FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

For the quarterly period ended DECEMBER 31, 2023

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

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 ☒ 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 ☒ 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 ☒, Smaller reporting company ☒ 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 ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, $.0001 par value		FONR		NASDAQ Capital Market

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 9, 2024
Common Stock, par value $.0001		6,328,294
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, 2023 (Unaudited) and June 30, 2023		3
Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2023 and December 31, 2022 (Unaudited)		6
Condensed Consolidated Statements of Income for the Six Months Ended December 31, 2023 and December 31, 2022 (Unaudited)		7
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended December 31, 2023 and December 31, 2022 (Unaudited)		8
Condensed Consolidated Statements of Changes in Equity for the Six Months Ended December 31, 2023 and December 31, 2022 (Unaudited)		9
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2023 and December 31, 2022 (Unaudited)		10
Notes to Condensed Consolidated Financial Statements (Unaudited)		11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		30
PART II - OTHER INFORMATION		31
Item 1. Legal Proceedings		31
Item 1A. Risk Factors		31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3. Defaults Upon Senior Securities		33
Item 4. Mine Safety Disclosures		33
Item 5. Other Information		33
Item 6. Exhibits		33
Signatures		34

Page 2

FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

ASSETS


	December 31, 2023		June 30, 2023 *
Current Assets:
Cash and cash equivalents	$	53,225	$	51,280
Short-term investments		33		33
Accounts receivable – net		3,881		3,861
Accounts receivable - related party		60		—
Medical receivable – net		22,548		21,259
Management and other fees receivable – net		39,352		35,888
Management and other fees receivable – related medical practices – net		9,267		9,162
Inventories		2,835		2,570
Prepaid expenses and other current assets		1,341		1,608
Total Current Assets		132,542		125,661

Accounts receivable – long term		376		710
Note receivable – related party		577		—
Deferred income tax asset		7,758		10,042
Property and equipment – net		20,109		22,146
Right-of-use Asset – operating lease		32,234		33,069
Right-of-use Asset – financing lease		630		729
Goodwill		4,269		4,269
Other intangible assets – net		3,266		3,432
Other assets		501		524
Total Assets	$	202,262	$	200,582

*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, 2023		June 30, 2023 *
Current Liabilities:
Current portion of long-term debt	$	45	$	44
Accounts payable		1,335		1,579
Other current liabilities		3,460		5,444
Unearned revenue on service contracts		3,804		3,832
Unearned revenue on service contracts – related party		55		—
Operating lease liability - current portion		4,658		3,905
Financing lease liability - current portion		222		218
Customer deposits		600		602

Total Current Liabilities		14,179		15,624

Long-Term Liabilities:
Unearned revenue on service contracts		376		760
Deferred income tax liability		395		395
Due to related medical practices		93		93
Operating lease liability – net of current portion		30,299		32,105
Financing lease liability – net of current portion		508		620
Long-term debt, less current portion		92		115
Other liabilities		23		42

Total Long-Term Liabilities		31,786		34,130
Total Liabilities		45,965		49,754

*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, 2023			June 30, 2023*
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2023 and June 30, 2023, 313 issued and outstanding at December 31, 2023 and June 30, 2023	$	—		$	—
Preferred stock $.001 par value; 567 shares authorized at December 31, 2023 and June 30, 2023, issued and outstanding – none		—			—
Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2023 and June 30, 2023, 6,332 and 6,462 issued at December 31, 2023 and June 30, 2023, respectively 6,328 and 6,451 outstanding at December 31, 2023 and June 30, 2023 respectively		1			1
Class B Common Stock (10 votes per share) $.0001 par value; 227 shares authorized at December 31, 2023 and June 30, 2023; .146 issued and outstanding at December 31, 2023 and June 30, 2023		—			—
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2023 and June 30, 2023, 383 issued and outstanding at December 31, 2023 and June 30, 2023		—			—
Paid-in capital in excess of par value		180,607			182,613
Accumulated deficit		(16,326	)		(24,191	)
Treasury stock, at cost - 4 shares of common stock at December 31, 2023 and 11 shares of common stock at June 30, 2023		(395	)		(516	)
Total Fonar Corporation’s Stockholders’ Equity		163,887			157,907
Non controlling interests		(7,590	)		(7,079	)
Total Stockholders’ Equity		156,297			150,828
Total Liabilities and Stockholders’ Equity	$	202,262		$	200,582

