FONAR Announces Fiscal 2017 2nd Quarter and Six Months Financial Results

MELVILLE, NY--(Marketwired - Feb 9, 2017) - FONAR Corporation (NASDAQ: FONR)

• 22% Increase of 1st half, Fiscal 2017, Diluted Net Income per Common Share available to Common Shareholders to $1.17, versus same six month period of prior year.
• 25% Increase of 1st half, Fiscal 2017, Net Income, to $9.4 million, versus same six month period of prior year, including a $800,000 impact of deferred income tax benefits.
• 19% Increase of 1st half, Fiscal 2017, Income from Operations, to $9.4 million, versus same six month period of prior year
• 3% Increase of 1st half, Fiscal 2017, Total Revenues - Net, to $37.1 million, versus same six month period of prior year

FONAR Corporation (NASDAQ: FONR), The Inventor of MR Scanning™, reported today its financial results for the 2nd Fiscal Quarter of 2017 and the six month period ended December 31, 2016.

In 1980 FONAR birthed the MRI industry with its installation of the first commercial whole-body MRI (Magnetic Resonance Imaging) scanner. Since then the Company has manufactured and installed hundreds of MRIs the world over. While FONAR continues to manufacture and service its products, the Company's primary source of income is derived from the management of 26 MRI centers though it subsidiary, Health Management Company of America (HMCA). Twenty-five of the 26 centers feature the FONAR UPRIGHT® Multi-Position™ MRI, aka Stand-Up® MRI, the only MRI scanner able to scan patients in normal full-weight-bearing positions.

The Company's extensive patent portfolio includes technology that enables Weight-Bearing MRI, allowing diagnosticians to view human anatomy in its normal weight-bearing positions, including sitting, standing and bending. Certain anatomical regions are very sensitive to body-position and gravity. For example, patients with lower back problems are often most uncomfortable when in a particular weight-bearing position. If diagnosticians can evaluate the spine in those positions, they can minimize or completely avoid the risks of mischaracterizing or underestimating the patients' problems. In light of the fact that most MRI exams are of the spine, this technology is of great importance.

FONAR's latest works-in-progress technology is aimed at visualizing and quantifying the flow of cerebrospinal fluid (CSF) throughout the brain and vertebral column, which circulates at a rate of 32 quarts per day. The ability to image and quantify the dynamics of this vital life-sustaining physiology of the body's neurologic system in all the normal positions of the body, particularly in its upright flow against gravity, is made possible by FONAR technology.

Financial Highlights

Income from Operations, for the six month period ended December 31, 2016, increased 19% to $9.4 million as compared to $7.8 million for the six month period ended December 31, 2015.

Income from Operations, for the quarter ended December 31, 2016, increased 9% to $4.6 million as compared to $4.2 million for the quarter ended December 31, 2015.

Net Income, for the six month period ended December 31, 2016, increased 25% to $9.4 million as compared to $7.6 million for the six month period ended December 31, 2015.

Net Income, for the quarter ended December 31, 2016, increased 20% to $4.9 million as compared to $4.1 million for the quarter ended December 31, 2015.

Total Revenues - Net, for the six month period ended December 31, 2016, increased 3% to $37.1 million as compared to $36.0 million for the six month period ended December 31, 2015.

Total Revenues - Net, for the quarters ended December 31, 2016 and 2015, was $18.4 million.

Net Income Available to Common Stockholders, for the six month period ended December 31, 2016, increased 23% to $7.3 million as compared to $5.9 million for the six month period ended December 31, 2015.

Net Income Available to Common Stockholders, for the quarter ended December 31, 2016, increased 22% to $4.0 million as compared to $3.3 million for the quarter ended December 31, 2015.

Diluted Net Income per Common Share Available to Common Stockholders, for the six month period ended December 31, 2016, increased 22% to $1.17 per share as compared to $0.96 per share for the quarter ended December 31, 2015. 

Diluted Net Income per Common Share Available to Common Stockholders, for the quarter ended December 31, 2016, increased 19% to $0.63 per share as compared to $0.53 per share for the quarter ended December 31, 2015. 

