenditures and the timing of such expenditures, make it difficult to forecast future operating results.

 

As mentioned, one of the effects of the PPACA on our business has been the reduction in Medicare reimbursement rates for MRI scans. This also has resulted in a reduction in the reimbursement rates by commercial insurers and government programs which tie their reimbursement rates to the Medicare rates. Nevertheless, the patient volume of the scanning centers we manage or own has enabled us to maintain healthy operating results in spite of these challenges. We believe we are pursuing the correct policies to cope with these problems and the problems caused by the COVID-19 pandemic, and to improve the Company’s operating results.

 

Our Upright® MRI (also referred to as the Stand-Up® MRI), together with our works-in-progress, are intended to significantly improve our competitive position.

The Upright® MRI scanner, which operates at 6000 gauss (.6 Tesla) field strength, allows patients to be scanned while standing, sitting, reclining and in multiple flexion and extension positions. It is common in visualizing the spine that abnormalities are visualized in some positions and not others. This enables surgical corrections that heretofore would not have been addressable for lack of visualizing the symptom causing the pathology and therefore, in general enables the treating physician to achieve a better treatment outcome for his patient. A floor-recessed elevator brings the patient to the height appropriate for the targeted image region. A custom-built multi-position adjustable bed will allow patients to sit or lie on their backs, sides or stomachs at any angle. This allows the MRI technologist to ask the patient to position himself/herself in the exact position that generates his/her pain so that images of the patient in the position that explicitly generates the patient’s pain can be nailed down. Full-range-of-motion studies of the joints in virtually any direction are possible, a particularly promising feature for sports injuries.

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In addition FONAR has announced the publication of a book “THE CRANIOCERVICAL SYNDROME and MRI” that highlights the unique attributes of FONAR UPRIGHT® MRI Imaging (S. Karger, A.G. based in Basel, Switzerland- www.karger.com/Book/Home/261956) which has been published by S. Karger, an approximately 125 year old company and an academic publisher of scientific and medical journals and books. The seven chapter monograph examines the rapid advances in MRI made possible by the FONAR UPRIGHT® Multi-Position MRI that are transforming the treatment of patients suffering from the craniocervical syndrome (CCS). It is written by leading international experts in the field to practitioners with a better understanding of the subtle anatomy and MRI appearances at the craniocervical junction, along with insight into the clinical significance of cerebrospinal fluid (CSF) flow measurements and its potential role in generating the devastating impairments of the neurodegenerative diseases: Alzheimer’s (5.1 million patients in the United States), childhood and adult Autism (3.0 million), Parkinson’s (1.0 million), Multiple Sclerosis (250,000-350,000) and Amyotrophic Lateral Sclerosis (ALS) (30,000). It calls attention to the revolutionary importance of FONAR’s UPRIGHT® MRI imaging technology and the prospect of significantly relieving the suffering of the above totaled 9.38 million patients afflicted with these disorders.

  

Fonar also announced a major diagnostic breakthrough in multiple sclerosis achieved with advanced Upright® MRI. Medical researchers at FONAR published a paper reporting a diagnostic breakthrough in multiple sclerosis (MS), based on observations made possible by the Company’s unique Upright® Multi-Position™ MRI scanner. The findings reveal that the cause of multiple sclerosis may be biomechanical and related to earlier trauma to the neck, which can result in obstruction of the flow of cerebrospinal fluid (CSF), which is produced and stored in the central anatomic structures of the brain known as the ventricles. Since the ventricles produce a large net volume of CSF each day (500 cc), the obstruction can result in a build up of pressure within the ventricles, resulting in leakage of the CSF and the antigenic polypeptides it contains into the surrounding brain tissue. This leakage could be responsible for generating the brain lesions of multiple sclerosis.

 

The paper, titled “The Possible Role of Cranio-Cervical Trauma and Abnormal CSF Hydrodynamics in the Genesis of Multiple Sclerosis," appears in the journal Physiological Chemistry and Physics and Medical NMR (Sept. 20, 2011).

 

This capability of the Fonar Upright® technology has demonstrated its key value on patients with the Arnold-Chiari syndrome [Cerebellar Tonsil Extopia (CTE)], which is believed to affect 200,000 to 500,000 Americans. In this syndrome, brain stem compression and subsequent severe neurological symptoms occur in these patients, because the brain stem descends and is compressed at the base of the skull in the foramen magnum, which is the circular bony opening at the base of the skull where the spinal cord exits the skull. Conventional lie-down MRI scanners cannot make an adequate evaluation of this pathology since the patient's pathology is most visible and the symptoms most acute when the patient is scanned in the upright fully weight-bearing position.

 

A combined study of 1,200 neck pain patients published in “Brain Injury” (July 2010) by eight university medical centers reported that cerebellar tonsil ectopia (CTE) of 1mm or greater was found and visualized 2.5 times (250%) more frequently when patients who had sustained automobile whiplash injuries were scanned upright rather than lying down.

 

The Upright® MRI has also demonstrated its value for patients suffering from scoliosis. Scoliosis patients have been typically subjected to routine x-ray exams for years and must be imaged upright for an adequate evaluation of their scoliosis. Because the patient must be standing for a complete evaluation of the extent of the patient’s scoliosis, an x-ray machine has been the only modality that could provide that service. The Upright® MRI is the only MRI scanner which allows the patient to stand during the MRI exam. Fonar has developed an RF receiver and scanning protocol that for the first time allows scoliosis patients to obtain diagnostic pictures of their spines without the risks of x-rays. A study by the National Cancer Institute (2000) of 5,466 women with scoliosis reported a 70% increase in breast cancer resulting from 24.7 chest x-rays these patients received on the average in the course of their scoliosis treatment. The Upright® MRI examination of scoliosis enables the needed imaging evaluation of the degree of spine scoliosis without exposing the patient to the risk of breast cancer from x-radiation. Currently scoliosis affects more than 3,000,000 American women.

  

In addition, the University of California, Los Angeles (UCLA) reported their results of their study of 1,302 patients utilizing the Fonar Upright® MRI at the 22nd Annual Meeting of the North American Spine Society on October 23, 2007. The UCLA study showed the superior ability of the Fonar Upright® MRI to detect spine pathology, including spondylolisthesis, disc herniations and disc degeneration, as compared to visualizations of the spine produced by traditional single position static MRIs.

 

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The UCLA study by MRI of 1,302 back pain patients when they were in the Fonar Upright® MRI and examined in a full range of flexion and extension positions made possible by Fonar’s new Upright® technology established that significant “misses” of pathology were occurring with static single position MRI imaging. At L4-5, the vertebral level responsible for 49.8% of lumbar disc herniations, 35.1% of the spondylolistheses (vertebral instabilities) visualized by the Upright® MRI, were being missed by static single position MRI (510 patients). Since this vertebral segment is responsible for the majority of all disc herniations, the finding may reveal a significant cause of failed back surgeries. The UCLA study further showed the “miss-rate” of vertebral instabilities by static only MRI was even higher, 38.7%, at the L3-4 vertebral segment. Additionally, the UCLA study showed that MRI examinations of the cervical spine that did not perform extension images of the neck “missed” disc bulges 23.75% of the time (163 patients).

 

The UCLA study further reported that they were able to quantitatively measure the dimensions of the central spinal canal with the “highest accuracy” using the FONAR Upright® MRI thereby enabling the extent of spinal canal stenosis that existed in patients to be measured. Spinal canal stenosis gives rise to the symptom complex intermittent neurogenic claudication manifest as debilitating pain in the back and lower extremities, weakness and difficulties in ambulation and leg paresthesias. Spinal canal stenosis is a spinal compression syndrome separate and distinct from the more common nerve compression syndrome of the spinal nerves as they exit the vertebral column through the bony neural foramen.

 

The Fonar Upright® MRI can also be useful for MRI directed emergency neuro-surgical procedures as the surgeon would have unhindered access to the patient’s head when the patient is supine with no restrictions in the vertical direction. This easy-entry, mid-field-strength scanner could prove ideal for trauma centers where a quick MRI-screening within the first critical hour of treatment will greatly improve patients’ chances for survival and optimize the extent of recovery.

 

 MRI has brought a new dimension to MEDICAL TREATMENT, the power to VISUALIZE ANATOMIC DETAIL in the body's VITAL SOFT TISSUES (brain, heart, kidney, liver, spleen, lungs, pancreas, intestines) plus MRI's new power to non-invasively QUANTIFY (e.g. measure T1, T2, diffusion, chemical spectra) the response of these VITAL TISSUES to treatment.

 

Liquidity and Capital Resources

 

Cash and cash equivalents, and short term investments increased by 10.3% from $36.8 million at June 30, 2020 to $40.6 million at December 31, 2020.

 

Cash provided by operating activities for the first six months of fiscal 2021 was $9.6 million. Cash provided by operating activities was attributable principally to net income of $7.2 million, depreciation and amortization of $2.0 million, amortization on right-to-use assets of $1.9 million, provision for bad debts of $2.8 million and deferred income tax of $2.0 million, offset by an increase in accounts, management fee receivables and medical receivables of $5.5 million, a decrease in other current liabilities of $2.7 million and a decrease in operating lease liabilities of $1.7 million. 

 

Cash used by investing activities for the first six months of fiscal 2021 was $2.2 million. Cash used by investing activities was attributable during the first six months of fiscal 2021 consisted of patent costs of $90,000 and the purchase of property and equipment of $2.1 million.

 

Cash used in financing activities for the first six months of fiscal 2021 was $3.5 million. The principal uses of cash in financing activities during the first six months of fiscal 2021 were the repayment of principal on long-term debt and capital lease obligations of $35,000 and distributions to non-controlling interests of $3.6 million, offset by the proceeds from debt of $63,000.

 

Total liabilities decreased by 6.9% to $50.3 million at December 31, 2020 from $54.0 million at June 30, 2020. “Other” current liabilities decreased by 31.8% to $5.6 million at December 31, 2020 from $8.2 million at June 30, 2020. Long-term debt and capital lease obligations decreased from $2.1 million at June 30, 2020 to $1.9 million at December 31, 2020. The current portion of our unearned revenue on service contracts decreased from $4.1 million at June 30, 2020 to $4.0 million at December 31, 2020. Customer deposits increased from $855,000 at June 30, 2020 to $1.2 million at December 31, 2020 as a result of an increase in services performed.

 

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As of December 31, 2020, the total of $5.6 million in “other” current liabilities included accrued salaries and payroll taxes of $2.6 million, and sales taxes of $1.1 million plus accrued interest and penalties of $466,000.

 

Our working capital increased to $84.7 million at December 31, 2020 from $77.2 million at June 30, 2020. This resulted from an increase in current assets ($95.9 million at June 30, 2020 as compared to $101.6 million at December 31, 2020), and a decrease in current liabilities from $18.7 million at June 30, 2020 to $16.9 million at December 31, 2020. This results from the Company’s care in selecting investments and capital expenditures.

