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PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

FONAR Announces Fiscal 2019 3rd Quarter and Nine-Months Financial Results

May 13, 2019

-- Total Revenues – Net increased 9% to $22.8 million, for the third quarter and 7% to $64.7 million for the nine-month period ended March 31, 2019, versus same period during prior year. -- Income from Operations increased 50% to $6.6 million, for the third quarter and 21% to $18.1 million for the nine-month period ended March 31, 2019, versus same period during prior year. -- Net Income increased 22% to $5.2 million, for the third quarter and 3% to $14.6 million for the nine-month period ended March 31, 2019, versus same period during prior year. This is largely due to net tax adjustments of $1.5 million For the nine months ended March 31, 2018, the Company recorded a net provision of $3.8 million and -- Diluted Net Income per Common Share available to Common Shareholders increased 10% to $0.56, for the third quarter, however it decreased 7% to $1.55 for the nine-month period ended March 31, 2019, versus same period during prior year, as a result of the Company’s requirement to re-evaluate the need for a deferred tax valuation allowance and record a full Provision for Income Taxes in the amount of $1.5 million for the third quarter and $3.8 million for the nine month period. -- MRI scans at the managed or owned centers increased 6% year over year, to 183,000. -- Working Capital increased by 29% to $67.5 million over the first nine-months of Fiscal 2019.

MELVILLE, N.Y., May 13, 2019 (GLOBE NEWSWIRE) -- FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning ™, announced today its financial results for the 3rd Fiscal Quarter of 2019 and the nine-month period ended March 31, 2019. The Company’s two industry segments are: development, manufacturing and servicing of the FONAR UPRIGHT® Multi-Position™ MRI, aka Stand-Up® MRI, and management or ownership of 26 MRI centers through its subsidiary, Health Management Company of America (HMCA).

The majority of MRI exams are of the spine, and FONAR’s UPRIGHT® MRI technology is of great importance. Diagnosticians are able 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. If diagnosticians can evaluate the spine in those positions, they can minimize or completely avoid the risks of mischaracterizing or underestimating the patients’ problems.

Statement of Operations Items

Revenues increased 9% for the third fiscal quarter ended March 31, 2019 to $22.8 million as compared to $21.0 million for the corresponding quarter one year earlier. Revenues increased 7% for the nine-month period ended March 31, 2019 to $ 64.5 million as compared to $60.5 million for the corresponding period one year earlier.

Part of the reason for this revenue growth was product sales – net increased to $0.8 million from $0.1 million during the third fiscal quarter ended March 31, 2019.

Income from Operations increased 50% for the third fiscal quarter ended March 31, 2019 to $6.7 million as compared to $4.4 million for the corresponding quarter one year earlier. Income from Operations increased 21% for the nine-month period ended March 31, 2019 to $18.1 million as compared to $15.0 million for the corresponding period one year earlier.

Net Income increased 22% for the third fiscal quarter ended March 31, 2019 to $5.2 million as compared to $4.3 million for the corresponding quarter one year earlier. Net Income increased 3% for the nine-month period ended March 31, 2019 to $14.6 million as compared to $14.1 million for the corresponding period one year earlier, as a result of the Company’s requirement to re-evaluate the need for a deferred tax valuation allowance and record a full Provision for Income Taxes in the amount of $3.8 million.

The Provision for Income Taxes increased 828% for the third fiscal quarter ended March 31, 2019 to $1.5 million as compared to $0.2 million for the corresponding quarter one year earlier. The Provision for Income Taxes increased 316% for the nine-month period ended March 31, 2019 to $3.8 million as compared to $0.9 million for the corresponding period one year earlier. This results from the re-evaluation of the need for a deferred tax valuation allowance and requirement to record a full tax provision for the nine months March 31, 2019 in the amount of $3.7 million.

Diluted Net Income Per Common Share Available to Common Shareholders increased 10% for the third fiscal quarter ended March 31, 2019 to $0.56 as compared to $0.51 for the corresponding quarter one year earlier. Diluted Net Income Per Common Share Available to Common Shareholders decreased 7% for the nine-month period ended March 31, 2019 to $1.55 as compared to $1.66 for the corresponding period one year earlier.

Total Costs and Expenses decreased 2% for the third fiscal quarter ended March 31, 2019 to $16.2 million as compared to $16.6 million for the corresponding quarter one year earlier. Total Costs and Expenses increased 2% for the nine-month period ended March 31, 2019 to $46.6 million as compared to $45.5 million for the corresponding period one year earlier.

