Insider-led FONAR (NASDAQ: FONR) buyout advances as earnings stay solid
Rhea-AI Filing Summary
FONAR Corporation reported modest revenue growth and solid profitability for the quarter ended December 31, 2025, while advancing a related-party going‑private transaction. Quarterly net revenue rose to
On December 23, 2025, FONAR agreed to be acquired by an entity controlled by its CEO in a going‑private merger. Public stockholders are to receive
Positive
- None.
Negative
- None.
Insights
FONAR combines steady operations with a transformative insider-led going‑private deal.
FONAR delivered stable operating performance. Quarterly net revenue grew to
The balance sheet remains conservative, with total liabilities of
The proposed merger with an entity controlled by the CEO at
FORM
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the quarterly period
ended
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area
code:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required
to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of accelerated filer, large accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Non-accelerated filer ☐ | |
| Smaller reporting company
|
Emerging Growth Company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Page 1
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of the latest practicable date.
| Class | Outstanding at February 5, 2026 | |||
| Common Stock, par value $.0001 | ||||
| Class B Common Stock, par value $.0001 | ||||
| Class C Common Stock, par value $.0001 | ||||
| Class A Preferred Stock, par value $.0001 | ||||
Page 2
EXPLANATORY NOTE
The number of outstanding shares of Common Stock, 6,173,008, as indicated on the cover page of this Form 10-Q, is net of 30,457 treasury shares deducted from the previously reported 6,203,465 outstanding shares of Common Stock. Such 30,457 shares represent treasury shares that were repurchased pursuant to the Company’s 2022 stock repurchase program in the quarter ended March 31, 2025.
Page 3
FONAR CORPORATION AND SUBSIDIARIES
INDEX
| PART I - FINANCIAL INFORMATION | PAGE |
| Item 1. Condensed Consolidated Financial Statements (Unaudited) | |
| Condensed Consolidated Balance Sheets – as of December 31, 2025 and June 30, 2025 | 5 |
| Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2025 and December 31, 2024 | 8 |
| Condensed Consolidated Statements of Operations for the Six Months Ended December 31, 2025 and December 31, 2024 | 9 |
| Condensed Consolidated Statements of Changes in Equity for the Three Months Ended December 31, 2025 and December 31, 2024 | 10 |
| Condensed Consolidated Statements of Changes in Equity for the Six Months Ended December 31, 2025 and December 31, 2024 | 12 |
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and December 31, 2024 | 14 |
| Notes to Condensed Consolidated Financial Statements | 15 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 41 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 48 |
| Item 4. Controls and Procedures | 48 |
| PART II - OTHER INFORMATION | 50 |
| Item 1. Legal Proceedings | 50 |
| Item 1A. Risk Factors | 50 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 58 |
| Item 3. Defaults Upon Senior Securities | 58 |
| Item 4. Mine Safety Disclosures | 58 |
| Item 5. Other Information | 59 |
| Item 6. Exhibits and Reports on Form 8-K | 59 |
| Signatures | 60 |
Page 4
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts and shares in thousands, except per share amounts)
ASSETS
| December 31, 2025 (Unaudited) | June 30, 2025 (Note 1) | |||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable – net of allowances for credit losses of $ | ||||||||
| Accounts receivable – related party | ||||||||
| Medical receivable | ||||||||
| Management and other fees receivable – net of allowances for credit losses of $ | ||||||||
| Management and other fees receivable – related medical practices – net of allowances for credit losses of $ | ||||||||
| Inventories – net | ||||||||
| Prepaid expenses and other current assets – related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Accounts receivable – long-term | ||||||||
| Deferred income tax asset | ||||||||
| Property and equipment – net | ||||||||
| Note receivable – related party | ||||||||
| Right-of-use asset – operating leases | ||||||||
| Right-of-use asset – finance lease | ||||||||
| Goodwill | ||||||||
| Other intangible assets – net | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 5
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts and shares in thousands, except per share amounts)
LIABILITIES AND EQUITY
| December 31, 2025 (Unaudited) | June 30, 2025 (Note 1) | |||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Unearned revenue on service contracts | ||||||||
| Unearned revenue on service contracts – related party | ||||||||
| Operating lease liabilities – current portion | ||||||||
| Finance lease liability – current portion | ||||||||
| Customer deposits | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| Unearned revenue on service contracts | ||||||||
| Deferred income tax liability | ||||||||
| Due to related party medical practices | ||||||||
| Operating lease liabilities – net of current portion | ||||||||
| Finance lease liability – net of current portion | ||||||||
| Other liabilities | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 6
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts and shares in thousands, except per share amounts)
LIABILITIES AND EQUITY (Continued)
| EQUITY: | December 31, 2025 (Unaudited) | June 30, 2025 (Note 1) | ||||||
| Class A non-voting preferred stock $ par value; shares authorized at December 31, 2025 and June 30, 2025, issued and outstanding at December 31, 2025 and June 30, 2025 | $ | $ | ||||||
| Preferred stock $ par value; shares authorized at December 31, 2025 and June 30, 2024, issued and outstanding – | ||||||||
| Common Stock $ par value; shares authorized at December 31, 2025 and June 30, 2025, issued at December 31, 2025 and June 30, 2025, outstanding at December 31, 2025 and June 30, 2025, respectively | ||||||||
| Class B Common Stock (10 votes per share) $ par value; shares authorized at December 31, 2025 and June 30, 2025, issued and outstanding at December 31, 2025 and June 30, 2025 | ||||||||
| Class C Common Stock (25 votes per share) $ par value; shares authorized at December 31, 2025 and June 30, 2025, issued and outstanding at December 31, 2025 and June 30, 2025 | ||||||||
| Paid-in capital in excess of par value | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares of common stock at December 31, 2025 and at June 30, 2025 | ( | ) | ( | ) | ||||
| Total FONAR Corporation’s Stockholders’ Equity | ||||||||
| Noncontrolling interests | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 7
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts and shares in thousands, except per share amounts)
| For the Three Months Ended December 31, (Unaudited) | ||||||||
| Revenues | 2025 | 2024 | ||||||
| Patient fee revenue – net of contractual allowances and discounts | $ | $ | ||||||
| Product sales | ||||||||
| Service and repair fees | ||||||||
| Service and repair fees – related parties | ||||||||
| Management and other fees | ||||||||
| Management and other fees – related medical practices | ||||||||
| Total Revenues – Net | ||||||||
| Cost and Expenses | ||||||||
| Costs related to patient fee revenue | ||||||||
| Costs related to product sales | ||||||||
| Costs related to service and repair fees | ||||||||
| Costs related to service and repair fees – related parties | ||||||||
| Costs related to management and other fees | ||||||||
| Costs related to management and other fees – related medical practices | ||||||||
| Research and development | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total Costs and Expenses | ||||||||
| Income from Operations | ||||||||
| Other income and (expenses): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income – related party | ||||||||
| Investment income | ||||||||
| Other income (expense) | ||||||||
| Income Before Provision for Income Taxes and Noncontrolling Interests | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||
| Consolidated Net Income | ||||||||
| Net Income – Noncontrolling Interests | ( | ) | ( | ) | ||||
| Net Income – Attributable to FONAR | $ | $ | ||||||
| Net Income Available to Common Stockholders | $ | $ | ||||||
| Net Income Available to Class A Non–Voting Preferred Stockholders | $ | $ | ||||||
| Net Income Available to Class C Common Stockholders | $ | $ | ||||||
| Basic Net Income Per Common Share Available to Common Stockholders | $ | $ | ||||||
| Diluted Net Income Per Common Share Available to Common Stockholders | $ | $ | ||||||
| Basic and Diluted Income Per Share – Class C Common | $ | $ | ||||||
| Weighted Average Basic Shares Outstanding – Common Stockholders | ||||||||
| Weighted Average Diluted Shares Outstanding – Common Stockholders | ||||||||
| Weighted Average Basic and Diluted Shares Outstanding – Class C Common | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 8
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts and shares in thousands, except per share amounts)