 

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry, and tax planning strategies in making this assessment. At the present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for the partial value of the deferred tax asset, (principally related to research and development tax credits and allowance for doubtful accounts). A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance.

 

The Company’s effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year’s taxable income on a periodic basis as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (Topic 606). ASU 2014-09 requires an entity to recognize as revenue the amount that reflects the consideration which it expects to be entitled in exchange for goods and services as it transfers control to its customers. It also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company earns revenue from the sale of scanners, maintenance contracts, product upgrades, patient services and management fees. Under the new guidance, the reporting for patient services revenue is now reported differently. All other streams of revenue were not impacted by the new guidance. The primary change for healthcare providers under the new guidance relates to revenue generated from patient services, with patient responsibility for payment. Under the new guidance, the Company is required to report an implicit price concession (both initially and for the subsequent changes in estimates) as a reduction of revenues as opposed to bad debt expense as a component of operating expenses. The Company now records any changes in expectation of collection amounts due to patient specific events that suggests that the patient no longer has the ability and intent to pay the amount due through the bad debt expense, as that is more indicative of a change in the customer’s credit worthiness as opposed to change in the transaction price.

 

The new standard supersedes most current revenue guidance, including industry-specific guidance. The guidance became effective for the Company on July 1, 2018 and as part of adopting the standard, the Company identified revenue streams of like contracts to allow for ease of implementation. The Company used primarily a portfolio approach to apply the new model to classes of customers with similar characteristics. The impact of adopting the new standard on our total revenue; and income from operations was not material. While the adoption of ASU 2014-09 did impact the presentation of net operating revenues in our Consolidated Statements of Operations and impacts certain disclosures, it did not materially impact our financial position, results of operations or cash flows. There was no cumulative effect of a change in accounting principle recorded related to the adoption of ASU 2014-09 on July 1, 2018.

 

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On March 27, 2020 Congress enacted the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding prior and future operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections to prior tax legislation for tax depreciation of certain qualified improvement property and the creation of refundable employee retention credits. At the present time, the only impact of the CARES Act to the Company is allowing a full reimbursement of $1.2 million of tax credits relating to the alternative minimum tax credits in the current year. Before the CARES Act, these credits were to be refunded over a period of 3 years. We will also realize a cash benefit from the deferral of Social Security payroll taxes.

 

On June 30, 2020, we entered into a $701,000 loan agreement under the Paycheck Protection Program (PPP) under the CARES Act that provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses. The Company applied for this additional loan exclusively for the Florida locations during June 2020 due to the fact that the COIVD-19 virus was increasing in Florida. The loans and accrued interest are forgivable after 24 weeks as long as the proceeds are used for eligible purposes, including payroll, benefits, rent and utilities and maintains certain payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the 24 week period. The Company believes that most it not all of the loan proceeds will be forgiven, however there is no assurance that it will be forgiven until approval is received.

 

Fonar has not committed to making any significant capital expenditures for the remainder of the 2021 fiscal year with the exception of placing an additional scanner at a facility located in New York.

 

Critical to our business plan are the improvement and expansion of the MRI facilities managed or owned by HMCA, and increasing the number of scans performed at those facilities. In addition, our business plan calls for a continuing commitment to providing our customers with enhanced equipment service and maintenance capabilities and delivering state-of-the-art, innovative and high quality equipment and upgrades at competitive prices.

 

Management is seeking to promote wider market recognition of Fonar’s scanner products, and to increase demand for Upright® scanning at the facilities HMCA owns or manages. Given the liquidity and credit constraints in the markets, the uncertainty resulting from the Patient Protection and Affordable Care Act or its repeal or modification, and the impact of the COVID-19 virus on the economy in general, the sale of medical equipment has and may continue to suffer.

 

The Company believes that its business plan has been responsible for the past eight consecutive fiscal years and first six months of fiscal 2021 profitability and that its capital resources will be adequate to support operations through at least December 31, 2021. The future effects on our business of healthcare legislation, the impact of the COVID-19 virus, the Deficit Reduction Act, the 2.3% excise tax on sales of medical equipment, reimbursement rates, public health conditions and the general economic and business climate are not known at the present time. Nevertheless, there is a possibility of adverse consequences to our business operations from these causes. Although the Company can not predict the full effect of COVID-19 for the first fiscal quarter or any later period, the Company believes that it has adequate revenues, cash reserves and other assets that will enable it to continue to operate until at least December 31, 2021.

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

The Company maintains its funds in liquid accounts. None of our investments are in fixed rate instruments.

 

All of our revenue, expense and capital purchasing activities are transacted in United States dollars.

  

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FONAR CORPORATION AND SUBSIDIARIES

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, 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, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon our evaluation, our chief executive officer and chief financial officer has concluded that the Company’s internal control over financial reporting was effective as of the December 31, 2020, in ensuring that material information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the same time periods specified in the Securities and Exchange Commission rules and forms.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our system of internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PART II – OTHER INFORMATION

 

Item 1 – Legal Proceedings: There were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2020.

 

Item 1A – Risk Factors: An investment in the securities of the Company is subject to various risks, the most significant of which are summarized below.

 

1. Reduced Reimbursement Rates. Most of our revenues are derived from our scanning center business conducted by HMCA. Our scanning center clients and the Florida facilities owned by HMCA are experiencing lower reimbursement rates from Medicare, other government programs and private insurance companies. To date, the impact of these reductions has been countered by increasing scanning volume, increased reimbursement rates with other payors, and reducing our operating expenses, thereby maintaining profitability in this business segment. There is, however, no assurance that we will be able to continue to do so, particularly in light of the COVID-19 pandemic, which has resulted in a decrease in scan volume.

 

2. Demand for MRI Scanners. The reduced reimbursement rates and COVID-19 pandemic, also affects our sales of MRI scanners negatively. With lower revenue projections, fewer prospective customers will be able to operate, and others are likely to demand lower prices for scanners. Although the reduced reimbursements may not affect foreign demand, a lower number of sales in the aggregate could reduce economies of scale and consequently, profit margins. The demand for MRI scanners could be further reduced by any downturn in the economy resulting from the COVID-19 virus.

 

3. Manufacturing Competition. Many if not most of our competing scanner manufacturers have significantly greater financial resources, production capacity, and other resources than we do. Such competitors would include General Electric, Siemens, Hitachi and Phillips. Although Fonar is the only company which can manufacture and sell the unique Stand-Up® (Upright®) MRI scanner, potential customers must be convinced that the purchase of a Fonar scanner is their best choice. We believe that with time, that objective will be reached, particularly with customers scanning patients having neck, back, knee and various orthopedic issues who would benefit from being scanned in weight-bearing positions.

 

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FONAR CORPORATION AND SUBSIDIARIES

 

4. Dependence on Referrals. HMCA derives substantially all of its revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at the facilities. We depend on referrals of patients from unaffiliated physicians and other third parties to the facilities we manage or own for the MRI scanning services performed. If these physicians and other third parties were to reduce the number of patients they refer or discontinue referring patients, scan volumes could decrease, which would have the effect of reducing our net revenue, from both management and scanning fees, and operating margins.

 

5. Pressure to Control Healthcare Costs. One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services. Healthcare providers participating in managed care plans may be required to refer diagnostic imaging tests to certain providers depending on the plan in which a covered patient is enrolled. In addition, managed care contracting has become very competitive. The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations in New York or Florida could have a negative impact on the utilization and pricing of services performed at the facilities HMCA manages or owns to the extent these organizations exert control over patients’ access to diagnostic imaging services, selections of the provider of such services and reimbursement rates for those services. Pressure to reduce healthcare costs results from government action, such as the reduction of Medicare reimbursements for MRI scans. This provides an additional basis to lower reimbursement levels from private payors, who often base their reimbursement rates on the Medicare rates.

 

6. Scanning Facility Competition. The market for diagnostic imaging services is highly competitive. The facilities we manage or own compete for patients on the basis of reputation, location and the quality of diagnostic imaging services. Groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment are the principal competitors.

 

7. Eligibility Changes to Insurance Programs. Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. Healthcare reform legislation may increase the participation of individuals in the Medicaid program in states that elect to participate in the expanded Medicaid coverage, subject to any changes which may result from efforts to repeal and replace the PPACA. A shift in payor mix from managed care and other private payors to government payors or an increase in the number of uninsured patients may result in a reduction in the rates of reimbursement or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in net revenue. Policies now being offered under various insurance plans are expected to reduce demand for MRI scans as they become less affordable. Changes in the eligibility requirements for governmental programs such as the Medicaid program and state decisions on whether to participate in the expansion of such programs also could increase the number of patients who participate in such programs and the number of uninsured patients. Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition, and results of operations.

 

8. Possible changes in Florida Insurance Law. In early 2019, two senate bills and one house bill in Florida were introduced, all of them calling for the repeal of PIP and replacing PI with $25,000 Bodily Injury Coverage and Property Damage Liability Coverage. Another Florida senate bill was introduced that would preserve PIP but dramatically cut reimbursement rates. None of the proposed bills ever made it onto the 2019 legislative agenda, but similar efforts in the future might be successful. Currently, drivers and passengers get car damages and PIP paid for up to $10,000, no matter who is at fault in an accident. Drivers have to pay an additional cost to insurance companies to pay for bodily injuries, which covers them if they are at fault. While PIP is required, coverage for bodily injury is not. Over the past several years there have been various bills introduced by a number of Florida legislators to eliminate PIP and instead mandate coverage including some combination of a minimum of bodily injury and a reduced or no amount of medical payments (Medpay coverage). Eliminating PIP would mean that the $10,000 drivers now get paid toward medical costs through their insurers might not be there for them to pay for injured drivers. Importantly, payments would be reduced by approximately 60% due to claims being paid at commercial rates or through legal settlements instead of at the presently prevailing PIP fee schedule. This would negatively impact our eight diagnostic imaging facilities (both those we own and those we manage) with more unpaid bills, lower reimbursement rates and elongated waiting times. The recent bills, which were introduced in 2020, gained no traction.

 

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FONAR CORPORATION AND SUBSIDIARIES

  

9. Federal and state privacy and information security laws. We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of Protected Health Information (‘PHI’), including Health Insurance Portability and Accountability Act (‘HIPAA’) and its implementing privacy and security regulations, as amended by the federal Health Information Technology for Economic and Clinical Health (‘HITECH’) Act and collectively referred to as HIPAA. If we fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, protect our proprietary rights to our systems, or defend against cybersecurity attacks, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

 

Information security risks have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct our operations, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state agents. Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information in our computer systems and networks.

