FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™,
reported today its financial results for the first quarter of
fiscal 2021 which ended September 30, 2020. FONAR’s primary source
of income and growth is attributable to its diagnostic imaging
management subsidiary, Health Management Company of America (HMCA).
In 2009, HMCA managed 9 MRI scanners. HMCA currently manages 37 MRI
scanners – 23 in New York and 14 in Florida.
Financial Results
Cash and cash equivalents and short term
investments increased 5% to $38.8 million at September 30, 2020 as
compared to $36.8 million at June 30, 2020.
Operating Cash Flow at September 30, 2020,
decreased 11% to $3.8 million, compared with $4.2 million for the
period ended September 30, 2019. For comparison, Operating Cash
Flow for the year ended June 30, 2020 was $20.4 million, an
increase of 5% versus $19.4 million for the previous fiscal year
ended June 30, 2019.
Total Revenues-Net for the quarter ended
September 30, 2020 decreased 4% to $21.0 million as compared to
$21.7 million for the corresponding quarter ended September 30,
2019.
Revenues from the diagnostic imaging center
segment, consisting of patient fee revenue net of contractual
allowances and discounts, and management and other fees of related
and non-related medical practices, decreased 2% to $19.0 million
for the quarter ended September 30, 2020 as compared to $19.5
million for the quarter ended September 30, 2019.
Total Costs and Expenses for the quarter ended
September 30, 2020 increased 3% to $16.8 million as compared to
$16.3 million for the corresponding quarter ended September 30,
2019.
Selling, general and administrative (SG&A)
expenses increased 44% to $6.2 million for the quarter ended
September 30, 2020, as compared to $4.3 million for the
corresponding quarter ended September 30, 2019. A large portion of
this increase was attributable primarily to reserves against
management contracts totaling $2.2 million resulting exclusively
from business interruptions due to the COVID-19 pandemic. It is too
early to know how much of these reserves will be recovered.
Income from Operations decreased 24% to $4.2 for
the quarter ended September 30, 2020 as compared to $5.5 million
for the quarter ended September 30, 2019. The 44% increase in the
SG&A represents a significant portion of this decrease. Other
explanations include the 4% decrease in total revenues and 3%
increase in total costs and expenses. All of these factors are the
result of the interruption of business caused by the COVID-19
pandemic.
Net Income decreased to $3.3 million for the
quarter ended September 30, 2020 as compared to $4.5 million for
the quarter ended September 30, 2019.
Diluted Net Income per Common Share available to
common stockholders decreased to $0.36 for the quarter ended
September 30, 2020 as compared to $0.47 for the corresponding
quarter ended September 30, 2019.
Total Current Assets at September 30, 2020 were
$99.1 million as compared to $95.9 million at June 30, 2020.
Total Current Liabilities at September 30, 2020
were $18.6 million as compared to $18.7 million at June 30,
2020.
Total Liabilities at September 30, 2020 were
$53.2 million as compared to $54.0 million at June 30, 2020.
Total Assets at September 30, 2020 were $181.3
million as compared to $180.3 million at June 30, 2020.
Total Fonar Corporation Stockholders’ Equity
increased to $128.7 million at September 30, 2020, as compared to
$126.2 million at June 30, 2020.
The Current Ratio (Current Assets / Current
Liabilities) is 5.3 at September 30, 2020, compared to 5.1 at June
30, 2020.
The Total Assets / Total Liabilities ratio is
3.4 at September 30, 2020, compared to 3.3 at June 30, 2020.
Working Capital increased 4% to $80.5 million at
September 30, 2020, compared to $77.2 million at June 30, 2020.
Significant Event
FONAR Celebrates the 50th Anniversary of
the Origination and discovery of the MRI
It’s been fifty years since Raymond V. Damadian,
M.D., FONAR Founder and Chairman of the Board, took the first step
to develop a human-sized scanner using the principles of magnetic
resonance to detect cancer. In his September 17, 1969 letter to Dr.
