FONAR

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 MARCH 31, 2025

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 ☐

Page 1

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 May 2, 2025
Common Stock, par value $.0001		6,203,465
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

Page 2

FONAR CORPORATION AND SUBSIDIARIES

INDEX

PART I - FINANCIAL INFORMATION		PAGE
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – as of March 31, 2025 and June 30, 2024		4
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and March 31, 2024		7
Condensed Consolidated Statements of Operations for the Nine Months Ended March 31, 2025 and March 31, 2024		8
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2025 and March 31, 2024		9
Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended March 31, 2025 and March 31, 2024		11
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2025 and March 31, 2024		13
Notes to Condensed Consolidated Financial Statements		14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 3. Quantitative and Qualitative Disclosures About Market Risk		42
Item 4. Controls and Procedures		42
PART II - OTHER INFORMATION		43
Item 1. Legal Proceedings		43
Item 1A. Risk Factors		43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3. Defaults Upon Senior Securities		45
Item 4. Mine Safety Disclosures		45
Item 5. Other Information		46
Item 6. Exhibits		46
Signatures		46

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

ASSETS


	March 31, 2025 (Unaudited)		June 30, 2024 (Note 1)
Current Assets:
Cash and cash equivalents	$	54,257	$	56,341
Short-term investments		123		136
Accounts receivable – net of allowance for credit losses of $273 and $166 at March 31, 2025 and June 30, 2024, respectively		4,596		4,035
Accounts receivable – related party		30		—
Medical receivable		24,290		23,992
Management and other fees receivable – net of allowance for credit losses of $13,864 and $12,370 at March 31, 2025 and June 30, 2024, respectively		42,812		41,954
Management and other fees receivable – related medical practices – net of allowance for credit losses of $7,117 and $6,110 at March 31, 2025 and June 30, 2024, respectively		9,907		9,865
Inventories - net		2,707		2,715
Prepaid expenses and other current assets		2,379		1,286
Total Current Assets		141,101		140,324

Accounts receivable – long term		3,572		830
Deferred income tax asset		6,346		7,223
Property and equipment – net		18,866		18,709
Note receivable – related party		620		581
Right-of-use-asset – operating leases		36,011		38,428
Right-of-use-asset – financing lease		433		531
Goodwill		4,269		4,269
Other intangible assets – net		3,230		2,870
Other assets		475		481
Total Assets	$	214,923	$	214,246

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

LIABILITIES AND EQUITY

	March 31, 2025 (Unaudited)		June 30, 2024 (Note 1)
Current Liabilities:
Current portion of long-term debt	$	—	$	47
Accounts payable		1,225		1,856
Other current liabilities		4,241		7,941
Unearned revenue on service contracts		4,430		3,870
Unearned revenue on service contracts – related party		28		—
Operating lease liabilities – current portion		3,318		3,474
Financing lease liability – current portion		244		226
Customer deposits		555		443
Total Current Liabilities		14,041		17,857

Long-Term Liabilities:
Unearned revenue on service contracts		3,738		1,175
Deferred income tax liability		371		371
Due to related party medical practices		93		93
Operating lease liabilities – net of current portion		36,005		37,468
Financing lease liability – net of current portion		224		395
Long-term debt, less current portion		—		67
Other liabilities		192		32

Total Long-Term Liabilities		40,623		39,601
Total Liabilities		54,664		57,458

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

LIABILITIES AND EQUITY (Continued)