| For the Six Months Ended December 31, (Unaudited) | ||||||||
| Revenues | 2025 | 2024 | ||||||
| Patient fee revenue – net of contractual allowances and discounts | $ | $ | ||||||
| Product sales | ||||||||
| Service and repair fees | ||||||||
| Service and repair fees – related parties | ||||||||
| Management and other fees | ||||||||
| Management and other fees – related medical practices | ||||||||
| Total Revenues – Net | ||||||||
| Cost and Expenses | ||||||||
| Costs related to patient fee revenue | ||||||||
| Costs related to product sales | ||||||||
| Costs related to service and repair fees | ||||||||
| Costs related to service and repair fees – related parties | ||||||||
| Costs related to management and other fees | ||||||||
| Costs related to management and other fees – related medical practices | ||||||||
| Research and development | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total Costs and Expenses | ||||||||
| Income from Operations | ||||||||
| Other income and (expenses): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income – related party | ||||||||
| Investment income | ||||||||
| Other income (expense) | ||||||||
| Income Before Provision for Income Taxes and Noncontrolling Interests | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||
| Consolidated Net Income | ||||||||
| Net Income – Noncontrolling Interests | ( | ) | ( | ) | ||||
| Net Income – Attributable to FONAR | $ | $ | ||||||
| Net Income Available to Common Stockholders | $ | $ | ||||||
| Net Income Available to Class A Non–Voting Preferred Stockholders | $ | $ | ||||||
| Net Income Available to Class C Common Stockholders | $ | $ | ||||||
| Basic Net Income Per Common Share Available to Common Stockholders | $ | $ | ||||||
| Diluted Net Income Per Common Share Available to Common Stockholders | $ | $ | ||||||
| Basic and Diluted Income Per Share – Class C Common | $ | $ | ||||||
| Weighted Average Basic Shares Outstanding – Common Stockholders | ||||||||
| Weighted Average Diluted Shares Outstanding – Common Stockholders | ||||||||
| Weighted Average Basic and Diluted Shares Outstanding – Class C Common | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 9
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts and shares in thousands)
(UNAUDITED)
For the Three Months Ended December 31, 2025
| Common Stock | Common Stock Outstanding (Shares) | Class A Preferred Stock (Shares) | Class C Common Stock (Shares) | Paid-in capital in excess of par value | ||||||||||||||||
| Balance – September 30, 2025 | $ | $ | ||||||||||||||||||
| Net Income | — | — | — | |||||||||||||||||
| Distributions – Non controlling interest | — | — | — | |||||||||||||||||
| Income – Non controlling interests | — | — | — | |||||||||||||||||
| Balance – December 31, 2025 | $ | $ | ||||||||||||||||||
| Accumulated Deficit | Treasury Stock | Treasury Stock (Shares) | Non Controlling Interests | Total | ||||||||||||||||
| Balance – September 30, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
| Net Income | — | |||||||||||||||||||
| Distributions – Non controlling interest | — | ( | ) | ( | ) | |||||||||||||||
| Income – Non controlling interests | — | |||||||||||||||||||
| Balance – December 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 10
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts and shares in thousands)
(UNAUDITED)
For the Three Months Ended December 31, 2024
| Common Stock | Common Stock Outstanding (Shares) | Class A Preferred Stock (Shares) | Class C Common Stock (Shares) | Paid-in capital in excess of par value | ||||||||||||||||
| Balance September 30, 2024 | $ | $ | ||||||||||||||||||
| Net Income | — | — | — | |||||||||||||||||
| Purchase of Treasury stock | — | — | — | |||||||||||||||||
| Cancellation of Treasury stock | ( | ) | — | — | ( | ) | ||||||||||||||
| Sale Non controlling interests | — | — | — | |||||||||||||||||
| Distributions Non controlling interest | — | — | — | |||||||||||||||||
| Income Non controlling interests | — | — | — | |||||||||||||||||
| Balance December 31, 2024 | $ | $ | ||||||||||||||||||
| Accumulated Deficit | Treasury Stock | Treasury Stock (Shares) | Non Controlling Interests | Total | ||||||||||||||||
| Balance September 30, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
| Net Income | — | |||||||||||||||||||
| Purchase of Treasury stock | ( | ) | ( | ) | ||||||||||||||||
| Cancellation of Treasury stock | ( | ) | ||||||||||||||||||
| Sale Non controlling interests | — | |||||||||||||||||||
| Distributions Non controlling interest | — | ( | ) | ( | ) | |||||||||||||||
| Income Non controlling interests | — | |||||||||||||||||||
| Balance December 31, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 11
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts and shares in thousands)
(UNAUDITED)
For the Six Months Ended December 31, 2025
| Common Stock | Common Stock Outstanding (Shares) | Class A Preferred Stock (Shares) | Class C Common Stock (Shares) | Paid-in capital in excess of par value | ||||||||||||||||
| Balance – June 30, 2025 | $ | $ | ||||||||||||||||||
| Net Income | — | — | — | |||||||||||||||||
| Distributions – Non controlling interest | — | — | — | |||||||||||||||||
| Income – Non controlling interests | — | — | — | |||||||||||||||||
| Balance – December 31, 2025 | $ | $ | ||||||||||||||||||
| Accumulated Deficit | Treasury Stock | Treasury Stock (Shares) | Non Controlling Interests | Total | ||||||||||||||||
| Balance – June 30, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
| Net Income | — | |||||||||||||||||||
| Distributions – Non controlling interest | — | ( | ) | ( | ) | |||||||||||||||
| Income – Non controlling interests | — | |||||||||||||||||||
| Balance – December 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 12
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts and shares in thousands)
(UNAUDITED)
For the Six Months Ended December 31, 2024
| Common Stock | Common Stock Outstanding (Shares) | Class A Preferred Stock (Shares) | Class C Common Stock (Shares) | Paid-in capital in excess of par value | ||||||||||||||||
| Balance – June 30, 2024 | $ | $ | ||||||||||||||||||
| Net Income | — | — | — | |||||||||||||||||
| Purchase of Treasury stock | — | — | — | |||||||||||||||||
| Cancellation of Treasury stock | ( | ) | — | — | ( | ) | ||||||||||||||
| Sale – Non controlling interests | — | — | — | |||||||||||||||||
| Distributions – Non controlling interest | — | — | — | |||||||||||||||||
| Income – Non controlling interests | — | — | — | |||||||||||||||||
| Balance – December 31, 2024 | $ | $ | ||||||||||||||||||
| Accumulated Deficit | Treasury Stock | Treasury Stock (Shares) | Non Controlling Interests | Total | ||||||||||||||||
| Balance – June 30, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
| Net Income | — | |||||||||||||||||||
| Purchase of Treasury stock | ( | ) | ( | ) | ||||||||||||||||
| Cancellation of Treasury stock | ( | ) | ||||||||||||||||||
| Sale – Non controlling interests | — | |||||||||||||||||||
| Distributions – Non controlling interest | — | ( | ) | ( | ) | |||||||||||||||
| Income – Non controlling interests | — | |||||||||||||||||||
| Balance – December 31, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 13
FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts and shares in thousands)
(UNAUDITED)
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Consolidated net income | $ | $ | ||||||
| Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Net change in operating right-of-use assets and lease liabilities | ( | ) | ||||||
| (Recovery) provision for credit losses | ( | ) | ||||||
| Deferred tax expense | ||||||||
| Changes in operating assets and liabilities, net: | ||||||||
| Accounts, medical and management fee receivable(s) | ( | ) | ( | ) | ||||
| Notes receivable – related party | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Other current liabilities | ( | ) | ( | ) | ||||
| Finance lease liabilities | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Cost of non-compete contract | ( | ) | ||||||
| Proceeds from short-term investments | ||||||||
| Cost of patents | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Repayment of borrowings and capital lease obligations | ( | ) | ||||||
| Sale of noncontrolling interest | ||||||||
| Purchase of treasury stock | ( | ) | ||||||
| Distributions to noncontrolling interests | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net (Decrease) in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents - Beginning of Period | ||||||||
| Cash and Cash Equivalents - End of Period | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Page 14
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
FONAR Corporation (the “Company” or “FONAR”) is a Delaware corporation, which was incorporated on July 17, 1978. FONAR is engaged in the research, development, production and marketing of medical scanning equipment, which uses principles of Magnetic Resonance Imaging (“MRI”) for the detection and diagnosis of human diseases. In addition to the direct sale of MRI equipment, revenue is also generated from our installed-base of customers through our service and upgrade programs.
