FONR Fonar Corporation

FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™, reported today its fiscal 2018 results.

FONAR’s primary source of income and growth is attributable to its wholly-owned diagnostic imaging management subsidiary, Health Management Company of America (HMCA). In 2009 FONAR managed 9 MRI facilities and had completed approximately 29,000 MRI scans. In 2010, Timothy Damadian, the Company’s current President and CEO, re-joined the Company and initiated a business plan aimed at growing HMCA by increasing scan volume at existing HMCA-managed facilities, establishing de novo centers, and making key acquisitions. With FONAR management’s enthusiastic endorsement of his plan, Mr. Damadian assembled an experienced management team that, under his leadership, has since faithfully executed the plan, thereby delivering consistent and unprecedented profitability for FONAR shareholders. Today, HMCA manages 26 diagnostic imaging centers, 19 in New York and 7 in Florida, collectively equipped with 34 MRI scanners. The imaging centers completed 176,000 MRI scans in fiscal 2018, as compared to 164,000 the previous fiscal year.

FONAR sold and installed the world’s first commercial MRI scanner in 1980, making it the first company in the now multi-billion-dollar MRI industry. FONAR’s flagship product is the FONAR UPRIGHT® Multi-Position™ MRI, aka Stand-Up® MRI. It is the only whole-body MRI that performs Position™ Imaging (pMRI™), which allows patients to be scanned in numerous weight-bearing positions, including standing, sitting, in flexion and extension, as well as in the conventional lie-down position.

Financial Discussion:

Net revenues increased by 4% to $81.5 million for the fiscal year ended June 30, 2018, as compared to $78.0 million for the fiscal year ended June 30, 2017.

For the year ended June 30, 2018, the revenues from the management of the diagnostic imaging center segment, consisting of patient and management and other fee revenue, and less the provision for bad debt for patient revenue, increased by 7% to $71.7 million as compared to $66.8 million one year earlier.

Income from operations increased by 3% to $19.7 million for the fiscal year ended June 30, 2018, as compared to $19.1 million for the fiscal year ended June 30, 2017.

Net Income increased by 7% to $25.5 million, for the fiscal year ended June 30, 2018, as compared to $23.7 million for the fiscal year ended June 30, 2017. Net income for the year ended June 30, 2018, reflects income tax benefits associated with changes to the net deferred income tax assets of $4.9 million and also the benefits associated with an AMT Carryforward Tax Credit of $1.2 million, available as a cash refund. These income tax benefits were precipitated in combination by both the Tax Cuts and Jobs Act enacted in December 2017, which decreased the corporate income tax rate from 35% to 21%, effective January 1, 2018, and the continued strength of the business.

Basic net income per common share available to common shareholders increased by 6% to $3.16 for the fiscal year ended June 30, 2018, as compared to $2.98 for the fiscal year ended June 30, 2017.

Diluted net income per common share available to common shareholders increased by 6% to $3.10, compared to $2.92 for the fiscal year ended June 30, 2017.

Total Costs and Expenses for the fiscal year ending June 30, 2018 increased by 5% to $61.8 million, as compared to $58.9 million for the fiscal year ended June 30, 2017.

At June 30, 2018, total assets increased by 20% to $118.3 million, as compared to $98.8 million at June 30, 2017.

At June 30, 2018, total current assets increased by 26% to $67.1 million, as compared to $53.4 million at June 30, 2017.

At June 30, 2018, total liabilities increased by 1% to $16.1 million, as compared to $15.9 million at June 30, 2017. 

At June 30, 2018, total current liabilities decreased by 2% to $14.6 million, as compared to $14.2 million at June 30, 2017.

At June 30, 2018, total cash and cash equivalents increased by 94% to $19.6 million, as compared to $10.1 million at June 30, 2017.

At June 30, 2018, working capital increased by 34% to $52.5 million, as compared to $39.2 million at June 30, 2017.

At June 30, 2018, FONAR Stockholder’s Equity increased by 27% to $98.7 million, as compared to $77.4 million at June 30, 2017.