*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	2023			2022
Patient fee revenue – net of contractual allowances and discounts	$	8,221		$	7,129
Product sales – net		55			170
Service and repair fees – net		1,778			1,838
Service and repair fees - related parties – net		28			28
Management and other fees – net		12,316			12,092
Management and other fees - related medical practices – net		2,988			2,999
Total Revenues – Net		25,386			24,256
COSTS AND EXPENSES
Costs related to patient fee revenue		4,602			4,023
Costs related to product sales		302			214
Costs related to service and repair fees		784			722
Costs related to service and repair fees - related parties		12			11
Costs related to management and other fees		7,208			6,622
Costs related to management and other fees – related medical practices		1,590			1,492
Research and development		416			342
Selling, general and administrative		5,587			6,598
Total Costs and Expenses		20,501			20,024
Income From Operations		4,885			4,232
Other Expense		—			(208	)
Other Income – Related party		577			—
Interest Expense		(10	)		(12	)
Investment Income		534			263
Income Before Provision for Income Taxes and Non controlling Interests		5,986			4,275
Provision for Income Taxes		(1,366	)		(1,463	)
Net Income		4,620			2,812
Net Income – Non controlling Interests		(861	)		(580	)
Net Income – Attributable to FONAR	$	3,759		$	2,232
Net Income Available to Common Stockholders	$	3,525		$	2,097
Net Income Available to Class A Non-Voting Preferred Stockholders	$	175		$	101
Net Income Available to Class C Common Stockholders	$	59		$	34
Basic Net Income Per Common Share Available to Common Stockholders	$	0.55		$	0.32
Diluted Net Income Per Common Share Available to Common Stockholders	$	0.54		$	0.32
Basic and Diluted Income Per Share – Class C Common	$	0.16		$	0.09
Weighted Average Basic Shares Outstanding – Common Stockholders		6,437			6,527
Weighted Average Diluted Shares Outstanding - Common Stockholders		6,565			6,655
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	2023			2022
Patient fee revenue – net of contractual allowances and discounts	$	16,896		$	13,205
Product sales – net		219			200
Service and repair fees – net		3,643			3,658
Service and repair fees - related parties – net		55			55
Management and other fees – net		24,436			24,342
Management and other fees - related medical practices – net		5,975			5,987
Total Revenues – Net		51,224			47,447
COSTS AND EXPENSES
Costs related to patient fee revenue		9,029			7,822
Costs related to product sales		405			383
Costs related to service and repair fees		1,633			1,440
Costs related to service and repair fees - related parties		25			22
Costs related to management and other fees		14,231			13,124
Costs related to management and other fees – related medical practices		3,109			2,890
Research and development		883			691
Selling, general and administrative		10,453			12,932
Total Costs and Expenses		39,768			39,304
Income From Operations		11,456			8,143
Other Income (Expense)		1			(197	)

Other Income – Related party		577			—
Interest Expense		(58	)		(27	)
Investment Income		1,040			414
Income Before Provision for Income Taxes and Non controlling Interests		13,016			8,333
Provision for Income Taxes		(3,036	)		(2,871	)
Net Income		9,980			5,462
Net Income – Non controlling Interests		(2,115	)		(1,183	)
Net Income – Attributable to FONAR	$	7,865		$	4,279
Net Income Available to Common Stockholders	$	7,375		$	4,020
Net Income Available to Class A Non-Voting Preferred Stockholders	$	365		$	193
Net Income Available to Class C Common Stockholders	$	125		$	66
Basic Net Income Per Common Share Available to Common Stockholders	$	1.14		$	0.62
Diluted Net Income Per Common Share Available to Common Stockholders	$	1.12		$	0.60
Basic and Diluted Income Per Share – Class C Common	$	0.33		$	0.17
Weighted Average Basic Shares Outstanding – Common Stockholders		6,448			6,534
Weighted Average Diluted Shares Outstanding - Common Stockholders		6,576			6,662
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 STATEMENT OF CHANGES IN EQUITY