Balance Sheet Items

Total Cash and Cash Equivalents at March 31, 2019, increased 26% to $24.8 million, as compared to $19.6 million at June 30, 2018.

Total Assets ended March 31, 2019, increased 7% to $126.6 million, as compared to $118.3 million at June 30, 2018.

Total Current Assets ended March 31, 2019, increased 18% to $ 78.8 million, as compared to $67.1 million at June 30, 2018.

Total Liabilities ended March 31, 2019, decreased 21% to $ 12.7 million, as compared to $16.1 million at June 30, 2018.

Total Current Liabilities ended March 31, 2019, decreased 23% to $ 11.3 million, as compared to $14.6 million at June 30, 2018.

Significant Event

On March 14, 2019, the Company reported in a press release the on-line publication of a chapter where the physician-author-researchers utilized the FONAR UPRIGHT® Multi-Position™ MRI. The title of their chapter is: Craniocervical Junction Syndrome: Anatomy of the Craniocervical and Atlantoaxial Junctions and the Effect of Misalignment on Cerebrospinal Fluid Flow.Management Discussion. To learn more visit: www.fonar.com/news/031419.htm.

One of the authors, Dr. Scott Rosa, has developed a patented method to restore cerebrospinal integrity by correcting misalignments at the cranio-cervical junction (CCJ) called Image Guided Atlas Treatment™ or IGAT™. He says that the FONAR UPRIGHT® MRI and its imaging sequences are a critical part of the IGAT™ methodology in correcting the misalignments found at the CCJ. This is because only the FONAR UPRIGHT® MRI can visualize the CCJ in the upright, fully weight-loaded position, necessary for detecting fully distended cerebellar tonsillar ectopia and CSF flow impeding vertebral malalignments.

Management Discussion

Raymond V. Damadian, M.D., Chairman of the Board of Directors of Fonar Corporation, remarked: “I was very pleased to report that a central part of this peer-reviewed, research chapter, strongly endorsed the FONAR UPRIGHT® Multi-Position™ MRI. The chapter reports: ‘The FONAR upright weight-bearing MRI has been shown to be most sensitive in detecting cerebellar tonsillar ectopia since the weight-bearing posture presents the cerebellar tonsils further distended into the foramen magnum.’ In addition, it recognized that, ’Upright Cine MRI of the cranio-cervical junction demonstrates CSF flow dynamics.” These dynamic studies cannot be obtained on a recumbent-only MRI.

President and CEO, Timothy R. Damadian said, “We are very pleased with the third quarter results, in particular the 9% increase in revenues and the 50% increase in Income from Operations. Eleven (11) of our 26 sites had record scan volumes this quarter.

“Much of our success is attributable to the installation of additional MRI equipment at high-volume centers. The ability to offer referring physicians a broad spectrum of MRI services together with the cost benefits from shared expenses has resulted in higher profit margins and record scan volumes at sites in New York and Florida. Encouraged by such performance, we are currently in the process of installing additional equipment at other high-volume centers.

“In addition to expanding capacity at existing centers, we have also grown by expanding our footprint with de novo projects. In fact, we have made the decision to open our eighth location in Florida and expect to have the lease finalized shortly. We continue to search for acquisitions within our footprint consistent with our business model. While several acquisition opportunities have arisen over the past six months, none offered our requisite combination of price and growth potential to warrant our use of capital.

“Naturally, the costs involved in purchasing and installing additional equipment, establishing new MRI centers, or making acquisitions are substantial. With our strong balance sheet, we are grateful to be able to pursue our business plan on a sound financial footing.”

The Company also sold an UPRIGHT® Multi-Position MRI to a new customer in central Florida who had become aware of its enormous appeal in his community.

Our cash position, which is now over $24 million, is growing at a significant rate. Along with other strong balance sheet items, the Company is in excellent position for future growth. Such growth will be well planned and executed in order to maintain the Company’s profit trajectory.

