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What changed in FONAR CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of FONAR CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+196 added−187 removedSource: 10-K (2025-09-22) vs 10-K (2024-09-27)

Top changes in FONAR CORP's 2025 10-K

196 paragraphs added · 187 removed · 154 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

79 edited+14 added−9 removed114 unchanged
Biggest changePage 10 FONAR CORPORATION AND SUBSIDIARIES GOVERNMENT REGULATION FDA Regulation The Food and Drug Administration in accordance with Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing of FONAR’s MRI scanners. The regulations can be classified as either pre-market or post-market. The pre-market requirements include obtaining marketing clearance, proper device labeling, establishment registration and device listing.
Biggest changeThe regulations can be classified as either pre-market or post-market. The pre-market requirements include obtaining marketing clearance, proper device labeling, establishment registration and device listing. Once the products are on the market, FONAR must comply with post-market surveillance controls.
HMCA can offer access to diagnostic imaging equipment through diagnostic imaging facilities it manages. The Company is expanding the ancillary services offered in its network to include x-rays, and other MRI equipment such as high-field (1.5 or 3.0 Tesla magnet strength) MRI scanners and extremity MRI scanners. 7. Marketing Strategies.
Diagnostic Imaging and Ancillary Services. HMCA can offer access to diagnostic imaging equipment through diagnostic imaging facilities it manages. The Company is expanding the ancillary services offered in its network to include x-rays, and other MRI equipment such as high-field (1.5 or 3.0 Tesla magnet strength) MRI scanners and extremity MRI scanners. 7. Marketing Strategies.
These Florida facilities are owned by limited liability companies which, as our subsidiaries, conduct their operations directly and bill and collect their fees from the patients and third-party payors. The facilities enter into contracts with third-party payors, including managed care companies. None of HMCA’s clients, however, participate in any capitated plans or other risk sharing arrangements.
These Florida facilities are owned by limited liability companies which, as our subsidiaries, conduct their operations directly and bill and collect their fees from the patients and third-party payors. The facilities enter into contracts with third-party payors, including managed care companies. None of HMCA’s clients participate in any capitated plans or other risk-sharing arrangements.
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per occurrence.
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new federal security breach notification requirements to affected individuals, HHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per occurrence.
HMCA also provides improvements to leaseholds, assistance in site selection and advice on improving, updating, expanding and adapting to new technology. 2. Personnel. HMCA staffs all the non-medical positions of its clients with its own employees, eliminating the client’s need to interview, train and manage non-medical employees. HMCA processes the necessary tax, insurance and other documentation relating to employees.
HMCA also provides improvements to leaseholds, assistance in site selection and advice on improving, updating, expanding and adapting to new technology. 2. Personnel. HMCA staffs all the non-medical positions of its clients with its own employees, eliminating the client’s need to interview, train and manage non-medical employees. HMCA processes the necessary tax, insurance and other documentation relating to employees. 3.
Certificates of Need Some states require hospitals and certain other healthcare facilities and providers to obtain a certificate of need, or CON, or similar regulatory approval prior to establishing certain healthcare operations or services, incurring certain capital projects and/or the acquisition of major medical equipment including MRI and PET/CT systems. We are not operating in any such states.
Certificates of Need Some states require hospitals and certain other healthcare facilities and providers to obtain a certificate of need, or CON, or similar regulatory approval prior to establishing certain healthcare operations or services, incurring certain capital projects and/or the acquisition of major medical equipment including MRI and PET/CT systems. We are not currently operating in any such states.
Stark Law Under the federal Self-Referral Law, also referred to as the “Stark Law”, which is applicable to Medicare and Medicaid patients, and the self-referral laws of various States, certain health practitioners, including physicians, chiropractors and podiatrists, are prohibited from referring their patients for the provision of designated health services, including diagnostic imaging and physical therapy services, to any entity with which they or their immediate family members have a financial relationship, unless the referral fits within one of the specific exceptions in the statutes or regulations.
Stark Law Under the federal Self-Referral Law, also referred to as the “Stark Law”, which is applicable to Medicare and Medicaid patients, and the self-referral laws of various States, certain health practitioners, including physicians, chiropractors and podiatrists, are prohibited from referring their patients for the provision of designated health services, including diagnostic imaging services, to any entity with which they or their immediate family members have a financial relationship, unless the referral fits within one of the specific exceptions in the statutes or regulations.
The fees for these three sites are flat monthly fees which are subject to adjustment by mutual agreement on an annual basis. In fiscal 2024 and fiscal 2023, the aggregate monthly amount of management fees payable to HMCA by these sites was $995,825. The six Florida facilities owned by HMCA subsidiaries directly bill their patients or the patients’ insurance carriers.
The fees for these three sites are flat monthly fees which are subject to adjustment by mutual agreement on an annual basis. In fiscal 2025 and fiscal 2024, the aggregate monthly amount of management fees payable to HMCA by these sites was $995,825. The six Florida facilities owned by HMCA subsidiaries directly bill their patients or the patients’ insurance carriers.
Page 23 FONAR CORPORATION AND SUBSIDIARIES Compliance Program We maintain a program to monitor compliance with federal and state laws and regulations applicable to the healthcare entities. The compliance program includes the adoption of (i) Standards of Conduct for our employees and affiliates and (ii) a process that specifies how employees, affiliates and others may report regulatory or ethical concerns.
Page 12 FONAR CORPORATION AND SUBSIDIARIES Compliance Program We maintain a program to monitor compliance with federal and state laws and regulations applicable to the healthcare entities. The compliance program includes the adoption of (i) Standards of Conduct for our employees and affiliates and (ii) a process that specifies how employees, affiliates and others may report regulatory or ethical concerns.
Managed Care and Private Insurance Health Maintenance Organizations, or HMO’s, Preferred Provider Organizations, or PPOs, and other managed care organizations attempt to control the cost of healthcare services by a variety of measures, including imposing lower payment rates, preauthorization requirements, limiting services and mandating less costly treatment alternatives.
Managed Care and Private Insurance Health Maintenance Organizations, or HMOs, Preferred Provider Organizations, or PPOs, and other managed care organizations attempt to control the cost of healthcare services by a variety of measures, including imposing lower payment rates, preauthorization requirements, limiting services and mandating less costly treatment alternatives.
We hope to control the cost of maintaining and repairing the outside manufacturer equipment operated by HMCA, and eventually expand into providing maintenance and repair services to third party operators of outside manufacturer equipment. Revenues from Opus are included in the service and maintenance revenues described above.
We hope to control the cost of maintaining and repairing the outside manufacturer equipment operated by HMCA, and to expand into providing maintenance and repair services to other third party operators of outside manufacturer equipment. Revenues from Opus are included in the service and maintenance revenues described above.
The MPFS is updated on an annual basis and sometimes modified more frequently. We have experienced reimbursement reductions for radiology services provided to Medicare beneficiaries. In calendar year 2024, changes to the MPFS included a reduction in the conversion factor.
The MPFS is updated on an annual basis and sometimes modified more frequently. We have experienced reimbursement reductions for radiology services provided to Medicare beneficiaries. In calendar year 2025, changes to the MPFS included a reduction in the conversion factor.
In 2013 additional legal requirements were adopted to provide further protection for PHI. In addition, many states have enacted comparable privacy and security statues or regulations that, in some cases, are most stringent than HIPAA requirements.
In 2013 additional legal requirements were adopted to provide further protection for PHI. In addition, many states have enacted comparable privacy and security statues or regulations that, in some cases, are more stringent than HIPAA requirements.
Health Management Corporation of America is owned 100% by FONAR Corporation. HDM operates under the assumed name “Health Management Company of America” (“HMCA”). Page 15 FONAR CORPORATION AND SUBSIDIARIES The combined business (HDM and Health Management Corporation of America) will be referred to as “HMCA” for all periods before and after July 1, 2015, unless otherwise indicated.
Health Management Corporation of America is owned 100% by FONAR Corporation. HDM operates under the assumed name “Health Management Company of America” (“HMCA”). The combined business (HDM and Health Management Corporation of America) will be referred to as “HMCA” for all periods before and after July 1, 2015, unless otherwise indicated.
Moreover, we cannot guarantee that enforcement agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with ours, or the interpretations of our contracted radiology practices or their affiliated physicians. A finding of liability under the HIPAA standards may result in significant criminal and civil penalties.
Moreover, we cannot guarantee that enforcement agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with our own interpretation, or the interpretations of our contracted radiology practices or their affiliated physicians. A finding of liability under the HIPAA standards may result in significant criminal and civil penalties.
It is anticipated that these will ultimately lead to new applications that are made available to existing customers as upgrade add-ons to their machines. For example, phase-contrast imaging techniques originally developed for angiography have recently been applied to cerebro-spinal fluid (CSF) flow.
It is anticipated that these will ultimately lead to new applications that are made available to existing customers as upgrade add-ons to their machines. For example, phase-contrast imaging techniques originally developed for angiography have recently been applied to cerebrospinal fluid (CSF) flow.
Revenues from the sale of SwiftMR TM are included in the service and maintenance revenues described above. We have also formed a new subsidiary, Opus Diagnostic Management, LLC, which is focused on providing service for MRI scanners sold by other manufacturers.
Revenues from the sale of SwiftMR TM are included in the service and maintenance revenues described above. In 2024, we formed a new subsidiary, Opus Diagnostic Management, LLC, which is focused on providing service for MRI scanners sold by other manufacturers.
Examples of the other actions which may lead to liability under the False Claims Act are set forth below: Failure to comply with the many technical billing requirements applicable to our Medicare and Medicaid business; Page 20 FONAR CORPORATION AND SUBSIDIARIES Failure to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal healthcare program, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare program; Failure to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision.
Examples of the other actions which may lead to liability under the False Claims Act are set forth below: Failure to comply with the many technical billing requirements applicable to our Medicare and Medicaid business; Failure to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal healthcare program, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare program; Failure to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision.
We believe that these patents, and the know-how we have developed, are material to our business. Our seminal patent, issued in the name of Dr. Damadian and licensed to FONAR, was United States patent No. 3,789,832, Apparatus and Method for Detecting Cancer in Tissue, also referred to in this report as the “1974 Patent”.
We believe that these patents, and the know-how we have developed, are material to our business. Page 16 FONAR CORPORATION AND SUBSIDIARIES Our seminal patent, issued in the name of Dr. Damadian and licensed to FONAR, was United States patent No. 3,789,832, Apparatus and Method for Detecting Cancer in Tissue, also referred to in this report as the “1974 Patent”.
These procedures include internal systems that: provide for timely and effective identification, communication and evaluation of adverse events; provide a standardized review process and procedures for determining whether or not an event is reportable; and provide procedures to insure the timely transmission of complete reports.
These procedures include internal systems that: - provide for timely and effective identification, communication and evaluation of adverseevents; - provide a standardized review process and procedures for determining whether or not an event is reportable; and - provide procedures to insure the timely transmission of complete reports.