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

(UNAUDITED)

For the Three Months Ending December 31, 2023


	Common Stock		Common Stock (Shares)			Paid in capital in excess of par value			Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance – September 30, 2023	$	1		6,450,882		$	182,613		$	(20,085	)	$	(1,230	)		54,674		$	(7,226	)	$	154,073
Net income		—		—			—			3,759			—			—			—			3,759
Purchase of Treasury stock		—		—			—			—			(1,171	)		72,297			—			(1,171	)
Cancellation of shares		—		(122,588	)		(2,006	)		—			2,006			(122,588	)		—			—
Distributions - Non controlling interests		—		—			—			—			—			—			(1,225	)		(1,225	)
Income - Non controlling interests		—		—			—			—			—			—			861			861
Balance – December 31, 2023	$	1		6,328,294		$	180,607		$	(16,326	)	$	(395	)		4,383		$	(7,590	)	$	156,297

For the Three Months Ending December 31, 2022

	Common Stock		Common Stock (Shares)			Paid in capital in excess of par value			Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance – September 30, 2022	$	1		6,554,210		$	184,531		$	(31,520	)	$	(797	)		20,445		$	(5,085	)	$	147,130
Net income		—		—			—			2,232			—			—			—			2,232
Purchase of Treasury stock		—		—			—			—			(356	)		20,819			—			(356	)
Cancellation of shares		—		(16,062	)		(401	)		—			402			(16,062	)		—			1
Distributions - Non controlling interests		—		—			—			—			—			—			(1,517	)		(1,517	)
Income - Non controlling interests		—		—			—			—			—			—			580			580
Balance – December 31, 2022	$	1		6,538,148		$	184,130		$	(29,288	)	$	(751	)		25,202		$	(6,022	)	$	148,070

See accompanying notes to condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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

(UNAUDITED)

For the Six Months Ending December 31, 2023

	Common Stock		Common Stock (Shares)			Paid in capital in excess of par value			Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance - June 30, 2023	$	1		6,450,882		$	182,613		$	(24,191	)	$	(516	)		11,463		$	(7,079	)	$	150,828
Net income		—		—			—			7,865			—			—			—			7,865
Purchase of Treasury stock		—		—			—			—			(1,885	)		115,508			—			(1,885	)
Cancellation of shares		—		(122,588	)		(2,006	)		—			2,006			(122,588	)		—			—
Distributions - Non controlling interests		—		—			—			—			—			—			(2,626	)		(2,626	)
Income - Non controlling interests		—		—			—			—			—			—			2,115			2,115
Balance - December 31, 2023	$	1		6,328,294		$	180,607		$	(16,326	)	$	(395	)		4,383		$	(7,590	)	$	156,297

For the Six Months Ending December 31, 2022

	Common Stock		Common Stock (Shares)			Paid in capital in excess of par value			Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance - June 30, 2022	$	1		6,554,210		$	184,531		$	(33,567	)	$	(675	)		11,643		$	(4,054	)	$	146,236
Net income		—		—			—			4,279			—			—			—			4,279
Purchase of Treasury stock		—		—			—			—			(478	)		29,621			—			(478	)
Cancellation of shares		—		(16,062	)		(401	)		—			402			(16,062	)		—			1
Distributions - Non controlling interests		—		—			—			—			—			—			(3,151	)		(3,151	)
Income - Non controlling interests		—		—			—			—			—			—			1,183			1,183
Balance - December 31, 2023	$	1		6,538,148		$	184,130		$	(29,288	)	$	(751	)		25,202		$	(6,022	)	$	148,070