FONAR, through its wholly-owned subsidiary Health Management Corporation of America (“HMCA”), provides comprehensive management services to diagnostic imaging facilities. The services provided by the Company include development, administration, leasing of office space, facilities and medical equipment, provision of supplies, staffing and supervision of non-medical personnel, legal services, accounting, billing and collection and the development and implementation of practice growth and marketing strategies.
On July 1, 2015, the Company reorganized the segment
of our business dedicated to the management of diagnostic imaging centers. The reorganization integrated the operations of Health Management
Corporation of America and Health Diagnostics Management (“HDM”). Imperial Management Services, LLC contributed all of its
assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a
Proposed Going-Private Transaction
On December 23, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with FONAR, LLC, a Delaware limited liability company (“Parent”), and FONAR Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a subsidiary of Parent following the Merger. Parent and Merger Sub are each affiliated with and owned and controlled, by Timothy Damadian, the Company’s Chief Executive Officer and Chairman of our Board of Directors. Timothy Damadian and other members of a group of 57 total (including Parent and Merger Sub) individuals, trusts, corporations and limited liability companies (we refer to this group, collectively, as the “Acquisition Group”) have proposed to acquire the Company pursuant to and on the terms and conditions set forth in the Merger Agreement. Under the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of our capital stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares, defined below) will be converted into the right to receive cash, without interest and subject to deduction for any required withholding tax, in an amount per share (the “Per
Page 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
Proposed Going-Private Transaction (Continued)
Share Price”) equal to: (i) $19.00 per share of Common Stock, (ii) $19.00 per share of Class B Common Stock, (iii) $6.34 per share of Class C Common Stock, and (iv) $10.50 per share of Class A Non-voting Preferred Stock. Shares held by Parent, by the Company or by any of their respective subsidiaries ( including as treasury shares) will not receive any Merger consideration (the “Excluded Shares”). Pursuant to the terms of the Class B Membership Units Subscription Agreements, dated December 23, 2025, between Parent and each of its equity financing sources (the “Equity Commitment Agreements”), the members of the Acquisition Group who are FONAR stockholders will, immediately prior to the Merger, cause all of their shares of Company Capital Stock and Class A Non-voting Preferred Stock to be contributed (or, alternatively, may elect to contribute an amount of cash equal to the aggregate Per Share Price for all of their FONAR shares) to Parent in exchange for membership units of Parent. All of such shares contributed to Parent are Excluded Shares that at the Effective Time will not receive any Merger consideration.
Consummation of the Merger is subject to the satisfaction or waiver (to the extent permitted by applicable law) of the conditions set forth in the Merger Agreement, including: (1) the approval by the Company’s stockholders in favor of the adoption of the Merger Agreement providing for the Merger by (a) the affirmative vote of shares representing a majority of the Company Capital Stock outstanding and entitled to vote, voting together as a single class, after giving effect to the respective voting powers of each class of Company Capital Stock (the “Company Stockholder Approval”), and (b) the affirmative vote of a majority of the votes cast at the Special Meeting (the “Special Meeting”) by disinterested stockholders of their shares of Company Capital Stock, voting together as a single class, after giving effect to the respective voting powers of each class of Company Capital Stock (the “Disinterested Stockholder Approval” and together with the Company Stockholder Approval, the “Requisite Company Vote”); (2) the expiration or termination of any applicable waiting periods; (3) the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction; (4) the receipt of all consents, approvals and other authorizations of any governmental entity required to consummate the Merger and the other transactions contemplated by the Merger Agreement, free of any condition that would reasonably be expected to have a Company Material Adverse Effect (as defined in the Merger Agreement) or a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by the Merger Agreement; (5) the accuracy of the parties’ representations and warranties, subject to certain qualifiers; and (6) the parties’ compliance in all material respects with their respective pre-closing covenants, subject to the terms of the Merger Agreement.
The Merger Agreement contains customary restrictions on the Company’s ability to solicit alternative acquisition proposals from third parties, subject to a customary “fiduciary out” that permits engagement with a third party in certain circumstances involving a bona fide written Superior Proposal and compliance with specified procedures. FONAR or Parent may terminate the Merger Agreement if the Merger has not been consummated by the “End Date” of March 12, 2026, subject to an automatic extension to the later of 90 days following (a) the date the Company’s definitive proxy statement in connection with the Special Meeting is filed and (b) the date, if applicable, upon which any SEC or other governmental review or investigation is completed. FONAR or Parent also may terminate the Merger Agreement (i) by mutual written consent; (ii) if any governmental entity of competent jurisdiction shall have enacted any law or order making illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement, and such law or order shall have become final and nonappealable (provided, however, that such right to terminate the Merger Agreement shall not be available to any party whose breach of any representation, warranty, covenant, or agreement set forth in the Merger Agreement has been the principal cause of the issuance, promulgation, enforcement, or entry of any such law or order); or (iii) if the Requisite Company Vote is not obtained at the Special Meeting. In addition, Parent may terminate the Merger Agreement if a Company Adverse Recommendation Change (as defined in the Merger Agreement) occurs, if certain non-solicitation or stockholder meeting covenants are breached, or if other specified Company breaches occur that are not cured, and FONAR may terminate the Merger Agreement to enter into a Company Acquisition Agreement (as defined in the Merger Agreement) with respect to a Superior Proposal (as defined in the Merger Agreement) or for
Page 16
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
Proposed Going-Private Transaction (Continued)
specified Parent breaches that are not cured, in each case subject to the conditions and procedures in the Merger Agreement. Upon termination of the Merger Agreement under certain circumstances, the Company will be required to pay Parent a termination fee equal to $450,000, as described in the previously filed Form 8-K with the SEC on December 30, 2025.
A special committee of the Board of Directors (the “Special Committee”), consisting of disinterested and independent directors, approved the Merger and unanimously recommended that the Board of Directors adopt and approve the Merger Agreement. Members of the Acquisition Group that are FONAR stockholders have entered into voting agreements to vote their shares in favor of the Merger Proposal. Subject to the satisfaction or waiver of the conditions to, the Closing is expected to occur in no event later than the End Date of March 12, 2026, as may be extended in accordance with the terms of the Merger Agreement.