Basic Net Income per Common Share Available to Common Stockholders, for the six month period ended December 31, 2016, increased 21% to $1.19 per share as compared to $0.98 per share for the quarter ended December 31, 2015. 

Basic Net Income per Common Share Available to Common Stockholders, for the quarter ended December 31, 2016, increased 19% to $0.64 per share as compared to $0.54 per share for the quarter ended December 31, 2015. 

Total Assets, at December 31, 2016, was $88.3 million, as compared to $84.9 million at June 30, 2016. Total Current Assets, at December 31, 2016, was $48.4 million, as compared to $45.6 million at June 30, 2016.

Total Liabilities, at December 31, 2016, was $19.3 million, as compared to $24.1 million at June 30, 2016. Total Current Liabilities, at December 31, 2016, was $17.3 million, as compared to $20.6 million at June 30, 2016.

Total Cash and Cash Equivalents, at December 31, 2016, was $7.7 million, as compared to $8.5 million at June 30, 2016.

Management Discussion

President and CEO Timothy R. Damadian said, "I am delighted to report that our bottom line EPS (Diluted Net Income Per Common Share Available to Common Stockholders) has increased by 22% to $1.17 per share for the six months ended December 31, 2016, as compared to the corresponding period one year earlier.

"Despite the uncertainties and challenges in today's healthcare arena, the HMCA management team is proud to have helped FONAR deliver to its shareholders a steady annual growth rate of 6% over the past 6 years."

Mr. Damadian continued, "Our strategy of growing consistently while maintaining profitability is working nicely. We made key acquisitions over the past several years, giving us the working capital and the cash flow needed for expansion. And, of course, we are always looking for opportunities that will add to the success to our Company."

"The good news," said Raymond V. Damadian, M.D., Chairman of the Board of FONAR Corporation, "is that patients love our UPRIGHT® Multi-Position™ MRI scanner, which contributes to steady patient throughput! Patients who are claustrophobic are very happy to be placed in the seated position and watch TV while they get their MRIs. For these patients, it can be a huge relief. In addition, more and more physicians recognize the diagnostic value of scanning patients in fully weight-bearing positions, particularly those patients getting MRIs of the spine.

"The Company's growth and profitability has been positive and consistent in recent years and that's something to be proud of," continued Dr. Damadian. "There were many years of struggle, but now FONAR has become a very successful Company. We owe our success to the medical benefits of the FONAR UPRIGHT® Multi-Position™ MRI, along with our management team's adherence to a business plan designed to cope with a very uncertain and challenging healthcare environment. We have now achieved 27 consecutive quarters (6 3/4 years) of profitability. And I am very grateful."

Recent Event

On January 24, 2017, Frost & Sullivan announced that Dr. Raymond Damadian, chairman of the Fonar Corporation, will receive special recognition at the 22nd Annual Medical Technologies: A Frost & Sullivan Executive MindXchange, taking place March 19 to 21, 2017 at the Loews Coronado Bay Resort in San Diego, Calif. 

The press release said: Dr. Damadian is the legendary inventor of the first MRI (Magnetic Resonance Imaging) machine and the innovative mind responsible for saving thousands of lives. He will be presented with the Medtech Innovation Catalyst Award, recognizing his contributions to medical device innovation. He is the recipient of numerous awards including the Lemelson-MIT Lifetime Achievement Award, National Medal of Technology and has been inducted in the National Inventors Hall of Fame.

About FONAR

FONAR, The Inventor of MR Scanning™, is located in Melville, NY, was incorporated in 1978, and is the first, oldest and most experienced MRI company in the industry. FONAR introduced the world's first commercial MRI in 1980, and went public in 1981. FONAR's signature product is the FONAR UPRIGHT® Multi-Position™ MRI (also known as the Stand-Up® MRI), the only whole-body MRI that performs Position™ Imaging (pMRI™) and scans patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as the conventional lie-down position. The FONAR UPRIGHT® MRI often detects patient problems that other MRI scanners cannot because they are lie-down and "weightless" only scanners. The patient-friendly UPRIGHT® MRI has a near-zero patient claustrophobic rejection rate. As a FONAR customer states, "If the patient is claustrophobic in this scanner, they'll be claustrophobic in my parking lot." Approximately 85% of patients are scanned sitting while watching TV.

