NEWS   Fonar Corporation
For Immediate Release  The Inventor of MR Scanning™
Contact: Daniel Culver  An ISO 9001 Company
Director of Communications  Melville, New York 11747
E-mail: investor@fonar.com  Phone: (631) 694-2929
www.fonar.com  Fax: (631) 390-1772

 

FONAR Announces Fiscal 2018 2nd Quarter and Six Months Financial Results

·                     26% Increase in Income from Operations, to $5.8 million, for the quarter ended December 31, 2017, versus same quarter during prior year.

·                     10% Increase in Total Revenues – Net, to $20.2 million, for the quarter ended December 31, 2017, versus same quarter during prior year.

·                     3% Decrease in Diluted Net Income per Common Share available to Common Shareholders to $0.61, for the quarter ended December 31, 2017, versus same quarter during prior year.

·                     6% Increase in Net Income, to $5.2 million, for the quarter ended December 31, 2017, versus same quarter during prior year.

MELVILLE, NEW YORK, February 12, 2018 - FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™, reported today its financial results for the 2nd Fiscal Quarter of 2018 and the six month period ended December 31, 2017. The Company’s two industry segments are: development, manufacturing and servicing of the FONAR UPRIGHT® Multi-Position™ MRI, aka Stand-Up® MRI, and management of 26 MRI centers through its subsidiary, Health Management Company of America (HMCA).

The FONAR UPRIGHT® Multi-Position™ MRI scanner is the world’s only MRI scanner licensed under FONAR’s multiple UPRIGHT® MRI patents to scan all the patient’s body parts in their normal full weight-bearing UPRIGHT® position. FONAR’s substantial list of patents includes recent patents for its technology enabling full weight-bearing MRI imaging on all the gravity sensitive regions of the human anatomy, especially the brain, extremities, spine and cerebrospinal fluid (CSF) flow.

Financial Highlights

Total Revenues – Net, for the quarter ended December 31, 2017 increased 10% to $20.2 million as compared to the quarter ended December 31, 2016, of $18.4 million.

Total Revenues – Net, for the six month period ended December 31, 2017, increased 6% to $39.5 million as compared to the six month period ended December 31, 2016, of $37.1 million.

Income from Operations, for the quarter ended December 31, 2017, increased 26% to $5.8 million, as compared to the quarter ended December 31, 2016, of $4.6 million.

Income from Operations, for the six month period ended December 31, 2017, increased 13% to $10.6 million as compared to the six month period ended December 31, 2016, of $9.4 million.

Net Income, for the quarter ended December 31, 2017, increased 6% to $5.2 million, as compared to the quarter ended December 31, 2016, of $4.9 million.

Net Income, for the six month period ended December 31, 2017, increased 4% to $9.8 million, as compared to the six month period ended December 31, 2016, of $9.4 million.

Net Income Available to Common Stockholders, for the quarter ended December 31, 2017, decreased 1% to $3.9 million as compared to the quarter ended December 31, 2016, of $4.0 million.

Net Income Available to Common Stockholders, for the six month period ended December 31, 2017, increased 1% to $7.4 million, as compared to the six month period ended December 31, 2016, of $7.3 million.

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FONAR CORPORATION AND SUBSIDIARIES

Basic Net Income per Common Share Available to Common Stockholders, for the quarter ended December 31, 2017, decreased 3% to $0.62 per share, as compared to the quarter ended December 31, 2016, of $0.64 per share.

Basic Net Income per Common Share Available to Common Stockholders, for the six month period ended December 31, 2017, decreased 1% to $1.18 per share, as compared to the quarter ended December 31, 2016, of $1.19 per share.

Diluted Net Income per Common Share Available to Common Stockholders, for the quarter ended December 31, 2017, decreased 3% to $0.61 per share, as compared to the quarter ended December 31, 2016, of $0.63 per share.

Diluted Net Income per Common Share Available to Common Stockholders, for the six month period ended December 31, 2017, decreased 1% to $1.16 per share, as compared to the quarter ended December 31, 2016, of $1.17 per share.

Total Assets, at December 31, 2017, was $105.2 million, as compared to $98.8 million at June 30, 2017.

Total Current Assets, at December 31, 2017, was $60.2 million, as compared to $53.4 million at June 30, 2016.

Total Cash and Cash Equivalents, at December 31, 2017, was $14.2 million, as compared to $10.1 million at June 30, 2017.

Total Liabilities, at December 31, 2017, was $15.2 million, as compared to $15.9 million at June 30, 2017.

Total Current Liabilities, at December 31, 2017, was $13.6 million, as compared to $14.2 million at June 30, 2017.

Management Discussion

The Tax Cuts and Jobs Act was signed into law on December 22, 2017 and makes numerous changes to the Internal Revenue Code.  Among other changes, the Act reduces the US corporate income tax rate to 21% effective January 1, 2018.  Because the Act became effective mid-way through the Company’s tax year, the Company will have a US statutory income tax rate of 27.7% for the fiscal 2018 and will have a 21% statutory income tax rate for fiscal years thereafter.