Basis of Presentation
These unaudited condensed consolidated financial statements for the six months ended December 31, 2025 have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2025, from which the accompanying condensed consolidated balance sheet at June 30, 2025 was derived. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial information have been included and are of a normal recurring nature.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company evaluates these estimates and judgements on an ongoing basis. The Company bases estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year.
Page 17
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Patient fee revenue
The Company’s revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients and annual management contracts with related and unrelated parties to which the Company provides comprehensive management services. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. The Company’s performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than the Company’s standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
Page 18
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
The Company’s patient fee revenue, net of contractual allowances and discounts for the three and six months ended December 31, 2025 and 2024 are summarized in the following table:
| For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Commercial Insurance/Managed Care | $ | $ | ||||||
| Medicare/Medicaid | ||||||||
| Workers’ Compensation/Personal Injury | ||||||||
| Other | ||||||||
| Net Patient Fee Revenue | $ | $ | ||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Commercial Insurance/Managed Care | $ | $ | ||||||
| Medicare/Medicaid | ||||||||
| Workers’ Compensation/Personal Injury | ||||||||
| Other | ||||||||
| Net Patient Fee Revenue | $ | $ | ||||||
Medical Receivable
Medical receivables are due under fee-for-service contracts from third-party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. Medical receivables are recorded at net realizable value based on the estimated amounts the Company expects to receive from patients and third-party payers. The medical receivable is reduced by an allowance for contractual adjustments based on the historical experience with each payor class at each location.
Page 19
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management and other fees revenue
HMCA generates management and other fees revenues (including management and other fees revenue from related parties) 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. Revenues are in the form of fees which are earned under annual management contracts with HMCA clients. Management and other fees revenue are recognized ratably over time as the services are provided throughout the term of the contract.
Revenue on sales contracts for scanners, included in “product sales” is recognized under the percentage-of-completion method in accordance with FASB ASC 606 “Revenue Recognition – Construction-Type and Production-Type Contracts”. The Company manufactures its scanners under specific contracts that provide for progress payments. Production and installation takes approximately three to six months.
Revenue on scanner service contracts is recognized on the straight-line method over the related contract period, usually one year.
Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC Topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the converted method in calculating diluted income per share for the three and six months ended December 31, 2025 and 2024.
Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and six months ended December 31, 2025 and 2024, diluted EPS for common shareholders includes shares upon conversion of Class C Common.
Page 20
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per share (Continued)
| Three months ended December 31, 2025 | Three months ended December 31, 2024 | |||||||||||||||||||||||||||||||
| Total | Common Stock | Class C Common Stock | Class A Preferred Stock | Total | Common Stock | Class C Common Stock | Class A Preferred Stock | |||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic income per common share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Convertible Class C Stock | ||||||||||||||||||||||||||||||||
| Total Denominator for diluted earnings per share | ||||||||||||||||||||||||||||||||
| Diluted income per common share | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Page 21
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per share (Continued)
| Six months ended December 31, 2025 | Six months ended December 31, 2024 | |||||||||||||||||||||||||||||||
| Total | Common Stock | Class C Common Stock | Class A Preferred Stock | Total | Common Stock | Class C Common Stock | Class A Preferred Stock | |||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic income per common share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Convertible Class C Stock | ||||||||||||||||||||||||||||||||
| Total Denominator for diluted earnings per share | ||||||||||||||||||||||||||||||||
| Diluted income per common share | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Recent Accounting Standards or Updates Not Yet Adopted
Income Taxes
In December 2023, The Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (740): “Improvements to Income Tax Disclosures”, which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. The ASU will be effective for our annual financial statements starting in fiscal 2026 and interim periods beginning in the first quarter of fiscal 2027, with early adoption permitted. We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our income tax disclosures.
Page 22
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Standards or Updates Not Yet Adopted
On June 30, 2025, the Company adopted Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in this update are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The disclosures required by ASU 2023-07 can be found in Note 9 – Segment Information of these consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures” (Subtopic 220-40): Disaggregation of Income Statement Expenses”. This ASU requires disaggregation of certain income statement expense captions into specified categories to be disclosed within the notes to the condensed consolidated financial statements, but does not change the expense captions on the income statement. The amendments in this ASU are to be applied prospectively, although retrospective application is permitted, and is effective for annual financial statements starting in fiscal 2028 and interim periods starting in fiscal 2029, with early adoption permitted. The Company is currently evaluating the effect that the adoption of ASU 2024-03 will have on our disclosures.
FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of December 31, 2025 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2025 or 2024, and it does not believe that any of those standards will have a significant impact on our unaudited consolidated condensed financial statements at the time they become effective.
Page 23
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE
Receivables, net are comprised of the following at December 31, 2025 and June 30, 2025:
| December 31, 2025 | ||||||||||||
| Gross Receivable | Allowance for credit losses | Net | ||||||||||
| Accounts receivable | $ | $ | $ | |||||||||
| Accounts receivable - related party | $ | $ | $ | |||||||||
| Medical receivable | $ | $ | $ | |||||||||
| Management and other fees receivable | $ | $ | $ | |||||||||
| Management and other fees receivable from related medical practices (“PC’s”) | $ | $ | $ | |||||||||
| June 30, 2025 | ||||||||||||
| Gross Receivable | Allowance for credit losses | Net | ||||||||||
| Accounts receivable | $ | $ | $ | |||||||||
| Medical receivable | $ | $ | $ | |||||||||
| Management and other fees receivable | $ | $ | $ | |||||||||
| Management and other fees receivable from related medical practices (“PC’s”) | $ | $ | $ | |||||||||
The Company’s customers are concentrated in the healthcare industry.
Accounts Receivable
Credit risk with respect to the Company’s accounts receivable related to product sales and service and repair fees is limited due to the customer advances received prior to the commencement of work performed and the billing of amounts to customers as sub-assemblies are completed. Service and repair fees are billed on a monthly or quarterly basis and the Company does not continue providing these services if accounts receivable become past due. The Company has established a current expected credit loss (“CECL”) to address the risk that a portion of these fees will not be paid. The Company controls credit risk with respect to accounts receivable from service and repair fees through its credit evaluation process, credit limits, monitoring procedures and reasonably short collection terms. The Company performs ongoing credit authorizations before a product sales contract is entered into or service and repair fees are provided.
Page 24
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (CONTINUED)
The following tables presents information related to the allowance for credit losses that relate to accounts and management and other fees receivable:
| Summary of Allowance For Credit Losses | ||||||||||||||||
| Description | Balance June 30, 2025 | Additions (Recovery) | Deductions | Balance Dec. 31, 2025 | ||||||||||||
| Accounts receivable | $ | $ | $ | ( | ) | $ | ||||||||||
| Management and other fees receivable | ( | ) | ||||||||||||||
| Management and other fees receivable - related medical practices | ||||||||||||||||
| Balance | Balance | |||||||||||||||
| Description | June 30, 2024 | Additions (Recovery) | Deductions | June 30, 2025 | ||||||||||||
| Accounts receivable | $ | $ | $ | ( | ) | $ | ||||||||||
| Management and other fees receivable | ( | ) | ||||||||||||||
| Management and other fees receivable - related medical practices | ||||||||||||||||
Long Term-Accounts Receivable
Long term-accounts receivable balances at December 31, 2025 and June 30, 2025 amounted to $3,428 and $3,550, respectively. The Company will generate revenue from long-term, non-cancellable contracts to provide service and repair services. Future revenue to be recognized over the following four years as of December 31, 2025 is as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Total | $ |
Page 25
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (CONTINUED)
Medical Receivables
Medical receivables are due under fee-for-service contracts from third-party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. Medical receivables are recorded at net realizable value based on the estimated amounts the Company expects to receive from patients and third-party payors. The medical receivable is reduced by contractual adjustments based on the historical experience with each payor class at each location.
