Fonar Logo
diagnostic imaging management services

For Immediate Release

The Inventor of MR Scanning

An ISO 9001 Company

Contact: Daniel Culver 110 Marcus Drive
Director of Communications Melville, NY 11747-4292
Web site: www.fonar.com Phone: (631) 694-2929
Email: investor @ fonar. com Fax: (631) 390-1709

FONAR ANNOUNCES SIX MONTHS AND 2nd QUARTER FINANCIAL
RESULTS FOR FISCAL 2023

 

MELVILLE, NEW YORK, February 14, 2023 - FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™, eported today its financial results for the fiscal 2023 six month period and quarter ended December 31, 2022. FONAR’s primary source of income and growth is attributable to its diagnostic imaging management subsidiary, Health Management Company of America (HMCA). In 2009, HMCA managed 9 MRI scanners. Currently, HMCA manages 40 MRI scanners.

Financial Results

Total Revenues-Net for the quarter ended December 31, 2022 decreased 1% to $24.3 million as compared to $24.4 million for the quarter ended December 31, 2021.

Income from Operations for the six months ended December 31, 2022 decreased 33% to $8.1 million as compared to $12.2 million for the corresponding six month period ended December 31, 2021.

Income from Operations for the quarter ended December 31, 2022 decreased 35% to $4.2 million as compared to $6.5 million for the corresponding quarter ended December 31, 2021.

Net Income for the six months ended December 31, 2022 decreased 47% to $5.5 million as compared to $10.3 million for the corresponding six month period ended December 31, 2021.

Net Income for the quarter ended December 31, 2022 decreased 45% to $2.8 million as compared to $5.1 million for the corresponding quarter ended December 31, 2021.

Diluted Net Income per Common Share Available to Common Stockholders for the six months ended December 31, 2022 decreased 46% to $0.60 as compared to $1.11 for the corresponding six month period ended December 31, 2021.

Diluted Net Income per Common Share Available to Common Stockholders for the quarter ended December 31, 2022 decreased 44% to $0.32 as compared to $0.57 for the corresponding quarter ended December 31, 2021.

Selling, general & administrative expenses (SG&A) for the six months ended December 31, 2022 increased 31% to $12.9 million as compared to $9.9 million for the corresponding six months ended December 31, 2021.

SG&A for the quarter ended December 31, 2022 increased 38% to $6.6 million, as compared to $4.8 million for the corresponding quarter ended December 31, 2021.

The increase in SG&A was almost exclusively due to more reserves being placed on management contracts and management fees and other receivables that had resulted from the COVID-19 pandemic. In addition, workforce shortages among both MRI technologists and administrative staff prevented us from meeting patient demand at many of our sites. This problem with hiring of skilled personnel is not unique to HMCA, as the problem exists throughout the entire healthcare industry. The ever-increasing demand for MRI studies further exacerbates the situation. HMCA-managed sites have always competed with other MRI providers for patient referrals. Now we’re competing for employees as well. Also, at the end of September, hurricane Ian had a negative impact on scan volume in Florida although to a much lesser degree.

Operating Cash Flow at December 31, 2022 was $5.9 million, compared with $5.8 million for the six-month period ended December 31, 2021.

Cash and cash equivalents and short term investments were $49.5 million at December 31, 2022 as compared to $48.7 million at June 30, 2022.

Total Current Assets at December 31, 2022 were $120.7 million as compared to $118.7 million at June 30, 2022.

Total Assets were $197.5 million at December 31, 2022 as compared to $199.3 million at June 30, 2022.

Total Current Liabilities were $13.7 million at December 31, 2022 as compared to $16.7 million at June 30, 2022.

Total Liabilities at December 31, 2022 were $49.4 million, as compared to $53.1 million at June 30, 2022.

Total Stockholders’ Equity at December 31, 2022 was $148.1 million, as compared to $146.2 million at June 30, 2022.

The ratio of Total Assets / Total Liabilities at December 31, 2022 was 4.0 as compared to 3.8 at June 30, 2022.

Working Capital increased 3% to $107.0 million at December 31, 2022 as compared to $101.9 million at June 30, 2022.

Net Book Value per Common Share increased 4% to $22.25 at December 31, 2022 as compared to $21.32 at December 31, 2021, one year ago.