See accompanying notes to condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts and shares in thousands)

(UNAUDITED)


	FOR THE SIX MONTHS ENDED DECEMBER 31,
	2023			2022
Cash Flows from Operating Activities:
Net income	$	9,980		$	5,462
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,415			2,218
Amortization on right-of-use assets		2,146			2,238
Provision for bad debts		355			2,891
Deferred income tax – net		2,284			2,306
Gain on sale of equipment – related party		(577	)		—
(Increase) decrease in operating assets, net:
Accounts, medical and management fee receivable(s)		(4,958	)		(3,375	)
Notes receivable		50			11
Inventories		(265	)		(274	)
Prepaid expenses and other current assets		217			60
Other assets		22			—
Increase (decrease) in operating liabilities, net:
Accounts payable		(244	)		(685	)
Other current liabilities		(2,341	)		(3,228	)
Operating lease liabilities		(2,265	)		(1,874	)
Financing lease liabilities		(108	)		(126	)
Customer deposits		(3	)		271
Other liabilities		(19	)		(33	)
Net cash provided by operating activities		6,689			5,862
Cash Flows from Investing Activities:
Purchases of property and equipment		(192	)		(1,362	)
Cost of patents		(20	)		(74	)
Net cash used in investing activities		(212	)		(1,436	)
Cash Flows from Financing Activities:
Repayment of borrowings and capital lease obligations		(21	)		(15	)
Purchase of treasury stock		(1,885	)		(478	)
Distributions to non controlling interests		(2,626	)		(3,151	)
Net cash used in financing activities		(4,532	)		(3,644	)
Net Increase in Cash and Cash Equivalents		1,945			782
Cash and Cash Equivalents - Beginning of Period		51,280			48,723
Cash and Cash Equivalents - End of Period	$	53,225		$	49,505

See accompanying notes to condensed consolidated financial statements.

Page 10

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

(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. During the fiscal year ended June 30, 2022, the Company purchased non-controlling interests from the minority shareholders for $546,000. Currently the Company has a direct ownership interest of 70.8% and the investors’ have a 29.2% ownership interest. 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 six months ended December 31, 2023, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2024. 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 September 28, 2023 for the fiscal year ended June 30, 2023.

The global pandemic of COVID-19 has caused turbulence and uncertainty in the United States and international markets and economies which has adversely affected our workforce, liquidity, financial conditions, revenues, profitability and business operations. The Company was able to enact certain decisions to allow the Company to navigate the global pandemic and from further losses, additional decreases in scan volume and avoid any significant disruption of the business. The Company must now take into account the severity, duration and recurrence of new strains of the COVID-19 virus which adds a new dimension to the challenges and uncertainty facing our business and the world economy in general. 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.

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.

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FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenues

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 judgements 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.

BUSINESS COMBINATION

When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period of final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.

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, 2023 and 2022.

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, 2023 and 2022, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

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FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings Per Share (Continued)

Schedule of earning per share
	Three months ended December 31, 2023						Three months ended December 31, 2022
	Total		Common Stock		Class C Common Stock		Total		Common Stock		Class C Common Stock
Basic
Numerator: Net income available to common stockholders	$	3,759	$	3,525	$	59	$	2,232	$	2,097	$	34
Denominator:
Weighted average shares outstanding		6,437		6,437		383		6,527		6,527		383
Basic income per common share	$	0.58	$	0.55	$	0.16	$	0.34	$	0.32	$	0.09
Diluted
Denominator: Weighted average shares outstanding				6,437		383				6,527		383
Convertible Class C Stock				128		—				128		—
Total Denominator for diluted earnings per share				6,565		383				6,655		383
Diluted income per common share			$	0.54	$	0.16			$	0.32	$	0.09