Management and Other Fees Receivable
Management fees receivable is related to management fees outstanding from the related and non-related centers under management agreements. The Company has established a CECL reserve 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 fee 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 CECL reserve is determined based on the difference between the management fee receivable and the current amount of outstanding fees estimated to be collected by the PCs.
The Company’s considerations into the estimate of the PCs’ fee collection is based on a combination of factors. As each management agreement specifies the Company’s ultimate collateral for unpaid management fees are the patient fee receivables owned by each PC, the Company considers the historical loss rates to pools of receivables with similar risks characteristics, aging of the patient fee receivables, and the financial condition of each PC. In addition, the Company subjectively adjusts its estimated expected credit losses for current and forward-looking economic conditions which would include trends seen within the industry and newly enacted regulations. The Company also incorporates qualitative factors, such as changes in the nature and volume of receivables, regulatory changes, and other relevant factors. Specifically, insurance carriers covering automobile no-fault and workers’ compensation claims incur longer payment cycles, rigorous informational requirements and certain other disallowed claims.
The Company combines an objective and subjective loss-rate methodology to estimate expected credit losses based on the collateral owned by each PC. This involves objectively using historical loss rates to pools of receivables with similar risk characteristics (i.e., various insurance payors) and then subjectively adjusting for current and forward-looking economic conditions which would include trends seen within the industry and newly enacted regulations. The Company also incorporates qualitative factors, such as changes in the nature and volume of the receivables, regulatory changes, and other relevant factors. Additional Company managed entities also operate under a guaranty agreement, pursuant to which management fees are payable to the Company.
Page 26
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (CONTINUED)
For LLCs owned by the Company, approximately
For LLCs owned by the Company, approximately
Net revenues from management and other fees charged
to the related PCs accounted for approximately
NOTE 4 – OPERATING AND FINANCING LEASES
The Company accounts for its various operating leases in accordance with Accounting Standards Codification (ASC) 842 – “Leases”, as updated by ASU 2016-02. At the inception of a lease, the Company recognizes right-of-use lease assets and related lease liabilities measured at present value of future lease payments on its balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. The Company most common initial term varies in length from 2 to 19 years. Including renewal options negotiated with the landlord, we have a total span of 2 to 16 years at the facilities we lease. The Company reviewed its contracts with vendors and customers, determining that its right-of-use lease assets consisted of only office space operating leases. In determining the right-of-use lease assets and liabilities, the Company did recognize lease extension options which the Company feels would be reasonably exercised. Our incremental borrowing rate (“IBR”) used to discount the stream of operating lease payments is closely related to the interest rates available to the Company.
A reconciliation of operating and financing lease payments undiscounted cash flows to lease liabilities recognized as of December 31, 2025 is as follows:
| 12 Months Ending December 31, | Operating Lease Payments | Financing Lease Payments | |||||||
| 2026 | $ | $ | |||||||
| 2027 | |||||||||
| 2028 | |||||||||
| 2029 | |||||||||
| 2030 | |||||||||
| Thereafter | |||||||||
| Present value discount | ( | ) | |||||||
| Total lease liability | $ | $ | |||||||
Page 27
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 4 – OPERATING AND FINANCING LEASES (CONTINUED)
Weighted Average Remaining Lease Term
| For the six months ended Dec. 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating leases - years | ||||||||
| Finance lease - years | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
| Finance lease | % | % | ||||||
The components of lease expense were as follows:
| Components of lease expense | ||||||||
| For the six months ended Dec. 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Depreciation of leased equipment | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | $ | $ | ||||||
Supplemental cash flow information related to leases was as follows:
| Supplemental cash flow information related to leases | ||||||||
| For the six months ended Dec. 31, | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | 2025 | 2024 | ||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Financing cash flows from financing leases | $ | $ | ||||||
| Right-of-use and equipment assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
Page 28
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment, at cost, less accumulated depreciation and amortization included in the accompanying condensed consolidated balance sheets is comprised of:
| December 31, 2025 | June 30, 2025 | |||||||
| Diagnostic equipment | $ | $ | ||||||
| Research, development and demonstration equipment | ||||||||
| Machinery and equipment | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Building | ||||||||
| Less: Accumulated depreciation and amortization | ||||||||
| $ | $ | |||||||
Depreciation of property and equipment for the three
months ended December 31, 2025 and 2024 was $
NOTE 6 - INVENTORIES
Inventories included in the accompanying condensed consolidated balance sheets consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| Purchased parts, components and supplies | $ | $ | ||||||
| Work-in-process | ||||||||
| Total inventories | $ | $ | ||||||
Page 29
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 7 – OTHER INTANGIBLE ASSETS
Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following:
| Weighted average useful lives | Gross carrying amount – December 31, 2025 | Accumulated amortization – December 31, 2025 | Net carrying amount – December 31, 2025 | |||||||||||||
| Capitalized software development costs | | $ | $ | ( | ) | $ | ||||||||||
| Software License | ( | ) | ||||||||||||||
| Patents and copy rights | ( | ) | ||||||||||||||
| Non-compete | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
| Weighted average useful lives | Gross carrying amount – June 30, 2025 | Accumulated amortization – June 30, 2025 | Net carrying amount – June 30, 2025 | |||||||||||||
| Capitalized software development costs | | $ | $ | ( | ) | $ | ||||||||||
| Software License | ( | ) | ||||||||||||||
| Patents and copy rights | ( | ) | ||||||||||||||
| Non-compete | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 7 – OTHER INTANGIBLE ASSETS (CONTINUED)
Amortization of patents and copyrights for the three
months ended December 31, 2025 and 2024 amounted to $
Amortization of customer relationships for the three
months ended December 31, 2025 and 2024 amounted to $
Amortization of software license for the three months
ended December 31, 2025 and 2024 amounted to $
Amortization of employment contract for the three
months ended December 31, 2025 and 2024 amounted to $
The estimated amortization of other intangible assets for the five years ending December 31, 2030 and thereafter is as follows:
| Schedule Of Other Intangible Assets For the Years Ending December 31, | Total | Software License | Non- Compete | Patents and Copyrights | Customer Relationships | ||||||||||||||||
| 2026 | $ | $ | $ | $ | $ | ||||||||||||||||
| 2027 | |||||||||||||||||||||
| 2028 | |||||||||||||||||||||
| 2029 | |||||||||||||||||||||
| 2030 | |||||||||||||||||||||
| Thereafter | |||||||||||||||||||||
| Other intangible assets - net | $ | $ | $ | $ | $ | ||||||||||||||||
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 8 – OTHER CURRENT LIABILITIES
Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| Accrued salaries, commissions and payroll taxes | $ | $ | ||||||
| Sales tax payable | ||||||||
| Self-funded health insurance reserve | ||||||||
| Property taxes | ||||||||
| Utilities | ||||||||
| Legal and other professional fees | ||||||||
| Accounting fees | ||||||||
| Software Licenses | ||||||||
| Recruiting fees | ||||||||
| Medical supplies | ||||||||
| Other general and administrative expenses | ||||||||
| Other current liabilities | $ | $ | ||||||
NOTE 9 - SEGMENT AND RELATED INFORMATION
The Company operates in two reportable segments - manufacturing and the service of medical equipment and management of diagnostic imaging centers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2025. All inter segment sales are market-based. The Company evaluates performance based on income or loss from operations.