In addition to complying with general controls, Class II devices are also subject to special controls. Special controls may include special labeling requirements, guidance documents, mandatory performance standards and post-market surveillance. On October 3, 2000 FONAR received FDA clearance for the Upright® MRI under the name “Indomitable”.
Page 18 FONAR CORPORATION AND SUBSIDIARIES In addition to complying with general controls, Class II devices are also subject to special controls. Special controls may include special labeling requirements, guidance documents, mandatory performance standards and post-market surveillance. On October 3, 2000 FONAR received FDA clearance for the Upright® MRI under the name “Indomitable”.
Legally marketed devices that comply with the requirements of the Food Drug & Cosmetic Act require a Certificate to Foreign Government issued by the FDA for export. Other devices that do not meet the requirements of the FD&C Act but comply with the laws of a foreign government require a Certificate of Exportability issued by the FDA.
Legally marketed devices that comply with the requirements of the FD&C Act require a Certificate to Foreign Government issued by the FDA for export. Other devices that do not meet the requirements of the FD&C Act but comply with the laws of a foreign government require a Certificate of Exportability issued by the FDA.
HMCA and its clients have never been sued under the False Claims Act and believe they are in compliance with the law.
HMCA and its clients have never been sued under the False Claims Act and believe we are in compliance with the law.
Noncompliance also may result in exclusion from participation in government programs, including Medicare and Medicaid. These actions could have a material adverse effect on our business, financial condition, and results of operations. Page 22 FONAR CORPORATION AND SUBSIDIARIES Civil Money Penalty Law and Other Federal Statutes The Civil Money Penalty, or CMP, law covers a variety of practices.
Noncompliance also may result in exclusion from participation in government programs, including Medicare and Medicaid. These actions could have a material adverse effect on our business, financial condition, and results of operations. Civil Money Penalty Law and Other Federal Statutes The Civil Money Penalty, or CMP, law covers a variety of practices.
Premarketing Submission Page 11 FONAR CORPORATION AND SUBSIDIARIES Each person who wants to market Class I, II and some III devices intended for human use in the U.S. must submit a 510(k) to FDA at least 90 days before marketing unless the device is exempt from 510(k) requirements.
Premarketing Submission Each person who wants to market Class I, II and some III devices intended for human use in the U.S. must submit a 510(k) to FDA at least 90 days before marketing unless the device is exempt from 510(k) requirements.
Page 12 FONAR CORPORATION AND SUBSIDIARIES A malfunction which is or can be corrected during routine service or device maintenance still must be reported if the recurrence of the malfunction is likely to cause or contribute to a death or serious injury if it were to recur. We have established and maintained written procedures for implementation of the MDR regulation.
A malfunction which is or can be corrected during routine service or device maintenance still must be reported if the recurrence of the malfunction is likely to cause or contribute to a death or serious injury if it were to recur. We have established and maintained written procedures for implementation of the MDR regulation.
Page 8 FONAR CORPORATION AND SUBSIDIARIES While software improvements to the user interface are important in their own right, significant value is added to the MRI scanner by the modification of existing protocols for examining various parts of the body, and the development of new protocols that utilize new underlying capabilities of the pulse sequence software.
While software improvements to the user interface are important in their own right, significant value is added to the MRI scanner by the modification of existing protocols for examining various parts of the body, and the development of new protocols that utilize new underlying capabilities of the pulse sequence software.
Some of these exceptions are also available under the State self-referral laws. HMCA believes that it and its clients are in compliance with these laws. Anti-kickback Regulation We are subject to federal and state laws which govern financial and other arrangements between healthcare providers.
Some of these exceptions are also available under the State self-referral laws. HMCA believes that it and its clients are in compliance with these laws. Page 10 FONAR CORPORATION AND SUBSIDIARIES Anti-Kickback Regulation We are subject to federal and state laws which govern financial and other arrangements between healthcare providers.
Nuclear medicine systems, which are based upon the detection of photons (gamma radiation) generated by radioactive pharmaceuticals introduced into the body, are used to provide information concerning soft tissue and internal body organs and particularly to examine organ function over time.
Page 17 FONAR CORPORATION AND SUBSIDIARIES Nuclear medicine systems, which are based upon the detection of photons (gamma radiation) generated by radioactive pharmaceuticals introduced into the body, are used to provide information concerning soft tissue and internal body organs and particularly to examine organ function over time.
These reductions could have an adverse impact on our financial condition and results of operations. These reductions have been, and any future reductions may be, similar to the reimbursement reductions previously proposed. Page 19 FONAR CORPORATION AND SUBSIDIARIES HMCA COMPETITION The physician and diagnostic management services field is highly competitive.
These reductions could have an adverse impact on our financial condition and results of operations. These reductions have been, and any future reductions may be, similar to the reimbursement reductions previously proposed. HMCA COMPETITION The physician and diagnostic management services field is highly competitive.
Page 5 FONAR CORPORATION AND SUBSIDIARIES The Upright® MRI facilitates patient scanning in a variety of postures thanks to a unique, three-axis patient handling system. The motorized patient table, or bed, can be rotated to any angle between 0 (horizontal) and 84 degrees (nearly vertical).
The Upright® MRI facilitates patient scanning in a variety of postures thanks to a unique, three-axis patient handling system. The motorized patient table, or bed, can be rotated to any angle between 0 (horizontal) and 84 degrees (nearly vertical).
HMCA is seeking to increase the number of locations of those facilities where market conditions are promising and to promote growth of our clients’ and Florida subsidiaries’ patient volume and revenue. DIAGNOSTIC IMAGING FACILITIES Diagnostic imaging facilities managed by HMCA provide diagnostic imaging services to patients referred by physicians.
HMCA is seeking to increase the number of locations of those facilities where market conditions are promising and to promote growth of our clients’ and Florida subsidiaries’ patient volume and revenue. Page 7 FONAR CORPORATION AND SUBSIDIARIES DIAGNOSTIC IMAGING FACILITIES Diagnostic imaging facilities managed by HMCA provide diagnostic imaging services to patients referred by physicians.
For the fiscal year ended June 30, 2023, approximately 58.4% of HMCA’s clients’ receipts were from patients covered by no-fault insurance and approximately 8.6% of HMCA’s clients’ receipts were from patients covered by workers’ compensation programs. The foregoing numbers do not include payments from third-party administrators.
For the fiscal year ended June 30, 2024, approximately 58.0% of HMCA’s clients’ receipts were from patients covered by no-fault insurance and approximately 8.8% of HMCA’s clients’ receipts were from patients covered by workers’ compensation programs. The foregoing numbers do not include payments from third-party administrators.
IMAGE QUALITY AND FIELD STRENGTH Most commercially available MRI scanners range in magnetic field strength from about 0.2 T (Tesla) to 7.0 T, and open MRI scanners range from about 0.2 T to 1.2 T. Field strength is an important characteristic of MRI scanners, but not the only one.
Page 13 FONAR CORPORATION AND SUBSIDIARIES IMAGE QUALITY AND FIELD STRENGTH Most commercially available MRI scanners range in magnetic field strength from about 0.2 T (Tesla) to 7.0 T, and open MRI scanners range from about 0.2 T to 1.2 T. Field strength is an important characteristic of MRI scanners, but not the only one.
HMCA is responsible for the billing and collection of revenues from third-party payors including those governed by No-Fault and Workers’ Compensation statutes. 5. Cost Saving Programs. Based on available volume discounts, HMCA seeks to assist in obtaining favorable pricing for office and medical supplies, equipment, contrast agents, and other inventory for its clients. 6. Diagnostic Imaging and Ancillary Services.
HMCA is responsible for the billing and collection of revenues from third-party payors including those governed by No-Fault and Workers’ Compensation statutes. Page 6 FONAR CORPORATION AND SUBSIDIARIES 5. Cost Saving Programs. Based on available volume discounts, HMCA seeks to assist in obtaining favorable pricing for office and medical supplies, equipment, contrast agents, and other inventory for its clients. 6.
In people with Chiari malformation, the lowest lying structures of the brain, the tonsils of the cerebellum, descend into and become entrapped by the foramen magnum, the circular bony opening at the base of the skull where the spinal cord exits.
In people with Chiari malformation, the lowest lying structures of the brain, the tonsils of the cerebellum, descend into and become entrapped by the foramen magnum, the circular bony opening at the base of the skull Page 14 FONAR CORPORATION AND SUBSIDIARIES where the spinal cord exits.
RESEARCH AND DEVELOPMENT During the fiscal year ended June 30, 2024, we incurred expenditures of $1,735,949, none of which were capitalized, on research and development, as compared to $1,567,749, none of which were capitalized, during the fiscal year ended June 30, 2023. Research and development activities have focused principally on software improvements to the user interface of the MRI scanner.
RESEARCH AND DEVELOPMENT During the fiscal year ended June 30, 2025, we incurred expenditures of $1,576,086, none of which were capitalized, on research and development, as compared to $1,735,949, none of which were capitalized, during the fiscal year ended June 30, 2024. Research and development activities have focused principally on software improvements to the user interface of the MRI scanner.
Usually, FDA files an injunction to stop a company from continuing to manufacture, package or distribute products that are in violation of the law. Prosecution Prosecution is a criminal action filed by FDA against a company or individual charging violation of the law for past practices.
Usually, FDA files an injunction to stop a company from continuing to manufacture, package or distribute products that are in violation of the law. Page 21 FONAR CORPORATION AND SUBSIDIARIES Prosecution Prosecution is a criminal action filed by FDA against a company or individual charging violation of the law for past practices.
Citation A citation is a formal warning to a firm of intent to prosecute the firm if violations of the FD&C Act are not corrected. It provides the firm an opportunity to convince FDA not to prosecute. Page 14 FONAR CORPORATION AND SUBSIDIARIES Injunction An injunction is a civil action filed by FDA against an individual or company.
Citation A citation is a formal warning to a firm of intent to prosecute the firm if violations of the FD&C Act are not corrected. It provides the firm an opportunity to convince FDA not to prosecute. Injunction An injunction is a civil action filed by FDA against an individual or company.
A number of large hospitals have acquired medical practices and this trend may continue. HMCA expects that more competition will develop. Many competitors have greater financial and other resources than HMCA. With respect to the diagnostic imaging facilities managed by HMCA, the outpatient diagnostic imaging industry is highly competitive.
A number of large health systems have acquired medical practices, and this trend is expected to continue. HMCA anticipates that more competition will develop. Many competitors have greater financial and other resources than HMCA. With respect to the diagnostic imaging facilities managed by HMCA, the outpatient diagnostic imaging industry is highly competitive.
For the fiscal year ended June 30, 2024 approximately 58.0% of our clients’ receipts were from patients covered by no-fault insurance and approximately 8.8% of our client’s receipts were from patients covered by workers’ compensation programs.