Under ASC Topic 740, Accounting for Income Taxes, the enactment of the Tax Act also requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation in enacted. The Company’s gross deferred tax assets and liabilities will be revalued from 35% to 21% with a corresponding offset to the valuation allowance and any potential other taxes arising due to the Tax Act will result in reductions to its net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess the full effects on its financial results, including disclosures, for our fiscal year ending June 30, 2018.

President and CEO, Timothy R. Damadian said, “We are very pleased with the Company’s second-quarter results. In fact, our income from operations was close to the highest that we have ever achieved. Also, without the reduction in the deferred tax asset, we would have had a year-over-year increase of 11% to $0.70 in Diluted Net Income per Common Share.

“We are already seeing the positive effects the recent federal tax cuts are having on the economy,” Mr. Damadian continued. “Higher wages and more jobs mean more Americans will be able to afford high-quality healthcare, which translates to increased patient volume at HMCA-managed MRI scanning centers.”

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FONAR CORPORATION AND SUBSIDIARIES

"It's rewarding to me," said Raymond V. Damadian, M.D., Chairman of the Board of Directors of FONAR Corporation, "how consistently profitable we are. Our UPRIGHT® Multi-Position™ (aka Stand-Up®) MRI scanner, for example, is unique. Its ability to medically visualize the spine of a patient with back pain (which condition is responsible for a very significant percentage of all MRI scans performed by all MRI scanners worldwide each year) in its normal upright position is unique. Its power to visualize the spine supporting the full weight load that it normally has to sustain each day and to position the patient in the exact position (that he/she specifies to the MRI technologist who is positioning him/her in the FONAR UPRIGHT® Multi-Position™ MRI) that generates his/her pain (which the conventional recumbent MRI cannot do) is unparalleled."

"This power of the FONAR UPRIGHT® Multi-Position™ MRI to completely visualize ALL the anatomy components under their full weight load that are giving rise to the patient's pain, which the conventional recumbent MRI cannot do, assures that the surgical procedure chosen for his/her treatment will achieve the optimum outcome for the patient."

"In addition," continued Dr. Damadian, "I am very proud of the fact that it has been 7 years since FONAR has had a quarterly loss. This is something we have all worked very hard to achieve."

About FONAR

FONAR, The Inventor of MR Scanning™, is 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 and ”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 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 central nervous system. FONAR’s UPRIGHT® Multi-Position™ MRI is the only scanner licensed under these patents.

UPRIGHT® and STAND-UP® are registered trademarks and The Inventor of MR Scanning™, Full Range of Motion™, Multi-Position™, Upright Radiology™, The Proof is in the Picture™, True Flow™, pMRI™, Spondylography™, Dynamic™, Spondylometry™, CSP™, and Landscape™, are trademarks of FONAR Corporation.

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

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

ASSETS

 

   December 31,
2017
  June 30,
2017
   $14,194   $10,140 
Accounts receivable – net   4,222    4,322 
Accounts receivable - related party   60    —   
Medical receivable – net   12,480    11,745 
Management and other fees receivable – net   20,268    18,594 
Management and other fees receivable – related medical practices – net   5,222    4,959 
Inventories   1,696    1,624 
           
Costs and estimated earnings in excess of billings on uncompleted contracts   736    736 
Prepaid expenses and other current assets   1,368    1,294 
Total Current Assets   60,246    53,414 
Deferred income tax asset   17,287    17,862 
Property and equipment - net   16,986    16,462 
Goodwill   3,985    3,927 
Other intangible assets - net   6,076    6,645 
Other Assets   603    453 
Total Assets  $105,183   $98,763 
           

 

 Page 4 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

   December 31,
2017
  June 30,
2017
Current Liabilities:          
Current portion of long-term debt and capital leases  $95   $180 
Accounts payable   1,365    1,423 
Other current liabilities   6,662    7,203 
Unearned revenue on service contracts   4,520    4,642 
Unearned revenue on service contracts - related party   55    —   
Customer advances   898    788 
 Total Current Liabilities   13,595    14,236 
Long-Term Liabilities:          
Deferred income tax liability   332    332 
Due to related medical practices   227    227 
Long-term debt and capital leases, less current portion   323    337 
Other liabilities   711    721 
 Total Long-Term Liabilities   1,593    1,617 
 Total Liabilities   15,188    15,853 

 

 Page 5 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)

 

   December 31, 2017 

June 30,

2017

STOCKHOLDERS' EQUITY:          
  Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2017 and June 30, 2017, 313 issued and outstanding at December 31, 2017 and June 30, 2017  $—     $—   
  Preferred stock $.001 par value; 567 shares authorized at December 31, 2017 and June 30, 2017, issued and outstanding – none   —      —   
  Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2017 and June 30, 2017, 6,299 issued at December 31, 2017 and June 30, 2017; 6,288 outstanding at December 31, 2017 and June 30, 2017   1    1 
  Class B Common Stock (10 votes per share) $ .0001 par value; 227 shares authorized at December 31, 2017 and June 30, 2017, .146 issued and outstanding at December 31, 2017 and June 30, 2017   —      —   
  Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2017 and June 30, 2017, 383 issued and outstanding at December 31, 2017 and June 30, 2017   —      —   
Paid-in capital in excess of par value   179,131    179,131 
Accumulated deficit   (93,095)   (101,003)
Notes receivable from employee stockholders   (13)   (17)
Treasury stock, at cost - 12 shares of common stock at December 31, 2016 and June 30, 2016   (675)   (675)
Total Fonar Corporation Stockholder Equity   85,349    77,437 
Non controlling interests   4,646    5,473 
 Total Stockholders' Equity   89,995    82,910 
 Total Liabilities and Stockholders' Equity  $105,183   $98,763 

