NEWS    Fonar Corporation and Subsidiaries
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 2019 2nd Quarter and Six Months Financial Results

Total Revenues – Net, increased 6% to $41.9 million, for the six month period ended December 31, 2018, versus same six month period during prior year.

Income from Operations increased 9% to $11.5 million, for the six month period ended December 31, 2018, versus same six month period during prior year.

Provision for Income Taxes - Due to a re-evaluation of the need for a deferred tax valuation allowance, the Company was required to record a full tax provision for the six months ended December 31, 2018 in the amount of $2.3 Million, a 208% increase as compared to a tax provision of only $0.8 million for the six months ended December 31, 2017.

Net Income decreased by 5% to $9.4 million for the six month period ended December 31, 2018, versus same six month period one year earlier, as a result of the Company’s requirement to re-evaluate the need for a deferred tax valuation allowance and record a full Provision for Income Taxes in the amount of $2.3 million.

Diluted Net Income per Common Share available to Common Shareholders decreased 15% to $0.99 for the six month period ended December 31, 2018, versus same six month period one year earlier, due to the Company's need to re-evaluate its deferred tax valuation allowance and record a full Provision for Income Taxes in the amount of $2.3 million.

Cash and cash equivalents increased by 19% to $23.3 million for the six month period ended December 31, 2018, versus the fiscal year ended June 30, 2018.

Working Capital increased by 18% to $62.0 million for the six month period ended December 31, 2018, versus the fiscal year ended June 30, 2018.

MELVILLE, NEW YORK, February 11, 2019 - FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™, reported today its financial results for the 2nd Quarter of Fiscal 2019 and the six month period ended December 31, 2018. 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 Company’s popular 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 has a substantial list of patents for the many features of the UPRIGHT® MRI which is unique for its ability to image the gravity sensitive regions of the human anatomy, especially the brain, extremities, spine and cerebrospinal fluid (CSF) flow.

Financial Highlights

Income from Operations, for the six month period ended December 31, 2018, increased 9% to $11.5 million as compared to the six month period ended December 31, 2017, of $10.6 million.

 Page 1 

 

FONAR CORPORATION AND SUBSIDIARIES

 Income from Operations, for the quarter ended December 31, 2018, increased 3% to $6.0 million, as compared to the quarter ended December 31, 2017, of $5.8 million.

Total Revenues – Net, for the six month period ended December 31, 2018, increased 6% to $41.9 million as compared to the six month period ended December 31, 2017, of $39.5 million.

Total Revenues – Net, for the quarter ended December 31, 2018 increased 5% to $21.2 million as compared to the quarter ended December 31, 2017, of $20.2 million.

Provision for Income Taxes for the six month period ended December 31, 2018, increased 208% to $2.3 million as compared to the six month period ended December 31, 2017, of $0.8 million, resulting from the re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision for the six months December 31, 2018 in the amount of $2.3 Million.

Provision for Income Taxes for the quarter ended December 31, 2018, increased 111% to $1.2 million as compared to the quarter ended December 31, 2017, of $0.6 million. Due to a re-evaluation of the need for a deferred tax valuation allowance, the Company was required to record a full tax provision for the quarter ending December 31, 2018 in the amount of $1.2 million.

Net Income, for the six month period ended December 31, 2018, decreased 5% to $9.4 million, as compared to the six month period ended December 31, 2017, of $9.8 million. The decrease is due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision for the six months December 31, 2018 in the amount of $2.3 Million, a 208% increase as compared to a tax provision of only $0.8 million for the six months ended December 31, 2017.

Net Income, for the quarter ended December 31, 2018, decreased 7% to $4.9 million, as compared to the quarter ended December 31, 2017, of $5.2 million. This decrease is also due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision.

Net Income Available to Common Stockholders, for the six month period ended December 31, 2018, decreased 13% to $6.4 million, as compared to the six month period ended December 31, 2017, of $7.4 million. The decrease is due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision for the six months December 31, 2018 in the amount of $2.3 Million, a 208% increase as compared to a tax provision of only $0.8 million for the six months ended December 31, 2017.

Net Income Available to Common Stockholders, for the quarter ended December 31, 2018, decreased 15% to $3.3 million as compared to the quarter ended December 31, 2017, of $3.9 million. This decrease is also due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision.