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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

ASSETS

March 31, June 30, 2019 2018 Cash and cash equivalents $ 24,780 $ 19,634 Accounts receivable – net 3,709 3,814 Accounts receivable - related party 30 - Medical receivable – net 15,318 13,351 Management and other fees receivable – net 24,979 21,863 Management and other fees receivable – related medical practices – net 6,204 5,535 Inventories 1,810 1,431 Costs and estimated earnings in excess of billings on uncompleted contracts 335 87 Prepaid expenses and other current assets 1,647 1,350 - ------- - ------- Total Current Assets 78,812 67,065 - ------- - ------- Income taxes receivable 1,200 1,200 Deferred income tax asset 18,989 22,689 Property and equipment - net 17,440 16,492 Goodwill 3,985 3,985 Other intangible assets - net 4,959 5,602 Other Assets 1,207 1,278 - ------- - ------- Total Assets $ 125,592 $ 118,311 - ------- - -------

FONAR CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts) (UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

March June 30, 31, 2018 2019 Current Liabilities: Current portion of long-term debt and capital leases $ 40 $ 39 Accounts payable 1,631 1,300 Other current liabilities 4,973 8,178 Unearned revenue on service contracts 3,777 4,192 Unearned revenue on service contracts - related party 27 - Customer advances 834 858 - ------ - ------ 11,282 14,567 Total Current Liabilities Long-Term Liabilities: Deferred income tax liability 239 239 Due to related medical practices 93 227 Long-term debt and capital leases, less current portion 282 306 Other liabilities 755 737 - ------ - ------ 1,369 1,509 Total Long-Term Liabilities - ------ - ------ 12,651 16,076 Total Liabilities - ------ - ------

FONAR CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts) (UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY (Continued)

March 31, June 30, 2018 2019 ----------- ----------- STOCKHOLDERS’ EQUITY: Class A non-voting preferred stock $.0001 par value; 453 shares authorized at March $ - $ - 31, 2019 and June 30, 2018, 313 issued and outstanding at March 31, 2019 and June 30, 2018 Preferred stock $.001 par value; 567 shares authorized at March 31, 2019 and June 30, - - 2018, issued and outstanding – none Common Stock $.0001 par value; 8,500 shares authorized at March 31, 2019 and June 30, 1 1 2018, 6,369 and 6,299 issued at March 31, 2019 and June 30, 2018; 6,357 and 6,288 outstanding at March 31, 2019 and June 30, 2018 Class B Common Stock (10 votes per share) $ .0001 par value; 227 shares authorized at - - March 31, 2019 and June 30, 2018, .146 issued and outstanding at March 31, 2019 and June 30, 2018 Class C Common Stock (25 votes per share) $.0001 par value; 567 shares authorized at - - March 31, 2019 and June 30, 2018, 383 issued and outstanding at March 31, 2019 and June 30, 2018 181,086 179,132 Paid-in capital in excess of par value Accumulated deficit (69,039 ) (79,773 ) Notes receivable from employee stockholders - (9 ) Treasury stock, at cost - 12 shares of common stock at March 31, 2019 and June 30, (675 ) (675 ) 2018 - ------- - - ------- - Total Fonar Corporation Stockholder Equity 111,373 98,676 Non controlling interests 2,568 3,559 - ------- - - ------- - 113,941 102,235 Total Stockholders’ Equity - ------- - - ------- - $ 126,592 $ 118,311 Total Liabilities and Stockholders’ Equity - ------- - - ------- -

FONAR CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

For the Three Months REVENUES Ended March 31, ---------------------- 2019 2018 - ------ - - ------ - Patient fee revenue, net of contractual allowances and discounts $ 6,410 $ 10,163 Provision for bad debts for patient fee - (4,552 ) - ------ - - ------ - Patient fee revenue – net 6,410 5,611 Product sales – net 796 69 Service and repair fees – net 1,964 2,314 Service and repair fees – related parties - net 28 28 Management and other fees – net 11,191 10,670 Management and other fees – related medical practices – net 2,390 2,287 - ------ - - ------ - Total Revenues – Net 22,779 20,979 - ------ - - ------ - COSTS AND EXPENSES Costs related to patient fee revenue 2,740 2,570 Costs related to product sales 216 173 Costs related to service and repair fees 752 775 Costs related to service and repair fees – related parties 10 9 Costs related to management and other fees 5,834 5,733 Costs related to management and other fees – related medical practices 1,634 1,281 Research and development 381 503 Selling, general and administrative 4,604 5,533 - ------ - - ------ - Total Costs and Expenses 16,171 16,577 - ------ - - ------ - Income From Operations 6,608 4,402 Interest Expense (27 ) (46 ) Investment Income 104 74 Other Expense - (8 ) - ------ - - ------ - Income Before Provision for Income Taxes and Non Controlling Interests 6,685 4,422 Provision for Income Taxes (1,484 ) (160 ) - ------ - - ------ - Net Income 5,201 4,262 Net Income - Non Controlling Interests (1,338 ) (781 ) - ------ - - ------ - Net Income - Controlling Interests $ 3,863 $ 3,481 - ------ - - ------ - Net Income Available to Common Stockholders $ 3,623 $ 3,263 - ------ - - ------ - Net Income Available to Class A Non-Voting Preferred Stockholders $ 179 $ 163 - ------ - - ------ - Net Income Available to Class C Common Stockholders $ 61 $ 55 - ------ - - ------ - Basic Net Income Per Common Share Available to Common Stockholders $ 0.57 $ 0.52 - ------ - - ------ - Diluted Net Income Per Common Share Available to Common Stockholders $ 0.56 $ 0.51 - ------ - - ------ - Basic and Diluted Income Per Share-Class C Common $ 0.16 $ 0.15 - ------ - - ------ - Weighted Average Basis Shares Outstanding-Common Stockholders 6,357 6,287 - ------ - - ------ - Weighted Average Diluted Shares Outstanding-Common Stockholders 6,485 6,415 - ------ - - ------ - Weighted Average Basic Shares Outstanding – Class C Common 383 383 - ------ - - ------ - Weighted Average Diluted Shares Outstanding – Class C Common 383 383 - ------ - - ------ -