 

10. COVID-19. Although we believe we have taken the proper steps and were making a good recovery from the impact of COVID-19 virus, the recent increase in new cases and mutations of COVID-19 and in the recent months, may have an economic and medical impact that would materially and adversely affect our business. The mitigating effect of new vaccines remains to be seen.

 

11. Other changes in Domestic and Worldwide Economic Conditions. We are subject to risk arising from adverse changes in general domestic and global economic and other conditions, including a prolonged period of the COVID-19 pandemic, recessions or economic slowdowns and disruptions of credit markets. Turbulence and uncertainty in the United States and international markets and economies may adversely affect our workforce, liquidity, financial condition, revenues, profitability and business operations generally.

 

 

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds: None

 

Item 3 - Defaults Upon Senior Securities: None

 

Item 4 - Mine Safety Disclosure: Not Applicable

 

Item 5 - Other Information: None 

  

Item 6 - Exhibits and Reports on Form 8-K:

 

 a) 

Exhibit 31.1 Certification. See Exhibits

 

 b) 

Exhibit 32.1 Certification. See Exhibits

 

 c)  Report on Form 8-K filed on November 13, 2020, Item 2.02: Results of Operations and Financial Condition for the fiscal quarter ended September 30, 2020.

 

  

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FONAR CORPORATION AND SUBSIDIARIES

 

SIGNATURES

 

Pursuant to the requirements 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.

 

FONAR CORPORATION

(Registrant)

 

________________

By: /s/ Timothy Damadian

Timothy Damadian

President and

Principal Executive Officer

 

________________

/s/ Raymond V. Damadian

Raymond V. Damadian

Chairman of the Board,

Treasurer and

Acting Principal Financial Officer

 

 

Dated: February 16, 2021

 Page 37 

 

 

 

 

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Exhibit 31.1

 

CERTIFICATION

 

 

Timothy Damadian and Raymond V. Damadian each certify that:

 

1.I have reviewed this report on Form 10-Q of Fonar Corporation;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f) for the registrant and have:

 

a)designed such disclosure controls and procedures or caused such disclosure controls over procedures to be designed under my supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, 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;

 

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report; and

 

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

  

Date: February 16, 2021

 

 

____________________________

/s/ Timothy Damadian

Timothy Damadian

President and

Principal Executive Officer

 

 

____________________________

/s/ Raymond V. Damadian

Raymond V. Damadian

Chairman of the Board, Treasurer and

Acting Principal Financial Officer

 

EX-32.1 4 fonar_exhibit-32.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of FONAR Corporation and Subsidiaries (the “Company”) on Form 10Q for the fiscal quarter ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy Damadian, President and Chief Executive Officer, and I, Raymond V. Damadian, Chairman of the Board, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

 

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

/s/Timothy Damadian

 

 

____________________________

Timothy Damadian

President and Chief Executive Officer

 

/s/ Raymond V. Damadian

 

 

____________________________

Raymond V. Damadian

Chairman of the Board, Treasurer and

Chief Financial Officer

 

 

February 16, 2021

 

A signed original of this written statement required by Section 906 has been provided to Fonar Corporation and will be retained by Fonar Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