Significant Events

On September 3, 2018, Dr. Damadian’s presentation of ‘The First MRI Scan’ was featured on the BBC (British Broadcasting Corporation) radio program, Witness. During the nine-minute broadcast to a BBC World Service radio network audience of more than 300 million listeners world-wide, Dr. Damadian relived the excitement of the moment when he conducted the world’s first MRI scan. “Well, we put Larry (Minkoff) in, we got a signal immediately from his heart, and I said, “Holy smokes. It’s actually going to work!’” The BBC broadcast of this pioneering episode in MRI can be heard online at: https://www.bbc.co.uk/programmes/w3cswsj4

First quarter Fiscal 2018 was the first complete quarter in which FONAR stock was included in the Russell 3000® Index, having joined the index effective June 26, 2017. The Company has since seen an increase in related index funds and ETFs (Exchange Traded Funds), mutual funds, and institutional owners. Currently, institutional ownership of outstanding FONAR Common Stock is over 50%.

In October, 2017, HMCA added a second Stand-Up® MRI in the Bronx, NY, in order to meet the demands of patients and referring physicians for FONAR technology.

Also, in December, 2017, the Tax Cuts and Jobs Act was signed into law, making numerous changes to the Internal Revenue Code. Among them is the reduction of the U.S. corporate income tax rate to 21%, effective January 1, 2018. Because the Act took effect midway through the Company’s tax year, the Company will have a U.S. statutory income tax rate of 27.7% for fiscal 2018 and a statutory income tax rate of 21% for all subsequent fiscal years.

Management Discussion

President and CEO, Timothy R. Damadian, said, “As of June 30, our cash and cash equivalents figure stood at $19.6 million, nearly double what is was a year earlier. Together with a 34% increase in working capital and consistent revenue growth, we are well positioned to pursue new business opportunities consistent with our growth strategy – opportunities that will enable us to maintain our positive earnings trajectory into fiscal 2019.

“Of course, I am pleased with our Income from Operations and Net Income. We remain committed to controlling costs. The Company’s Selling, General, and Administrative (SG&A) costs decreased by $1.3 million, or 7%, year-over-year.”

Mr. Damadian concluded, “Thanks to the enormous appeal of the UPRIGHT® MRI (also known as the Stand-Up® MRI) among both patients and physicians, and thanks to our experienced and highly competent management team, we continue to thrive.”

Chairman of the Board, Raymond V. Damadian, M.D., said, “We continue to explore the impact of our new works-in-progress technology for visualizing and quantifying the flow of cerebrospinal fluid (CSF) circulating throughout the brain and vertebral column while the patient is scanned in the Upright position.”

Dr. Damadian added, “The Company was recently issued a patent covering the use of the FONAR UPRIGHT® Multi-Position™ MRI to diagnose patients with Multiple Sclerosis (MS). The patent is based on a discovery FONAR had announced on November 2, 2011. We are hopeful that this research will help to lead to a new understanding of the role of CSF on brain diseases, like MS.”

Dr. Damadian concluded, “It has been 47 years since we announced the discovery that birthed the MRI industry.* We’ve had the privilege and joy of witnessing its marvelous growth from infancy. Today there are tens of millions of MRI scans performed each year worldwide in what has become a multi-billion-dollar industry. After all these years, FONAR is finally reaping the rewards, and we’re certainly very thankful for it.”

* In 1971, Dr. Damadian’s paper in Science contained the two key discoveries that remain fundamental to the operation of every MRI scanner ever made: 1) his discovery that the relaxation times of cancerous tissues, are markedly prolonged relative to those of healthy tissues and 2) his discovery that there are also marked differences in relaxation times across the full spectrum of healthy tissue types.

About FONAR

FONAR, the Inventor of MR Scanning™ is the first, oldest and most experienced MRI company in the industry. Incorporated in 1978, FONAR, which is located in Melville, New York, introduced the world’s first commercial MRI in 1980, and went public in 1981. The company’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™), allowing it to scan patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as in the conventional lie-down position.