Diluted Net Income per Common Share Available to Common Stockholders, for the six month period ended December 31, 2018, decreased 15% to $0.99 per share, as compared to the six month period ended December 31, 2017, of $1.16 per share. The decrease is due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision for the six months ended December 31, 2018 in the amount of $2.3 million, a 208% increase as compared to a tax provision of only $0.8 million for the six months ended December 31, 2017.

Diluted Net Income per Common Share Available to Common Stockholders, for the quarter ended December 31, 2018, decreased 16% to $0.51 per share, as compared to the quarter ended December 31, 2017, of $0.61 per share. This decrease is also due to a re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision.

 Page 2 

 

FONAR CORPORATION AND SUBSIDIARIES

Total Assets, at December 31, 2018, increased 4% to $122.9 million, as compared to $118.3 million at June 30, 2018.

Total Current Assets, at December 31, 2018, increased 10% to $73.6 million, as compared to $67.1 million at June 30, 2018.

Total Cash and Cash Equivalents, at December 31, 2018, increased 19% to $23.3 million, as compared to $19.6 million at June 30, 2018.

Total Liabilities, at December 31, 2018, were $13.0 million, as compared to $16.1 million at June 30, 2018.

Total Current Liabilities, at December 31, 2018, were $11.6 million, as compared to $14.6 million at June 30, 2018.

The Total Assets / Total Liabilities ratio increased 28% to 9.4 for the six month period ended December 31, 2018 as compared to 7.4 at June 30, 2018.

Significant Event

On November 10, 2018, FONAR Founder Raymond Vahan Damadian, M.D., received ‘The Excellence in Medicine Medal of Honor’ from the Chiari & Syringomyelia Foundation at Brooks’s in London, England.

Fraser Henderson, M.D., a neurosurgeon and a member of the steering committee for the Chiari & Syringomyelia Foundation said: “Raymond Damadian revolutionized medicine with the discovery and development of MRI.”

Professor Donlin Long, M.D., former Chairman of Neurosurgery at Johns Hopkins University called it: “the single most important diagnostic discovery in the history of all of medicine.”

The award citation included: In 1970, Raymond Damadian made the discovery that is the basis for MR scanning - that there is a marked difference in relaxation times between normal and abnormal tissues of the same type, as well as between different types of normal tissues. This seminal discovery, which remains the basis for the making of every MRI image ever produced, is the foundation of the MRI industry.

Management Discussion

President and CEO, Timothy R. Damadian said, “We are very pleased with the results, in particular the 9% increase in Income from Operations for the 6-month period ending on December 31, 2018.

“It’s important to point out that our net income is being affected by the Company’s requirement to record a full Provision for Income Taxes. Fortunately, there are ample tax loss carry-forwards for the company to utilize. Changes in the tax law have benefited the Company by lowering its tax rate, further extending the benefit by reducing future cash outlays, once net operating losses are fully utilized.

“HMCA’s continuing success is fundamentally attributable to the ever-expanding appeal of FONAR MRI technology among patients and physicians. Patients strongly prefer the UPRIGHT® MRI, also known as the Stand-Up® MRI, for its openness, unlike the more conventional ‘tunnel MRIs.’

“Physicians are drawn to the UPRIGHT® MRI as well, for two reasons: They can accommodate their patients’ preferences without compromising on diagnostic image quality, and for the many instances where the anatomy of interest needs to be viewed in any of its normal weight-bearing positions, such as the lower back with the patient standing or sitting, the UPRIGHT® is the only MRI that can do it.

“It’s great technology, but it has to be properly marketed, and the patients and their physicians have to be pleased with the service provided at all 26 HMCA-managed facilities. Our highly experienced, skilled and dedicated management team has successfully achieved that objective year in and year out.

“Looking ahead, we continue to evaluate potential acquisitions, but, as always, we will not take unnecessary risks for short term gains. Apart from acquisitions, we continue to increase patient volume at our existing centers and, at the same time, search for areas whose demographics satisfy our criteria for new locations.”