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Is Entity a Small Business Entity Filer Category Is Entity an Emerging Growth Company Entity Common Stock, Shares Outstanding Trading Symbol Security Exchange Name Security 12B Title Entity Shell Company ASSETS Current Assets: Cash and cash equivalents Short term investments Accounts receivable - net Account receivable - related parties Medical receivables -net Management and other fees receivable -net Management and other fees receivable - related medical practices -net Inventories Costs and estimated earnings in excess of billings on uncompleted contracts Income taxes receivable Prepaid expenses and other current assets Total Current Assets Accounts receivable Deferred income tax asset Property and equipment - net Right-of-use Asset - operating lease Right-of-use-asset - financing lease Goodwill Other intangible assets - net Other assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt and capital leases Accounts payable Other current liabilities Unearned revenue on service contracts Unearned revenue on service contracts - related parties Operating lease liability - current portion Financing lease liability - current portion Customer deposits Total Current Liabilities Long-Term Liabilities: Unearned revenue on service contracts Deferred Income Tax Liability Due to related party medical practices Operating lease liability - net of current portion Financing lease liability - net of current portion Long-term debt and capital leases, less current portion Other liabilities Total Long-Term Liabilities Total Liabilities STOCKHOLDERS' EQUITY: Preferred stock value Common stock value Paid-in capital in excess of par value Accumulated deficit Treasury stock, at cost Total Fonar Corporation Stockholder Equity Noncontrolling interests Total Stockholders' Equity Total Liabilities and Stockholders' Equity Preferred Stock, Par Value Preferred Stock, Authorized Preferred Stock, Issued Preferred Stock, Outstanding Common Stock, Par Value Common Stock, Authorized Common Stock, Issued Common Stock, Outstanding REVENUES Patient fee revenue, net of contractual allowances and discounts Product sales - net Service and repair fees - net Service and repair fees - related parties - net Management and other fees - net Management and other fees - related medical practices - net Total Revenues - net COSTS AND EXPENSES Costs related to patient fee revenue Costs related to product sales Costs related to service and repair fees Costs related to service and repair fees - related parties Costs related to management and other fees Costs related to management and other fees - related medical practices Research and development Selling, general and administrative Total Costs and Expenses INCOME Income From Operations Other Expenses Interest Expense Investment Income Income Before Provision for Income Taxes and Noncontrolling Interests Provision for Income Taxes Net Income Net Income - Noncontrolling Interests Net Income - Attributable to FONAR Basic Net Income Per Share Diluted Net Income Per Share Basic and Diluted Income Per Share Weighted Average Basic Shares Outstanding Weighted Average Diluted Shares Outstanding Balance - Beginning, Value Issuance of common stock (value) Net Income Distributions - noncontrolling Income - Noncontrolling interests Balance - Ending, Value Statement of Cash Flows [Abstract] Cash Flows from Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization on right-of-use assets Provision (Recovery) for bad debts Deferred income tax - net Compensatory element of stock issuances Stock issued for costs and expense Abandoned patents (Increase) decrease in operating assets, net: Accounts, medical and management fee receivable(s) Notes receivable Costs and estimated earnings in excess of billings on uncompleted contracts Inventories Income tax receivable Prepaid expenses and other current assets Other assets Increase (decrease) in operating liabilities, net: Accounts payable Other current liabilities Operating lease liabilities Financing lease liabilities Customer deposits Billings in excess of costs and estimated earnings on uncompleted contracts Other liabilities Net cash provided by operating activities Cash Flows from Investing Activities: Purchases of property and equipment Purchase of short term investment Cost of patents Net cash used in investing activities Cash Flows from Financing Activities: Repayment of borrowings and capital lease obligations Proceeds from debt Distributions to noncontrolling interests Net cash used in financing activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning of Period Cash and Cash Equivalents - End of Period Accounting Policies [Abstract] NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Receivables [Abstract] NOTE 3 - ACCOUNTS RECEIVABLE. MEDICAL RECEIVABLES AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $) Leases [Abstract] NOTE 4 - OPERATING & FINANCING LEASES Inventory Disclosure [Abstract] NOTE 5 - INVENTORIES Notes to Financial Statements NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Goodwill and Intangible Assets Disclosure [Abstract] NOTE 7 - OTHER INTANGIBLE ASSETS Other Liabilities, Current [Abstract] NOTE 8 - OTHER CURRENT LIABILITIES Stockholders' Equity Attributable to Parent [Abstract] NOTE 9 - STOCKHOLDERS EQUITY Segment Reporting [Abstract] NOTE 10 - SEGMENT AND RELATED INFORMATION Supplemental Cash Flow Elements [Abstract] NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION Commitments and Contingencies Disclosure [Abstract] NOTE 12 - COMMITMENTS AND CONTINGENCIES Income Tax Disclosure [Abstract] NOTE 13 - INCOME TAXES Subsequent Events [Abstract] NOTE 14 - SUBSEQUENT EVENTS Principles of Consolidation Revenue Earnings Per Share Recent Accounting Pronouncements Reclassifications Earnings Per Share Summary of Allowance For Doubtful Accounts Receivables - Non Current - net Patient fee revenue - net Lease, Liability, Maturity Inventories Information relating to uncompleted contracts Other intangible assets - net Other current liabilities Segment information Related Party [Axis] The ownership interest of Imperial Management Services after reorganization of newly expanded HDM (percent). The ownership interest of Health Management Corporation of America after reorganization of newly expanded HDM (percent). The ownership interest of the original investors of HDM after reorganization of newly expanded HDM (percent). Basic Numerator: Net income available to common stockholders Basic Denominator: Weighted average shares outstanding Basic income per common share Shares included upon conversion of Class C Common to calculate a diluted EPS Total Denominator for diluted earnings per share Diluted income per common share Shares included upon conversion of Class C Common to calculate a diluted EPS. Receivable Type [Axis] Accounts receivable Accounts receivable - Related party Medical Receivables Management and other fees receivable Management and other fees receivable from related medical practices ("PC's") Receivables, Long-term Contracts or Programs [Abstract] 2022 2023 2024 2025 Total Note 3 - Accounts Receivable Medical Receivable And Management And Other Fees Receivable - Percentage of PC's net revenue derived from no-fault and personal injury protection claims Percentage of consolidated net revenue from management fees charged to related party medical practices Operating Lease Payments 2021 2022 2023 2024 2025 Thereafter Present Value discount Total lease liability Financing Lease Payments 2021 2022 2023 2024 2025 Thereafter Present Value discount Total lease liability Receivable from landlord for tenant improvements Operating lease payments Purchased parts, components and supplies Work-in-process Total Inventories Costs incurred on uncompleted contracts Estimated earnings Costs and estimated earnings on uncompleted contracts Less: Billings to date Total costs and estimated earnings in excess of billings on uncompleted contracts Gross other intangible assets Less: Accumulated amortization Other intangible assets-net Amortization of intangible assets Accrued salaries, commissions and payroll taxes Litigation accruals Sales tax payable Legal and other professional fees Accounting fees Self-funded health insurance reserve Accrued interest and penalty Other Other current liabilities Stock issued for cost and expenses, shares Stock issued for cost and expenses, value Stock issued for compensation, shares Stock issued for compensation, value Operating Activities [Axis] Net revenues from external customers Inter-segment net revenues (Loss) Income from operations Depreciation and amortization Capital expenditures Interest paid Income taxes paid Litigation settelement description Recorded tax obligations Tax interest and penalties Maximum limit for individual claims under stop-loss umbrella policy for health insurance Income tax expense Income tax component - current Income tax component - deferred Deferred tax assets Deferred tax liability Net operating loss (NOL) carryforwards available to offset future taxable income Reimbursement of alternative minimum tax credits description Accounts receivable from service and repair fees of Related MRI scanner customers; net of allowances for doubtful accounts. Accounts receivable - net - non current - from service and repair fees of non related MRI scanner customers; net of allowances for doubtful accounts. Accounts receivable from service and repair fees of Related Party MRI scanner customers; net of allowances for doubtful accounts Accounts receivable - net - Current from service and repair fees of Non Related MRI scanner customers; net of allowances for doubtful accounts. Amount within current period that has been billed to customer. Class A NonVoting Preferred Stock Commercial Insurance Managed Care Member Costs and estimated earnings on uncompleted contracts. Costs And EstimatedEarningsOn Uncompleted Contracts And Customer Advances Costs related to management and other fees - non related medical practices. Costs related to management and other fees - related medical practices. Costs related to Product sales-net revenue for MRI scanners, upgrades and supplies. Costs incurred and are to service and repair costs related to the general maintenance of the Company's MRI installation base. This includes the costs of maintenance on client contracts - for non-related parties. Costs incurred and are to service and repair costs related to the general maintenance of the Company's MRI installation base. This includes the costs of maintenance on client contracts - for related parties. Table of total customer advances Estimated Earnings on uncompleted contracts. Management and other fees receivable from MRI Centers owned by non-related parties - net of allowances for doubtful accounts. Management and other fees are revenues attributable to the Company's physician and diagnostic services management segment, HMCA. These revenues, from non-related professional corporations, substantially consist of fees from management agreements. Payment of the fees is dependent on collection by the PCs of fees from third party medical reimbursement organizations, principally insurance companies and health management organizations. Management and other fees are revenues attributable to the Company's physician and diagnostic services management segment, HMCA. These revenues, from the related professional corporations, substantially consist of fees from management agreements. Payment of the fees is dependent on collection by the PCs of fees from third party medical reimbursement organizations, principally insurance companies and health management organizations. Management of Diagnostic Imaging Centers - Member - Custom element Management of, and other fees receivable from MRI Centers owned by related parties - net of allowances for doubtful accounts. The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $110 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. Medical equipment - Member - Custom element Medical receivable from management of specific centers - net of allowances for doubtful accounts. Medicare Medicaid Total revenue from sale of goods and services rendered during the reporting period, in the normal course of business, reduced by sales returns and allowances. Other Revenue Source Patents and copyrights - Member - Custom elements Revenue derived from the sale of Fonar MRI scanners or upgrades. Provision for bad debts used for calculation of cash flow statements. Revenue derived from maintenance services provided under contracts or arrangements with non related parties. Revenue derived from maintenance services provided under contracts or arrangements with clients for related parties - net Amount of receivables reflecting the cost incurred on uncompleted contracts in excess of related billings, net of current billings in excess of costs and estimated earnings on uncompleted contracts. The carrying amount of consideration received or receivable as of the balance sheet date on potential earnings that were not recognized as revenue in conformity with GAAP, and which are expected to be recognized as such within one year or the normal operating cycle, if longer, including sales, license fees, and royalties, but excluding interest income. For related parties. Workers Compensation Personal Injury Abandoned patents. Increase (Decrease) in Financing Lease Liability during the period. Percentage of PCs net revenue derived from no-fault and personal injury protection claims. Percentage of consolidated net revenue from management fees. Present value discount. Present value discount financing lease. Description related to litigation settelement. On March 27, 2020 Congress enacted the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding prior and future operation losses, temporary changes to prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections to prior tax legislation for tax depreciation of certain qualified improvement property and enhanced recoverability of AMT tax credits. At the present time, the only impact of the CARES Act to the Company is allowing a full reimbursement of $1,342 of tax credits relating to the alternative minimum tax credits. The Company received the first half payment in June 2020. The balance of alternative minimum tax credits of $671 was received in July 2020. Previously, these credits were to be refunded over a 3 year period. Receivable from landlord for tenant improvements. HDM Member Compensatory element of stock issuances. Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name Health Management Company of America. Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name Health Management Company of America. Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name Health Management Company of America. 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Document and Entity Information - shares
6 Months Ended
Dec. 31, 2020
Feb. 05, 2021
Entity Registrant Name FONAR CORP  
Entity Central Index Key 0000355019  
Document Type 10-Q  
Document Period End Date Dec. 31, 2020  
Document Fiscal Year Focus 2021  
Current Fiscal Year End Date --06-30  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity File Number 0-10248  
Entity Incorporation State Country Code DE  
Is Entity Interactive Data Current Yes  
Is Entity's Reporting Status Current? Yes  
Is Entity a Small Business true  
Entity Filer Category Non-accelerated Filer  
Is Entity an Emerging Growth Company false  
Trading Symbol FONR  
Security Exchange Name NASDAQ  
Security 12B Title Common Stock  
Entity Shell Company false  
Common Stock    
Entity Common Stock, Shares Outstanding   6,554,210
Class B Common Stock    
Entity Common Stock, Shares Outstanding   146
Class C Common Stock    
Entity Common Stock, Shares Outstanding   382,513
Class A Common Stock    
Entity Common Stock, Shares Outstanding   313,438
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Current Assets:    
Cash and cash equivalents $ 40,579 $ 36,802
Short term investments 32 32
Accounts receivable - net 4,171 4,313
Account receivable - related parties 72 6
Medical receivables -net 16,373 16,172
Management and other fees receivable -net 29,808 27,438
Management and other fees receivable - related medical practices -net 7,262 6,896
Inventories 1,844 1,649
Costs and estimated earnings in excess of billings on uncompleted contracts 153 153
Income taxes receivable 671
Prepaid expenses and other current assets 1,302 1,758
Total Current Assets 101,596 95,890
Accounts receivable 2,594 2,730
Deferred income tax asset 16,848 18,810
Property and equipment - net 21,683 21,364
Right-of-use Asset - operating lease 29,570 31,392
Right-of-use-asset - financing lease 1,226 1,326
Goodwill 3,985 3,985
Other intangible assets - net 4,014 4,109
Other assets 632 653
Total Assets 182,148 180,259
Current Liabilities:    
Current portion of long-term debt and capital leases 222 108
Accounts payable 2,198 1,965
Other current liabilities 5,584 8,185
Unearned revenue on service contracts 4,029 4,105
Unearned revenue on service contracts - related parties 55
Operating lease liability - current portion 3,403 3,370
Financing lease liability - current portion 200 75
Customer deposits 1,232 855
Total Current Liabilities 16,923 18,663
Long-Term Liabilities:    
Unearned revenue on service contracts 2,528 2,656
Deferred Income Tax Liability 234 234
Due to related party medical practices 93 93
Operating lease liability - net of current portion 28,415 30,105
Financing lease liability - net of current portion 1,151 1,251
Long-term debt and capital leases, less current portion 780 865
Other liabilities 148 150
Total Long-Term Liabilities 33,349 35,354
Total Liabilities 50,272 54,017
STOCKHOLDERS' EQUITY:    
Paid-in capital in excess of par value 185,101 183,076
Accumulated deficit (50,596) (56,215)
Treasury stock, at cost (675) (675)
Total Fonar Corporation Stockholder Equity 133,831 126,187
Noncontrolling interests (1,955) 55
Total Stockholders' Equity 131,876 126,242
Total Liabilities and Stockholders' Equity 182,148 180,259
Class A Non-Voting Preferred Stock    
STOCKHOLDERS' EQUITY:    
Preferred stock value
Preferred Stock    
STOCKHOLDERS' EQUITY:    
Preferred stock value
Common Stock    
STOCKHOLDERS' EQUITY:    
Common stock value 1 1
Class B Common Stock    
STOCKHOLDERS' EQUITY:    
Common stock value
Class C Common Stock    
STOCKHOLDERS' EQUITY:    
Common stock value
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares
Dec. 31, 2020
Jun. 30, 2020
Class A Non-Voting Preferred Stock    
Preferred Stock, Par Value $ 0.0001 $ 0.0001
Preferred Stock, Authorized 453,000 453,000
Preferred Stock, Issued 313,000 313,000
Preferred Stock, Outstanding 313,000 313,000
Preferred Stock    
Preferred Stock, Par Value $ 0.001 $ 0.001
Preferred Stock, Authorized 567,000 567,000
Preferred Stock, Issued
Preferred Stock, Outstanding
Common Stock    
Common Stock, Par Value $ 0.0001 $ 0.0001
Common Stock, Authorized 8,500,000 8,500,000
Common Stock, Issued 6,566,000 6,459,000
Common Stock, Outstanding 6,554,000 6,447,000
Class B Common Stock    
Common Stock, Par Value $ 0.0001 $ 0.0001
Common Stock, Authorized 227,000 227,000
Common Stock, Issued 146 146
Common Stock, Outstanding 146 146
Class C Common Stock    
Common Stock, Par Value $ 0.0001 $ 0.0001
Common Stock, Authorized 567,000 567,000
Common Stock, Issued 383,000 383,000
Common Stock, Outstanding 383,000 383,000
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
REVENUES        
Patient fee revenue, net of contractual allowances and discounts $ 5,238 $ 5,996 $ 10,330 $ 12,041
Product sales - net 3 3 31 195
Service and repair fees - net 1,862 2,038 3,788 4,102
Service and repair fees - related parties - net 28 28 55 55
Management and other fees - net 11,340 10,996 22,554 22,024
Management and other fees - related medical practices - net 2,693 2,390 5,386 4,780
Total Revenues - net 21,164 21,451 42,144 43,197
COSTS AND EXPENSES        
Costs related to patient fee revenue 2,649 2,958 5,169 5,820
Costs related to product sales 192 120 325 450
Costs related to service and repair fees 608 772 1,234 1,522
Costs related to service and repair fees - related parties 9 10 18 20
Costs related to management and other fees 6,237 6,203 11,788 12,208
Costs related to management and other fees - related medical practices 1,522 1,621 2,950 3,157
Research and development 424 583 824 1,055
Selling, general and administrative 4,541 4,163 10,704 8,458
Total Costs and Expenses 16,182 16,430 33,012 32,690
INCOME        
Income From Operations 4,982 5,021 9,132 10,507
Other Expenses     (140)
Interest Expense (16) (19) (38) (40)
Investment Income 75 139 187 287
Income Before Provision for Income Taxes and Noncontrolling Interests 5,041 5,141 9,141 10,754
Provision for Income Taxes (1,113) (932) (1,962) (2,039)
Net Income 3,928 4,209 7,179 8,715
Net Income - Noncontrolling Interests (817) (1,105) (1,560) (2,313)
Net Income - Attributable to FONAR $ 3,111 $ 3,104 $ 5,619 $ 6,402
Basic Net Income Per Share $ 0.48 $ 0.48 $ 0.87 $ 0.99
Weighted Average Basic Shares Outstanding 6,465 6,447 6,456 6,440
Common Stock        
INCOME        
Net Income - Attributable to FONAR $ 2,923 $ 2,914 $ 5,281 $ 6,010
Basic Net Income Per Share $ 0.45 $ 0.45 $ 0.82 $ 0.93
Diluted Net Income Per Share $ 0.44 $ 0.44 $ 0.80 $ 0.92
Weighted Average Basic Shares Outstanding 6,465 6,447 6,456 6,440
Weighted Average Diluted Shares Outstanding 6,593 6,575 6,584 6,568
Class A Non-Voting Preferred Stock        
INCOME        
Net Income - Attributable to FONAR $ 140 $ 142 $ 252 $ 292
Class C Common Stock        
INCOME        
Net Income - Attributable to FONAR $ 48 $ 48 $ 86 $ 100
Basic Net Income Per Share $ 0.12 $ 0.13 $ 0.23 $ 0.26
Diluted Net Income Per Share 0.12 0.13 0.23 0.26
Basic and Diluted Income Per Share $ 0.12 $ 0.13 $ 0.23 $ 0.26
Weighted Average Basic Shares Outstanding 383 383 383 383
Weighted Average Diluted Shares Outstanding 383 383 383 383
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($)
$ in Thousands
Common Stock
Paid in capital in excess of par value
Accumulated Deficit
Treasury Stock
Non Controlling Interest
Total
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Issuance of common stock (value) 1,990 1,990
Net Income 6,402 6,402
Distributions - noncontrolling (3,735) (3,735)
Income - Noncontrolling interests 2,313 2,313
Balance - Ending, Value at Dec. 31, 2019 1 183,076 (58,053) (675) 734 125,083
Balance - Beginning, Value at Sep. 30, 2019 1 183,076 (61,157) (675) 1,609 122,854
Net Income 3,104   3,104
Distributions - noncontrolling (1,980) (1,980)
Income - Noncontrolling interests 1,105 1,105
Balance - Ending, Value at Dec. 31, 2019 1 183,076 (58,053) (675) 734 125,083
Balance - Beginning, Value at Jun. 30, 2020 1 183,076 (56,215) (675) 55 126,242
Issuance of common stock (value) 2,025   2,025
Net Income 5,619 5,619
Distributions - noncontrolling (3,570) (3,570)
Income - Noncontrolling interests 1,560 1,560
Balance - Ending, Value at Dec. 31, 2020 1 185,101 (50,596) (675) (1,955) 131,876
Balance - Beginning, Value at Sep. 30, 2020 1 183,076 (53,707) (675) (642) 128,053
Issuance of common stock (value) 2,025     2,025
Net Income 3,111 3,111
Distributions - noncontrolling (2,130) (2,130)
Income - Noncontrolling interests 817 817
Balance - Ending, Value at Dec. 31, 2020 $ 1 $ 185,101 $ (50,596) $ (675) $ (1,955) $ 131,876
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Thousands
6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Cash Flows from Operating Activities:    
Net income $ 7,179 $ 8,715
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 2,009 2,003
Amortization on right-of-use assets 1,922 1,656
Provision (Recovery) for bad debts 2,825 (978)
Deferred income tax - net 1,962 1,816
Compensatory element of stock issuances 83
Stock issued for costs and expense 1,941 1,990
Abandoned patents 1
(Increase) decrease in operating assets, net:    
Accounts, medical and management fee receivable(s) (5,549) (4,300)
Notes receivable 25 11
Costs and estimated earnings in excess of billings on uncompleted contracts 372
Inventories (195) 47
Income tax receivable 671
Prepaid expenses and other current assets 452 330
Other assets (1) (45)
Increase (decrease) in operating liabilities, net:    
Accounts payable 233 (576)
Other current liabilities (2,748) 430
Operating lease liabilities (1,657) (1,447)
Financing lease liabilities 24
Customer deposits 378 28
Billings in excess of costs and estimated earnings on uncompleted contracts 12
Other liabilities (3) 123
Net cash provided by operating activities 9,552 10,187
Cash Flows from Investing Activities:    
Purchases of property and equipment (2,143) (4,656)
Purchase of short term investment (199)
Cost of patents (90) (62)
Net cash used in investing activities (2,233) (4,917)
Cash Flows from Financing Activities:    
Repayment of borrowings and capital lease obligations (35) (24)
Proceeds from debt 63
Distributions to noncontrolling interests (3,570) (3,735)
Net cash used in financing activities (3,542) (3,759)
Net Increase in Cash and Cash Equivalents 3,777 1,511
Cash and Cash Equivalents - Beginning of Period 36,802 13,882
Cash and Cash Equivalents - End of Period $ 40,579 $ 15,393
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NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
6 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Description of Business