	Six months ended December 31, 2023						Six months ended December 31, 2022
	Total		Common Stock		Class C Common Stock		Total		Common Stock		Class C Common Stock
Basic
Numerator: Net income available to common stockholders	$	7,865	$	7,375	$	125	$	4,279	$	4,020	$	66
Denominator:
Weighted average shares outstanding		6,448		6,448		383		6,534		6,534		383
Basic income per common share	$	1.22	$	1.14	$	0.33	$	0.65	$	0.62	$	0.17
Diluted
Denominator: Weighted average shares outstanding				6,448		383				6,534		383
Convertible Class C Stock				128		—				128		—
Total Denominator for diluted earnings per share				6,576		383				6,662		383
Diluted income per common share			$	1.12	$	0.33			$	0.60	$	0.17

Page 13

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (740) “Improvements to Income Tax Disclosures”, which requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. We are currently evaluating the effect that adoption of ASU 2023-09 will have on our disclosures.

In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280)”, which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments require disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM) as well as other segment items, extended certain annual disclosures to interim periods, clarify the applicability to single reportable segment entities, permit, more than one measure of profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM. The effective date for public entities is beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024. We expect to adopt the new disclosures as required and are currently evaluating the impact on the related disclosures.

In June 2016, FASB issued ASU 2016-13, “Financial Instruments – Credit Loses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2022. The Company adopted this standard on July 1, 2023 using the modified retrospective approach and it did not have a material impact of the Company’s financial statements, resulting in no adjustment to prior year earnings.

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of December 31, 2023 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2023 or 2022, and it does not believe that any of those standards will have a significant impact on our consolidated condensed financial statements at the time they become effective.

Page 14

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

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

Receivables, net is comprised of the following at December 31, 2023, and June 30, 2023:

Schedule of financing receivable noncurrent allowance for credit loss
	December 31, 2023
	Gross Receivable		Allowance for doubtful accounts		Net
Accounts receivable	$	4,080	$	199	$	3,881
Accounts receivable - related party	$	60		—	$	60
Medical receivable	$	22,548	$	—	$	22,548
Management and other fees receivable	$	51,092	$	11,740	$	39,352
Management and other fees receivable from related medical practices (“PC’s”)	$	14,480	$	5,213	$	9,267

	June 30, 2023
	Gross Receivable		Allowance for doubtful accounts		Net
Accounts receivable	$	4,060	$	199	$	3,861
Medical receivable	$	21,259	$	—	$	21,259
Management and other fees receivable	$	48,497	$	12,609	$	35,888
Management and other fees receivable from related medical practices (“PC’s”)	$	13,152	$	3,990	$	9,162

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

Long term accounts receivable balances at December 31, 2023 and June 30, 2023 amounted to approximately $376 and $710 respectively. 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 two years as of December 31, 2023 is as follows:

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.

Page 15

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

(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

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 67% of the PCs’ net revenues for the three months ended December 31, 2023 and 2022, respectively, were derived from no-fault and personal injury protection claims. Approximately 67% and 68% of the PCs’ net revenue for the six months ended December 31, 2023 and 2022, 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 11.8% and 12.4% of the consolidated net revenues for the three months ended December 31, 2023 and 2022, respectively. Net revenues from management and other fees charged to the related PCs accounted for approximately 11.7% and 12.6% of the consolidated net revenues for the six months ended December 31, 2023 and 2022, respectively.

Tallahassee Magnetic Resonance Imaging, Inc., Stand Up MRI of Boca Raton, Inc. and Stand Up MRI & Diagnostic Center, Inc. (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, 2023 and 2022 are summarized in the following table.