 Page 3 

 

FONAR CORPORATION AND SUBSIDIARIES

Raymond V. Damadian, M.D., Chairman of the Board of Directors of FONAR Corporation, said: “I am pleased to report that a peer-reviewed, research chapter, found on-line at IntechOpen.com, gives credit to the FONAR UPRIGHT® MRI. It says: ‘The FONAR upright weight bearing MRI has been shown to be most sensitive in detecting cerebellar tonsillar ectopia since the weight-bearing posture presents the cerebellar tonsils further distended into the foramen magnum.’ Later in the chapter, it also says, 'Upright Cine MRI of the cranio-cervical junction demonstrates CSF flow dynamics.' These give significant credit to the FONAR UPRIGHT® Multi-Position™ MRI.”

Dr. Damadian continued: “Essentially, this chapter reports the latest FONAR UPRIGHT® (fully weight-loaded) evidence regarding the craniocervical junction syndrome. My own research, using the FONAR UPRIGHT® Multi-Position™ MRI, indicates that the craniocervical junction syndrome is a major cause of many neuro-degenerate diseases. I am delighted to see that other researchers are finding such significant value while using our scanner.

 

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.

 Page 4 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

ASSETS

 

   December 31,
2018
 

June 30,

2018

Cash and cash equivalents  $23,287   $19,634 
Accounts receivable – net   3,806    3,814 
Accounts receivable - related party   60    —   
Medical receivable – net   14,154    13,351 
Management and other fees receivable – net   23,478    21,863 
Management and other fees receivable – related medical practices – net   5,966    5,535 
Inventories   1,657    1,431 
           
Costs and estimated earnings in excess of billings on uncompleted contracts   87    87 
Prepaid expenses and other current assets   1,129    1,350 
Total Current Assets   73,624    67,065 
Income taxes receivable   1,200    1,200 
Deferred income tax asset   20,348    22,689 
Property and equipment - net   17,344    16,492 
Goodwill   3,985    3,985 
Other intangible assets - net   5,160    5,602 
Other Assets   1,205    1,278 
Total Assets  $122,866   $118,311 
           

 

 

 Page 5 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

   December 31,
2018
  June 30,
2018
Current Liabilities:          
Current portion of long-term debt and capital leases  $39   $39 
Accounts payable   1,294    1,300 
Other current liabilities   5,285    8,178 
Unearned revenue on service contracts   4,027    4,192 
Unearned revenue on service contracts - related party   55    —   
Customer advances   930    858 
Total Current Liabilities   11,630    14,567 
Long-Term Liabilities:          
Deferred income tax liability   239    239 
Due to related medical practices   93    227 
Long-term debt and capital leases, less current portion   290    306 
Other liabilities   758    737 
Total Long-Term Liabilities   1,380    1,509 
Total Liabilities   13,010    16,076 

 

 

 Page 6 

 

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, 2018 

June 30,

2018

STOCKHOLDERS' EQUITY:          
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2018 and June 30, 2018, 313 issued and outstanding at December 31, 2018 and June 30, 2018  $—     $—   
 Preferred stock $.001 par value; 567 shares authorized at December 31, 2018 and June 30, 2018, issued and outstanding – none   —      —   
Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2018 and June 30, 2018, 6,369 and 6,299 issued at December 31, 2018 and June 30, 2018; 6,357 and 6,288 outstanding at December 31, 2018 and June 30, 2018   1    1 
Class B Common Stock (10 votes per share) $ .0001 par value; 227 shares authorized at December 31, 2018 and June 30, 2018, .146 issued and outstanding at December 31, 2018 and June 30, 2018   —      —   
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2018 and June 30, 2018, 383 issued and outstanding at December 31, 2018 and June 30, 2018   —      —   
Paid-in capital in excess of par value   181,131    179,132 
Accumulated deficit   (72,902)   (79,773)
Notes receivable from employee stockholders   (9)   (9)
Treasury stock, at cost - 12 shares of common stock at December 31, 2018 and June 30, 2018   (675)   (675)
Total Fonar Corporation Stockholder Equity   107,501    98,676 
Non controlling interests   2,355    3,559 
Total Stockholders' Equity   109,856    102,235 
Total Liabilities and Stockholders' Equity  $122,866   $118,311 

 

 

 Page 7 

 

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(UNAUDITED)