 

Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name “Health Management Company of America”.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended December 31, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed on October 1, 2020 for the fiscal year ended June 30, 2020.

 

During March 2020 the global pandemic of COVID-19 has caused turbulence and uncertainty in the United States and international markets and economies which has adversely effected our workforce, liquidity, financial conditions, revenues, profitability and business operations. Generally COVID-19 had caused us to require that much of our workforce work from home and has restricted the ability of our personnel to travel for marketing purposes or to service our customers. The Company experienced a sudden drop in scan volume for a short term period and while the Company is not back to pre-COVID-19 levels, the volume has risen. At the end of fiscal year ending June 30, 2020, the Company was able to enact certain decisions to allow the Company to survive during the global pandemic and from further losses or additional decreases in scan volume. The Company immediately enacted wide scale furloughs, deferment of up to 50% of management salaries, halted variable compensation plans and rent deferrals we negotiated with the majority of all landlords. The Company also received some government stimulus funds from the Paycheck Protection Program (“PPP”) and Medicare advances/stimulus payments. Although we are unable to predict if there will be additional consequences on our operations from the continuing global pandemic of COVID-19, the Company believes with positive cash flows, low debt and cash on hand, it will be able to continue operations going forward.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Revenues

 

On July 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

 

Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

 

Earnings Per Share

 

Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the if converted method in calculating diluted income per share for the three and six months ended December 31, 2020 and 2019.

 

Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and six months ended December 31, 2020 and 2019, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

 

    Three months ended
December 31, 2020
  Three months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 3,111     $ 2,923     $ 48     $ 3,104     $ 2,914     $ 48  
Denominator:                                                
Weighted average shares outstanding     6,465       6,465       383       6,447       6,447       383  
Basic income per common share   $ 0.48     $ 0.45     $ 0.12     $ 0.48     $ 0.45     $ 0.13  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,465       383               6,447       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,593       383               6,575       383  
Diluted income per common share           $ 0.44     $ 0.12             $ 0.44     $ 0.13  

 

 

    Six months ended
December 31, 2020
  Six months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 5,619     $ 5,281     $ 86     $ 6,402     $ 6,010     $ 100  
Denominator:                                                
Weighted average shares outstanding     6,456       6,456       383       6,440       6,440       383  
Basic income per common share   $ 0.87     $ 0.82     $ 0.23     $ 0.99     $ 0.93     $ 0.26  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,456       383               6,440       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,584       383               6,568       383  
Diluted income per common share           $ 0.80     $ 0.23             $ 0.92     $ 0.26  

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 will be effective beginning in the first quarter of 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We are current evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of the adoption.

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted the Standard on July 1, 2020 and the impact of adopting this guidance will have no material impact on our Consolidated Financial Statements.

 

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of December 31, 2020 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2020 or 2019, and it does not believe that any of those pronouncements will have a significant impact on our consolidated condensed financial statements at the time they become effective. 

 

Reclassifications 

 

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on reported consolidated net income for any periods presented. 

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE
6 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
NOTE 3 - ACCOUNTS RECEIVABLE. MEDICAL RECEIVABLES AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $)

NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE

 

Receivables, net is comprised of the following at December 31, 2020, and June 30, 2020:

 

    December 31, 2020
    Gross Receivable  

 

Allowance for doubtful accounts

  Net
Accounts receivable   $ 4,686     $ 515     $ 4,171  
Accounts receivable - related party   $ 72       —       $ 72  
Medical receivable   $ 16,373     $ —       $ 16,373  
Management and other fees receivable   $ 43,298     $ 13,490     $ 29,808  
Management and other fees receivable from related medical practices ("PC’s")   $ 10,982     $ 3,720     $ 7,262  

 

 

    June 30, 2020
    Gross Receivable  

 

Allowance for doubtful accounts

  Net
Accounts receivable   $ 4,828     $ 515     $ 4,313  
Accounts receivable - related party   $ 6       —       $ 6  
Medical receivable   $ 16,172     $ —       $ 16,172  
Management and other fees receivable   $ 38,501     $ 11,063     $ 27,438  
Management and other fees receivable from related medical practices ("PC’s")   $ 10,218     $ 3,322     $ 6,896  

 

The Company's customers are concentrated in the healthcare industry.

 

Accounts Receivable

 

Credit risk with respect to the Company’s accounts receivable related to product sales and service and repair fees is limited due to the customer advances received prior to the commencement of work performed and the billing of amounts to customers as sub-assemblies are completed. Service and repair fees are billed on a monthly or quarterly basis and the Company does not continue providing these services if accounts receivable become past due. The Company controls credit risk with respect to accounts receivable from service and repair fees through its credit evaluation process, credit limits, monitoring procedures and reasonably short collection terms. The Company performs ongoing credit authorizations before a product sales contract is entered into or service and repair fees are provided.

 

Long Term Accounts Receivable

 

The Company will generate revenue from long-term, non-cancellable contracts to provide service and repair services. Future revenue to be recognized over the following four years as of December 31, 2020 is as follows:

 

2022     $ 853
2023       827
2024       752
2025       96
Total     $ 2,528

 

Medical Receivables

 

Medical receivables are due under fee-for-service contracts from third party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. The carrying amount of the medical receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. The Company determines allowances for contractual adjustments and uncollectible accounts based on specific agings, specific payor collection issues that have been identified and based on payor classifications and historical experience at each site.

 

Management and Other Fees Receivable

 

The Company's receivables from the related and non-related professional corporations (PC's) substantially consist of fees outstanding under management agreements. Payment of the outstanding fees is dependent on collection by the PC's of fees from third party medical reimbursement organizations, principally insurance companies and health management organizations.

 

Payment of the management fee receivables from the PC’s may be impaired by the inability of the PC’s to collect in a timely manner their medical fees from the third party payors, particularly insurance carriers covering automobile no-fault and workers compensation claims due to longer payment cycles and rigorous informational requirements and certain other disallowed claims. Approximately 66% and 60% of the PCs’ net revenues for the three months ended December 31, 2020 and 2019, respectively, were derived from no-fault and personal injury protection claims. Approximately 66% and 63% of the PCs’ net revenue for the six months ended December 31, 2020 and 2019, respectively, were derived from no-fault and personal injury protection claims. The Company considers the aging of its accounts receivable in determining the amount of allowance for doubtful accounts. The Company generally takes all legally available steps to collect its receivables. Credit losses associated with the receivables are provided for in the condensed consolidated financial statements and have historically been within management's expectations. 