George S. Mirick of the Health Research Council of the City of New
York, Raymond V. Damadian, FONAR Founder and Chairman of the Board,
requested financial support for equipment to pursue his promising
line of research. In the letter, Dr. Damadian states his intention
to “proceed with the development of instrumentation and probes that
can be used to scan the human body externally for early signs of
malignancy.” Dr. Damadian’s September 17, 1969 letter to Dr. George
S. Mirick may be viewed online at
fonar.com/nobel.htm#1969_letter.
On June 18, 1970, Dr. Damadian performed the
experiment whereby he discovered the distinctly elongated
time-lapsed signal marking differences between normal and cancerous
tissue, as well as differences among various normal organs
themselves. This was an ‘eureka’ moment. The results were published
in the journal ‘Science’ on March 19, 1971. Upon that publication,
scientists around the world began their own research, marking the
birth of the MRI industry.
On July 3, 1977, Dr. Damadian, and two
collaborators, Lawrence Minkoff and Michael Goldsmith, performed
the world’s first MRI scan, which was of Minkoff’s chest. It took 4
hours and 20 minutes to complete the scan. Now, fifty years after
Dr. Damadian’s discovery, tens of millions of MRI scans are
conducted throughout the world every year, each scan seeing
magnificently into the human body.
Perhaps Professor Donlin Long, M.D., former
Chairman of Neurosurgery, Johns Hopkins University, says it best:
MRI is “The Single Most Important Diagnostic Discovery in the
History of All of Medicine.” Professor Long made this statement on
November 10, 2018, when Dr. Damadian was awarded the Excellence in
Medicine Medal of Honor from the Chiari & Syringomyelia
Foundation at Brooks’s in London, England. He was joined by Fraser
Henderson, M.D., a neurosurgeon and member of the steering
committee for the Chiari & Syringomyelia Foundation, who said,
“Raymond Damadian revolutionized medicine with the discovery and
development of MRI.”
Management Discussion
President and CEO, Timothy R. Damadian, said,
“The COVID-19 pandemic has had a significant negative impact on our
management subsidiary, HMCA. MRI scan volume in the quarter ending
June 30, 2020 was just 27,757, which was 38% lower than the scan
volume in the prior quarter (45,123). Thankfully, scan volume for
the quarter ending September 30, 2020 grew by 50% to 41,566,
bringing us to approximately 90% of our pre-COVID scan volume.
Barring any future waves of COVID-19, we expect, in fiscal 2021, a
full return to pre-pandemic levels and then steady growth from that
point forward. The impact from COVID-19 on MRI scan volume for the
current fiscal year cannot be forecasted at this time.
“Our business first experienced the effects of
COVID-19 in the latter part of the quarter ending March 30, 2020.
Our HMCA management team, comprised of non-controlling-interest
group members, quickly and skillfully implemented procedures,
practices, and policies that have protected employees and patients
from the coronavirus. Further, wherever practical, the team reduced
expenses in accordance with reduced scan volume, largely through
reduced employee workloads and furloughs. As scan volume has been
returning to pre-COVID levels, I am pleased that we have been
adding hours to our workforce and welcoming back furloughed
employees as needed.
“In regard to growth,” continued Mr. Damadian,
“Prior to the pandemic disruption, we had planned to invest between
$4 million and $6 million dollars at four (4) HMCA-managed MRI
scanning centers in Fiscal 2020. We installed a second MRI scanner
in the Ormond Beach, Florida facility in October, 2019, and the
first MRI of what will be a two-MRI facility in Pembroke Pines,
Florida in June, 2020. COVID-19 delayed the installation of an
additional MRI in our Islandia, New York center, but has now been
operational since the beginning of October, 2020. Also delayed by
the pandemic has been the installation of a second MRI in our
Westchester County facility. We now expect it will be installed in
mid-fiscal 2021.
“Our vertical growth strategy of installing a
second or even a third MRI at high-volume, high-patient-backlog
facilities has been very successful, so we are naturally watching
for such opportunities in the future. As always, we are also
actively searching for promising locations that are currently
underserved by FONAR’s UPRIGHT® MRI technology and would enhance
and/or expand our existing networks of managed facilities. Beyond
the four installations I previously mentioned, we are expecting to
establish a de novo center in Bronx County, New York in the latter
part of fiscal 2021, making it the third installation expected in
fiscal 2021.”