For the fiscal year ended June 30, 2025 approximately 58.0% of our clients’ receipts were from patients covered by no-fault insurance and approximately 9.1% of our client’s receipts were from patients covered by workers’ compensation programs.
Class II Page 13 FONAR CORPORATION AND SUBSIDIARIES Is a situation in which use of, or exposure to, a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.
Class II Is a situation in which use of, or exposure to, a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.
For our fiscal year ended June 30, 2024, Medicare revenues represented approximately 2.7% of the revenues for HMCA’s clients and subsidiaries as compared to 2.9% for the fiscal year ended June 30, 2023. Medicaid The Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons.
For our fiscal year ended June 30, 2025, Medicare revenues represented approximately 2.6% of the revenues for HMCA’s clients and subsidiaries as compared to 2.7% for the fiscal year ended June 30, 2024. Page 8 FONAR CORPORATION AND SUBSIDIARIES Medicaid The Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons.
In fiscal 2024, approximately 0.06% of the revenues of HMCA’s clients were attributable to Medicaid, as compared to 0.05% in fiscal 2023.
In fiscal 2025, approximately .05% of the revenues of HMCA’s clients and subsidiaries were attributable to Medicaid, as compared to 0.06% in fiscal 2024.
Patient fees net of contractual allowances and discounts were $33,815,796 in fiscal 2024 as compared to $29,793,993 in fiscal 2023. HMCA MARKETING HMCA’s marketing strategy is to expand the business and improve the facilities which it manages.
Patient fees net of contractual allowances and discounts were $33,179,446 in fiscal 2025 as compared to $33,815,796 in fiscal 2024. HMCA MARKETING HMCA’s marketing strategy is to expand the business and improve the facilities which it manages.
Class III Is a situation in which use of, or exposure to, a violative product is not likely to cause adverse health consequences. FONAR has initiated six voluntary recalls which occurred between 1987 and 2016. Five of the recalls were Class II and one was Class III. The recalls involved making minor corrections to the product in the field.
Page 20 FONAR CORPORATION AND SUBSIDIARIES Class III Is a situation in which use of, or exposure to, a violative product is not likely to cause adverse health consequences. FONAR has initiated six voluntary recalls which occurred between 1987 and 2016. Five of the recalls were Class II and one was Class III.
Six of the facilities in Florida are owned by HMCA subsidiaries, where the corporate practice of medicine is permitted. We believe the utilization of FONAR Upright® MRI scanning systems, which are produced under the protection of our patents, accounts for the historically robust patient volume at the scanning facilities.
Six of the facilities in Florida are owned and operated by HMCA subsidiaries. We believe the utilization of FONAR Upright® MRI scanning systems, which are produced under the protection of our patents, accounts for the historically robust patient volume at the scanning facilities.
EMPLOYEES FONAR and HMCA had approximately 520 employees as of September 12, 2024. This total number included employees engaged in production, customer support, research and development, information technology, employees engaged in marketing and sales, billing and collection, legal and compliance matters, as well as transcriptionists, Florida technologists, field service technicians and individuals in various administrative positions.
This total number included employees engaged in production, customer support, research and development, information technology, employees engaged in marketing and sales, billing and collection, legal and compliance matters, as well as transcriptionists, Florida technologists, field service technicians and individuals in various administrative positions.
We have engaged with a third-party software vendor, AIRS Medical USA, Inc., to distribute their SwiftMR TM to our installed base of customers. We believe that the SwiftMR TM product significantly improves the image quality and efficiency of both the Upright® MRI and the outside manufacturer equipment that is operated by our installed base.
Page 15 FONAR CORPORATION AND SUBSIDIARIES We have engaged with AIRS Medical USA, Inc., to distribute their SwiftMR TM product to our installed base of customers. We believe that the SwiftMR TM product significantly improves the image quality and efficiency of both the Upright® MRI and the outside manufacturer equipment that is operated by our installed base.
Fees under the management agreements are subject to adjustment by mutual agreement on an annual basis. Page 17 FONAR CORPORATION AND SUBSIDIARIES Timothy Damadian currently owns three HMCA-managed MRI facilities in Florida. The facilities were owned by Dr. Damadian until his passing in August of 2022.
Fees under the management agreements are subject to adjustment by mutual agreement on an annual basis. Timothy Damadian currently owns three HMCA-managed MRI facilities in Florida. The facilities were owned by the Company’s founder and former CEO, Dr. Raymond Damadian until his passing in August of 2022.
In those cases it may be necessary to modify our operations and procedures to comply with the more stringent state laws, which may entail significant and costly changes for us. We believe that we are in compliance with such state laws and regulations.
It may be necessary to modify our operations and procedures to comply with the more stringent state laws, which may entail significant and costly changes for us. We believe that we are in compliance with such state laws and regulations. However, if we fail to comply with applicable state laws and regulations, we could be subject to sanctions.
Malfunctions are not reportable if they are not likely to result in a death, serious injury or other significant adverse event experience.
Page 19 FONAR CORPORATION AND SUBSIDIARIES Malfunctions are not reportable if they are not likely to result in a death, serious injury or other significant adverse event experience.
Frequently, corrections which are made at the site of the device are called field corrections as opposed to recalls. Civil Money Penalties The FDA, after an appropriate hearing, may impose civil money penalties for violations of the FD&C Act that relate to medical devices.
The recalls involved making minor corrections to the product in the field. Frequently, corrections which are made at the site of the device are called field corrections as opposed to recalls. Civil Money Penalties The FDA, after an appropriate hearing, may impose civil money penalties for violations of the Food Drug & Cosmetic Act that relate to medical devices.
Health Insurance Portability and Accountability Act Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information.
Neither HMCA nor its clients engage in this practice. Health Insurance Portability and Accountability Act Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information.
Capitated plans are those HMO programs where the provider is paid a flat monthly fee per patient. The management fees payable by the facilities to HMCA are flat monthly fees. In fiscal 2024, the aggregate amount of active management fees was $4,960,733 per month. In fiscal 2023, the aggregate amount of active management fees was $4,860,732 per month.
Capitated plans are those Health Maintenance Organization programs where the provider is paid a flat monthly fee per patient. The management fees payable by the facilities to HMCA are flat monthly fees. In fiscal 2025, the aggregate amount of active management fees was $5,160,735 per month. In fiscal 2024, the aggregate amount of active management fees was $4,960,733 per month.
Our plans and objectives are based, in part, on assumptions involving the expansion of business. These assumptions involve judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.
These assumptions involve judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.
However, if we fail to comply with applicable state laws and regulations, we could be subject to sanctions. We believe that we are in compliance with the current HIPAA requirements, as amended by HITECH, together with other legislation and regulations, and comparable state laws, but we anticipate that we may encounter certain costs associated with future compliance.
Page 11 FONAR CORPORATION AND SUBSIDIARIES We believe that we are in compliance with the current HIPAA requirements, as amended by HITECH, together with other legislation and regulations, and comparable state laws, but we anticipate that we may encounter certain costs associated with future compliance.
A study by the National Cancer Institute (2000) of 5,466 women with scoliosis reported a 70% increase in breast cancer resulting from 24.7 chest x-rays received on average over the course of their treatment.
The Upright® MRI has demonstrated its value for patients suffering from scoliosis, who typically undergo regular x-ray exams over a course of years. A study by the National Cancer Institute (2000) of 5,466 women with scoliosis reported a 70% increase in breast cancer resulting from 24.7 chest x-rays received on average over the course of their treatment.
Whether or not the federal government intervenes in the case, it will receive the majority of any recovery. When an entity is determined to have violated the federal False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim and the government’s attorneys’ fees.
Page 9 FONAR CORPORATION AND SUBSIDIARIES When an entity is determined to have violated the federal False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim and the government’s attorneys’ fees.
See Note 16 to the Consolidated Financial Statements for separate financial information regarding our medical equipment and physician and diagnostic management services segments. Page 4 FONAR CORPORATION AND SUBSIDIARIES CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS .
See Note 15 to the Consolidated Financial Statements for separate financial information regarding our medical equipment and physician and diagnostic management services segments.
We have increased internet awareness of our product by driving patient traffic to the HMCA scanning centers we manage via the FONAR website as well as through websites for each HMCA location. These websites give prospective customers of Upright® MRI scanners a view of operating Upright® MRI centers and highlight the benefits of using the Upright® MRI scanner.
Our advertising for FONAR and HMCA reinforces the unique value provided by the FONAR Upright® MRI scanner. We have increased internet awareness of our product by driving patient traffic to the HMCA scanning centers we manage via the FONAR website as well as through websites for each HMCA location.
Page 16 FONAR CORPORATION AND SUBSIDIARIES 3. Administrative. HMCA assists in the scheduling of patient appointments, purchasing of office and medical supplies and equipment and handling of reporting, accounting, processing and filing systems. It prepares and files the physician portions of complex applications to enable its clients to participate in managed care programs and to qualify for insurance reimbursement.
Administrative. HMCA assists in scheduling patient appointments, purchasing medical supplies and equipment, and handles the reporting, accounting, processing and filing systems. It prepares and files the complex applications which enables our clients to participate in managed care programs and to qualify for insurance reimbursement.
As of June 30, 2024, HMCA managed a total of 42 MRI scanners of which twenty-five (25) scanners are located in New York and seventeen (17) scanners are located in Florida. For the 2024 fiscal year, the revenues HMCA recognized from the MRI facilities has increased to $94.6 million from $90.4 million in fiscal 2023.
Page 5 FONAR CORPORATION AND SUBSIDIARIES As of June 30, 2025, HMCA managed a total of 44 MRI scanners. Twenty-six (26) scanners are located in New York and eighteen (18) scanners are located in Florida. For the 2025 fiscal year, the revenues HMCA recognized from the MRI facilities has increased to $95.4 million from $94.6 million in fiscal 2024.
We believe that the higher field strength and larger dimensions of the FONAR Upright® MRI magnet, together with the greater variety of patient positioning possibilities afforded by the FONAR Upright® MRI bed, give us a competitive advantage over the products introduced by these companies. Most of our competitors have marketing and financial resources more substantial than those available to us.
Their success in the US has so far been limited. We believe that the higher field strength and larger dimensions of the FONAR Upright® MRI magnet, together with the greater variety of patient positioning possibilities afforded by the FONAR Upright® MRI bed, give us a competitive advantage over the products introduced by these companies.
Managed care providers are an important factor in the diagnostic imaging industry. To further its position, HMCA is seeking to expand the imaging modalities offered at its managed and owned diagnostic imaging facilities. Four facilities in New York and eight facilities in Florida have two or more MRI scanners.
To further its position, HMCA is seeking to expand the imaging modalities offered at its managed and owned diagnostic imaging facilities. Six facilities in New York and nine facilities in Florida have two or more MRI scanners. One facility in New York and three in Florida also perform X-rays.