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

FONAR's substantial list of patents includes recent patents for its technology enabling full weight-bearing MRI imaging of all the gravity sensitive regions of the human anatomy, especially the brain, extremities and spine. It includes its newest technology for measuring the Upright cerebral hydraulics of the central nervous system. FONAR's UPRIGHT® Multi-Position™ MRI is the only scanner licensed under these patents.

UPRIGHT® and STAND-UP® are registered trademarks and The Inventor of MR Scanning™, Full Range of Motion™, Multi-Position™, Upright Radiology™, The Proof is in the Picture™, True Flow™, pMRI™, Spondylography™, Dynamic™, Spondylometry™, CSP™, and Landscape™, are trademarks of FONAR Corporation.

This release may include forward-looking statements from the company that may or may not materialize. Additional information on factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
ASSETS
		December 31, 2016			June 30, 2016
Cash and cash equivalents		$	7,692		$	8,528
Accounts receivable - net			4,325			4,370
Accounts receivable - related party			60			-
Medical receivable - net			10,824			10,127
Management and other fees receivable - net			17,420			15,638
Management and other fees receivable - related medical practices - net			4,464			4,064
Inventories			2,735			2,074
Prepaid expenses and other current assets			926			759
Total Current Assets			48,446			45,560
Deferred income tax asset			13,842			13,042
Property and equipment - net			14,914			14,513
Goodwill			3,322			3,322
Other intangible assets - net			7,202			7,719
Other assets			560			732
Total Assets		$	88,286		$	84,888

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
				December 31,  2016			June 30,  2016
Current Liabilities:
	Current portion of long-term debt and capital leases			$	1,674		$	2,448
	Accounts payable				1,470			1,254
	Other current liabilities				8,109			10,827
	Unearned revenue on service contracts				4,752			4,679
	Unearned revenue on service contracts - related party				55			-
	Customer advances				1,036			1,199
	Billings in excess of costs and estimated earnings on uncompleted contracts				176			207
		Total Current Liabilities			17,272			20,614
Long-Term Liabilities:
	Deferred income tax liability				482			482
	Due to related medical practices				228			245
	Long-term debt and capital leases, less current portion				411			2,059
	Other liabilities				883			712
		Total Long-Term Liabilities			2,004			3,498
		Total Liabilities			19,276			24,112

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
		December 31, 2016				June 30, 2016
STOCKHOLDERS' EQUITY:
Class A non-voting preferred stock $.0001 par value; 453 shares authorized at December 31, 2016 and June 30, 2016, 313 issued and outstanding at December 31, 2016 and June 30, 2016		$	-			$	-
Preferred stock $.001 par value; 567 shares authorized at December 31, 2016 and June 30, 2016, issued and outstanding - none			-				-
Common Stock $.0001 par value; 8,500 shares authorized at December 31, 2016 and June 30, 2016, 6,171 and 6,062 issued at December 31, 2016 and June 30, 2016; 6,159 and 6,051 outstanding at December 31, 2016 and June 30, 2016			1				1
Class B Common Stock (10 votes per share) $ .0001 par value; 227 shares authorized at December 31, 2016 and June 30, 2016, .146 issued and outstanding at December 31, 2016 and June 30, 2016			-				-
Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at December 31, 2016 and June 30, 2016, 383 issued and outstanding at December 31, 2016 and June 30, 2016			-				-
Paid-in capital in excess of par value			175,970				173,702
Accumulated deficit			(112,812	)			(120,624	)
Notes receivable from employee stockholders			(20	)			(24	)
Treasury stock, at cost - 12 shares of common stock at December 31, 2016 and June 30, 2016			(675	)			(675	)
Total Fonar Corporation Stockholder Equity			62,464				52,380
Non controlling interests			6,546				8,396
Total Stockholders' Equity			69,010				60,776
Total Liabilities and Stockholders' Equity		$	88,286			$	84,888