Page 16

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

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

Schedule of patient fee revenue
	For the Three Months Ended December 31,
	2023		2022
Commercial Insurance/ Managed Care	$	1,243	$	958
Medicare/Medicaid		284		247
Workers’ Compensation/Personal Injury		4,907		4,262
Other		1,787		1,662
Patient Fee Revenue, net of contractual allowances and discounts	$	8,221	$	7,129

	For the Six Months Ended December 31,
	2023		2022
Commercial Insurance/ Managed Care	$	2,416	$	1,869
Medicare/Medicaid		555		484
Workers’ Compensation/Personal Injury		10,044		8,497
Other		3,881		2,355
Patient Fee Revenue, net of contractual allowances and discounts	$	16,896	$	13,205

NOTE 4 – OPERATING & FINANCING LEASES

In July 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842). This 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. 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 Company accounts for its various operating leases in accordance with Topic 842, 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. 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, 2023 is as follows:

Page 17

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 4 – OPERATING & FINANCING LEASES (CONTINUED)

	Lessee operating leases liability maturity
Twelve Months Ending December 31,		Operating Lease Payments			Financing Lease Payments
	2024	$	6,319		$	244
	2025		5,672			244
	2026		4,902			244
	2027		3,677			41
	2028		3,426			—
	Thereafter		20,698			—
	Present value discount		(9,737	)		(43	)
	Total lease liability	$	34,957		$	730

NOTE 5 - INVENTORIES

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

Schedule of inventories
	December 31, 2023		June 30, 2023
Purchased parts, components and supplies	$	2,582	$	2,346
Work-in-process		253		224
Total Inventories	$	2,835	$	2,570

NOTE 6 – OTHER INTANGIBLE ASSETS

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

Schedule of other intangible assets
	December 31, 2023		June 30, 2023
Capitalized software development costs	$	7,005	$	7,005
Patents and copyrights		5,472		5,452
Non-compete		4,150		4,150
Customer relationships		3,900		3,900
Gross Other intangible assets		20,527		20,507
Less: Accumulated amortization		17,261		17,075
Other Intangible Assets	$	3,266	$	3,432

Page 18

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 6 – OTHER INTANGIBLE ASSETS (CONTINUED)

Amortization of patents and copyrights for the three months ended December 31, 2023 and 2022 amounted to $43 and $47, respectively.

Amortization of customer relationships for the three months ended December 31, 2023 and 2022 amounted to $50 and $50, respectively.

Amortization of patents and copyrights for the six months ended December 31, 2023 and 2022 amounted to $86 and $101, respectively.

Amortization of customer relationships for the six months ended December 31, 2023 and 2022 amounted to $100 and $100, respectively.

NOTE 7 – OTHER CURRENT LIABILITIES

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

Schedule of other current liabilities
	December 31, 2023		June 30, 2023
Accrued salaries, commissions and payroll taxes	$	2,078	$	4,413
Sales tax payable		222		193
Income taxes payable		196		48
Legal and other professional fees		11		11
Accounting fees		54		100
Self-funded health insurance reserve		86		101
Accrued interest and penalty		4		4
Other general and administrative expenses		809		574
Other Current Liabilities	$	3,460	$	5,444

NOTE 8 - 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, 2023. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations.

Page 19

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 8 - SEGMENT AND RELATED INFORMATION (CONTINUED)

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, 2023
Net revenues from external customers	$	1,861		$	23,525	$	25,386
Inter-segment net revenues	$	254		$	—	$	254
(Loss) Income from operations	$	(993	)	$	5,878	$	4,885
Depreciation and amortization	$	60		$	1,160	$	1,220
Capital expenditures	$	4		$	129	$	133

For the three months ended Dec. 31, 2022
Net revenues from external customers	$	2,035		$	22,221	$	24,256
Inter-segment net revenues	$	245		$	—	$	245
(Loss) Income from operations	$	(551	)	$	4,783	$	4,232
Depreciation and amortization	$	65		$	1,035	$	1,100
Capital expenditures	$	50		$	423	$	473