We use internal personnel and independent manufacturer’s representatives for domestic and foreign sales. FONAR’s marketing strategy has been designed to reach key purchasing decision makers with information concerning the Upright® MRI. This has led to many inquiries and some sales of the Upright® MRI scanner and is intended to increase FONAR’s presence in the medical equipment market.
FONAR’s marketing strategy has been designed to reach key purchasing decision makers with information concerning the Upright® MRI. This has led to many inquiries and some sales of the Upright® MRI scanner and is intended to increase FONAR’s presence in the medical equipment market. FONAR focuses primarily on four target audiences: neurosurgeons, orthopedic surgeons, radiologists, and general physicians.
The QSR is a quality assurance requirement that covers the design, packaging, labeling and manufacturing of a medical device. The MDR regulation is an adverse event-reporting program. Classes of Products Under the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act, all medical devices are classified by the FDA into one of three classes.
Classes of Products Under the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act, all medical devices are classified by the FDA into one of three classes.
However, history has shown that the superior tissue contrast characteristics of MRI have secured its place as the diagnostic imaging modality of choice for a wide variety of pathologies.
However, history has shown that the superior tissue contrast characteristics of MRI have secured its place as the diagnostic imaging modality of choice for a wide variety of pathologies. GOVERNMENT REGULATION FDA Regulation The Food and Drug Administration in accordance with Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing of FONAR’s MRI scanners.
Some countries, including many in Latin America and Africa, have very few regulatory requirements, beyond FDA clearance. To date, FONAR has been able to comply with all foreign regulatory requirements applicable to its export sales. PHYSICIAN AND DIAGNOSTIC SERVICES MANAGEMENT BUSINESS Health Diagnostics Management, LLC (HDM) is owned by Health Management Corporation of America (70.8%) and investors (29.2%).
Some countries, including many in Latin America and Africa, have very few regulatory requirements, beyond FDA clearance. To date, FONAR has been able to comply with all foreign regulatory requirements applicable to its export sales. EMPLOYEES FONAR and HMCA had approximately 535 employees as of August 7, 2025.
They have in the past, and may in the future, heavily discount the sales price of their scanners.
Most of our competitors have marketing and financial resources more substantial than those available to us. They have in the past, and may in the future, heavily discount the sales price of their scanners.
In addition to acting as a management company, HMCA owns and operates six diagnostic imaging facilities in Florida, where the corporate practice of medicine is permitted.
In addition to acting as a management company, HMCA owns and operates six diagnostic imaging facilities in Florida. See Note 15 for a more detailed analysis.
We expect to maintain service revenues at present levels or better, based on the demonstrated longevity of the Upright® MRI scanner and continued customer satisfaction with the product.
Service and maintenance revenues from our external installed base were approximately $8.4 million in fiscal 2025 and $7.6 million in fiscal 2024. We hope to maintain service revenues at present levels, based on the demonstrated longevity of the Upright® MRI scanner and continued customer satisfaction with the product.
None of these firms has so far introduced an open, upright MRI. In recent years, other companies have introduced MRI scanners aimed at the upright, weight-bearing MRI market. Their success in the US has so far been limited.
Each of these is primarily focused on the high-field (1.0 T and above) marketplace, though some have produced open MRI scanners for imaging in the recumbent posture. None of these firms has so far introduced an open, upright MRI. In recent years, other companies have introduced MRI scanners aimed at the upright, weight-bearing MRI market.
During fiscal 2024, a new stand-alone facility was opened in the Bronx, New York. During fiscal 2023, two scanners were installed in Casselberry, Florida. During fiscal year 2025, we intend to install two additional high field magnets in Naples, Florida and Lynbrook, New York, to supplement the existing FONAR Upright® MRI scanning systems at those facilities.
During fiscal 2025, two additional high field magnets were installed at our existing facilities in Naples, FL and Melville, NY, respectively. During fiscal year 2026, we expect to complete installation of an additional high field magnet in Lynbrook, NY, to supplement the existing FONAR Upright® MRI scanning systems at that facility along with a new location in Nassau County, NY.
Once the products are on the market, FONAR must comply with post-market surveillance controls. These requirements include the Quality Systems Regulation, or “QSR”, also known as Current Good Manufacturing Practices or CGMPs, and Medical Device Reporting, also referred to as MDR regulations.
These requirements include the Quality Systems Regulation, or “QSR”, also known as Current Good Manufacturing Practices or CGMPs, and Medical Device Reporting, also referred to as MDR regulations. The QSR is a quality assurance requirement that covers the design, packaging, labeling and manufacturing of a medical device. The MDR regulation is an adverse event-reporting program.
One facility in New York and two in Florida also perform X-rays. REIMBURSEMENT HMCA’s clients receive reimbursements for their services through Medicare, Medicaid, managed care, private commercial insurance, third-party administrators, Workers’ Compensation, No-Fault and other insurance.
REIMBURSEMENT HMCA’s clients receive reimbursements for their services through Medicare, Medicaid, managed care, private commercial insurance, third-party administrators, Workers’ Compensation, No-Fault and other insurance. Medicare The Medicare program provides reimbursement for hospitalization, physician, diagnostic and certain other services to eligible persons 65 years of age and over and certain other individuals.
Perhaps most significantly, shortly after the close of fiscal 2024 we obtained approval for a patent related to the development of our next generation patient positioning system. We have several other matters pending before the patent office as of this filing.
As of June 30, 2025, a total of 245 patents have been issued to FONAR. In fiscal year 2025, we obtained four new patents. Most significantly, we obtained approval for a patent related to the development of our next generation patient positioning system.
These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on current expectations that involve numerous risks and uncertainties.
Forward-looking statements involve risks and uncertainties which may cause actual results or outcomes to differ materially from those expressed herein.
In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. These statements are not guarantees of future performance and undue reliance should not be placed on them.
You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from our expectations. These statements are not guarantees of future performance and undue reliance should not be placed on them. The forward-looking statements included in this report are made only as of the date hereof.
Removed
Certain statements made in this Annual Report on Form 10-K are “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the plans and objectives of Management for future operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeData incidents in the form of breaches, ransomware attacks, denial-of-service attacks, and a variety of other hazards could materially disrupt our operations, or the operations of our partners. In addition, the costs to respond to such incidents related to rebuilding internal systems, restoring data, responding to regulatory investigations and/or litigation could be significant.
Biggest changeOur partners, vendors, and business associates are equally reliant on their own computer systems to provide the services that we depend on to perform core functions. Data incidents in the form of breaches, ransomware attacks, denial-of-service attacks, and a variety of other hazards could materially disrupt our operations, or the operations of our partners.
Dependence on Referrals. HMCA derives substantially all of its revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at the facilities. We depend on referrals of patients from unaffiliated physicians and other third parties to the facilities we manage or own for the services we perform.
HMCA derives substantially all of its revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at the facilities. We depend on referrals of patients from unaffiliated physicians and other third parties to the facilities we manage or own for the services we perform.
The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations in New York or Florida could have a negative impact on the utilization and pricing of services performed at the facilities HMCA manages or owns to the extent these organizations exert control over patients’ access to diagnostic imaging services, selections of the provider of such services and reimbursement rates for those services. 6.
The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations in New York or Florida could have a negative impact on the utilization and pricing of services performed at the facilities HMCA manages or owns to the extent these organizations exert control over patients’ access to diagnostic imaging services, selections of the provider of such services and reimbursement rates for those services. 8.
Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition, and results of operations. 8. Federal and state privacy and information security laws.
Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition, and results of operations. 9. Federal and state privacy and information security laws.
We believe that with time, that objective will be reached, particularly with customers scanning patients having neck, back, knee and various orthopedic issues who would benefit from being scanned in weight-bearing positions. Page 26 FONAR CORPORATION AND SUBSIDIARIES 12. Other changes in Domestic and Worldwide Economic Conditions.
We believe that with time, that objective will be reached, particularly with customers scanning patients having neck, back, knee and various orthopedic issues who would benefit from being scanned in weight-bearing positions. 12. Other changes in Domestic and Worldwide Economic Conditions.
Page 25 FONAR CORPORATION AND SUBSIDIARIES 7. Eligibility Changes to Insurance Programs. Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. Healthcare reform legislation will increase the participation of individuals in the Medicaid program in states that elect to participate in the expanded Medicaid coverage.
Eligibility Changes to Insurance Programs. Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. Healthcare reform legislation will continue to increase the participation of individuals in the Medicaid program in states that elect to participate in the expanded Medicaid coverage.
With lower revenue projections, prospective customers demand lower prices for scanners. Although the reduced reimbursements may not affect foreign demand, a lower number of sales in the aggregate could reduce economies of scale and consequently, profit margins. 11. Manufacturing Competition.
The reduced reimbursement rates have a negative effect on our sales of MRI scanners. With lower revenue projections, prospective customers would demand lower prices for scanners. Although the reduced reimbursements may not affect foreign demand, a lower number of sales in the aggregate could reduce economies of scale and consequently, profit margins. 11. Manufacturing Competition.
We are subject to risk arising from adverse changes in general domestic and global economic conditions, including recession or economic slowdown and disruption of credit markets. Turbulence and uncertainty in the United States and international markets and economies may adversely affect our liquidity, financial condition, revenues, profitability and business operations generally. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We are subject to risk arising from adverse changes in general domestic and global economic and other conditions, including tariffs, recessions or economic slowdowns, disruptions of credit markets and military conflicts. Turbulence and uncertainty in the United States and international markets and economies may adversely affect our workforce, liquidity, financial condition, revenues, profitability and business operations generally.
If we fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, protect our proprietary rights to our systems, or defend against cybersecurity attacks, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected. 9. Current and future changes in Florida Insurance Law.
If we fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, or protect our proprietary rights to our systems, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected. 10. Demand for MRI Scanners.
On March 24, 2023, Florida Governor Ron DeSantis signed into law House Bill 837. Dubbed the Tort Reform Act. The bill makes sweeping changes to Florida’s negligence laws. These changes will negatively impact our Florida diagnostic imaging facilities (both those we own and those we manage) with more unpaid bills, and lower reimbursement rates.
Dubbed the Tort Reform Act, the bill made sweeping changes to Florida’s negligence laws that negatively impact our Florida diagnostic imaging facilities (both those we own and those we manage) with more unpaid bills, higher administrative costs, and lower reimbursement rates.
Inflation in the cost of both materials and labor have limited our ability to control our costs, negatively impacting our ability to maintain profitability in this business segment. 2. Inflation and Increasing Interest Rates. Inflation has drastically increased our costs for both materials and labor.
To the extent possible, we counter these reductions by increasing scanning volume and controlling operating expenses. Inflation in the cost of both materials and labor have limited our ability to control our costs, negatively impacting our ability to maintain profitability in this business segment. Page 22 FONAR CORPORATION AND SUBSIDIARIES 2. Inflation.