Mr. Damadian concluded, “HMCA’s success is
largely due to the efforts of the non-controlling-interest group
members of our management team. All of them have been with me for
many years. Their extensive experience, concern for patients and
employees, skill, and dedication to the company have been on full
display throughout the pandemic, to the benefit of FONAR and its
shareholders.”
FONAR Founder and Chairman of the Board, Raymond
V. Damadian, M.D., said, “It’s pleasing to me to see FONAR continue
to be profitable, despite the COVID-19 pandemic. Among the reasons
for the Company’s success are its enduring history and ongoing
contributions to the MRI industry. The Company has always been
recognized as a key player in the MRI industry. Today, we offer the
patent-protected UPRIGHT® Multi-Position™ MRI scanner, the world’s
only weight-loaded MRI scanner. It is the only MRI scanner in the
world to provide UPRIGHT RADIOLOGY™. Our superior technology is
what patients and their doctors want and need. The UPRIGHT® MRI,
aka the STAND-UP® MRI, is the only whole-body MRI that can scan
patients in numerous weight-bearing positions, including sitting,
standing, as well as bending in flexion or extension. Most patients
sit and watch a large TV while being scanned. Most patients love
it. There is no doubt that a key component to the success of
HMCA-managed MRI centers is the popularity of the FONAR UPRIGHT®
MRI among both physicians and patients.”
Dr. Damadian concluded, “The Company is
currently researching Cerebrospinal Fluid (CSF) Flow as it
navigates from the brain, down the spine and throughout the brain.
It is hopeful that this research will lead to a new understanding
of the role of CSF on neurologic diseases, such as MS. In Fiscal
2021, the Company will continue with this valuable research which
can only be done on the UPRIGHT® MRI.”
About FONAR
FONAR, the Inventor of MR Scanning™, located in
Melville, NY, was incorporated in 1978, and is the first, oldest
and most experienced MRI company in the industry. FONAR introduced
the world’s first commercial MRI in 1980, and went public in 1981.
FONAR’s signature product is the FONAR UPRIGHT® Multi-Position™ MRI
(also known as the STAND-UP® MRI), the only whole-body MRI that
performs Position™ Imaging (pMRI™) and scans patients in numerous
weight-bearing positions, i.e. standing, sitting, in flexion and
extension, as well as the conventional lie-down position. The FONAR
UPRIGHT® MRI often detects patient problems that other MRI scanners
cannot because they are lie-down, ”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
cerebro-spinal fluid (CSF) 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™, CSP™, Multi-Position™, UPRIGHT
RADIOLOGY™, The Proof is in the Picture™, pMRI™, Videography™ and
Dynamic™, 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.
CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and
shares in thousands, except per share amounts)(UNAUDITED)
ASSETS
|
September 30,2020 |
|
June 30,2020 |
Current Assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
38,763 |
|
$ |
36,802 |
Short term investments |
|
32 |
|
|
32 |
Accounts receivable – net |
|
4,191 |
|
|
4,313 |
Accounts receivable - related party |
|
102 |
|
|
6 |
Medical receivable – net |
|
16,293 |
|
|
16,172 |
Management and other fees receivable - net |
|
29,011 |
|
|
27,438 |
Management and other fees receivable – related medical practices –
net |
|
7,002 |
|
|
6,896 |
Inventories |
|
1,698 |
|
|
1,649 |
Costs and estimated earnings in excess of billings on uncompleted
contracts |
|
153 |
|
|
153 |
Income tax receivable |
|
— |
|
|
671 |
Prepaid expenses and other current assets |
|
1,879 |
|
|
1,758 |
Total Current Assets |
|
99,124 |
|
|
95,890 |
|
|
|
|
|
|
Accounts receivable – long term |
|
2,839 |
|
|
2,730 |
Deferred income tax asset |
|
17,961 |
|
|
18,810 |
Property and equipment – net |
|
20,904 |
|
|
21,364 |
Right-of-use Asset – operating lease |
|
30,489 |
|
|
31,392 |
Right-of-use Asset – financing lease |
|
1,276 |
|
|
1,326 |
Goodwill |
|
3,985 |
|
|
3,985 |
Other intangible assets – net |
|
4,036 |
|
|
4,109 |
Other assets |
|
642 |
|
|
653 |
Total Assets |
$ |
181,256 |
|
$ |
180,259 |
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and
shares in thousands, except per share amounts)(UNAUDITED)
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
September 30,2020 |
|
June 30,2020 |
Current Liabilities: |
|
|
|
|
|
Current portion of long-term
debt and capital leases |
$ |
169 |
|
$ |
108 |
Accounts payable |
|
1,848 |
|
|
1,965 |
Other current liabilities |
|
7,864 |
|
|
8,185 |
Unearned revenue on service
contracts |
|
4,203 |
|
|
4,105 |
Unearned revenue on service
contracts – related party |
|
83 |
|
|
— |
Operating lease liability –
current portion |
|
3,433 |
|
|
3,370 |
Financing lease liability –
current portion |
|
136 |
|
|
75 |
Customer deposits |
|
912 |
|
|
855 |
Total Current Liabilities |
|
18,648 |
|
|
18,663 |
|
|
|
|
|
|
Long-Term Liabilities: |
|
|
|
|
|
Unearned revenue on service
contracts |
|
2,761 |
|
|
2,656 |
Deferred income tax
liability |
|
234 |
|
|
234 |
Due to related medical
practices |
|
93 |
|
|
93 |
Operating lease liability –
net of current portion |
|
29,246 |
|
|
30,105 |
Financing lease liability –
net of current portion |
|
1,201 |
|
|
1,251 |
Long-term debt and capital
leases, less current portion |
|
859 |
|
|
865 |
Other liabilities |
|
161 |
|
|
150 |
Total Long-Term
Liabilities |
|
34,555 |
|
|
35,354 |
Total Liabilities |
|
53,203 |
|
|
54,017 |
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and
shares in thousands, except per share amounts)(UNAUDITED)
LIABILITIES AND STOCKHOLDERS’ EQUITY
(Continued)
|
|
September 30,2020 |
|
June 30,2020 |
Class A non-voting preferred stock $.0001 par value;
453 shares authorized at September 30, 2020 and June
30, 2020, 313 issued and outstanding at September 30,
2020 and June 30, 2020 |
|
$ |
— |
|
|
$ |
— |
|
Preferred stock $.001 par
value; 567 shares authorized at September 30, 2020 and
June 30, 2020, issued and outstanding – none |
|
|
— |
|
|
|
— |
|
Common Stock $.0001 par value;
8,500 shares authorized at September 30, 2020 and June
30, 2020, 6,459 issued at September 30, 2020 and
June 30, 2020, 6,447 outstanding at September 30,
2020 and June 30, 2020 |
|
|
1 |
|
|
|
1 |
|
Class B Common Stock (10 votes
per share) $.0001 par value; 227 shares authorized at
September 30, 2020 and June 30, 2020; .146 issued and