The FONAR UPRIGHT® MRI often detects patient problems that other MRI scanners cannot because they are lie-down, “weightless-only” scanners. The patient-friendly UPRIGHT® MRI has a near-zero patient claustrophobic rejection rate. As a FONAR customer states, “If the patient is claustrophobic in this scanner, they’ll be claustrophobic in my parking lot.” Approximately 85% of patients are scanned sitting while watching TV.

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

FONAR’s 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.

CONSOLIDATED BALANCE SHEETS
ASSETS
		June 30,
		2018		2017
Current Assets:
Cash and cash equivalents		$19,663,742		$10,139,621
Accounts receivable – net of allowances for doubtful     accounts of $190,244 at June 30, 2018 and 2017		3,813,756		4,321,760
Medical receivables – net of allowances for doubtful     accounts of $22,727,698 and $19,853,318 at June     30, 2018 and 2017, respectively		13,350,772		11,744,704
Management and other fees receivable – net of     allowances for doubtful accounts of $10,983,022 and     $12,859,750 at June 30, 2018 and 2017, respectively		21,863,431		18,593,894
Management and other fees receivable – related party     medical practices – net of allowances for doubtful     accounts of $1,711,385 and $582,001 at June 30,     2018 and 2017, respectively		5,535,096		4,959,598
Costs and estimated earnings in excess of billings on     uncompleted contracts		86,638		736,061
Inventories		1,431,380		1,624,262
Prepaid expenses and other current assets		1,349,907		1,293,806
Total Current Assets		67,064,542		53,413,706
Income taxes receivable		1,200,000		-
Deferred income tax asset		22,689,011		17,861,777
Property and Equipment – Net		16,492,278		16,462,504
Goodwill		3,985,397		3,927,123
Other Intangible Assets – Net		5,601,656		6,644,504
Other Assets		1,278,061		452,952
Total Assets		$118,310,945		$98,762,566

CONSOLIDATED BALANCE SHEETS
LIABILITIES
		June 30,
		2018		2017
Current Liabilities:
Current portion of long-term debt and capital leases		$38,332		$180,090
Accounts payable		1,300,250		1,423,217
Other current liabilities		8,177,995		7,203,278
Unearned revenue on service contracts		4,191,930		4,641,534
Customer deposits		858,195		787,884
Total Current Liabilities		14,566,702		14,236,003
Long-Term Liabilities:
Deferred income tax liability		239,011		331,527
Due to related party medical practices		227,543		227,543
Long-term debt and capital leases, less current portion		306,035		336,761
Other liabilities		737,183		720,779
Total Long-Term Liabilities		1,509,772		1,616,610
Total Liabilities		16,076,474		15,852,613

CONSOLIDATED BALANCE SHEETS
STOCKHOLDERS EQUITY
		June 30,
		2018			2017
Stockholders' Equity:
Class A non-voting preferred stock $.0001 par value;     453,000 shares authorized at June 30, 2018 and     2017, 313,438 issued and outstanding at June 30,     2018 and 2017		$31			$31
Preferred stock $.001 par value; 567,000 shares     authorized at June 30, 2018 and 2017, issued and     outstanding – none		–			–
Common stock $.0001 par value; 8,500,000 shares     authorized at June 30, 2018 and 2017, 6,299,154     issued at June 30, 2018 and 2017, 6,287,511     outstanding at June 30, 2018 and 2017		630			630
Class B convertible common stock (10 votes per share)     $.0001 par value; 227,000 shares authorized at June     30, 2018 and 2017, 146 issued and outstanding at     June 30, 2018 and 2017		–			–
Class C common stock (25 votes per share) $.0001 par     value; 567,000 shares authorized at June 30, 2018     and 2017, 382,513 issued and outstanding at June     30, 2018 and 2017		38			38
Paid-in capital in excess of par value		179,131,780			179,131,780
Accumulated deficit		(79,772,587	)		(101,003,389	)
Notes receivable from employee stockholders		(9,213	)		(16,546	)
Treasury stock, at cost – 11,643 shares of common stock     at June 30, 2018 and 2017		(675,390	)		(675,390	)
Total Fonar Corporation’s Stockholders’ Equity		98,675,289			77,437,154
Noncontrolling interests		3,559,182			5,472,799
Total Stockholders' Equity		102,234,471			82,909,953
Total Liabilities and Stockholders' Equity		$118,310,945			$98,762,566