   For the Three Months
REVENUES  Ended December 31,
   2018  2017
Patient fee revenue, net of contractual allowances and discounts  $5,921   $9,537 
Provision for bad debts for patient fee   —      (4,571)
Patient fee revenue – net   5,921    4,966 
Product sales – net   395    276 
Service and repair fees – net   2,021    2,352 
Service and repair fees – related parties - net   28    28 
Management and other fees – net   10,573    10,340 
Management and other fees – related medical practices – net   2,287    2,206 
Total Revenues – Net   21,225    20,168 
COSTS AND EXPENSES          
Costs related to patient fee revenue   2,702    2,570 
Costs related to product sales   317    246 
Costs related to service and repair fees   746    753 
Costs related to service and repair fees – related parties   11    9 
Costs related to management and other fees   5,904    5,826 
Costs related to management and other fees – related medical practices   1,405    1,261 
Research and development   550    407 
Selling, general and administrative   3,610    3,286 
Total Costs and Expenses   15,245    14,358 
Income From Operations   5,980    5,810 
Interest Expense   (25)   (48)
Investment Income   122    58 
Other Expense   —      (5)
Income Before Provision for Income Taxes and Non Controlling Interests   6,077    5,815 
Provision for Income Taxes   (1,213)   (575)
Net Income   4,864    5,240 
Net Income - Non Controlling Interests   (1,312)   (1,051)
Net Income - Controlling Interests  $3,552   $4,189 
Net Income Available to Common Stockholders  $3,332   $3,926 
Net Income Available to Class A Non-Voting Preferred Stockholders  $164   $196 
Net Income Available to Class C Common Stockholders  $56   $67 
Basic Net Income Per Common Share Available to Common Stockholders  $0.52   $0.62 
Diluted Net Income Per Common Share Available to Common Stockholders  $0.51   $0.61 
Basic and Diluted Income Per Share-Class C Common  $0.15   $0.17 
Weighted Average Basis Shares Outstanding-Common Stockholders   6,357    6,287 
Weighted Average Diluted Shares Outstanding-Common Stockholders   6,485    6,415 
Weighted Average Basic Shares Outstanding – Class C Common   383    383 
Weighted Average Diluted Shares Outstanding – Class C Common   383    383 

 

 Page 8 

 

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,

   2018  2017
REVENUES      
Patient fee revenue, net of contractual allowances and discounts  $11,446   $18,190 
Provision for bad debts for patient fee   —      (8,321)
Patient fee revenue – net   11,446    9,869 
Product sales – net   445    439 
Service and repair fees – net   4,152    4,616 
Service and repair fees – related parties - net   55    55 
Management and other fees – net   21,257    20,111 
Management and other fees – related medical practices – net   4,575    4,412 
Total Revenues – Net   41,930    39,502 
COSTS AND EXPENSES          
Costs related to patient fee revenue   5,276    5,049 
Costs related to product sales   322    389 
Costs related to service and repair fees   1,491    1,533 
Costs related to service and repair fees – related parties   20    18 
Costs related to management and other fees   11,660    11,384 
Costs related to management and other fees – related medical practices   2,787    2,411 
Research and development   987    755 
Selling, general and administrative   7,869    7,367 
Total Costs and Expenses   30,412    28,906 
Income From Operations   11,518    10,596 
Interest Expense   (50)   (92)
Investment Income   230    104 
Other (Expense) Income   —      (7)
Income Before Provision for Income Taxes and  Non Controlling Interests   11,698    10,601 
Provision for Income Taxes   (2,341)   (760)
Net Income   9,357    9,841 
Net Income - Non Controlling Interests   (2,486)   (1,933)
Net Income - Controlling Interests  $6,871   $7,908 
Net Income Available to Common Stockholders  $6,444   $7,413 
Net Income Available to Class A Non-Voting Preferred Stockholders  $318   $369 
Net Income Available to Class C Common Stockholders  $109   $126 
Basic Net Income Per Common Share Available to Common Stockholders  $1.01   $1.18 
Diluted Net Income Per Common Share Available to Common Stockholders  $0.99   $1.16 
Basic and Diluted Income Per Share-Class C Common  $0.28   $0.33 
Weighted Average Basic Shares Outstanding-Common Stockholders   6,351    6,287 
Weighted Average Diluted Shares Outstanding-Common Stockholders   6,479    6,415 
Weighted Average Basic Shares Outstanding – Class C Common   383    383 
Weighted Average Diluted Shares Outstanding – Class C Common   383    383 

 

Page 9 


The following information was filed by Fonar Corp (FONR) on Tuesday, February 12, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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