Management Discussion

Timothy Damadian, Chairman, President and CEO of FONAR, said: “Scan volume at the HMCA-managed sites for the 6-month period ending on December 31, 2022 was 89,888, which was 5% lower than the scan volume in the corresponding period ending December 31, 2021 (94,460). However, scan volume improved by 2% in the last three months in comparison to the first three months of that 6-month period, from 44,476 to 45,412.”

“Although it’s been challenging returning to previous rates of scan volume growth, we are now making progress. I am pleased to report that the HMCA-managed sites have recently added 19 MRI technologists, which allows for expanded business hours and therefore higher scan volume.”

“Staffing shortages continue to be problematic across the entire nation. According to Healthcare Finance News (Jan 5, 2022), healthcare has been the second largest industry sector hit by the “Great Resignation,” with tens of thousands of workers abandoning their posts or the field altogether in the wake of the COVID-19 pandemic. On top of that, U.S. Bureau of Labor Statistics data point to a trend that more technologists will be needed to meet growing demand for imaging services. Accordingly, we have successfully developed and implemented innovative strategies for recruiting MRI technologists, as mentioned previously.”

“As of December 31, 2022, HMCA was managing 40 MRI scanners, 25 in New York and 15 in Florida. We will add a new location in Casselberry, Florida in the third fiscal quarter, followed shortly thereafter by another location in the southern part of Bronx, New York. Both brand new facilities, they are ideal extensions of the existing HMCA networks in their respective regions and are expected to contribute significantly to the growth of our Company.”

“I am grateful to our management team and all the HMCA employees who have admirably met the COVID and now the post-COVID challenges of the past few years and kept the Company profitable throughout.”

“I would also like to report that pursuant to our September 13, 2022 announcement of a FONAR stock repurchase plan of up to $9 million, we have to date repurchased 53,607 shares at a cost of $922,593.”

Company Event

On August 3, 2022, FONAR founder and The Father of MRI, Raymond V. Damadian, died at 86. Dr. Damadian was the Chairman of the Board at the time of his passing. Timothy R. Damadian, President and CEO of Fonar Corporation, succeeded his father as Chairman of the Board.

Dr. Damadian is sorely missed for his leadership and scientific achievement. Besides the discovery of the basis of MRI (1970) and the building of the world's first MRI scanner (1977), FONAR’s founder Raymond V. Damadian had continued important research. On October 5, 2011, he and FONAR scientist David Chu, Ph.D. published a study on multiple sclerosis (MS), based on observations made possible by the Company’s unique FONAR UPRIGHT® Multi-Position™ MRI.

Drs. Damadian and Chu co-authored a paper titled “The Possible Role of Cranio-Cervical Trauma and Abnormal CSF Hydrodynamics in the Genesis of Multiple Sclerosis.” The paper has been published in the journal Physiological Chemistry and Physics and Medical NMR (Sept. 20, 2011, 41: 1-17).

Using the FONAR UPRIGHT® Multi-Position™ MRI, Drs. Damadian and Chu imaged and measured cerebrospinal fluid flow of eight MS patients. Their findings revealed 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 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 into the surrounding brain tissue. The
scientists concluded that the leakage could be responsible for generating the brain lesions of multiple sclerosis. The researchers believe that the unique ability of the FONAR MRI to scan patients in an upright position is what enabled them to arrive at this result.

The complete study on multiple sclerosis can be accessed at the company website at: www.fonar.com/pdf/PCP41_damadian.pdf. A press release can be found at FONAR NEWS-100511.

While recumbent based MRI is a common tool in research medicine, more research needs to be done using Upright MRI. Nevertheless, a paper using FONAR technology titled: Upright versus supine MRI: effects of body position on craniocervical CSF flow was published on December 24, 2021 in collaboration with Doctors Marco Muccio and Yulin Ge at the Bernard and Irene Schwartz Center for Biomedical Imaging, Department of Radiology, NYU Grossman School of Medicine, New York, NY.

The study consisted of 30 asymptomatic volunteers who were scanned in the UPRIGHT® Multi-Position™ MRI scanner designed and manufactured by FONAR. The objective of the study was to understand how CSF is driven by cardiovascular brain pulsation and how it is affected by body orientation, supine or upright.