	Medical Equipment			Management of Diagnostic Imaging Centers		Totals
For the six months ended Dec. 31, 2023
Net revenues from external customers	$	3,917		$	47,307	$	51,224
Inter-segment net revenues	$	508		$	—	$	508
(Loss) Income from operations	$	(1,731	)	$	13,187	$	11,456
Depreciation and amortization	$	121		$	2,294	$	2,415
Capital expenditures	$	20		$	192	$	212

For the six months ended Dec. 31, 2022
Net revenues from external customers	$	3,913		$	43,534	$	47,447
Inter-segment net revenues	$	490		$	—	$	490
(Loss) Income from operations	$	(1,353	)	$	9,496	$	8,143
Depreciation and amortization	$	137		$	2,081	$	2,218
Capital expenditures	$	74		$	1,362	$	1,436

Page 20

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 9 – RELATED PARTY TRANSACTION

On December 31, 2023, the Company entered into an agreement with Magnetic Resonance Management, LLC (“MRM”) for the sale of a MRI scanner. MRM is owned by the CEO and President of the Company. The sales price of the equipment was $577 which is payable based upon a promissory note dated December 1, 2023. The note bears interest at a rate of 9% and is payable in full at the maturity of the note in December 2028. The MRI scanner had zero basis,which resulted ina gain of $577. The Company has the option but not the obligation to re-take possession of the scanner in lieu of payment upon maturity of the note.

NOTE 10 – SUPPLEMENTAL CASH FLOW INFORMATION

During the six months ended December 31, 2023 and December 31, 2022, the Company paid $58 and $27 for interest, respectively.

During the six months ended December 31, 2023 and December 31, 2022, the Company paid $150 and $647 for income taxes, respectively.

NOTE 11 – 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, 2023.

Other Matters

On September 13, 2022, the Company adopted a stock repurchase plan. The plan has no expiration date and cannot determine the number of shares which will be repurchased. On September 26, 2022, the Board of Directors has approved up to $9 million to be repurchased under the plan which will be purchased on the publicly traded open market at prevailing prices. During the six months ended December 31, 2023 and 2022, the Company repurchased 116 and 30 shares at a cost of $1,885 and $478, respectively. The Company cancelled 123 shares and 16 shares at a cost of $2,005 and $402 for the six months ended December 31, 2023 and 2022, respectively.

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 $150 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, 2023 and June 30, 2023, the Company had approximately $86 and $101, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the condensed consolidated balance sheets.

Page 21

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 11 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Other Matters - Continued

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.

NOTE 12 - 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, 2023 and 2022, the Company recorded income tax expense of $3,036 in 2023 as compared to $2,871 in 2022. For the three months ended December 31, 2023 and 2022, the Company recorded income tax expense of $1,366 and $1,462 respectively. The six month and three month 2023 provision is comprised of a current income tax component of $751 and a deferred income tax component of $2,285 and a current income tax component of $323 and a deferred income tax component of $1,043 respectively. 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 year 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 2018.

Page 22

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 and 2022

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

(UNAUDITED)

NOTE 12 - INCOME TAXES (CONTINUED)

The Company recorded a deferred tax asset of $7,758 and a deferred tax liability of $395 as of December 31, 2023, primarily relating to allowance for doubtful accounts and tax credits. The net operating losses begin to expire in 2028 for federal tax and state income tax purposes. The Company anticipates that their Federal operating loss will be utilized in the current fiscal year.

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, 2023, no such changes in ownership have occurred.

The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement income. The CAMT will be effective for tax years beginning after December 31, 2022. Currently, the Company is expecting the IRA not to have a material impact to the Company’s financial statements.

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 separate state net operating losses that are not expected to be fully utilized. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation.

NOTE 13 – SUBSEQUENT EVENTS

The Company has evaluated events that occurred subsequent to December 31, 2023 and through the date the condensed consolidated financial statements were issued.

During February 2024, the Company signed an amendment to a property lease for its principal office in Melville, New York. The agreement extends the term of the lease until November 2033.

Page 23

Schedule of Future revenue

SEC Form 10-Q filed by Fonar Corporation