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				2016				2015
	Product sales - net			$	93			$	742
	Service and repair fees - net				2,356				2,280
	Service and repair fees - related parties - net				28				28
	Patient fee revenue, net of contractual allowances and discounts				8,657				7,786
	Provision for bad debts for patient fee				(4,002	)			(3,270	)
	Management and other fees - net				9,364				8,958
	Management and other fees - related medical practices - net				1,907				1,845
		Total Revenues - Net			18,403				18,369
COSTS AND EXPENSES
	Costs related to product sales				(34	)			564
	Costs related to service and repair fees				683				447
	Costs related to service and repair fees - related parties				8				5
	Costs related to patient fee revenue				2,323				2,238
	Costs related to management and other fees				5,257				5,597
	Costs related to management and other fees - related medical practices				1,127				1,012
	Research and development				361				412
	Selling, general and administrative				4,069				3,869
		Total Costs and Expenses			13,794				14,144
Income From Operations					4,609				4,225
Interest Expense					(77	)			(139	)
Investment Income					49				58
Income Before Benefit/(Provision) for Income Taxes and Non Controlling Interests					4,581				4,144
Benefit/(Provision) for Income Taxes					353				( 40	)
Net Income					4,934				4,104
Net Income - Non Controlling Interests					(692	)			(611	)
Net Income - Controlling Interests				$	4,242			$	3,493
Net Income Available to Common Stockholders				$	3,971			$	3,266
Net Income Available to Class A Non-Voting Preferred Stockholders				$	202			$	169
Net Income Available to Class C Common Stockholders				$	69			$	58
Basic Net Income Per Common Share Available to Common Stockholders				$	0.64			$	0.54
Diluted Net Income Per Common Share Available to Common Stockholders				$	0.63			$	0.53
Basic and Diluted Income Per Share-Class C Common				$	0.18			$	0.15
Weighted Average Basis Shares Outstanding-Common Stockholders					6,158				6,051
Weighted Average Diluted Shares Outstanding-Common Stockholders					6,286				6,179
Weighted Average Basic Shares Outstanding - Class C Common					383				383
Weighted Average Diluted Shares Outstanding - Class C Common					383				383

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,
				2016				2015
REVENUES
	Product sales - net			$	335			$	760
	Service and repair fees - net				4,708				4,564
	Service and repair fees - related parties - net				55				55
	Patient fee revenue, net of contractual allowances and discounts				17,481				15,901
	Provision for bad debts for patient fee				(7,880	)			(6,778	)
	Management and other fees - net				18,625				17,786
	Management and other fees - related medical practices - net				3,814				3,691
		Total Revenues - Net			37,138				35,979
COSTS AND EXPENSES
	Costs related to product sales				179				676
	Costs related to service and repair fees				1,339				990
	Costs related to service and repair fees - related parties				16				12
	Costs related to patient fee revenue				4,737				4,466
	Costs related to management and other fees				10,518				11,015
	Costs related to management and other fees - related medical practices				2,080				2,070
	Research and development				773				849
	Selling, general and administrative				8,135				8,061
		Total Costs and Expenses			27,777				28,139
Income From Operations					9,361				7,840
Interest Expense					(174	)			(289	)
Investment Income					97				107
Other (Expense) Income					(3	)			1
Income Before Benefit/(Provision) for Income Taxes and Non Controlling Interests					9, 281				7,659
Benefit/(Provision) for Income Taxes					153				( 90	)
Net Income					9,434				7,569
Net Income - Non Controlling Interests					(1,622	)			(1,214	)
Net Income - Controlling Interests				$	7,812			$	6,355
Net Income Available to Common Stockholders				$	7,313			$	5,942
Net Income Available to Class A Non-Voting Preferred Stockholders				$	372			$	308
Net Income Available to Class C Common Stockholders				$	127			$	105
Basic Net Income Per Common Share Available to Common Stockholders				$	1.19			$	0.98
Diluted Net Income Per Common Share Available to Common Stockholders				$	1.17			$	0.96
Basic and Diluted Income Per Share-Class C Common				$	0.33			$	0.27
Weighted Average Basic Shares Outstanding-Common Stockholders					6,131				6,051
Weighted Average Diluted Shares Outstanding-Common Stockholders					6,259				6,179
Weighted Average Basic Shares Outstanding - Class C Common					383				383
Weighted Average Diluted Shares Outstanding - Class C Common					383				383