If these physicians and other third parties were to reduce the number of patients they refer or discontinue referring patients, scan volumes could decrease, which would reduce our net revenue and operating margins. 5. Pressure to Control Healthcare Costs. One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services.
If these physicians and other third parties were to reduce the number of patients they refer or discontinue referring patients, scan volumes could decrease, which would reduce our net revenue and operating margins. 5. Current and future changes in Florida Insurance Law. On March 24, 2023, Florida enacted House Bill 837.
Our scanning center clients and the Florida facilities owned by HMCA are experiencing lower reimbursement rates from Medicare, other government programs and private insurance companies. To the extent possible, we counter these reductions by increasing scanning volume and controlling operating expenses.
ITEM 1A. RISK FACTORS 1. Reduced Reimbursement Rates. Most of our revenues are derived from our scanning center business conducted by HMCA. Our scanning center clients and the Florida facilities owned by HMCA are experiencing lower reimbursement rates from Medicare, other government programs and private insurance companies.
Scanning Facility Competition. The market for diagnostic imaging services is highly competitive. The facilities we manage or own compete for patients on the basis of reputation, location and the quality of diagnostic imaging services. Groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment are the principal competitors.
We will continue to monitor this bill as it continues through the legislative process. 6. Scanning Facility Competition. The market for diagnostic imaging services is highly competitive. The facilities we manage or own compete for patients on the basis of reputation, location and the quality of diagnostic imaging services.
These increased costs make it more difficult to achieve organic growth and extend the time that a new center takes to achieve profitability. Continued costs increases, coupled with reduced reimbursement rates, may threaten the profitability of our current operations and cause the cost of expansion to become prohibitively high. Page 24 FONAR CORPORATION AND SUBSIDIARIES 3. Cybersecurity threats.
Continued cost increases, coupled with reduced reimbursement rates may threaten the profitability of our current operations and cause the cost of expansion to become prohibitively high. 3. Cybersecurity threats. Diagnostic imaging centers have increasingly become a target for threat actors. Our organization relies on information technology systems and computer networks to operate.
Our cybersecurity liability insurance may be inadequate to cover these losses. The cost of maintaining and improving our security technologies to protect ourselves from these threats is increasing. Risk outside of our control, such as cybersecurity attacks to our partners, vendors and business associates could threaten our ability to operate in the short term and reduce operating margins. 4.
However, cybersecurity threats have the potential to significantly impair our operations and the operations of the various third parties upon whom we rely. Risks outside of our control, such as cybersecurity attacks to our partners, vendors and business associates could threaten our ability to operate and reduce operating margins. 4. Dependence on Referrals.
The Federal Reserve has increased interest rates substantially in an attempt to control inflation, which in turn has increased the cost of capital. Diagnostic imaging facilities require significant amounts of capital to operate, particularly in the context of opening new diagnostic imaging centers.
Inflation has drastically increased our costs for both materials and labor. Diagnostic imaging facilities require significant amounts of capital to operate, particularly in the context of opening new diagnostic imaging centers. These increased costs make it more difficult to achieve organic growth and extend the time that a new center takes to achieve profitability.
Removed
ITEM 1A. RISK FACTORS An investment in our securities is subject to various risks, the most significant of which are summarized below. 1. Reduced Reimbursement Rates. Most of our revenues are derived from our scanning center business conducted by HMCA.
Added
In addition, the costs to respond to such incidents related to rebuilding internal systems, restoring data, responding to regulatory investigations and/or litigation could be significant. Our cybersecurity liability insurance may be inadequate to cover these losses. Management has identified a material weakness in our internal controls over our information technology systems during the fiscal year ending June 30, 2025.
Removed
The healthcare industry has increasingly become a target for threat actors. Our organization relies on information technology systems and computer networks to operate. Our partners, vendors and business associates are equally reliant on their own computer systems to provide the services that we depend on to perform core functions such as scheduling and billing.
Added
While management has enacted a plan for remediation by improving these internal controls and implementing additional controls, there is no guarantee these remediation efforts will be adequate. Further, there is no guarantee that other, unidentified risks could negatively impact our operations in the future.
Removed
The full extent of those reductions are unclear at this time. Florida legislators continue to propose significant changes to the current structure of Florida’s auto insurance industry, which may impact our future operations in Florida. 10. Demand for MRI Scanners. The reduced margins have a negative effect on our sales of MRI scanners.
Added
The cost of maintaining and improving our security technologies to protect ourselves from these threats, and to comply with associated regulatory requirements related to cybersecurity, has increased substantially in the most recent fiscal year and will continue to increase in the future. Previous cybersecurity incidents have not materially affected our results of operations or financial condition.
Added
Florida legislators continue to propose significant changes to the current structure of Florida’s insurance industry, including an annual proposal to repeal of Florida’s no-fault insurance law and replace it with a fault-based system. This proposal was vetoed by Governor Ron DeSantis after passing both houses in 2021, but similar legislation was proposed in 2022, 2023, and again in 2025.
Added
The 2025 proposal died unheard in the Florida Senate’s Banking and Insurance committee. A repeal of the no-fault law will result in significant delays in payment for the services we render and will have a negative effect on our operations. The full impact of these proposed changes, including their impact on scan volume, are impossible to estimate at this time.
Added
Groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment are the principal competitors. The Florida market in particular is experiencing a high level of competition, which, coupled with recent Tort Reform, has created a challenging landscape for the centers we own and manage in that state, and may deter future expansion.
Added
Page 23 FONAR CORPORATION AND SUBSIDIARIES 7. Pressure to Control Healthcare Costs. One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAt the present time, risks from cybersecurity threats have not materially affected the Company. However, cybersecurity threats have the potential to significantly impair our operations and the operations of the various third parties upon whom we rely. Page 27 FONAR CORPORATION AND SUBSIDIARIES Governance The audit committee of our Board of Directors provides oversight of cybersecurity risks.
Biggest changeCybersecurity threats, including previous cybersecurity incidents, have not materially affected our results of operations or financial condition. However, cybersecurity threats have the potential to significantly impair our operations and the operations of the various third parties upon whom we rely. Governance The audit committee of our Board of Directors provides oversight of cybersecurity risks.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our Cybersecurity Risk Management Strategy includes a myriad of tools and resources that are designed to ensure the integrity of our information systems. We place a particular emphasis on protecting the privacy of our patient data pursuant to the HIPAA Security Rule.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our Cybersecurity Risk Management Strategy includes a myriad of tools and resources that are designed to ensure the integrity of our information systems. We place particular emphasis on protecting the privacy of our patient data pursuant to the HIPAA Security Rule.
Our cybersecurity risk management process is integrated with our larger risk management system and is considered a core function of our overall risk management strategy. Our strategy is based around the identification, mitigation, avoidance and response to material cybersecurity risks. We employ physical and electronic safeguards to control access to our systems.
Our cybersecurity risk management process is integrated with our larger risk management system and is considered a core function of our overall risk management strategy. Our strategy is based around identification, mitigation, avoidance and response to material cybersecurity risks. We employ physical and electronic safeguards to control access to our systems.
Our General Counsel has an educational background in computer science and has relevant work experience in cybersecurity insurance and risk management, in addition to his relevant legal experience.
Our General Counsel has an educational background in computer science and has relevant work experience in cybersecurity insurance and risk management. Page 25 FONAR CORPORATION AND SUBSIDIARIES
Added
For the fiscal year ended June 30, 2025, management has identified a material weakness in our internal controls over our information technology systems, as described in greater detail in Item 9A. In response, we have taken several steps to enhance our cybersecurity efforts.
Added
Those steps include increasing the scope of our Multi-Factor Authentication requirement to include additional tertiary information systems, improving password security, upgrading our anti-virus software, upgrading our threat detection tools, implementing additional threat detection tools, and replacing and/or decommissioning hardware that has known vulnerabilities.

Item 2. Properties

Properties — owned and leased real estate

0 edited+0 added−1 removed2 unchanged
Removed
The Company received approval from the Suffolk County Industrial Development Agency on February 29, 2016 of a 50% property tax abatement, valued at $440,000, over a 10 year period commencing January, 2017. ITEM 3. LEGAL PROCEEDINGS. There are no material legal proceedings threatened or pending against the Company. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDate June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 June 30, 2024 FONR Common Stock $ 100 $ 83 $ 71 $ 80 $ 75 Nasdaq Composite $ 100 $ 145 $ 111 $ 140 $ 182 Health Care Management Services $ 100 $ 139 $ 169 $ 162 $ 177 Medical Equipment $ 100 $ 145 $ 121 $ 137 $ 143 Page 29 FONAR CORPORATION AND SUBSIDIARIES Share Repurchase Program In September 2022, our Board of Directors authorized a program to repurchase up to $9 million of our common stock.
Biggest changePage 26 FONAR CORPORATION AND SUBSIDIARIES Relative Dollar Values June 30, 2021 June 30, 2022 June 30, 2023 June 30, 2024 June 30, 2025 FONR Common Stock $ 100 $ 86 $ 97 $ 90 $ 85 NASDAQ Composite $ 100 $ 77 $ 97 $ 125 $ 145 Health Care Management Services $ 100 $ 122 $ 117 $ 127 $ 91 Medical Equipment $ 100 $ 83 $ 94 $ 98 $ 104 Share Repurchase Program In September 2022, our Board of Directors authorized a program to repurchase up to $9 million of our common stock.
Performance Graph The following graph compares the Company’s cumulative total stockholder return on its Common Stock against industry and broad-market indexes which have been compiled by the Nasdaq Global Index Group. The periods commence on June 28, 2020 for five years and end on June 30, 2024..
Performance Graph The following graph compares the Company’s cumulative total stockholder return on its Common Stock against industry and broad-market indexes which have been compiled by the Nasdaq Global Index Group. The periods commence on June 30, 2021 for five years and end on June 30, 2025.
Page 28 FONAR CORPORATION AND SUBSIDIARIES At the present time, the only class of our securities for which there is a market is the Common Stock. We currently have a policy of retaining earnings to finance the development and expansion of our business. We expect to continue this policy for the foreseeable future.
The only class of our securities for which there is a market is the Common Stock. We currently have a policy of retaining earnings to finance the development and expansion of our business. We expect to continue this policy for the foreseeable future.
On September 12, 2024, we had approximately 978 stockholders of record of our Common Stock, 12 stockholders of record of our Class B Common Stock, 3 stockholders of record of our Class C Common Stock and 1,008 stockholders of record of our Class A Non-voting Preferred Stock .
On September 8, 2025 we had approximately 922 stockholders of record of our Common Stock, 12 stockholders of record of our Class B Common Stock, 3 stockholders of record of our Class C Common Stock and 992 stockholders of record of our Class A Non-voting Preferred Stock .