 

 

 Page 6 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(UNAUDITED)

   For the Three Months Ended
REVENUES 

December 31,

   2017  2016
Product sales – net  $276   $93 
Service and repair fees – net   2,352    2,356 
Service and repair fees – related parties - net   28    28 
Patient fee revenue, net of contractual allowances and discounts   9,537    8,657 
Provision for bad debts and bad debt expense for patient fee   (4,571)   (4,002)
Management and other fees – net   10,340    9,364 
Management and other fees – related medical practices – net   2,206    1,907 
Total Revenues – Net   20,168    18,403 
COSTS AND EXPENSES          
Costs related to product sales   246    (34)
Costs related to service and repair fees   753    683 
Costs related to service and repair fees – related parties   9    8 
Costs related to patient fee revenue   2,570    2,323 
Costs related to management and other fees   5,826    5,257 
Costs related to management and other fees – related medical practices   1,261    1,127 
Research and development   407    361 
Selling, general and administrative   3,286    4,069 
Total Costs and Expenses   14,358    13,794 
Income From Operations   5,810    4,609 
Interest Expense   (48)   (77)
Investment Income   58    49 
Other Expense   (5)   —   
Income Before (Provision)/Benefit for Income Taxes and Non Controlling Interests   5,815    4,581 
(Provision)/Benefit for Income Taxes   (575)   353 
Net Income   5,240    4,934 
Net Income - Non Controlling Interests   (1,051)   (692)
Net Income - Controlling Interests  $4,189   $4,242 
Net Income Available to Common Stockholders  $3,926   $3,971 
Net Income Available to Class A Non-Voting Preferred Stockholders  $196   $202 
Net Income Available to Class C Common Stockholders  $67   $69 
Basic Net Income Per Common Share Available to Common Stockholders  $0.62   $0.64 
Diluted Net Income Per Common Share Available to Common Stockholders  $0.61   $0.63 
Basic and Diluted Income Per Share-Class C Common  $0.17   $0.18 
Weighted Average Basis Shares Outstanding-Common Stockholders   6,287    6,158 
Weighted Average Diluted Shares Outstanding-Common Stockholders   6,415    6,286 
Weighted Average Basic Shares Outstanding – Class C Common   383    383 
Weighted Average Diluted Shares Outstanding – Class C Common   383    383 
 Page 7 

 

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,

   2017  2016
REVENUES      
Product sales – net  $439   $335 
Service and repair fees – net   4,616    4,708 
Service and repair fees – related parties - net   55    55 
Patient fee revenue, net of contractual allowances and discounts   18,190    17,481 
Provision for bad debts and bad debt expense for patient fee   (8,321)   (7,880)
Management and other fees – net   20,111    18,625 
Management and other fees – related medical practices – net   4,412    3,814 
Total Revenues – Net   39,502    37,138 
 COSTS AND EXPENSES          
Costs related to product sales   389    179 
Costs related to service and repair fees   1,533    1,339 
Costs related to service and repair fees – related parties   18    16 
Costs related to patient fee revenue   5,049    4,737 
Costs related to management and other fees   11,384    10,518 
Costs related to management and other fees – related medical practices   2,411    2,080 
Research and development   755    773 
Selling, general and administrative   7,367    8,135 
Total Costs and Expenses   28,906    27,777 
Income From Operations   10,596    9,361 
Interest Expense   (92)   (174)
Investment Income   104    97 
Other (Expense) Income   (7)   (3)
Income Before (Provision)/Benefit for Income Taxes and Non Controlling Interests   10,601    9,281 
(Provision)/Benefit for Income Taxes   (760)   153 
Net Income   9,841    9,434 
Net Income - Non Controlling Interests   (1,933)   (1,622)
Net Income - Controlling Interests  $7,908   $7,812 
Net Income Available to Common Stockholders  $7,413   $7,313 
Net Income Available to Class A Non-Voting Preferred Stockholders  $369   $372 
Net Income Available to Class C Common Stockholders  $126   $127 
Basic Net Income Per Common Share Available to Common Stockholders  $1.18   $1.19 
Diluted Net Income Per Common Share Available to Common Stockholders  $1.16   $1.17 
Basic and Diluted Income Per Share-Class C Common  $0.33   $0.33 
Weighted Average Basic Shares Outstanding-Common Stockholders   6,287    6,131 
Weighted Average Diluted Shares Outstanding-Common Stockholders   6,415    6,259 
Weighted Average Basic Shares Outstanding – Class C Common   383    383 
Weighted Average Diluted Shares Outstanding – Class C Common   383    383 

 

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