FONAR CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts and shares in thousands, except per share amounts) (UNAUDITED)

For the Nine Months Ended March 31, ----------------------- 2019 2018 - ------ - - ------- - REVENUES Patient fee revenue, net of contractual allowances and discounts $ 17,856 $ 28,353 Provision for bad debts for patient fee - (12,873 ) - ------ - - ------- - Patient fee revenue – net 17,856 15,480 Product sales – net 1,241 508 Service and repair fees – net 6,116 6,929 Service and repair fees – related parties - net 83 83 Management and other fees – net 32,448 30,781 Management and other fees – related medical practices – net 6,965 6,699 - ------ - - ------- - Total Revenues – Net 64,709 60,480 - ------ - - ------- - COSTS AND EXPENSES Costs related to patient fee revenue 8,016 7,619 Costs related to product sales 539 562 Costs related to service and repair fees 2,242 2,309 Costs related to service and repair fees – related parties 30 27 Costs related to management and other fees 17,493 17,116 Costs related to management and other fees – related medical practices 4,421 3,692 Research and development 1,368 1,258 Selling, general and administrative 12,474 12,899 - ------ - - ------- - Total Costs and Expenses 46,583 45,482 - ------ - - ------- - Income From Operations 18,126 14,998 Interest Expense (78 ) (138 ) Investment Income 336 179 Other (Expense) Income - (15 ) Income Before Provision for Income Taxes and Non Controlling Interests 18,384 15,024 Provision for Income Taxes (3,826 ) (920 ) - ------ - - ------- - Net Income 14,558 14,104 Net Income - Non Controlling Interests (3,824 ) (2,715 ) - ------ - - ------- - Net Income - Controlling Interests $ 10,734 $ 11,389 - ------ - - ------- - Net Income Available to Common Stockholders $ 10,067 $ 10,675 - ------ - - ------- - Net Income Available to Class A Non-Voting Preferred Stockholders $ 496 $ 532 - ------ - - ------- - Net Income Available to Class C Common Stockholders $ 170 $ 182 - ------ - - ------- - Basic Net Income Per Common Share Available to Common Stockholders $ 1.58 $ 1.70 - ------ - - ------- - Diluted Net Income Per Common Share Available to Common Stockholders $ 1.55 $ 1.66 - ------ - - ------- - Basic and Diluted Income Per Share-Class C Common $ 0.44 $ 0.48 - ------ - - ------- - Weighted Average Basic Shares Outstanding-Common Stockholders 6,353 6,287 - ------ - - ------- - Weighted Average Diluted Shares Outstanding-Common Stockholders 6,481 6,415 - ------ - - ------- - Weighted Average Basic Shares Outstanding – Class C Common 383 383 - ------ - - ------- - Weighted Average Diluted Shares Outstanding – Class C Common 383 383 - ------ - - ------- -

For Immediate Release The Inventor of MR Scanning™ Contact: Daniel Culver An ISO 9001 Company Director of Communications Melville, New York 11747 E-mail: investor@fonar.com Phone: (631) 694-2929 www.fonar.com Fax: (631) 390-1772