 

Net revenues from management and other fees charged to the related PCs accounted for approximately 12.7% and 11.1% of the consolidated net revenues for the three months ended December 31, 2020 and 2019, respectively. Net revenues from management and other fees charged to the related PCs accounted for approximately 12.8% and 11.1% of the consolidated net revenues for the six months ended December 31, 2020 and 2019, respectively.

 

Tallahassee Magnetic Resonance Imaging, PA, Stand Up MRI of Boca Raton, PA and Stand Up MRI & Diagnostic Center, PA (all related medical practices) entered into a guaranty agreement, pursuant to which they cross guaranteed all management fees which are payable to the Company, which have arisen under each individual management agreement. Additional Company managed entities also operate under a guaranty agreement, pursuant to which management fees are payable to the Company.

 

The Company’s patient fee revenue, net of contractual allowances and discounts for the three and six months ended December 31, 2020 and 2019 are summarized in the following table.

 

   

For the Three Months Ended

December 31,

    2020   2019
Commercial Insurance/ Managed Care   $ 966     $ 1,335  
Medicare/Medicaid     206       276  
Workers' Compensation/Personal Injury     3,543       4,112  
Other     523       273  
Patient Fee Revenue, net of contractual allowances and discounts   $ 5,238     $ 5,996  

 

 

   

For the Six Months Ended

December 31,

    2020   2019
Commercial Insurance/ Managed Care   $ 1,912     $ 2,689  
Medicare/Medicaid     404       542  
Workers' Compensation/Personal Injury     6,930       8,406  
Other     1,084       404  
Patient Fee Revenue, net of contractual allowances and discounts   $ 10,330     $ 12,041  
XML 20 R10.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 4 - OPERATING & FINANCING LEASES
6 Months Ended
Dec. 31, 2020
Leases [Abstract]  
NOTE 4 - OPERATING & FINANCING LEASES

NOTE 4 – OPERATING & FINANCING LEASES

 

During February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based upon the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Lease with a term of 12 months or less will be accounted for similar to existing guidance foOTr operating leases. The standard was effective for us beginning July 1, 2019. We have elected the optional transition method to apply the standard as of the effective date and therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements. We have also elected the transition package of the practical expedients permitted within the standard which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and indirect costs. The adoption of this guidance had a material impact on the Company’s balance sheet by virtue of including the present value of its future operating lease payments as a liability of $33.3 million and related right-to-use lease assets as of July 1, 2019. At the time of adoption of this guidance we had no significant financing leases.

 

The Company accounts for its various operating leases in accordance with Accounting Standards Codification (‘ASC’) 842 – Lease, as updated by ASU 2016-02. At the inception of a lease, the Company recognizes right-of-use lease assets and related lease liabilities measured at present value of future lease payments on its balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. Our most common initial term varies in length from 2 to 10 years. Including renewal options negotiated with the landlord, we have a total span of 2 to 16 years at the facilities we lease. The Company reviewed its contracts with vendors and customers, determining that its right-to-use lease assets consisted of only office space operating leases. In determining the right-to-use lease assets and liabilities, the Company did recognize lease extension options which the Company feels would be reasonably exercised. Also included in other current assets is a $202 receivable from a landlord for tenant improvements. Our incremental borrowing rate (“IBR”) used to discount the stream of operating lease payments is closely related to the interest rates available to the Company.

 

A reconciliation of operating and financing lease payments undiscounted cash flows to lease liabilities recognized as of December 31, 2020 is as follows:

 

Year Ending

December 31,

 

Operating Lease

Payments

  Financing Lease Payments
  2021     $ 4,960     $ 244  
  2022       4,877       244  
  2023       4,599       244  
  2024       4,480       244  
  2025       4,301       244  
  Thereafter       17,505       287  
  Present value discount       (8,904 )     (156 )
  Total lease liability     $ 31,818     $ 1,351  
XML 21 R11.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 5 - INVENTORIES
6 Months Ended
Dec. 31, 2020
Inventory Disclosure [Abstract]  
NOTE 5 - INVENTORIES

NOTE 5 - INVENTORIES

 

Inventories included in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Purchased parts, components and supplies   $ 1,614     $ 1,544  
Work-in-process     230       105  
Total Inventories   $ 1,844     $ 1,649  
XML 22 R12.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
6 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

 

Information relating to uncompleted contracts is as follows:

 

   

December 31,

2020

 

June 30,

 2020

Costs incurred on uncompleted contracts   $ 448     $ 448  
Estimated earnings     309       309  
Subtotal     757       757  
Less: Billings to date     604       604  
Total Costs and estimated earnings in excess of billings on uncompleted contracts   $ 153     $ 153  
XML 23 R13.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 7 - OTHER INTANGIBLE ASSETS
6 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
NOTE 7 - OTHER INTANGIBLE ASSETS

NOTE 7 – OTHER INTANGIBLE ASSETS

 

Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Capitalized software development costs   $ 7,005     $ 7,005  
Patents and copyrights     5,171       5,082  
Non-compete     4,100       4,100  
Customer relationships     3,800       3,800  
Gross Other intangible assets     20,076       19,987  
Less: Accumulated amortization     16,062       15,878  
Other Intangible Assets   $ 4,014     $ 4,109  

 

  

Amortization of patents and copyrights for the three months ended December 31, 2020 and 2019 amounted to $44 and $47, respectively.

 

Amortization of non-compete for the three months ended December 31, 2020 and 2019 amounted to $0 and $147, respectively.

 

Amortization of customer relationships for the three months ended December 31, 2020 and 2019 amounted to $47 and $47, respectively.

 

Amortization of patents and copyrights for the six months ended December 31, 2020 and 2019 amounted to $89 and $94, respectively.

 

Amortization of non-compete for the six months ended December 31, 2020 and 2019 amounted to $0 and $293, respectively.

 

Amortization of customer relationships for the six months ended December 31, 2020 and 2019 amounted to $95 and $95, respectively.

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 8 - OTHER CURRENT LIABILITIES
6 Months Ended
Dec. 31, 2020
Other Liabilities, Current [Abstract]  
NOTE 8 - OTHER CURRENT LIABILITIES

NOTE 8 – OTHER CURRENT LIABILITIES

 

Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Accrued salaries, commissions and payroll taxes   $ 2,573     $ 4,492  
Litigation accruals     9       443  
Sales tax payable     1,123       1,353  
Legal and other professional fees     276       113  
Accounting fees     180       120  
Self-funded health insurance reserve     123       87  
Accrued interest and penalty     511       877  
Other     789       700  
Other Current Liabilities   $ 5,584     $ 8,185  
XML 25 R15.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 9 - STOCKHOLDERS EQUITY
6 Months Ended
Dec. 31, 2020
STOCKHOLDERS' EQUITY:  
NOTE 9 - STOCKHOLDERS EQUITY

 NOTE 9 – STOCKHOLDERS EQUITY

 

Common Stock

 

During the six months ended December 31, 2020, the Company issued 102 shares of common stock for costs and expenses of $1,941 and 4 shares of common stock to employees and consultants as compensation valued at $83.

 

During the six months ended December 31, 2019, the Company issued 90 shares of common stock for costs and expenses of $1,990.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 10 - SEGMENT AND RELATED INFORMATION
6 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
NOTE 10 - SEGMENT AND RELATED INFORMATION

NOTE 10 - SEGMENT AND RELATED INFORMATION

 

The Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic imaging centers.

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2020. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations.

 

The Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic imaging centers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2020. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations.

 

Summarized financial information concerning the Company's reportable segments is shown in the following table:

 

    Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the three months ended Dec. 31, 2020                        
Net revenues from external customers   $ 1,893     $ 19,271     $ 21,164  
Inter-segment net revenues   $ 219     $ —       $ 219  
(Loss) Income from operations   $ (8 )   $ 4,990     $ 4,982  
Depreciation and amortization   $ 65     $ 977     $ 1,042  
Capital expenditures   $ 70     $ 1,728     $ 1,798  
                         
For the three months ended Dec. 31, 2019                        
Net revenues from external customers   $ 2,069     $ 19,382     $ 21,451  
Inter-segment net revenues   $ 219     $ —       $ 219  
(Loss) Income from operations   $ (790 )   $ 5,811     $ 5,021  
Depreciation and amortization   $ 94     $ 914     $ 1,008  
Capital expenditures   $ 153     $ 2,116     $ 2,269  

 

    Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the six months ended Dec. 31, 2020                        
Net revenues from external customers   $ 3,874     $ 38,270     $ 42,144  
Inter-segment net revenues   $ 438     $ —       $ 438  
(Loss) Income from operations   $ (569 )   $ 9,701     $ 9,132  
Depreciation and amortization   $ 132     $ 1,878     $ 2,010  
Capital expenditures   $ 90     $ 2,143     $ 2,233  
                         
For the six months ended Dec. 31, 2019                        
Net revenues from external customers   $ 4,352     $ 38,845     $ 43,197  
Inter-segment net revenues   $ 438     $ —       $ 438  
(Loss) Income from operations   $ (1,526 )   $ 12,033     $ 10,507  
Depreciation and amortization   $ 185     $ 1,818     $ 2,003  
Capital expenditures   $ 1,754     $ 2,964     $ 4,718  
XML 27 R17.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
6 Months Ended
Dec. 31, 2020
Supplemental Cash Flow Elements [Abstract]  
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

 

During the six months ended December 31, 2020 and December 31, 2019, the Company paid $35 and $14 for interest, respectively.

 

During the six months ended December 31, 2020 and December 31, 2019, the Company paid $145 and $228 for income taxes, respectively.

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 12 - COMMITMENTS AND CONTINGENCIES
6 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
NOTE 12 - COMMITMENTS AND CONTINGENCIES

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

 

There were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2020.

 

Other Matters

 

In September 2020, the Company entered into a settlement agreement with an unrelated third party for a claim made during March 2018 which was scheduled for arbitration. The settlement was for $1.2 million of which $900 was paid by the Company’s insurance in September 2020. The Company paid the remaining balance of $315 in September 2020.

 

The Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. As of December 31, 2020, the Company has recorded tax obligations of approximately $1.1 million plus interest and penalties of approximately $466. The Company is in the process of determining the regulatory requirements in order to become compliant.

 

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $110 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of December 31, 2020 and June 30, 2020, the Company had approximately $123 and $87, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the condensed consolidated balance sheets.

 

The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant adjustments recorded in the periods covered by this report.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 13 - INCOME TAXES
6 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
NOTE 13 - INCOME TAXES

NOTE 13 - INCOME TAXES

 

In accordance with ASC 740-270, Income Taxes – Interim Reporting, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and apply that rate to year-to-date ordinary income or loss. The resulting tax expense (or benefit) is adjusted for the tax effect of specific events, if any, required to be discretely recognized in the interim period as they occur. For the six months ended December 31, 2020 and 2019, the Company recorded income tax expense of $1,962 in 2020 as compared to $2,039 in 2019. The 2020 provision is comprised of a current income tax component of $0 and a deferred income tax component of $1,962. Obligations for any liability associated with the current income tax provision, has been reduced, primarily resulting from the benefits and utilization of net operating loss carryforwards.