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 9 - SEGMENT AND RELATED INFORMATION (CONTINUED)
Summarized financial information concerning the Company’s reportable segments is shown in the following table:
| Manufacturing and Servicing of Medical | Management of Diagnostic Imaging | |||||||||||
| Three months ended December 31, 2025 | Equipment | Centers | Totals | |||||||||
| Net revenues from external customers | $ | $ | $ | |||||||||
| Cost of Sales | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other Cost of sales expenses** | ||||||||||||
| Total Cost of sales | $ | $ | $ | |||||||||
| Research and development | ||||||||||||
| Salaries and wages | ||||||||||||
| Other research and development costs** | ||||||||||||
| Total Research and development costs | $ | $ | $ | |||||||||
| Selling, general and administrative expenses | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other selling, general and administrative expenses** | ||||||||||||
| Total Selling, general and administrative expenses | $ | $ | $ | |||||||||
| Total costs and expenses | $ | $ | $ | |||||||||
| (Loss) Income from operations | $ | ( | ) | $ | $ | |||||||
| Investment income | ||||||||||||
| Other income | ( | ) | ||||||||||
| (Loss) Income before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Net (Loss) income | $ | ( | ) | $ | $ | |||||||
| Intersegment net revenues * | ||||||||||||
| Depreciation and amortization | ||||||||||||
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 9 - SEGMENT AND RELATED INFORMATION (CONTINUED)
| Manufacturing and Servicing of Medical | Management of Diagnostic Imaging | |||||||||||
| Three months ended December 31, 2024 | Equipment | Centers | Totals | |||||||||
| Net revenues from external customers | $ | $ | $ | |||||||||
| Cost of Sales | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other Cost of sales expenses** | ||||||||||||
| Total Cost of sales | $ | $ | $ | |||||||||
| Research and development | ||||||||||||
| Salaries and wages | ||||||||||||
| Other research and development costs** | ||||||||||||
| Total Research and development costs | $ | $ | $ | |||||||||
| Selling, general and administrative expenses | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other selling, general and administrative expenses** | ||||||||||||
| Total Selling, general and administrative expenses | $ | $ | $ | |||||||||
| Total costs and expenses | $ | $ | $ | |||||||||
| (Loss) Income from operations | $ | ( | ) | $ | $ | |||||||
| Investment income | ||||||||||||
| Other income (expense) | ( | ) | ||||||||||
| (Loss) Income before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||
| Net (Loss) income | $ | ( | ) | $ | $ | |||||||
| Intersegment net revenues * | ||||||||||||
| Depreciation and amortization | ||||||||||||
*Amounts eliminated in consolidation
** Other segment costs include supplies, professional fees, marketing expenses, repairs and maintenance and other operational costs.
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 9 - SEGMENT AND RELATED INFORMATION (CONTINUED)
| Manufacturing and Servicing of Medical | Management of Diagnostic Imaging | |||||||||||
| Six months ended December 31, 2025 | Equipment | Centers | Totals | |||||||||
| Net revenues from external customers | $ | $ | $ | |||||||||
| Cost of Sales | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other Cost of sales expenses** | ||||||||||||
| Total Cost of sales | $ | $ | $ | |||||||||
| Research and development | ||||||||||||
| Salaries and wages | ||||||||||||
| Other research and development costs** | ||||||||||||
| Total Research and development costs | $ | $ | $ | |||||||||
| Selling, general and administrative expenses | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other selling, general and administrative expenses** | ||||||||||||
| Total Selling, general and administrative expenses | $ | $ | $ | |||||||||
| Total costs and expenses | $ | $ | $ | |||||||||
| (Loss) Income from operations | $ | ( | ) | $ | $ | |||||||
| Investment income | ||||||||||||
| Other income (expense) | ( | ) | ||||||||||
| (Loss) Income before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Net (Loss) income | $ | ( | ) | $ | $ | |||||||
| Intersegment net revenues * | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Total identifiable assets | $ | $ | $ | |||||||||
* Amounts eliminated in consolidation
** Other segment costs include supplies, professional fees, marketing expenses, repairs and maintenance and other operational costs.
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 9 - SEGMENT AND RELATED INFORMATION (CONTINUED)
| Manufacturing and Servicing of Medical | Management of Diagnostic Imaging | |||||||||||
| Six months ended December 31, 2024 | Equipment | Centers | Totals | |||||||||
| Net revenues from external customers | $ | $ | $ | |||||||||
| Cost of Sales | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other Cost of sales expenses** | ||||||||||||
| Total Cost of sales | $ | $ | $ | |||||||||
| Research and development | ||||||||||||
| Salaries and wages | ||||||||||||
| Other research and development costs** | ||||||||||||
| Total Research and development costs | $ | $ | $ | |||||||||
| Selling, general and administrative expenses | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expense | ||||||||||||
| Other selling, general and administrative expenses** | ||||||||||||
| Total Selling, general and administrative expenses | $ | $ | $ | |||||||||
| Total costs and expenses | $ | $ | $ | |||||||||
| (Loss) Income from operations | $ | ( | ) | $ | $ | |||||||
| Investment income | ||||||||||||
| Other income (expense) | ( | ) | ||||||||||
| (Loss) Income before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Net (Loss) income | $ | ( | ) | $ | $ | |||||||
| Intersegment net revenues * | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Total identifiable assets | $ | $ | $ | |||||||||
* Amounts eliminated in consolidation
** Other segment costs include supplies, professional fees, marketing expenses, repairs and maintenance and other operational costs.
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FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 10 – SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended December 31, 2025 and
2024, the Company paid $
During the six months ended December 31, 2025 and
2024, the Company paid $
During the six months ended December 31, 2024, the
Company sold a
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
In the ordinary course of its business, the Company is a party to various lawsuits arising from the operations at the MRI sites and other insurance related matters, which are generally handled by the Company’s insurance carriers. Management believes, based in part on the advice counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
Other than as described under Note 14, there were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2025.
Other Matters
On September 13, 2022, the Company adopted a stock
repurchase plan. The plan has no expiration date and cannot determine the number of shares which will be repurchased. On September 26,
2022, the Board of Directors approved up to $
Page 37
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 11 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
Other Matters (continued)
The Company maintains a self-funded health insurance
program with a stop-loss umbrella policy with a third-party insurer to limit the maximum potential liability for individual claims to
$
The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant adjustments recorded in the periods covered by this report.
NOTE 12 - INCOME TAXES
In accordance with ASC 740-270, “Income Taxes
– Interim Reporting”, the Company is required at the end of each interim period to determine the best estimate of its annual
effective tax rate and apply that rate to year-to-date ordinary income or loss. The resulting tax expense (or benefit) is adjusted for
the tax effect of specific events, if any, required to be discretely recognized in the interim period as they occur. For the six months
ended December 31, 2025 and 2024, the Company recorded income tax expense of $
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC Topic 740. The Company believes there are no uncertain tax positions in prior year tax filings and therefore it has not recorded a liability for unrecognized tax benefits.
Page 38
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 12 - INCOME TAXES (CONTINUED)
The Company recorded a deferred tax asset of $
The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2021.
Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization of net operating loss carryforwards. As of December 31, 2025, no such changes in ownership have occurred.