EQUITY:	March 31, 2025 (Unaudited)			June 30, 2024 (Note 1)
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at March 31, 2025 and June 30, 2024, 313 issued and outstanding at December 31, 2024 and June 30, 2024	$	—		$	—
Preferred stock $.001 par value; 567 shares authorized at March 31, 2025 and June 30, 2024, issued and outstanding – none		—			—
Common Stock $.0001 par value; 8,500 shares authorized at March 31, 2025 and June 30, 2024, 6,203 and 6,373 issued at March 31, 2025 and June 30, 2024, respectively, 6,168 and 6,328 outstanding at March 31, 2025 and June 30, 2024, respectively		1			1
Class B Common Stock (10 votes per share) $.0001 par value; 227 shares authorized at March 31, 2025 and June 30, 2024, 0.146 issued and outstanding at March 31, 2025 and June 30, 2024		—			—
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at March 31, 2025 and June 30, 2024, 383 issued and outstanding at March 31, 2025 and June 30, 2024		—			—
Paid-in capital in excess of par value		178,758			180,608
Accumulated deficit		(6,019	)		(13,624	)
Treasury stock, at cost – 35 shares of common stock at March 31, 2025 and 45 shares of common stock at June 30, 2024		(860	)		(1,017	)
Total FONAR Corporation’s Stockholders’ Equity		171,880			165,968
Noncontrolling interests		(11,621	)		(9,180	)
Total Equity		160,259			156,788
Total Liabilities and Equity	$	214,923		$	214,246

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
REVENUES	2025			2024
Patient fee revenue – net of contractual allowances and discounts	$	8,853		$	8,614
Product sales		55			110
Service and repair fees		2,295			1,818
Service and repair fees – related parties		45			39
Management and other fees		12,929			12,149
Management and other fees – related medical practices		2,988			2,988
Total Revenues – Net		27,165			25,718
COSTS AND EXPENSES
Costs related to patient fee revenue		4,901			4,437
Costs related to product sales		319			153
Costs related to service and repair fees		1,182			900
Costs related to service and repair fees – related parties		58			82
Costs related to management and other fees		6,897			6,864
Costs related to management and other fees – related medical practices		1,714			1,529
Research and development		441			414
Selling, general and administrative expenses		7,991			7,593
Total Costs and Expenses		23,503			21,972
INCOME FROM OPERATIONS		3,662			3,746
Other income and (expenses)
Interest expense		(7	)		(9	)
Investment income – related party		13			13
Investment income		463			536
Other income – related party		-			-
Other (expense) income		(1	)		45
Income Before Provision for Income Taxes and Noncontrolling Interests		4,130			4,331
Provision for income taxes		(1,006	)		(1,848	)
Consolidated Net Income		3,124			2,483
Net Income - Noncontrolling Interests		(618	)		(611	)
Net Income – Attributable to FONAR	$	2,506		$	1,872
Net Income Available to Common Stockholders	$	2,347		$	1,755
Net Income Available to Class A Non-Voting Preferred Stockholders	$	119		$	87
Net Income Available to Class C Common Stockholders	$	40		$	30
Basic Net Income Per Common Share Available to Common Stockholders	$	0.38		$	0.28
Diluted Net Income Per Common Share Available to Common Stockholders	$	0.37		$	0.27
Basic and Diluted Income Per Share – Class C Common	$	0.11		$	0.08
Weighted Average Basic Shares Outstanding – Common Stockholders		6,168			6,335
Weighted Average Diluted Shares Outstanding – Common Stockholders		6,296			6,463
Weighted Average Basic and Diluted Shares Outstanding–Class C Common		383			383