 

ASC topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC topic 740. The Company believes there are no uncertain tax positions in prior years tax filings and therefore it has not recorded a liability for unrecognized tax benefits.

 

In accordance with ASC topic 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as “Interest expense, net”. Penalties if incurred would be recognized as a component of “Selling, general and administrative” expenses.

 

The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2016. 

 

The Company recorded a deferred tax asset of $16,848 and a deferred tax liability of $234 as of December 31, 2020, primarily relating to net operating loss carryforwards of approximately $47,208 available to offset future taxable income through 2031. The net operating losses begin to expire in 2023 for federal tax and state income tax purposes.

 

On March 27, 2020 Congress enacted the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding prior and future operation losses, temporary changes to prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections to prior tax legislation for tax depreciation of certain qualified improvement property and enhanced recoverability of AMT tax credits.

 

At the present time, the only impact of the CARES Act to the Company is allowing a full reimbursement of $1,342 of tax credits relating to the alternative minimum tax credits. The Company received the first half payment in June 2020. The balance of alternative minimum tax credits of $671 was received in July 2020. Previously, these credits were to be refunded over a 3 year period.

 

As we continue to monitor tax implications of the CARES Act and other state and federal stimulus tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities.

 

Future ownership changes as determined under Section 382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of December 31, 2020, no such changes in ownership have occurred.

 

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry and tax planning strategies in making this assessment. At present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for the partial value of the deferred tax asset, which principally related to research and development tax credits.

 

A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 14 - SUBSEQUENT EVENTS
6 Months Ended
Dec. 31, 2020
Subsequent Events [Abstract]  
NOTE 14 - SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS

 

The Company has evaluated events that occurred subsequent to December 31, 2020 and through the date the condensed consolidated financial statements were issued.

XML 31 R21.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue

Revenues

 

On July 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

 

Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

Earnings Per Share

Earnings Per Share

 

Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the if converted method in calculating diluted income per share for the three and six months ended December 31, 2020 and 2019.

 

Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and six months ended December 31, 2020 and 2019, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

 

    Three months ended
December 31, 2020
  Three months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 3,111     $ 2,923     $ 48     $ 3,104     $ 2,914     $ 48  
Denominator:                                                
Weighted average shares outstanding     6,465       6,465       383       6,447       6,447       383  
Basic income per common share   $ 0.48     $ 0.45     $ 0.12     $ 0.48     $ 0.45     $ 0.13  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,465       383               6,447       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,593       383               6,575       383  
Diluted income per common share           $ 0.44     $ 0.12             $ 0.44     $ 0.13  

 

 

    Six months ended
December 31, 2020
  Six months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 5,619     $ 5,281     $ 86     $ 6,402     $ 6,010     $ 100  
Denominator:                                                
Weighted average shares outstanding     6,456       6,456       383       6,440       6,440       383  
Basic income per common share   $ 0.87     $ 0.82     $ 0.23     $ 0.99     $ 0.93     $ 0.26  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,456       383               6,440       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,584       383               6,568       383  
Diluted income per common share           $ 0.80     $ 0.23             $ 0.92     $ 0.26  
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 will be effective beginning in the first quarter of 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We are current evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of the adoption.

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted the Standard on July 1, 2020 and the impact of adopting this guidance will have no material impact on our Consolidated Financial Statements.

 

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of December 31, 2020 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2020 or 2019, and it does not believe that any of those pronouncements will have a significant impact on our consolidated condensed financial statements at the time they become effective. 

Reclassifications

Reclassifications 

 

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on reported consolidated net income for any periods presented. 

XML 32 R22.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
6 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Earnings Per Share

Earnings Per Share

 

    Three months ended
December 31, 2020
  Three months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 3,111     $ 2,923     $ 48     $ 3,104     $ 2,914     $ 48  
Denominator:                                                
Weighted average shares outstanding     6,465       6,465       383       6,447       6,447       383  
Basic income per common share   $ 0.48     $ 0.45     $ 0.12     $ 0.48     $ 0.45     $ 0.13  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,465       383               6,447       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,593       383               6,575       383  
Diluted income per common share           $ 0.44     $ 0.12             $ 0.44     $ 0.13  

 

 

    Six months ended
December 31, 2020
  Six months ended
December 31, 2019
    Total   Common Stock   Class C Common
Stock
  Total   Common Stock   Class C Common
Stock
Basic                        
Numerator: 
Net income available to common stockholders
  $ 5,619     $ 5,281     $ 86     $ 6,402     $ 6,010     $ 100  
Denominator:                                                
Weighted average shares outstanding     6,456       6,456       383       6,440       6,440       383  
Basic income per common share   $ 0.87     $ 0.82     $ 0.23     $ 0.99     $ 0.93     $ 0.26  
Diluted                                                
Denominator:
Weighted average shares outstanding
            6,456       383               6,440       383  
Convertible Class C Stock             128       —                 128       —    
Total Denominator for diluted earnings per share             6,584       383               6,568       383  
Diluted income per common share           $ 0.80     $ 0.23             $ 0.92     $ 0.26  
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (Tables)
6 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Summary of Allowance For Doubtful Accounts

Receivables, net is comprised of the following at December 31, 2020, and June 30, 2020:

 

    December 31, 2020
    Gross Receivable  

 

Allowance for doubtful accounts

  Net
Accounts receivable   $ 4,686     $ 515     $ 4,171  
Accounts receivable - related party   $ 72       —       $ 72  
Medical receivable   $ 16,373     $ —       $ 16,373  
Management and other fees receivable   $ 43,298     $ 13,490     $ 29,808  
Management and other fees receivable from related medical practices ("PC’s")   $ 10,982     $ 3,720     $ 7,262  

 

 

    June 30, 2020
    Gross Receivable  

 

Allowance for doubtful accounts

  Net
Accounts receivable   $ 4,828     $ 515     $ 4,313  
Accounts receivable - related party   $ 6       —       $ 6  
Medical receivable   $ 16,172     $ —       $ 16,172  
Management and other fees receivable   $ 38,501     $ 11,063     $ 27,438  
Management and other fees receivable from related medical practices ("PC’s")   $ 10,218     $ 3,322     $ 6,896  
Receivables - Non Current - net

Future revenue to be recognized over the following four years as of December 31, 2020 is as follows:

 

2022     $ 853
2023       827
2024       752
2025       96
Total     $ 2,528
Patient fee revenue - net

The Company’s patient fee revenue, net of contractual allowances and discounts for the three and six months ended December 31, 2020 and 2019 are summarized in the following table.

 

   

For the Three Months Ended

December 31,

    2020   2019
Commercial Insurance/ Managed Care   $ 966     $ 1,335  
Medicare/Medicaid     206       276  
Workers' Compensation/Personal Injury     3,543       4,112  
Other     523       273  
Patient Fee Revenue, net of contractual allowances and discounts   $ 5,238     $ 5,996  

 

 

   

For the Six Months Ended

December 31,

    2020   2019
Commercial Insurance/ Managed Care   $ 1,912     $ 2,689  
Medicare/Medicaid     404       542  
Workers' Compensation/Personal Injury     6,930       8,406  
Other     1,084       404  
Patient Fee Revenue, net of contractual allowances and discounts   $ 10,330     $ 12,041  
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 4 - OPERATING & FINANCING LEASES (Tables)
6 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Lease, Liability, Maturity

A reconciliation of operating and financing lease payments undiscounted cash flows to lease liabilities recognized as of December 31, 2020 is as follows:

 

Year Ending

December 31,

 

Operating Lease

Payments

  Financing Lease Payments
  2021     $ 4,960     $ 244  
  2022       4,877       244  
  2023       4,599       244  
  2024       4,480       244  
  2025       4,301       244  
  Thereafter       17,505       287  
  Present value discount       (8,904 )     (156 )
  Total lease liability     $ 31,818     $ 1,351  
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 5 - INVENTORIES (Tables)
6 Months Ended
Dec. 31, 2020
Inventory Disclosure [Abstract]  
Inventories

Inventories included in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Purchased parts, components and supplies   $ 1,614     $ 1,544  
Work-in-process     230       105  
Total Inventories   $ 1,844     $ 1,649  
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Tables)
6 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Information relating to uncompleted contracts

Information relating to uncompleted contracts is as follows:

 

   

December 31,

2020

 

June 30,

 2020

Costs incurred on uncompleted contracts   $ 448     $ 448  
Estimated earnings     309       309  
Subtotal     757       757  
Less: Billings to date     604       604  
Total Costs and estimated earnings in excess of billings on uncompleted contracts   $ 153     $ 153  
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 7 - OTHER INTANGIBLE ASSETS (Tables)
6 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Other intangible assets - net

Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Capitalized software development costs   $ 7,005     $ 7,005  
Patents and copyrights     5,171       5,082  
Non-compete     4,100       4,100  
Customer relationships     3,800       3,800  
Gross Other intangible assets     20,076       19,987  
Less: Accumulated amortization     16,062       15,878  
Other Intangible Assets   $ 4,014     $ 4,109  
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 8 - OTHER CURRENT LIABILITIES (Tables)
6 Months Ended
Dec. 31, 2020
Other Liabilities, Current [Abstract]  
Other current liabilities

Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following:

 

   

December 31,

2020

 

June 30,

2020

Accrued salaries, commissions and payroll taxes   $ 2,573     $ 4,492  
Litigation accruals     9       443  
Sales tax payable     1,123       1,353  
Legal and other professional fees     276       113  
Accounting fees     180       120  
Self-funded health insurance reserve     123       87  
Accrued interest and penalty     511       877  
Other     789       700  
Other Current Liabilities   $ 5,584     $ 8,185  
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 10 - SEGMENT AND RELATED INFORMATION (Tables)
6 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Segment information

Summarized financial information concerning the Company's reportable segments is shown in the following table:

 

    Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the three months ended Dec. 31, 2020                        
Net revenues from external customers   $ 1,893     $ 19,271     $ 21,164  
Inter-segment net revenues   $ 219     $ —       $ 219  
(Loss) Income from operations   $ (8 )   $ 4,990     $ 4,982  
Depreciation and amortization   $ 65     $ 977     $ 1,042  
Capital expenditures   $ 70     $ 1,728     $ 1,798  
                         
For the three months ended Dec. 31, 2019                        
Net revenues from external customers   $ 2,069     $ 19,382     $ 21,451  
Inter-segment net revenues   $ 219     $ —       $ 219  
(Loss) Income from operations   $ (790 )   $ 5,811     $ 5,021  
Depreciation and amortization   $ 94     $ 914     $ 1,008  
Capital expenditures   $ 153     $ 2,116     $ 2,269  