On July 4, 2025, the One Big Beautiful Act (“OBBA”) was signed into law, which enacts significant changes to the U.S. tax and related laws. Some of the provisions of the new tax law that affect corporations include but are not limited to expensing of domestic specified research or experimental expenditures, increasing the limit of the deduction to 30% of EBITDA, and 100% percent bonus depreciation on eligible property acquired after January 19, 2025. The Company is currently evaluating the impact that the new tax law will have on its financial condition and results of operations.
NOTE 13 - RELATED PARTY TRANSACTIONS
Tallahassee Magnetic Resonance Imaging, Inc., Stand
Up MRI of Boca Raton, Inc., and Stand Up MRI & Diagnostic Center, Inc. (all related medical practices) entered into a guaranty agreement,
pursuant to which they cross guaranteed all management fees which are payable to the Company, which have arisen under each individual
management agreement. As of December 31, 2025 and June 30, 2025, the net revenues owed to the Company was $
Integrity Healthcare Management, LLC, which is owned by the CEO and President of the Company owns a 7.1% interest in HMCA’s Class A membership and receives distributions from the Company.
Page 39
FONAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
(Amounts and shares in thousands, except per share amounts)
(UNAUDITED)
NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)
On December 31, 2023, the Company entered into an
agreement with Magnetic Resonance Management, LLC (“MRM”) for the sale of a MRI scanner. MRM is owned by the CEO and President
of the Company. The sales price of the equipment was $
There was a special one-time cash fees paid to the
Company’s disinterested directors for their service on the Special Committee, which were paid in six equal monthly installments
beginning in July 2025 and ending in December 2025 and were not contingent on consummation of the Merger or upon any other factor. Rick
Turk received $
NOTE 14 - SUBSEQUENT EVENTS
The Company has evaluated events that occurred subsequent to December 31, 2025 and through the date the condensed consolidated financial statements were issued.
On February 2, 2026, a Verified Stockholder Class Action Complaint entitled Bruce Taylor v. Fonar Corporation et al., C.A. No. 2026-0142-JTL (Del. Ch.) (the “Complaint”), was filed in the Delaware Court of Chancery by a putative FONAR stockholder (the “Delaware Plaintiff”), on behalf of himself and all other similarly situated stockholders, against FONAR, the Parent Entities and members of the FONAR Board. The Complaint alleges that the Parent Entities reached an “agreement, arrangement or understanding,” as those terms are defined in Section 203 of the Delaware General Corporation Law (“DGCL”) (“Section 203”), among certain FONAR stockholders prior to the FONAR Board’s approval of the Merger, thereby triggering Section 203’s requirement that at least 66 2/3% of the outstanding Company Capital Stock unaffiliated with the Parent Entities vote in favor of the Merger (after giving effect to the respective voting powers of each class of Company Capital Stock under FONAR’s existing amended and restated certificate of incorporation). The Complaint seeks, among other things, (1) an order declaring that the Merger is subject to Section 203’s supermajority voting requirement, (2) an order enjoining the vote on the Merger unless and until stockholders are informed that the Merger can close only if it is subject to Section 203’s supermajority voting requirement, and (3) a finding that the members of the Board of Directors breached their fiduciary duties by entering into the Merger Agreement without providing for a supermajority stockholder vote contemplated by Section 203. FONAR disputes the Complaint’s allegations, including the allegation that Section 203’s supermajority voting requirement applies to the Merger.
Page 40
FONAR CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, item 1 of the Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended June 30, 2024 included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”) on September 22, 2025.
Forward Looking Statements
We make statements in this Quarterly Report on Form 10-Q regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements, other than statements of historical facts, included or incorporated by reference herein relating to management’s current expectations of future financial performance, continued growth and changes in economic conditions or capital markets are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “outlook,” “plan,” “predict,” “project,” “should,” “target,” “will,” “would,” and similar expressions, although not all forward-looking statements contain these words.
Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those expressed. We caution that while we make such statements in good faith and we believe such statements are based on reasonable assumptions, including without limitation, management’s examination of historical operating trends, data contained in records and other data available from third parties, we cannot assure you that our projections will be accurate. Factors that may cause such differences include, but are not limited to: economic conditions generally and in each of the markets in which we are located, the amount of sales contributed by new and existing locations, labor costs for our personnel, and the level of competition from existing or new competitors. Other factors, many of which are beyond our control, may also impact our forward-looking statements. We caution our stockholders that any forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements.
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of unknown factors, and it is impossible for us to anticipate all factors that could affect our actual results. 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
Page 41
FONAR CORPORATION AND SUBSIDIARIES
The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. All forward-looking statements are expressly qualified in their entirety by these cautionary statements.
Critical Accounting Estimates
There have been no material changes in our Critical Accounting Estimates from the information provided in the “Critical Accounting Estimates” section of “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Proposed Going-Private Transaction
On December 23, 2025, the Company entered into the Merger Agreement with Parent, and Merger Sub. The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a subsidiary of Parent following such Merger. Parent and Merger Sub are each affiliated with and owned and controlled, by Timothy Damadian, the Company’s Chief Executive Officer and Chairman of our Board of Directors. Timothy Damadian and other members of a group of 57 total (including Parent and Merger Sub) individuals, trusts, corporations and limited liability companies (we refer to this group, collectively, as the “Acquisition Group”) have proposed to acquire the Company pursuant to and on the terms and conditions set forth in the Merger Agreement.. Under the Merger Agreement, at the Effective Time, each share of our capital stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares, defined below) will be converted into the right to receive cash, without interest and subject to deduction for any required withholding tax, in an amount equal to the applicable Per Share Price of: (i) $19.00 per share of Common Stock, (ii) $19.00 per share of Class B Common Stock, (iii) $6.34 per share of Class C Common Stock, and (iv) $10.50 per share of Class A Non-voting Preferred Stock. Excluded Shares (including shares held by Parent, by the Company or any of their respective subsidiaries, and treasury shares) will not receive any Merger consideration. Pursuant to the terms of the Equity Commitment Agreements, the members of the Acquisition Group who are FONAR stockholders will, immediately prior to the Merger, cause all of their shares of Company Capital Stock and Class A Non-voting Preferred Stock to be contributed (or, alternatively, may elect to contribute an amount of cash equal to the aggregate Per Share Price for all of their FONAR shares) to Parent in exchange for membership units of Parent. All of such shares contributed to Parent are Excluded Shares that at the Effective Time will not receive any Merger consideration.
Consummation of the Merger is subject to the satisfaction or waiver (to the extent permitted by applicable law) of the conditions set forth in the Merger Agreement, including: (1) the approval by the Requisite Company Vote of the Company’s stockholders at the Special Meeting, in favor of the adoption of the Merger Agreement providing for the Merger; (2) the expiration or termination of any applicable waiting periods; (3) the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction; (4) the receipt of all consents, approvals and other authorizations of any governmental entity required to consummate the Merger and the other transactions contemplated by the Merger Agreement, free of any condition that would reasonably be expected to have a Company Material Adverse Effect or a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by the Merger Agreement; (5) the accuracy of the parties’ representations and warranties, subject to certain qualifiers; and (6) the parties’ compliance in all material respects with their respective pre-closing covenants, subject to the terms of the Merger Agreement.
We are subject to customary restrictions on our ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, subject to customary exceptions.
Page 42
FONAR CORPORATION AND SUBSIDIARIES
For a summary of the transaction, see our Form 8-K filed with the SEC on December 30, 2025
Results of Operations
We operate in two reportable segments: the manufacture and servicing of medical (“MRI”) equipment, which is conducted by FONAR and diagnostic facilities management services, which is conducted through HMCA.