The following table summarizes the number of shares repurchased during the three months ended June 30, 2024: Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Still Be Purchased Under the Program (In Thousands) April 1, 2024 – April 30, 2024 0 $ — 0 5,355 May 1, 2024 – May 31, 2024 17,851 $ 15.02 17,851 5,087 June 1, 2024 – June 30, 2024 22,847 $ 15.45 22,847 4,734 Total 40,698 $ 15.26 40,698 ITEM 6. [Reserved] Not applicable.
Page 27 FONAR CORPORATION AND SUBSIDIARIES The following table summarizes the number of shares repurchased during the three months ended June 30, 2025: Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Still Be Purchased Under the Program (In Thousands) April 1, 2025 – April 30, 2025 0 $ — 0 2,928 May 1, 2025 – May 31, 2025 0 $ — 0 2,928 June 1, 2025 – June 30, 2025 0 $ — 0 2,928 Total 0 $ — 0 ITEM 6. [Reserved] Not applicable.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved[ 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 38 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 80 Item 9A. Controls and Procedures 80 Item 9B.
Biggest changeItem 6. [Reserved[ 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 34 Item 8. Financial Statements and Supplementary Data 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 83 Item 9A. Controls and Procedures 83 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTo this end, we have formed a subsidiary, Opus Diagnostic Management, LLC, to provide in-house repair and maintenance of third party manufactured MRI equipment that we operate. We hope this entity will contain and eventually reduce the maintenance and repair costs of our equipment fleet, and eventually expand into providing service to outside entities.
Biggest changeThe cost control efforts are intended to keep expenditures at levels which can be supported by service revenues and HMCA revenues. To this end, in February 2024, we have formed a subsidiary, Opus Diagnostic Management, LLC, to provide in-house repair and maintenance of third party manufactured MRI equipment that we operate.
CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements that were prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Management makes estimates and assumptions when preparing financial statements.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements that were prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Management makes estimates and assumptions when preparing financial statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. INTRODUCTION. FONAR was formed in 1978 to engage in the business of designing, manufacturing and selling MRI scanners. HMCA, a subsidiary of FONAR, provides management services to diagnostic imaging facilities. FONAR’s principal MRI product is its Upright® MRI (also called Stand-Up® MRI) scanner.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTION. FONAR was formed in 1978 to engage in the business of designing, manufacturing and selling MRI scanners. HMCA, a subsidiary of FONAR, provides management services to diagnostic imaging facilities. FONAR’s principal MRI product is its Upright® MRI (also called Stand-Up® MRI) scanner.
Page 31 FONAR CORPORATION AND SUBSIDIARIES We recognize revenue and related costs of revenue from sales contracts for our MRI scanners and major upgrades, under the percentage-of-completion method. Under this method, we recognize revenue and related costs of revenue, as each sub-assembly is completed. Amounts received in advance of our commencement of production are recorded as customer advances.
Page 29 FONAR CORPORATION AND SUBSIDIARIES We recognize revenue and related costs of revenue from sales contracts for our MRI scanners and major upgrades, under the percentage-of-completion method. Under this method, we recognize revenue and related costs of revenue, as each sub-assembly is completed. Amounts received in advance of our commencement of production are recorded as customer advances.
As of June 30, 2024, the valuation allowance was $193,000. We have been taking steps to improve HMCA revenues by our marketing efforts, which focus on the unique capability of our Upright® MRI scanners to scan patients in different positions. We have also been increasing the number of health insurance plans in which our clients participate.
As of June 30, 2025, the valuation allowance was $252,000. We have been taking steps to improve HMCA revenues by our marketing efforts, which focus on the unique capability of our Upright® MRI scanners to scan patients in different positions. We have also been increasing the number of health insurance plans in which our clients participate.
Revenues are in the form of fees which are earned under contracts with HMCA’s clients except for its six Florida subsidiaries which engage in the practice of medicine, and bill and collect fees from patients, insurers and other third-party payors directly.
Revenues are in the form of fees which are earned under contracts with HMCA’s clients, except for its six Florida subsidiaries which bill and collect fees from patients, insurers and other third-party payors directly.
Fees for on-going service and maintenance from our installed base of scanners were $7.5 million for the year ended June 30, 2023 and $7.6 million for the year ended June 30, 2024. In order to promote profitability and to reduce demands on our cash and other liquid reserves, we maintain an aggressive program of cost containment.
Fees for on-going service and maintenance from our installed base of scanners were $7.6 million for the year ended June 30, 2024 and $8.4 million for the year ended June 30, 2025. In order to promote profitability and to reduce demands on our cash and other liquid reserves, we maintain an aggressive program of cost containment.
As a result of fewer sales, service revenues have decreased since as older scanners are taken out of service, there are fewer new scanners available to sign service contracts. The operating loss for the medical equipment segment increased from an operating loss of $5.9 million in fiscal 2023 to an operating loss of $7.0 million in fiscal 2024.
As a result of fewer sales, service revenues have decreased since as older scanners are taken out of service, there are fewer new scanners available to sign service contracts. The operating loss for the medical equipment segment increased from an operating loss of $7.0 million in fiscal 2024 to an operating loss of $7.6 million in fiscal 2025.
Page 35 FONAR CORPORATION AND SUBSIDIARIES Certain third-party payers have proposed and implemented changes in the methods and rates of reimbursement that have had the effect of substantially decreasing reimbursement for diagnostic imaging services that HMCA’s clients provide.
Certain third-party payers have proposed and implemented changes in the methods and rates of reimbursement that have had the effect of substantially decreasing reimbursement for diagnostic imaging services that HMCA’s clients provide.
Revenues from HMCA have been the principal reason for our profitability, and we have so far been able to maintain and increase such revenues by increasing the number of scans being performed by the sites we manage and those we own, notwithstanding reductions in reimbursement rates from third-party payers.
Revenues from HMCA have been the principal reason for our profitability, and we have so far been able to maintain such revenues by increasing the number of scans being performed by the sites we manage and those we own, notwithstanding reductions in reimbursement rates and increases in operating costs.
In fiscal 2024 we continued our investment in the development of various upgrades for the UPRIGHT® MRI, with an investment of $1,735,949 in research and development, none of which was capitalized, as compared to $1,567,749, none of which was capitalized, in fiscal 2023.
In fiscal 2025 we continued our investment in the development of various upgrades for the UPRIGHT® MRI, with an investment of $1,576,086 in research and development, none of which was capitalized, as compared to $1,735,949, none of which was capitalized, in fiscal 2024.
Discussion of Operating Results of Physician and Diagnostic Services Management Segment Fiscal 2024 Compared to Fiscal 2023 Revenues attributable to the Company’s physician and diagnostic services management segment, HMCA, increased to $94.6 million in fiscal 2024 as compared to $90.4 million in fiscal 2023.
Discussion of Operating Results of Management of Diagnostic Imaging Centers Fiscal 2025 Compared to Fiscal 2024 Revenues attributable to the Company’s physician and diagnostic services management segment, HMCA, increased to $95.4 million in fiscal 2025 as compared to $94.6 million in fiscal 2024.
The CECL is determined based upon the difference between the management fee receivable and the current amount of outstanding fees estimated to be collected by the PCs.
The Company’s management fees are collateralized, individually and collectively, by the assets of the PCs. The CECL is determined based upon the difference between the management fee receivable and the current amount of outstanding fees estimated to be collected by the PCs.
On September 13, 2022, the Company adopted a stock repurchase plan. On September 26, 2022, the Board of Directors has approved up to $9 million to be repurchased under the plan which will be purchased on the open market at prevailing prices. During fiscal 2024, we repurchased 156,206 shares for $2.5 million.
On September 13, 2022, the Company adopted a stock repurchase plan. On September 26, 2022, the Board of Directors has approved up to $9 million to be repurchased under the plan which will be purchased on the open market at prevailing prices. During fiscal 2025, we repurchased 114,588 shares for $1.8 million.
The research and development expenditures were approximately 20.8% of revenues attributable to our medical equipment segment and 1.7% of total revenues in 2024, and 18.9% of medical equipment segment revenues and 1.5% of total revenues in fiscal 2023. This represented a 10.7% increase in research and development expenditures in fiscal 2024 as compared to fiscal 2023.
The research and development expenditures were approximately 17.6% of revenues attributable to our medical equipment segment and 1.5% of total revenues in 2025, and 20.8% of medical equipment segment revenues and 1.7% of total revenues in fiscal 2024. This represented a 9.2% decrease in research and development expenditures in fiscal 2025 as compared to fiscal 2024.
The Company has recorded a deferred tax asset of $7.2 million as of June 30, 2024, primarily relating to the tax benefits from the net state operating loss carry forwards, allowance for credit losses and tax credits available to offset future taxable income.
The Company has recorded a deferred tax asset of $6.3 million as of June 30, 2025, primarily relating to the tax benefits from the net allowance for credit losses and tax credits available to offset future taxable income.
Current economic credit conditions have contributed to a slower than optimal business environment. As a result our business may suffer, should the credit markets not improve in the near future. The direct impact of these conditions is not fully known.
As a result our business may suffer, should the credit markets not improve in the near future. The direct impact of these conditions is not fully known.
The increase in revenues was due to an increase of $4.0 million of patient fees (net of contractual allowances and discounts) from patient and third-party payers recognized by six of the facilities in Florida. Management and other fees increased by $0.1 million.
The increase in revenues was due to an increase of $1.5 million of management and other fees which was offset from a decrease of patient fees (net of contractual allowances and discounts) from patient and third-party payers recognized by six of the facilities in Florida of approximately $636,000.
Revenue Recognition and Receivable Allowances The Company’s receivables from the related and non-related professional corporations, as well as those receivables due under fee-for-service contracts at the Florida subsidiaries, are largely dependent on collection of fees from various third-party payers. As described in greater detail in Note 2, we recognize revenue in accordance with ASC 606, as the services are provided.
Revenue Recognition and Receivable Allowances The Company’s receivables from the related and non-related professional corporations, as well as those receivables due under fee-for-service contracts at the Florida subsidiaries, are largely dependent on collection of fees from various third-party payers.
FISCAL 2024 COMPARED TO FISCAL 2023 In fiscal 2024, we recognized net income of $14.1 million on revenues of $102.9 million, as compared to net income of $12.1 million on revenues of $98.6 million for fiscal 2023. This represents an increase in revenues of 4.3%. Total costs and expenses increased by 3.0%.
RESULTS OF OPERATIONS. FISCAL 2025 COMPARED TO FISCAL 2024 In fiscal 2025, we recognized net income of $10.7 million on revenues of $104.4 million, as compared to net income of $14.1 million on revenues of $102.9 million for fiscal 2024. This represents an increase in revenues of 1.4%. Total costs and expenses increased by 7.4%.
The 29.2% non-controlling interest allocations of $3,530,000 and $2,751,000 for fiscal 2024 and fiscal 2023, respectively, have been calculated by Income from operations, and adding depreciation and amortization net of miscellaneous losses and other income from the Physician and Diagnostic Service Management segment (See Note 16).