 

    Medical
Equipment
  Management
of Diagnostic
Imaging
Centers
  Totals
For the six months ended Dec. 31, 2020                        
Net revenues from external customers   $ 3,874     $ 38,270     $ 42,144  
Inter-segment net revenues   $ 438     $ —       $ 438  
(Loss) Income from operations   $ (569 )   $ 9,701     $ 9,132  
Depreciation and amortization   $ 132     $ 1,878     $ 2,010  
Capital expenditures   $ 90     $ 2,143     $ 2,233  
                         
For the six months ended Dec. 31, 2019                        
Net revenues from external customers   $ 4,352     $ 38,845     $ 43,197  
Inter-segment net revenues   $ 438     $ —       $ 438  
(Loss) Income from operations   $ (1,526 )   $ 12,033     $ 10,507  
Depreciation and amortization   $ 185     $ 1,818     $ 2,003  
Capital expenditures   $ 1,754     $ 2,964     $ 4,718  

XML 40 R30.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details Narrative) - Health Diagnostics Management LLC (HDM)
Jul. 01, 2015
The ownership interest of Imperial Management Services after reorganization of newly expanded HDM (percent). 24.20%
The ownership interest of Health Management Corporation of America after reorganization of newly expanded HDM (percent). 45.80%
The ownership interest of the original investors of HDM after reorganization of newly expanded HDM (percent). 30.00%
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Basic Numerator: Net income available to common stockholders $ 3,111 $ 3,104 $ 5,619 $ 6,402
Basic Denominator: Weighted average shares outstanding 6,465 6,447 6,456 6,440
Basic income per common share $ 0.48 $ 0.48 $ 0.87 $ 0.99
Shares included upon conversion of Class C Common to calculate a diluted EPS 128 128 128 128
Common Stock        
Basic Numerator: Net income available to common stockholders $ 2,923 $ 2,914 $ 5,281 $ 6,010
Basic Denominator: Weighted average shares outstanding 6,465 6,447 6,456 6,440
Basic income per common share $ 0.45 $ 0.45 $ 0.82 $ 0.93
Shares included upon conversion of Class C Common to calculate a diluted EPS 128 128 128 128
Total Denominator for diluted earnings per share 6,593 6,575 6,584 6,568
Diluted income per common share $ 0.44 $ 0.44 $ 0.80 $ 0.92
Class C Common Stock        
Basic Numerator: Net income available to common stockholders $ 48 $ 48 $ 86 $ 100
Basic Denominator: Weighted average shares outstanding 383 383 383 383
Basic income per common share $ 0.12 $ 0.13 $ 0.23 $ 0.26
Shares included upon conversion of Class C Common to calculate a diluted EPS
Total Denominator for diluted earnings per share 383 383 383 383
Diluted income per common share $ 0.12 $ 0.13 $ 0.23 $ 0.26
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - shares
shares in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Accounting Policies [Abstract]        
Shares included upon conversion of Class C Common to calculate a diluted EPS. 128 128 128 128
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - Receivables, Net (Details) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Accounts receivable $ 4,171 $ 4,313
Accounts receivable - Related party 72 6
Medical Receivables 16,373 16,172
Management and other fees receivable 29,808 27,438
Management and other fees receivable from related medical practices ("PC's") 7,262 6,896
Gross Receivable    
Accounts receivable 4,686 4,828
Accounts receivable - Related party 72 6
Medical Receivables 16,373 16,172
Management and other fees receivable 43,298 38,501
Management and other fees receivable from related medical practices ("PC's") 10,982 10,218
Allowance for Doubtful Accounts    
Accounts receivable 515 515
Accounts receivable - Related party
Medical Receivables
Management and other fees receivable 13,490 11,063
Management and other fees receivable from related medical practices ("PC's") $ 3,720 $ 3,322
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE & MANAGEMENT & OTHER FEES RECEIVABLE - Long Term Accounts Receivable (Details)
$ in Thousands
Dec. 31, 2020
USD ($)
Receivables, Long-term Contracts or Programs [Abstract]  
2022 $ 853
2023 827
2024 752
2025 96
Total $ 2,528
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - Patient Fees Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Patient fee revenue, net of contractual allowances and discounts $ 5,238 $ 5,996 $ 10,330 $ 12,041
Commercial Insurance / Managed Care        
Patient fee revenue, net of contractual allowances and discounts 966 1,335 1,912 2,689
Medicare/Medicaid        
Patient fee revenue, net of contractual allowances and discounts 206 276 404 542
Workers Compensation/Personal Injury        
Patient fee revenue, net of contractual allowances and discounts 3,543 4,112 6,930 8,406
Other        
Patient fee revenue, net of contractual allowances and discounts $ 523 $ 273 $ 1,084 $ 404
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - (Details Narrative)
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Note 3 - Accounts Receivable Medical Receivable And Management And Other Fees Receivable -        
Percentage of PC's net revenue derived from no-fault and personal injury protection claims 66.00% 60.00% 66.00% 63.00%
Percentage of consolidated net revenue from management fees charged to related party medical practices 12.70% 11.10% 12.80% 11.10%
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 4 - OPERATING & FINANCING LEASES (Details)
$ in Thousands
Dec. 31, 2020
USD ($)
Operating Lease Payments  
2021 $ 4,960
2022 4,877
2023 4,599
2024 4,480
2025 4,301
Thereafter 17,505
Present Value discount (8,904)
Total lease liability 31,818
Financing Lease Payments  
2021 244
2022 244
2023 244
2024 244
2025 244
Thereafter 287
Present Value discount (156)
Total lease liability $ 1,351
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 4 - OPERATING & FINANCING LEASES (Details Narrative)
$ in Thousands
6 Months Ended
Dec. 31, 2020
USD ($)
Leases [Abstract]  
Receivable from landlord for tenant improvements $ 202
Operating lease payments $ 33,300
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 5 - INVENTORIES (Details) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Inventory Disclosure [Abstract]    
Purchased parts, components and supplies $ 1,614 $ 1,544
Work-in-process 230 105
Total Inventories $ 1,844 $ 1,649
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 6 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - Information relating to uncompleted contracts (Details) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Notes to Financial Statements    
Costs incurred on uncompleted contracts $ 448 $ 448
Estimated earnings 309 309
Costs and estimated earnings on uncompleted contracts 757 757
Less: Billings to date 604 604
Total costs and estimated earnings in excess of billings on uncompleted contracts $ 153 $ 153
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 7 - OTHER INTANGIBLE ASSETS (Details) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Gross other intangible assets $ 20,076 $ 19,987
Less: Accumulated amortization 16,062 15,878
Other intangible assets-net 4,014 4,109
Capitalized software development costs    
Gross other intangible assets 7,005 7,005
Patents and copyrights    
Gross other intangible assets 5,171 5,082
Non-compete    
Gross other intangible assets 4,100 4,100
Customer relationships    
Gross other intangible assets $ 3,800 $ 3,800
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 7 - OTHER INTANGIBLE ASSETS (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Patents and copyrights        
Amortization of intangible assets $ 44 $ 47 $ 89 $ 94
Non-compete        
Amortization of intangible assets 0 147 0 293
Customer relationships        
Amortization of intangible assets $ 47 $ 47 $ 95 $ 95
XML 53 R43.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 8 - OTHER CURRENT LIABILITIES (Details) - USD ($)
$ in Thousands
Dec. 31, 2020
Jun. 30, 2020
Other Liabilities, Current [Abstract]    
Accrued salaries, commissions and payroll taxes $ 2,573 $ 4,492
Litigation accruals 9 443
Sales tax payable 1,123 1,353
Legal and other professional fees 276 113
Accounting fees 180 120
Self-funded health insurance reserve 123 87
Accrued interest and penalty 511 877
Other 789 700
Other current liabilities $ 5,584 $ 8,185
XML 54 R44.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 9 - STOCKHOLDERS EQUITY (Details Narrative) - USD ($)
shares in Thousands, $ in Thousands
6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
STOCKHOLDERS' EQUITY:    
Stock issued for cost and expenses, shares 102 90
Stock issued for cost and expenses, value $ 1,941 $ 1,990
Stock issued for compensation, shares 4  
Stock issued for compensation, value $ 83  
XML 55 R45.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 10 - SEGMENT AND RELATED INFORMATION - Segment Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Net revenues from external customers $ 21,164 $ 21,451 $ 42,144 $ 43,197
Inter-segment net revenues 219 219 438 438
(Loss) Income from operations 4,982 5,021 9,132 10,507
Depreciation and amortization 1,042 1,008 2,010 2,003
Capital expenditures 1,798 2,269 2,233 4,718
Medical Equipment        
Net revenues from external customers 1,893 2,069 3,874 4,352
Inter-segment net revenues 219 219 438 438
(Loss) Income from operations (8) (790) (569) (1,526)
Depreciation and amortization 65 94 132 185
Capital expenditures 70 153 90 1,754
Management Of Diagnostic Imaging Centers        
Net revenues from external customers 19,271 19,382 38,270 38,845
Inter-segment net revenues
(Loss) Income from operations 4,990 5,811 9,701 12,033
Depreciation and amortization 977 914 1,878 1,818
Capital expenditures $ 1,728 $ 2,116 $ 2,143 $ 2,964
XML 56 R46.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION ($) (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Supplemental Cash Flow Elements [Abstract]    
Interest paid $ 35 $ 14
Income taxes paid $ 145 $ 228
XML 57 R47.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Dec. 31, 2020
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]    
Litigation settelement description In September 2020, the Company entered into a settlement agreement with an unrelated third party for a claim made during March 2018 which was scheduled for arbitration. The settlement was for $1.2 million of which $900 was paid by the Company’s insurance in September 2020. The Company paid the remaining balance of $315 in September 2020.  
Recorded tax obligations $ 1,100  
Tax interest and penalties 466  
Maximum limit for individual claims under stop-loss umbrella policy for health insurance 110  
Self-funded health insurance reserve $ 123 $ 87
XML 58 R48.htm IDEA: XBRL DOCUMENT v3.20.4
NOTE 13 - INCOME TAXES (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Income Tax Disclosure [Abstract]    
Income tax expense $ 1,962 $ 2,039
Income tax component - current 0  
Income tax component - deferred 1,962  
Deferred tax assets 16,848  
Deferred tax liability 234  
Net operating loss (NOL) carryforwards available to offset future taxable income $ 47,208  
Reimbursement of alternative minimum tax credits description The Company is allowing a full reimbursement of $1,342 of tax credits relating to the alternative minimum tax credits. The Company received the first half payment in June 2020. The balance of alternative minimum tax credits of $671 was received in July 2020. Previously, these credits were to be refunded over a 3 year period.  
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