In summary, body position has significant effects on CSF flow in and out of the cranium, with more CSF oscillating in supine compared to upright position. Such difference was driven by an increased caudo-cranial diastolic CSF velocity and an increased systolic phase duration when moving from upright to supine position. Extrapolation to a 24-hour timeframe suggests that more time spent in supine position increases total amount of CSF exchange between cranial and spinal CSF space, which may play a beneficial role in waste clearance in the brain.

The study is published in Fluids and Barriers of the CNS. This is an open access, peer-reviewed journal that considers manuscripts on all CNS fluids and barrier systems in health and disease. Its Web address is fluidsbarrierscns.biomedcentral.com. It may also be found at Upright versus supine MRI: effects of body position on craniocervical CSF flow - PubMed (nih.gov)

Dr. Damadian had believed at the time that research using the UPRIGHT® Multi-Position™ MRI might have profound implications for many neurodegenerative disorders including Chiari malformation, syringomyelia and Multiple Sclerosis (MS).

About FONAR

Fonar Corporation, the Inventor of MR Scanning™, located in Melville, NY, was incorporated in 1978, and is the first, oldest and most experienced MRI company in the industry. Fonar introduced the world's first commercial MRI in 1980, and went public in 1981. Fonar's signature product is the FONAR UPRIGHT® Multi-Position™ MRI (also known as the STAND-UP® MRI), the only whole-body MRI that performs Position™ Imaging (pMRI™) and scans patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as the conventional lie-down position. The FONAR UPRIGHT® MRI often detects patient problems that other MRI scanners cannot because they are lie-down,"weightless-only" scanners. The patient-friendly UPRIGHT® MRI has a near-zero patient claustrophobic rejection rate. As a Fonar customer states, "If the patient is claustrophobic in this scanner, they'll be claustrophobic in my parking lot." Approximately 85% of patients are scanned sitting while watching TV.

Fonar has new works-in-progress technology for visualizing and quantifying the cerebral hydraulics of the central nervous system, the flow of cerebrospinal fluid (CSF), which circulates throughout the brain and vertebral column at the rate of 32 quarts per day. This imaging and quantifying of the dynamics of this vital life-sustaining physiology of the body's neurologic system has been made possible first by Fonar's introduction of the MRI and now by this latest works-in-progress method for quantifying CSF in all the normal positions of the body, particularly in its upright flow against gravity. Patients with whiplash or other neck injuries are among those who will benefit from this new understanding.

FONAR’s primary source of income and growth is attributable to its wholly-owned diagnostic imaging management subsidiary, Health Management Company of America (HMCA) www.hmca.com.

FONAR’s substantial list of patents includes recent patents for its technology enabling full weight-bearing MRI imaging of all the gravity sensitive regions of the human anatomy, especially the brain, extremities and spine. It includes its newest technology for measuring the Upright cerebral hydraulics of the cerebro-spinal fluid (CSF) of the central nervous system. FONAR’s UPRIGHT® Multi-Position™ MRI is the only scanner licensed under these patents.

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

 

FONAR logo

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)

ASSETS

  December 31, June 30,
 

2022

2022

Current Assets:
Cash and cash equivalents      $ 49,505 $ 48,723
Short term investments 32 32
Accounts receivable – net 3,949 4,336
Accounts receivable – related party 60
Medical receivables - net 19,685 20,109
Management and other fees receivable – net 34,910 33,419
Management and other fees receivable – related party medical practices – net 8,941 8,603
Inventories 2,634 2,360
Prepaid expenses and other current assets 1,033 1,104
    Total Current Assets 120,749 118,686
Accounts receivable – long term 1,278 1,872
Deferred income tax asset 10,536 12,843
Property and equipment – net 21,627 22,282
Right-of-use Asset – operating lease 34,107 34,232
Right-of-use Asset – financing lease 829 928
Goodwill 4,269 4,269
Other intangible assets – net 3,577 3,704
Other Assets 526 526
Total Assets $ 197,498
================
$ 199,342
===============