The 29.4% non-controlling interest allocations of $2,339,000 and $3,530,000 for fiscal 2025 and fiscal 2024, respectively, have been calculated by Income from operations, and adding depreciation and amortization net of miscellaneous losses and other income from the Physician and Diagnostic Service Management segment (See Note 15). We incurred some unusual one-time expenses during Fiscal Year 2025.
Service revenue increased by 0.8% from $7.5 million in fiscal 2023 to $7.6 million in fiscal 2024. Lower reimbursement rates have reduced the demand for our MRI products, resulting in lower sales volumes.
Service revenue increased by 10.8% from $7.6 million in fiscal 2024 to $8.4 million in fiscal 2025. Page 32 FONAR CORPORATION AND SUBSIDIARIES Lower reimbursement rates have reduced the demand for our MRI products, resulting in lower sales volumes.
The efficacy of RBMs is still a highly controversial topic. We cannot predict whether the use of RBMs will negatively impact our business, but it is possible that our financial position and results of operations could be negatively affected.
In many cases, this leads to lower utilization of imaging procedures based on a determination of medical necessity. The efficacy of RBMs is still a highly controversial topic. We cannot predict whether the use of RBMs will negatively impact our business, but it is possible that our financial position and results of operations could be negatively affected.
Page 33 FONAR CORPORATION AND SUBSIDIARIES Cost of revenues as a percentage of the related revenues for our physician and diagnostic services management segment increased from $49.0 million or 54.1% of related revenues for the year ended June 30, 2023 to $53.0 million, or 56.0% of related revenues for the year ended June 30, 2024.
Cost of revenues as a percentage of the related revenues for our physician and diagnostic services management segment increased from $53.0 million or 56.0% of related revenues for the year ended June 30, 2024 to $55.6 million, or 58.3% of related revenues for the year ended June 30, 2025.
Our consolidated operating results increased by 11.8% to an operating income of $16.5 million for fiscal 2024 as compared to operating income of $14.8 million for fiscal 2023.
Our consolidated operating results decreased by 29.7% to an operating income of $11.6 million for fiscal 2025 as compared to operating income of $16.5 million for fiscal 2024.
Page 37 FONAR CORPORATION AND SUBSIDIARIES The Company believes that its business plan has been responsible for the past five consecutive fiscal years of profitability (fiscal 2024, fiscal 2023, fiscal 2022, fiscal 2021 and fiscal 2020) and that its capital resources will be adequate to support operations at current levels through September 30, 2025.
The Company believes that its business plan has been responsible for the past five consecutive fiscal years of profitability (fiscal 2025, fiscal 2024, fiscal 2023, fiscal 2022 and fiscal 2021), our current cash balance of $56. 3 million, along with a working capital of $127. 5 million and its capital resources will be adequate to support operations at current levels through September 30, 2026.
In addition, the use of radiology benefit managers, or RBM’s has increased in recent years. It is common practice for health insurance carriers to contract with RBMs to manage utilization of diagnostic imaging procedures for their insureds. In many cases, this leads to lower utilization of imaging procedures based on a determination of medical necessity.
Page 31 FONAR CORPORATION AND SUBSIDIARIES In addition, the use of radiology benefit managers, or RBM’s has increased in recent years. It is common practice for health insurance carriers to contract with RBMs to manage utilization of diagnostic imaging procedures for their insureds.
For the fiscal year ended June 30, 2024, 11.6% of total revenues were derived from contracts with facilities that are currently owned by Timothy Damadian, the Chief Executive Officer of FONAR, and were previously owned and operated by Dr. Raymond V. Damadian until his passing. 12.1% of total revenues were derived from these contracts for the 2023 fiscal year.
For the fiscal year ended June 30, 2025, 11.5% of total revenues were derived from contracts with facilities that are currently owned by Timothy Damadian, the Chief Executive Officer of FONAR as compared to 11.6% of total revenues were derived from these contracts for the 2024 fiscal year.
Revenue from service and repair fees increased from $7.5 million in fiscal 2023 to $7.6 million in fiscal 2024. Page 34 FONAR CORPORATION AND SUBSIDIARIES Continuing our tradition as the originator of MRI, we remain committed to maintaining our position as the leading innovator of the industry through investing in research and development.
Page 30 FONAR CORPORATION AND SUBSIDIARIES Continuing our tradition as the originator of MRI, we remain committed to maintaining our position as the leading innovator of the industry through investing in research and development.
The agreements with these MRI facilities are for one-year terms which renew automatically on an annual basis, unless terminated. The fees for these sites, which are located in Florida, are flat monthly fees. Discussion of Certain Consolidated Results of Operations Fiscal 2024 Compared to Fiscal 2023 Interest and investment income increased in 2024 compared to 2023.
The agreements with these MRI facilities are for one-year terms which renew automatically on an annual basis, unless terminated. The fees for these sites, which are located in Florida, are flat monthly fees.
Cash provided by operating activities was attributable to the net income of $14.1 million, depreciation and amortization of $4.6 million, provision for credit losses of $1.9 million, deferred income tax expense benefit of $2.8 million which was offset by the increase in accounts, and medical and management fee receivables of $11.7 million.
Cash provided by operating activities was attributable to the consolidated net income of $10.7 million, adjusted primarily for depreciation and amortization of $4.7 million, provision for credit losses of $3.2 million, and an increase in other current liabilities of $2.7 million which was offset by the increase in accounts, and medical and management fee receivables of $9.0 million and an increase in prepaid expenses and other current assets of $1.2 million.
Page 36 FONAR CORPORATION AND SUBSIDIARIES At June 30, 2024, we had working capital of approximately $122.5 million as compared to working capital of $110.00 million at June 30, 2023, and stockholders’ equity of $156.8 million at June 30, 2024 as compared to stockholders’ equity of $150.8 million at June 30, 2023.
At June 30, 2025, we had working capital of approximately $127.5 million as compared to working capital of $122.5 million at June 30, 2024, and equity of $160.1 million at June 30, 2025 as compared to equity of $156.8 million at June 30, 2024.
Cash used in investing activities for fiscal 2024 approximated $851,000. The cash used in investing activities was attributable to purchases of property and equipment of $790,000, purchase of short term investments of $103,000, costs of patents of $33,000, offset by proceeds from sale of equipment of $75,000. Cash used in financing activities for fiscal 2024 approximated $8.2 million.
Cash used in investing activities for fiscal 2025 was approximately $3.8 million. The cash used in investing activities was attributable to purchases of property and equipment of $3.8 million, costs of patents of $25,325, offset by proceeds from short term investments of $15,608.
We made additional investments into sales and marketing of image enhancement software SwiftMR TM pursuant to our distribution agreement with AIRS Medical USA, Inc. We hope these ventures will develop into a viable source of new revenue in the future. We also discontinued the prosecution of two patents that ultimately did not issue, after substantial investment into their pursuit.
We made additional investments into sales and marketing of image enhancement software SwiftMR TM pursuant to our distribution agreement with AIRS Medical USA, Inc. We hope these ventures will develop into a viable source of new revenue in the future. Research and development expenses decreased to $1.6 million in fiscal 2025 from $1.7 million in fiscal 2024.
Discussion of Operating Results of Medical Equipment Segment Fiscal 2024 Compared to Fiscal 2023 Revenues attributable to our medical equipment segment remained constant at $8.3 million in fiscal 2024 and in fiscal 2023, with product sales revenues increasing by 0.8% from $732,000 in fiscal 2023 to $738,000 in fiscal 2024.
Discussion of Operating Results of Medical Equipment - Manufacturing and Service of MRI Equipment Fiscal 2025 Compared to Fiscal 2024 Revenues attributable to our medical equipment segment increased to $9.0 million in fiscal 2025 as compared to $8.4 million in fiscal 2024, with product sales revenues decreasing by 23.6% from $738,000 in fiscal 2024 to $563,000 in fiscal 2025.
The PCs may be limited in their ability to pay the full management fees receivable if they do not collect sufficient expected fees from third-party payers and patients. The Company’s management fees are collateralized, individually and collectively, by the assets of the PCs.
The Company establishes a current expected credit loss (“CECL”) to address the risk that a portion of the contractually obligated management fees receivable from the PCs may not be paid. The PCs may be limited in their ability to pay the full management fees receivable if they do not collect sufficient expected fees from third-party payers and patients.
The utilization of these tax benefits is dependent on the Company generating future taxable income and other factors. A partial valuation allowance will be maintained until evidence exists to support that it is no longer needed, (principally related to research and development credits and unrealizable state operating losses).
A partial valuation allowance will be maintained until evidence exists to support that it is no longer needed, (principally related to unrealizable state operating losses).
For the year ended June 30, 2024, we realized a net income of $14.1 million. Our principal sources of liquidity are derived from revenues. Our business plan includes a program for manufacturing and selling our Upright® MRI scanners. In addition, we are enhancing our revenue by participating in the physician and diagnostic services management business through our subsidiary, HMCA.
Our business plan includes a program for manufacturing, selling, maintaining and repairing our Upright® MRI scanners. In addition, we generate the majority of our revenue by participating in the physician and diagnostic services management business through our subsidiary, HMCA.
For the fiscal year 2024 the Company recorded an income tax expense of $5.2 million compared with an income tax expense of $3.6 million for 2023. The income tax benefits are attributable to the expected tax benefits associated with the projected realization and utilization of our net state operating losses in future periods.
The income tax benefits are attributable to the expected tax benefits associated with the projected realization and utilization of our net state operating losses in future periods. The utilization of these tax benefits is dependent on the Company generating future taxable income and other factors.
We recognized interest income of $2.1 million in 2024 as compared to $1.2 million in fiscal 2023, representing an increase of 74.0%. This is due to the increase in the prime interest rate and the Company placing cash in interest bearing accounts and purchasing short term treasury bills.
If ATIC enters receivership or suffers additional adverse consequences, we may need to take additional reserves in the future. Interest and investment income remained constant in 2025 compared to 2024. We recognized investment income of $2.1 million in fiscal 2025 and 2024. This is due to the Company placing cash in interest bearing accounts and purchasing short term treasury bills.
The principal uses of cash used in financing activities included the repayment of borrowings and capital lease obligations of $45,000, purchase of treasury stock of $2.5 million and distributions to non-controlling interests of $5.6 million. Total liabilities increased by 15.5% during fiscal 2024, from approximately $49.8 million at June 30, 2023 to approximately $57.5 million at June 30, 2024.
The principal uses of cash used in financing activities included the repayment of borrowings and capital lease obligations of $113,940, purchase of treasury stock of $1.8 million and distributions to non-controlling interests of $5.7 million which was offset by the sale of noncontrolling interests of $132,000.