CONSOLIDATED STATEMENTS OF INCOME
		For the Years Ended June 30,
		2018			2017			2016
Revenues
Product sales – net		$602,541			$1,572,148			$1,276,882
Service and repair fees – net		9,124,728			9,537,040			9,396,736
Service and repair fees – related parties – net		110,000			110,000			110,000
Patient fee revenue, net of contractual allowances and discounts		39,165,413			36,400,600			32,985,809
Provision for bad debts for patient fee		(17,896,528	)		(16,171,434	)		(14,539,786	)
Management and other fees – net		41,422,958			38,361,514			36,633,230
Management and other fees – related party medical practices – net		8,986,882			8,226,718			7,505,339
Total Revenues – Net		81,515,994			78,036,586			73,368,210
Costs and Expenses
Costs related to product sales		751,221			931,501			1,254,328
Costs related to service and repair fees		3,212,527			2,996,736			2,148,143
Costs related to service and repair fees – related parties		38,728			34,564			25,147
Costs related to patient fee revenue		10,256,951			8,987,673			9,418,935
Costs related to management and other fees		22,778,202			20,828,581			21,949,583
Costs related to management and other fees – related party medical     practices		4,913,141			4,273,370			4,074,762
Research and development		1,755,747			1,480,670			1,631,846
Selling, general and administrative, inclusive of compensatory element     of stock issuances of $0, $2,397,276 and $2,006 for the years     ended June 30, 2018, 2017 and 2016, respectively		18,125,266			19,407,411			18,509,850
Total Costs and Expenses		61,831,783			58,940,506			59,012,594
Income from Operations		19,684,211			19,096,080			14,355,616
Other Income and (Expenses):
Interest expense		(160,074	)		28,299			(262,193	)
Investment income		262,569			193,141			224,263
Other (expense) income – net		(4,271	)		(1,156	)		190,560
Income before benefit for income taxes and noncontrolling interests		19,782,435			19,316,364			14,508,246
Benefit for Income Taxes		5,669,750			4,362,434			4,287,271
Net Income		$25,452,185			$23,678,798			$18,795,517
Net Income – Noncontrolling Interests		(4,221,383	)		(4,058,177	)		(3,070,892	)
Net Income – Attributable to FONAR		$21,230,802			$19,620,621			$15,724,625

CONSOLIDATED STATEMENTS OF INCOME (Continued)
		For the Years Ended June 30,
		2018		2017		2016
Net Income Available to Common     Stockholders		$19,899,823		$18,390,586		$14,702,834
Net Income Available to Class A Non-     Voting Preferred Stockholders		$992,005		$916,769		$761,561
Net Income Available to Class C Common     Stockholders		$338,974		$313,266		$260,230
Basic Net Income Per Common Share     Available to Common Stockholders		$3.16		$2.98		$2.43
Diluted Net Income Per Common Share     Available to Common Stockholders		$3.10		$2.92		$2.38
Basic and Diluted Income Per Share –     Class C Common		$0.89		$0.82		$0.68
Weighted Average Basic Shares     Outstanding – Common Stockholders		6,287,510		6,161,599		6,050,893
Weighted Average Diluted Shares     Outstanding – Common Stockholders		6,415,014		6,289,103		6,178,397
Weighted Average Basic and Diluted     Shares Outstanding – Class C Common		382,513		382,513		382,513

Contact: Daniel Culver
Director of Communications
E-mail: investor@fonar.com
www.fonar.com

The Inventor of MR Scanning™
An ISO 9001 Company
Melville, New York 11747
Phone: (631) 694-2929
Fax: (631) 390-1772