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

  December 31, June 30,
  2022 2022
Current Liabilities:
Current portion of long-term debt and capital leases $ 42 $ 40
Accounts payable 866 1,552
Other current liabilities 4,137 6,417
Unearned revenue on service contracts 3,847 4,289
Unearned revenue on service contracts – related party 55
Operating lease liability - current portion 3,952 3,880
Financing lease liability - current portion 214 210
Customer deposits 632 361
Total Current Liabilities 13,745 16,749
Long-Term Liabilities:    
Unearned revenue on service contracts 1,296 1,857
Deferred income tax liability 216 216
Due to related medical practices 93 93
Operating lease liability – net of current portion 33,158 33,091
Financing lease liability – net of current portion 709 838
Long-term debt and capital leases, less current portion 137 155
Other liabilities 74 107
Total Long-Term Liabilities 35,683 36,357
    Total Liabilities 49,428 53,106

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY (Continued)

  December 31, June 30,
 

2022

2022 *

STOCKHOLDERS' EQUITY:    
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2022 and June 30, 2022, 313 issued and outstanding at December 31, 2022 and June 30, 2022 $ — $ —
Preferred stock $.001 par value; 567 shares authorized at December 31, 2022 and June 30, 2022, issued and outstanding – none
Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2022 and June 30, 2022, 6,563 and 6,566 issued at December 31, 2022 and June 30, 2022, respectively 6,538 and 6,554 outstanding at December 31, 2022 and June 30, 2022 respectively 1 1
Class B Common Stock (10 votes per share) $.0001 par value; 227 shares authorized at December 31, 2022 and June 30, 2022; .146 issued and outstanding at December 31, 2022 and June 30, 2022
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2022 and June 30, 2022, 383 issued and outstanding at December 31, 2022 and June 30, 2022
Paid-in capital in excess of par value
184,130
184,531
Accumulated deficit (29,288)
(33,567)
Treasury stock, at cost – 25 shares of common stock at December 31, 2022 and 12 shares of common stock at June 30, 2022 (751) (675)
Total Fonar Corporation’s Stockholders’ Equity 154,092 150,290
Noncontrolling interests (6,022) (4,054)
Total Stockholders' Equity 148,070 146,236
Total Liabilities and Stockholders' Equity $ 197,498
================
$ 199,342
================

 

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,
  2022 2021
REVENUES    
Patient fee revenue – net of contractual allowances and discounts $ 7,129 $ 7,443
Product sales – net 170 198
Service and repair fees – net 1,838 1,907
Service and repair fees – related parties – net 28 28
Management and other fees – net 12,092 12,108
Management and other fees – related party medical practices – net 2,999 2,795
    Total Revenues – Net 24,256 24,479
COSTS AND EXPENSES    
Costs related to patient fee revenue 4,023 3,323
Costs related to product sales 214 190
Costs related to service and repair fees 722 719
Costs related to service and repair fees - related parties 11 10
Costs related to management and other fees 6,622 6,924
Costs related to management and other fees – related party medical practices 1,492 1,690
Research and development 342 370
Selling, general and administrative 6,598 4,770
    Total Costs and Expenses 20,024 17,996
Income From Operations 4,232 6,483
Other (Expense) Income (208) 47
Interest Expense (12) (23)
Investment Income 263 60
Income Before Provision for Income Taxes and Noncontrolling Interests 4,275 6,567
Provision for Income Taxes (1,409) (1,416)
Net Income 2,812 5,137
Net Income – Noncontrolling Interests (580) (1,117)
Net Income – Attributable to FONAR $ 2,232
================
$ 4,020
================
Net Income Available to Common Stockholders $ 2,097
================
$ 3,777
================
Net Income Available to Class A Non-Voting Preferred Stockholders $ 101
================
$ 181
================
Net Income Available to Class C Common Stockholders $ 34
================
$ 62
================
Basic Net Income Per Common Share Available to Common Stockholders $ 0.32
================
$ 0.58
================
Diluted Net Income Per Common Share Available to Common Stockholders $ 0.32
================
$ 0.57
================
Basic and Diluted Income Per Share – Class C Common $ 0.09
================
$ 0.16
================
Weighted Average Basic Shares Outstanding – Common Stockholders 6,527
================
6,554
================
Weighted Average Diluted Shares Outstanding - Common Stockholders 6,655
================
6,682
================
Weighted Average Basic and Diluted Shares Outstanding – Class C Common 383
================
383
================