FONAR’s open MRI scanners were the first high field strength open MRI scanners in the industry. Page 30 FONAR CORPORATION AND SUBSIDIARIES HMCA generates revenues 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.
For the sake of simplicity, HMCA, and HDM are referred to as “HMCA”, unless otherwise indicated .HMCA generates revenues 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.
Medical receivables are due under fee-for-service contracts with third-party payors, such as hospitals, government sponsored healthcare programs, patients legal counsel and directly from patients. The carrying amount of the medical receivable is reduced by contractual allowances and discounts based on the historical experience with each payor class on a per location basis.
The carrying amount of the medical receivable is reduced by contractual allowances and discounts based on the historical experience with each payor class on a per location basis. Management fee receivable is related to the management fees outstanding from the related and non-related professional corporations (“PCs”) under management agreements.
As of June 30, 2024, HMCA manages a total of 42 MRI scanners of which 25 MRI scanners are located in New York and 17 are located in Florida. We have also intensified our marketing activities through the hiring of additional marketers for HMCA’s clients.
As of June 30, 2025, HMCA manages a total of 44 MRI scanners of which 26 MRI scanners are located in New York and 18 are located in Florida.
Interest expense of $76,997 was recognized in fiscal 2024, as compared to interest expense of $50,131 in fiscal 2023.
Interest expense of $25,611 was recognized in fiscal 2025, as compared to interest expense of $76,997 in fiscal 2024. The Company repaid the outstanding debt for a building located in Florida during fiscal 2025.
While revenue increased by 4.3% selling, general and administrative expenses decreased by 8.6% to $26.9 million in fiscal 2024 from $29.4 million in fiscal 2023. This difference in selling, general and administrative expenses was due to less reserves on management fees and other receivables due to increased scan volume as compared to fiscal 2023.
Discussion of Consolidated Results of Operations Fiscal 2025 Compared to Fiscal 2024 While revenue increased by 1.4% selling, general and administrative expenses increased by 10.7% to $29.7 million in fiscal 2025 from $26.9 million in fiscal 2024.
LIQUIDITY AND CAPITAL RESOURCES Cash, and cash equivalents increased by 9.9% from $51.3 million at June 30, 2023 to $56.3 million at June 30, 2024. Cash provided by operating activities for fiscal 2024 approximated $14.1 million.
Our expenses for fiscal 2025 represented continued research and development of various upgrades for the Upright® MRI scanner. LIQUIDITY AND CAPITAL RESOURCES Cash, and cash equivalents remained constant at $56.3 million at June 30, 2025 and June 30, 2024. Cash provided by operating activities for fiscal 2025 was approximately $11.3 million.
Removed
Management fee receivable is related to the management fees outstanding from the related and no-related professional corporations (“PCs”) under management agreements. The Company establishes a current expected credit loss (“CECL”) to address the risk that a portion of the contractually obligated management fees receivable from the PCs may not be paid.
Added
FONAR’s open MRI scanners were the first high field strength open MRI scanners in the industry. FONAR’s wholly owned subsidiary, Health Management Corporation of America (“HMCA”), has the controlling interest in Health Diagnostics Management, LLC (“HDM”). HMCA presently has a direct ownership interest of 70.6% in HDM, and the investors in HDM have a 29.4% ownership interest.
Removed
Income Taxes and Related Tax Asset Valuation Allowances We qualitatively and quantitatively evaluate the realizability (including both positive and negative evidence) of the net deferred tax assets and assess the valuation allowance periodically. Our evaluation considers the financial condition of the Company and both the business conditions and regulatory environment of the industry.
Added
During the fiscal year ended June 30, 2025, the Company sold non-controlling interests to a minority shareholder for $132,000. The management of the diagnostic imaging centers business segment is being conducted by HDM, operating under the name “Health Management Company of America”.
Removed
If future taxable income or other factors are not consistent with our expectations, an adjustment to our allowance for net deferred tax assets may be required. For net deferred tax assets we consider estimates of future taxable income, including tax planning strategies, in determining whether our net deferred tax assets are more likely than not to be realized.
Added
Page 28 FONAR CORPORATION AND SUBSIDIARIES In February 2024, FONAR formed a wholly-owned subsidiary, Opus Diagnostic Management, LLC, to provide repair and maintenance of third party manufactured MRI equipment that HMCA operates.
Removed
Our ability to project future taxable income may be significantly affected by our ability to determine the impact of regulatory changes which could adversely affect our future profits. As a result, the benefits of our net operating loss carry forwards could expire before they are utilized. At June 30, 2023, the net deferred tax asset was valued at $10,041,960 .
Added
As described in greater detail in Note 2 to the Consolidated Financial Statements, we recognize revenue in accordance with Accounting Standards Codification 606, as the services are provided. Medical receivables are due under fee-for-service contracts with third-party payors, such as hospitals, government sponsored healthcare programs, patients’ legal counsel and directly from patients.
Removed
At June 30, 2024, the net deferred tax asset was valued at $7,223,255. Long-Lived and Intangible Assets We depreciate our long-lived assets over their estimated economic useful lives, with the exception of leasehold improvements.
Added
This difference in selling, general and administrative expenses was largely due to a $2,300,000 increase on reserves for credit loses for a single payer – American Transit Insurance Company. American Transit Insurance Company (ATIC) is a New York based motor vehicle insurer primarily focused on for-hire automobile insurance.
Removed
With respect to leasehold improvements, we use the shorter of the assets useful lives or the lease term of the facility for which these assets are associated. We amortize our intangible assets, including patents, and capitalized software development costs, over the shorter of the contractual/legal life or the estimated economic life.
Added
During Fiscal 2025, ATIC posted over $750 million in net losses and has indicated that they are approaching insolvency. ATIC continues to operate and is working with the New York Department of Financial Services to resolve its issues. We are monitoring the situation for new developments.
Removed
Our amortization life for patents and capitalized software development costs is 15 to 17 years and 5 years, respectively. Goodwill is recorded as a result of business combinations. Management evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.
Added
We settled an outstanding tax debt related to New York City Commercial Rent Tax in the amount of $172,000. We also incurred a significant expense from Consolidated Edison Company in the amount of $206,000 for unreported electricity bills at our Midtown Manhattan location, due to faulty meter reading over a period of years. These one-time expenses have been resolved.
Removed
Impairment of goodwill is tested by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable market data.
Added
For the fiscal year 2025 the Company recorded an income tax expense of $3.1 million compared with an income tax expense of $5.2 million for 2024.
Removed
If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. Based on our test for goodwill impairment, we noted no impairment related to goodwill.
Added
The decrease in patient fees at our Florida locations is a consequence of Florida’s 2023 Tort Reform Act. We have seen a decrease in both volume and average reimbursement rate since the act took effect, and we expect that trend to continue for the immediate future.
Removed
However, if estimates or the related assumptions change in the future, we may be required to record impairment charges to reduce the carrying amount of goodwill. We periodically assess the recoverability of long-lived assets, including property and equipment, intangibles and management agreements, when there are indications of potential impairment, based on estimates of undiscounted future cash flows.
Added
Operating results of this segment decreased from operating income of $23.5 million in fiscal 2024 to operating income of $19.2 million in fiscal 2025. The decrease is due mainly to taking a large reserve for the American Transit Insurance Company business along with increased expenses in the form of staffing costs, equipment repair costs and helium replacement costs.
Removed
The amount of impairment is calculated by comparing anticipated discounted future cash flows with the carrying value of the related asset. In performing this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic factors. Page 32 FONAR CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS.
Added
The majority of the purchases of property and equipment was due to the addition of an additional high field scanners at two existing centers. Cash used in financing activities for fiscal 2025 approximated $7.5 million.
Removed
Research and development expenses increased to $1.7 million in fiscal 2024 from $1.6 million in fiscal 2023. Our expenses for fiscal 2024 represented continued research and development of various upgrades for the Upright® MRI scanner.
Added
Total liabilities decreased by 1.2% during fiscal 2025 from approximately $57.5 million at June 30, 2024 to approximately $56.8 million at June 30, 2025.
Removed
Operating results of this segment increased from operating income of $20.7 million in fiscal 2023 to operating income of $23.5 million in fiscal 2024. The increase is due mainly to increased patient fee revenue due to higher scan volumes.
Added
This resulted from an increase in current assets ($140.3 million at June 30, 2024 as compared to $144.7 million at June 30, 2025), and a decrease in current liabilities from $17.9 million at June 30, 2024 to $17.1 million at June 30, 2025. Page 33 FONAR CORPORATION AND SUBSIDIARIES Our principal sources of liquidity are derived from revenues.
Removed
For the physician and diagnostic services management segment, HMCA, revenues increased to $94.6 million in fiscal 2024 as compared to $90.4 million in fiscal 2023. This is primarily attributable to an increase in patient scans resulting from our marketing efforts.
Added
We hope this entity will contain the maintenance and repair costs of our equipment fleet, and eventually expand into providing service to outside entities, including third party equipment operated by FONAR’s existing installed base. Current economic credit conditions have contributed to a slower than optimal business environment.
Removed
The cost control efforts are intended to enable us to withstand periods of low volumes of MRI scanner sales, by keeping expenditures at levels which can be supported by service revenues and HMCA revenues.
Added
Capital expenditures for fiscal 2025 approximated $3.8 million and capitalized patent costs were approximately $25,000. Purchases of property and equipment were approximately $3.8 million. We have committed to making material capital expenditures in the 2026 fiscal year.
Removed
The likelihood and effect of any subsequent reimbursement reductions is not fully known. Capital expenditures for fiscal 2024 approximated $926,000. Capitalized patent costs were approximately $33,000. Purchases of property and equipment were approximately $790,000. Purchase of short term investments was $103,000.
Added
We expect to complete the installation of an additional high field scanner in Lynbrook, New York in the first quarter of fiscal 2026.The capital expenditures for this project will approximate $1.5 million for the purchase of a new scanner.
Removed
FONAR has committed to making any material capital expenditures in the 2025 fiscal year by installing an additional scanner in two of its current locations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not have any investments in marketable securities, foreign currencies, mutual funds, certificates of deposit or other fixed rate instruments. All of our funds are in cash accounts or money market accounts which are liquid.
Biggest changeITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not have any significant investments in marketable securities, foreign currencies, mutual funds, certificates of deposit or other fixed rate instruments. The Company currently has 2 certificates of deposits totaling approximately $120,000 with maturities under 1 year.
Removed
All of our revenue, expense and capital purchasing activities are transacted in United States dollars. See Note 10 to the consolidated Financial Statements for information on long-term debt.
Added
Most of our funds are in cash accounts or money market accounts which are liquid. The Company has been investing in short term Treasury bills with a maturity date of 90 days or less. All of our revenue, expense and capital purchasing activities are transacted in United States dollars. Page 34 FONAR CORPORATION AND SUBSIDIARIES

Other FONR 10-K year-over-year comparisons