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	FOR THE NINE MONTHS ENDED MARCH 31, (Unaudited)
REVENUES	2025			2024
Patient fee revenue – net of contractual allowances and discounts	$	24,284		$	25,511
Product sales		200			329
Service and repair fees		6,047			5,460
Service and repair fees – related parties		135			94
Management and other fees		37,447			36,585
Management and other fees – related medical practices		8,962			8,962
Total Revenues – Net		77,075			76,941
COSTS AND EXPENSES
Costs related to patient fee revenue		14,170			13,466
Costs related to product sales		761			558
Costs related to service and repair fees		3,211			2,533
Costs related to service and repair fees – related parties		154			106
Costs related to management and other fees		22,008			21,095
Costs related to management and other fees – related medical practices		4,888			4,638
Research and development		1,124			1,297
Selling, general and administrative expenses		20,055			18,046
Total Costs and Expenses		66,371			61,739
INCOME FROM OPERATIONS		10,704			15,202
Other income and (expenses)
Interest Expense		(21	)		(67	)
Investment income – related party		39			13
Investment income		1,626			1,576
Other income – related party		—			577
Other income		(1	)		46
Income Before Provision for Income Taxes and Noncontrolling Interests		12,347			17,347
Provision for income taxes		(3,018	)		(4,884	)
Consolidated Net Income		9,329			12,463
Net Income – Noncontrolling Interests		(1,724	)		(2,726	)
Net Income – Attributable to FONAR	$	7,605		$	9,737
Net Income Available to Common Stockholders	$	7,122		$	9,130
Net Income Available to Class A Non-Voting Preferred Stockholders	$	360		$	452
Net Income Available to Class C Common Stockholders	$	123		$	155
Basic Net Income Per Common Share Available to Common Stockholders	$	1.14		$	1.42
Diluted Net Income Per Common Share Available to Common Stockholders	$	1.12		$	1.40
Basic and Diluted Income Per Share – Class C Common	$	0.32		$	0.40
Weighted Average Basic Shares Outstanding – Common Stockholders		6,244			6,410
Weighted Average Diluted Shares Outstanding – Common Stockholders		6,372			6,538
Weighted Average Basic and Diluted Shares Outstanding Class C Common		383			383

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts and shares in thousands)

(UNAUDITED)

For the Three Months Ended March 31, 2025


	Common Stock		Common Stock Outstanding (Shares)		Class A Preferred Stock (Shares)		Class C Common Stock (Shares)		Paid-in capital in excess of par value
Balance – December 31, 2024	$	1		6,203		313		383	$	178,758
Net Income		—		—		—		—		—
Purchase of Treasury Stock		—		—		—		—		—
Distributions – Non controlling interest		—		—		—		—		—
Income – Non controlling interests		—		—		—		—		—
Balance – March 31, 2025	$	1		6,203		313		383	$	178,758


	Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)		Non Controlling Interests			Total
Balance – December 31, 2024	$	(8,525	)	$	(395	)		4	$	(10,888	)	$	158,951
Net Income		2,506			—			—		—			2,506
Purchase of Treasury Stock		—			(465	)		31		—			(465	)
Distributions – Non controlling interest		—			—			—		(1,351	)		(1,351	)
Income – Non controlling interests		—			—			—		618			618
Balance – March 31, 2025	$	(6,019	)	$	(860	)		35	$	(11,621	)	$	160,259

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts and shares in thousands)

(UNAUDITED)

For the Three Months Ended March 31, 2024


	Common Stock		Common Stock Outstanding (Shares)		Class A Preferred Stock (Shares)		Class C Common Stock (Shares)		Paid-in capital in excess of par value
Balance – December 31, 2023	$	1		6,328		313		383	$	180,607
Net Income		—		—		—		—		—
Distributions – Non controlling interest		—		—		—		—		—
Income – Non controlling interests		—		—		—		—		—
Balance – March 31, 2024	$	1		6,328		313		383	$	180,607


	Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)		Non Controlling Interests			Total
Balance – December 31, 2023	$	(16,326	)	$	(395	)		4	$	(7,590	)	$	156,297
Net Income		1,872			—			—		—			1,872
Distributions – Non controlling interest		—			—			—		(1,750	)		(1,750	)
Income – Non controlling interests		—			—			—		611			611
Balance – March 31, 2024	$	(14,454	)	$	(395	)		4	$	(8,729	)	$	157,030

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts and shares in thousands)

(UNAUDITED)

For the Nine Months Ended March 31, 2025


	Common Stock		Common Stock Outstanding (Shares)			Class A Preferred Stock (Shares)		Class C Common Stock (Shares)		Paid-in capital in excess of par value
Balance – June 30, 2024	$	1		6,328			313		383	$	180,608
Net Income		—		—			—		—		—
Purchase of Treasury Stock		—		—			—		—		—
Cancellation of Treasury Stock		—		(125	)		—		—		(1,963	)
Sale – Non controlling interests		—		—			—		—		113
Distributions – Non controlling interest		—		—			—		—		—
Income – Non controlling interests		—		—			—		—		—
Balance – March 31, 2025	$	1		6,203			313		383	$	178,758


	Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance – June 30, 2024	$	(13,624	)	$	(1,017	)		45		$	(9,180	)	$	156,788
Net Income		7,605			—			—			—			7,605
Purchase of Treasury Stock		—			(1,806	)		115			—			(1,806	)
Cancellation of Treasury Stock		—			1,963			(125	)		—			—
Sale – Non Controlling interest		—			—			—			19			132
Distributions – Non controlling interest		—			—			—			(4,184	)		(4,184	)
Income – Non controlling interests		—			—			—			1,724			1,724
Balance – March 31, 2025	$	(6,019	)	$	(860	)		35		$	(11,621	)	$	160,259

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts and shares in thousands)

(UNAUDITED)

For the Nine Months Ended March 31, 2024


	Common Stock		Common Stock Outstanding (Shares)			Class A Preferred Stock (Shares)		Class C Common Stock (Shares)		Paid-in capital in excess of par value
Balance – June 30, 2023	$	1		6,451			313		383	$	182,613
Net Income		—		—			—		—		—
Purchase of Treasury Stock		—		—			—		—		—
Cancellation of Treasury Stock		—		(123	)		—		—		(2,006	)
Distributions – Non controlling interest		—		—			—		—		—
Income – Non controlling interests		—		—			—		—		—
Balance – March 31, 2024	$	1		6,328			313		383	$	180,607


	Accumulated Deficit			Treasury Stock			Treasury Stock (Shares)			Non Controlling Interests			Total
Balance – June 30, 2023	$	(24,191	)	$	(516	)		11		$	(7,079	)	$	150,828
Net Income		9,737			—			—			—			9,737
Purchase of Treasury Stock		—			(1,885	)		116			—			(1,885	)
Cancellation of Treasury Stock		—			2,006			(123	)		—			—
Distributions – Non controlling interest		—			—			—			(4,376	)		(4,376	)
Income – Non controlling interests		—			—			—			2,726			2,726
Balance – March 31, 2024	$	(14,454	)	$	(395	)		4		$	(8,729	)	$	157,030

See accompanying notes to the unaudited 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 NINE MONTHS ENDED MARCH 31,
	2025			2024
Cash Flows from Operating Activities:
Consolidated Net income	$	9,329		$	12,463
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		3,536			3,546
Net change in operating right-of-use assets and lease liabilities		15			(472	)
Provision for credit losses		2,608			1,674
Deferred tax expense		878			3,003
Gain on sale of equipment – related party		—			(577	)
Changes in operating assets and liabilities, net:
Accounts, medical and management fee receivable(s)		(7,140	)		(8,835	)
Notes receivable		—			55
Notes receivable – related party		(39	)		—
Inventories		8			(365	)
Prepaid expenses and other current assets		(1,093	)		243
Other assets		6			(28	)
Accounts payable		(631	)		97
Other current liabilities		(549	)		(1,095	)
Financing lease liabilities		(153	)		(163	)
Customer deposits		111			(49	)
Other liabilities		159			(1	)
Net cash provided by operating activities		7,045			9,496
Cash Flows from Investing Activities:
Purchases of property and equipment		(3,145	)		(375	)
Proceeds(Purchase) from short term investments		13			(102	)
Cost of patents		(25	)		(24	)
Net cash used in investing activities		(3,157	)		(501	)
Cash Flows from Financing Activities:
Repayment of borrowings and capital lease obligations		(114	)		(32	)
Sale of noncontrolling interest		132			—
Purchase of treasury stock		(1,806	)		(1,885	)
Distributions to noncontrolling interests		(4,184	)		(4,376	)
Net cash used in financing activities		(5,972	)		(6,293	)
Net (Decrease) Increase in Cash and Cash Equivalents		(2,084	)		2,702
Cash and Cash Equivalents - Beginning of Period		56,341			51,280
Cash and Cash Equivalents - End of Period	$	54,257		$	53,982

See accompanying notes to the unaudited condensed consolidated financial statements.