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)

  FOR THE SIX MONTHS
ENDED DECEMBER 31,
  2022 2021
REVENUES    
Patient fee revenue – net of contractual allowances and discounts $ 13,205 $ 14,294

Product sales – net

200 346

Service and repair fees – net

3,658 3,844
Service and repair fees - related parties – net 55 55
Management and other fees – net 24,342 24,081
Management and other fees - related medical practices – net 5,987 5,589
          Total Revenues – Net 47,447 48,209
COSTS AND EXPENSES    
Costs related to patient fee revenue 7,822 6,479

Costs related to product sales

383 299

Costs related to service and repair fees

1,440 1,443

Costs related to service and repair fees – related parties

22 22

Costs related to management and other fees

13,124 13,801

Costs related to management and other fees – related medical practices

2,890 3,326

Research and development

691 755

Selling, general and administrative

12,932 9,860

          Total Costs and Expenses

39,304 35,984

Income From Operations

8,143 12,225

Other (Expense) Income

(197) 858

Interest Expense

(27) (40)

Investment Income

414 122
Income Before Provision for Income Taxes and Noncontrolling Interests 8,333 13,165

Provision for Income Taxes

(2,871) (2,846)

Net Income

5,462 10,319
Net Income – Noncontrolling Interests (1,183) (2,412)
Net Income – Attributable to FONAR $ 4,279
================
$ 7,907
================
Net Income Available to Common Stockholders $ 4,020
================
$ 7,430
================
Net Income Available to Class A Non-Voting Preferred Stockholders $ 193
================
$ 355
================
Net Income Available to Class C Common Stockholders $ 66
================
$ 122
================
Basic Net Income Per Common Share Available to Common Stockholders $ 0.62
================
$ 1.13
================
Diluted Net Income Per Common Share Available to Common Stockholders $ 0.60
================
$ 1.11
================
Basic and Diluted Income Per Share – Class C Common $ 0.17
================
$ 0.32
================
Weighted Average Basic Shares Outstanding – Common Stockholders 6,534
================
6,554
================
Weighted Average Diluted Shares Outstanding – Common Stockholders 6,662
================
6,682
================
Weighted Average Basic and Diluted Shares Outstanding – Class C Common 383
================
383
================

 

FONAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

 
FOR THE SIX MONTHS
ENDED DECEMBER 31,
  2022 2021
Cash Flows from Operating Activities:    
          Net income $ 5,462 $ 10,319

Adjustments to reconcile net income to net cash provided by operating activities:

   

     Depreciation and amortization

2,218 2,358

     Amortization on right-of-use assets

2,238 1,644

     Provision for bad debts

2,891 822
     Deferred income tax – net 2,306 2,437
     Gain on forgiveness of PPP loan (701)
(Increase) decrease in operating assets, net:    
     Accounts, medical and management fee receivable(s) (3,375) (2,429)
     Notes receivable 11 22
     Inventories (274) (436)
     Prepaid expenses and other current assets 60 (33)
     Other assets 102
Increase (decrease) in operating liabilities, net:    
     Accounts payable (685) (1,090)
     Other current liabilities (3,228) (5,395)
     Operating lease liabilities (1,874) (1,414)
     Financing lease liabilities (126) (101)
     Customer deposits 271 (277)
     Other liabilities (33) (33)
Net cash provided by operating activities 5,862 5,795
     Cash Flows from Investing Activities:    
     Purchases of property and equipment (1,362) (2,106)
     Purchase of noncontrolling interests (546)
     Cost of patents (74) (38)
     Net cash used in investing activities (1,436) (2,690)
Cash Flows from Financing Activities: (74)  
     Repayment of borrowings and capital lease obligations (15) (13)
     Purchase of treasury stock (478)
     Distributions to noncontrolling interests (3,151) (2,701)
Net cash used in financing activities (3,644) (2,714)
Net Increase in Cash and Cash Equivalents 782 391
Cash and Cash Equivalents – Beginning of Period 48,723 44,460
Cash and Cash Equivalents – End of Period $ 49,505
================
$ 44,851
================