outstanding at September 30, 2020 and June 30,
2020 |
|
|
— |
|
|
|
— |
|
Class C Common Stock (25 votes
per share) $.0001 par value; 567 shares authorized at
September 30, 2020 and June 30, 2020, 383 issued and
outstanding at September 30, 2020 and June 30,
2020 |
|
|
— |
|
|
|
— |
|
Paid-in capital in excess of
par value |
|
|
183,076 |
|
|
|
183,076 |
|
Accumulated deficit |
|
|
(53,707 |
) |
|
|
(56,215 |
) |
Treasury stock, at cost - 12
shares of common stock at September 30, 2020 and June
30, 2020 |
|
|
(675 |
) |
|
|
(675 |
) |
Total Fonar Corporation’s
Stockholders’ Equity |
|
|
128,695 |
|
|
|
126,187 |
|
Noncontrolling interests |
|
|
(642 |
) |
|
|
55 |
|
Total Stockholders'
Equity |
|
|
128,053 |
|
|
|
126,242 |
|
Total Liabilities and
Stockholders' Equity |
|
$ |
181,256 |
|
|
$ |
180,259 |
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Amounts and shares in thousands, except per share
amounts)(UNAUDITED)
|
FOR THE THREE MONTHS ENDEDSEPTEMBER 30, |
REVENUES |
2020 |
|
2019 |
Patient fee revenue – net of contractual allowances and
discounts |
$ |
5,091 |
|
|
$ |
6,045 |
|
Product sales – net |
|
28 |
|
|
|
192 |
|
Service and repair fees – net |
|
1,925 |
|
|
|
2,064 |
|
Service and repair fees - related parties – net |
|
28 |
|
|
|
28 |
|
Management and other fees – net |
|
11,214 |
|
|
|
11,028 |
|
Management and other fees - related medical practices – net |
|
2,693 |
|
|
|
2,390 |
|
Total Revenues – Net |
|
20,979 |
|
|
|
21,747 |
|
COSTS AND EXPENSES |
|
|
|
|
|
|
|
Costs related to patient fee revenue |
|
2,521 |
|
|
|
2,863 |
|
Costs related to product sales |
|
132 |
|
|
|
330 |
|
Costs related to service and repair fees |
|
626 |
|
|
|
750 |
|
Costs related to service and repair fees - related parties |
|
9 |
|
|
|
10 |
|
Costs related to management and other fees |
|
5,550 |
|
|
|
6,005 |
|
Costs related to management and other fees – related medical
practices |
|
1,428 |
|
|
|
1,537 |
|
Research and development |
|
400 |
|
|
|
472 |
|
Selling, general and administrative |
|
6,163 |
|
|
|
4,294 |
|
Total Costs and Expenses |
|
16,829 |
|
|
|
16,261 |
|
Income From Operations |
|
4,150 |
|
|
|
5,486 |
|
Other Expenses |
|
(140 |
) |
|
|
— |
|
Interest Expense |
|
(22 |
) |
|
|
(21 |
) |
Investment Income |
|
112 |
|
|
|
148 |
|
Income Before Provision for Income Taxes and Noncontrolling
Interests |
|
4,100 |
|
|
|
5,613 |
|
Provision for Income Taxes |
|
(849 |
) |
|
|
(1,107 |
) |
Net Income |
|
3,251 |
|
|
|
4,506 |
|
Net Income - Noncontrolling Interests |
|
(743 |
) |
|
|
(1,207 |
) |
Net Income - Controlling Interests |
$ |
2,508 |
|
|
$ |
3,299 |
|
Net Income Available to Common Stockholders |
$ |
2,355 |
|
|
$ |
3,097 |
|
Net Income Available to Class A Non-Voting Preferred
Stockholders |
$ |
114 |
|
|
$ |
151 |
|
Net Income Available to Class C Common Stockholders |
$ |
39 |
|
|
$ |
51 |
|
Basic Net Income Per Common Share Available to Common
Stockholders |
$ |
0.37 |
|
|
$ |
0.48 |
|
Diluted Net Income Per Common Share Available to Common
Stockholders |
$ |
0.36 |
|
|
$ |
0.47 |
|
Basic and Diluted Income Per Share – Class C Common |
$ |
0.10 |
|
|
$ |
0.13 |
|
Weighted Average Basic Shares Outstanding – Common
Stockholders |
|
6,447 |
|
|
|
6,432 |
|
Weighted Average Diluted Shares Outstanding - Common
Stockholders |
|
6,575 |
|
|
|
6,560 |
|
Weighted Average Basic and Diluted Shares Outstanding – Class C
Common |
|
383 |
|
|
|
383 |
|
|
|
|
|
|
|
|
|
Contact: Daniel CulverDirector of CommunicationsE-mail:
investor@fonar.comwww.fonar.com
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