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FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025 and 2024

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

(UNAUDITED)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

FONAR Corporation (the “Company” or “FONAR”) is a Delaware corporation, which was incorporated on July 17, 1978. FONAR is engaged in the research, development, production and marketing of medical scanning equipment, which uses principles of Magnetic Resonance Imaging (“MRI”) for the detection and diagnosis of human diseases. In addition to deriving revenues from the direct sale of MRI equipment, revenue is also generated from our installed-base of customers through our service and upgrade programs.

FONAR, through its wholly-owned subsidiary Health Management Corporation of America (“HMCA”) provides comprehensive management services to diagnostic imaging facilities. The services provided by the Company include development, administration, leasing of office space, facilities and medical equipment, provision of supplies, staffing and supervision of non-medical personnel, legal services, accounting, billing and collection and the development and implementation of practice growth and marketing strategies.

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 Health Diagnostics Management (“HDM”). Imperial Management Services, LLC 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. As of June 30, 2024, the Company had a direct ownership interest of 70.8% and the investors a 29.2% ownership interest. During the nine months ended March 31, 2025, the Company sold non-controlling interests to a minority shareholder for $132. Currently, the Company has a direct ownership interest of 70.63% and the investors have a 29.37% 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

These unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2025 have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, from which the accompanying condensed consolidated balance sheet at June 30, 2024 was derived. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial information have been included and are of a normal recurring nature.

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FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025 and 2024

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

(UNAUDITED)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company evaluates these estimates and judgements on an ongoing basis. The Company bases estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year.

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.

Revenue Recognition

Patient fee revenue

The Company’s 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 and annual management contracts with related and unrelated parties to which the Company provides comprehensive management services. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. The Company’s 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 the Company’s 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.

Page 15

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025 and 2024

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

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company’s patient fee revenue, net of contractual allowances and discounts for the three and nine months ended March 31, 2025 and 2024 are summarized in the following table:


	For the Three Months Ended March 31,
	2025		2024
Commercial Insurance/Managed Care	$	1,251	$	1,258
Medicare/Medicaid		300		314
Workers’ Compensation/Personal Injury		5,207		5,073
Other		2,095		1,969
Patient Fee Revenue, net of contractual allowances and discounts	$	8,853	$	8,614

	For the Nine Months Ended March 31,
	2025		2024
Commercial Insurance/ Managed Care	$	3,629	$	3,674
Medicare/Medicaid		862		869
Workers’ Compensation/Personal Injury		14,589		15,117
Other		5,204		5,851
Patient Fee Revenue, net of contractual allowances and discounts	$	24,284	$	25,511

Management and other fees revenue

HMCA generates management and other fees revenues (including management and other fees revenue from related parties) from providing comprehensive management services, including development, administration, accounting, billing and collection services, together with office space, medical equipment, supplies and non-medical personnel to its clients. Revenues are in the form of fees which are earned under annual management contracts with HMCA clients. Management and other fees revenue are recognized ratably over time as the services are provided throughout the term of the contract.

Revenue on sales contracts for scanners, included in “product sales” is recognized under the percentage-of-completion method in accordance with FASB ASC 606 “Revenue Recognition – Construction-Type and Production-Type Contracts”. The Company manufactures its scanners under specific contracts that provide for progress payments. Production and installation takes approximately three to six months.

Revenue on scanner service contracts is recognized on the straight-line method over the related contract period, usually one year.

Page 16

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025 and 2024

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

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 converted method in calculating diluted income per share for the three and nine months ended March 31, 2025 and 2024.

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 nine months ended March 31, 2025 and 2024, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

Earnings Per Share

SEC Form 10-Q filed by Fonar Corporation