For the six month period ended December 31, 2025, we reported net income of $5.2 million on revenues of $51.6 million as compared to net income of $6.2 million on revenues of $50.0 million for the six month period ended December 31, 2024. Operating income decreased from $7.0 million for the six month period ended December 31, 2024 to $6.2 million for the six month period ended December 31, 2025. Revenues from product sales and service and repair fees increased from $4.0 million for the first six months of fiscal 2025 as compared to $4.9 million for the first six months of fiscal 2026.
For the three month period ended December 31, 2025, we reported a net income of $2.5 on revenues of $25.5 as compared to net income of $2.2 million on revenues of $25.0 for the three month period ended December 31, 2024.
The revenue increase, from $50.0 million for the six months of fiscal 2025 to $51.6 million for the six months of fiscal 2026, was due to increases in management and other fees of $1.3 million, from $30.5 million for the six months of fiscal 2025 to $31.8 million for the six months of fiscal 2026 along with increases in product sales and service and repair fees of $900,000, from $4.0 million for the six months of fiscal 2025 to $4.9 million for the six months of fiscal 2026. This was offset by a decrease of approximately $560,000 in patient fee revenue from $15.4 million for the first six months of fiscal 2025 to $14.9 million for the first six months of fiscal 2026.
The small increase in revenue from $25.0 million for the three month period ended December 31, 2024 to $25.5 for the three month period ended December 31, 2025 can be attributed mainly due and increase in service and repair fees. Services and repair fees for the three month period ended December 31, 2025 was $2.1 million as compared to $1.8 million for the three month December 31, 2024.
During the first half of fiscal 2026, the aggregate number of scans performed by the sites we own and manage increased to 109,952 scans from 106,168 scans in the first half of fiscal 2025. We attribute this increase the absence of hurricane related closures that we experienced in the first quarter of 2025.
The combination of our small increase in revenues along with our costs and expenses increasing at a larger rate caused our operating income to decrease to $6.2 million for the six months ended December 31, 2025 as compared to $7.0 million for the six months ended December 31, 2024. In terms of percentages, costs and expenses increased 5.9% to $45.4 million for the first six months of fiscal 2026 as compared to $42.9 million for the first six months of fiscal 2026, while revenues increased 3.3% to $51.6 million for the first six months of fiscal 2026 as compared to $50.0 million for the first three months of fiscal 2025
In contrast, our operating income increased from $2.4 million for the three months ended December 31, 2024 to $3.0 million for the three months ended December 31, 2025. This is a result of revenues increasing from $25.0 million for the three months ending December 31, 2024 to $25.5 million for the three months ended December 31, 2025 while total costs and expenses remained constant at $22.5 for the three months ended December 31, 2025 and 2024.
Page 43
FONAR CORPORATION AND SUBSIDIARIES
The increase in costs and expenses is attributable to several factors. The Company also incurred expenses related to the proposed take private transaction in the form of independent director compensation, legal fees and financial advisor fees. The Company also made several expenditures related to information technology software and cybersecurity improvements in response to deficiencies that were identified during our most recent audit. Further, we took additional credit losses of $160,000 which was mainly due to increase reserves for the outstanding balance of American Transit Insurance Company. Other additional costs incurred were due to the expenses relating to our subsidiary dedicated to the maintenance and repair of non-FONAR equipment. These costs were lower in the prior period.
As a result of our costs and expenses increasing at a higher rate than our revenues, our operating income decreased from $7.0 million for the six-month period ended December 31, 2024 to $6.2 million for the six months ended December 31, 2025. In terms of percentages, costs and expenses increased 5.9% to $45.4 million for the six months ended December 31, 2025 as compared to $42.9 million for the six months ended December 31, 2024, while revenues increased 3.3% to $51.6 million for the six months ended December 31, 2025 as compared to $49.9 million for the six months ended December 31, 2024.
Management of Diagnostic Imaging Centers
HMCA revenues increased in the first six months of fiscal 2026 by 1.6% to $46.7 million from $45.9 million for the first six months of fiscal 2024. The percentage of our revenues derived from our diagnostic facilities management segment relative to the percentage of our total revenues decreased slightly to 90.5% for the first six months of fiscal 2026, from 92.0% for the first six months of fiscal 2025.
HMCA’s revenues remained constant at $23.1 million for the three months ending December 31, 2025 and 2024.
HMCA’s operating income for the first six months of fiscal 2026 was $8.9 million compared to operating income of $9.4 million for the first six months of fiscal 2025. The increase in operating revenue was offset by a combination of increased costs and expenses.
HMCA’s cost of revenues for the first six months of fiscal 2026 increased to $28.6 million as compared to $27.6 million for the first six months of fiscal 2025. HMCA’s cost of revenues also increased from $14.0 million for the three months ended December 31, 2024 to $14.4 million for the three months ended December 31, 2025. This increase is the result of increased expenses from scanning volume at our HMCA-managed sites, where revenues are fixed pursuant to the management agreements.
We now manage or own a total of 45 MRI scanners. Twenty-seven (27) MRI scanners are located in New York and eighteen (18) are located in Florida. The ability of HMCA to maintain its profitability is principally due to HMCA’s success in marketing the scanning services of the facilities managed or owned by HMCA, notwithstanding the decrease in reimbursement rates paid for MRI scans by insurers, Medicare and other government programs. The reductions in reimbursement rates are not unique to HMCA or HMCA’s clients.
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Medicare reimbursement rates for MRI scans are flat year over year for calendar year 2026. The Medicare rate dictates the reimbursement rates for many commercial insurers and government programs which tie their reimbursement rates to the Medicare rates. In contrast, operational costs, most significantly MRI technologist and radiologist compensation, have been rapidly increasing in recent years. The combination of increasing costs and stagnant reimbursement rates create operational challenges in maintaining our historic performance levels. We are committed to improving our operating results and dealing with the challenges posed by legislative and regulatory requirements. Factors beyond our control, such as the timing and rate of market growth, economic conditions, the availability of credit and payor reimbursement rates, or unexpected expenditures and the timing of such expenditures, make it difficult to forecast future operating results.
Medical Equipment - Manufacturing and Service of MRI Equipment
Revenues from MRI product sales increased to $442,000 for the first six months of fiscal 2026 from $145,000 for the first six months of fiscal 2025. Costs related to product sales increased from $442,000 for the six month period ended December 31, 2024 to $539,000 for the six month period ended December 31, 2025. Economic uncertainty and lower reimbursement rates for MRI scans, have depressed the market for our MRI scanner products, notwithstanding our scanners’ unique technological capabilities (e.g., multi-positional scanning). Due to the low sales volumes of our MRI product, period to period comparisons are not necessarily indicative of any trends.
Service and repair fees revenue increased to $4.5 million for the six month period ended December 31, 2025 from $3.8 million for the six month period ended December 31, 2024. Service and repair fees revenue also increased to $2.2 million for the three month period ending December 31, 2025 from $1.8 million for the three month period ended December 31, 2024.
Costs relating to providing service increased to $2.3 million in the first six months of fiscal 2026 as compared to $2.1 million for the first six months of fiscal 2025. These costs are attributable to spending on our subsidiary dedicated to the maintenance and repair of non-FONAR MRI equipment. Because of our ability to remotely monitor the performance of customers’ scanners on a daily basis and to detect and repair any irregularities before more serious and costly problems develop, we have been able to contain our costs of providing service.
There were approximately $314,000 in foreign revenues for the first six months of fiscal 2026 and for the first six months of fiscal 2025.
Consolidated
For the first six months of fiscal 2026, our consolidated net revenues increased by 3.3% to $51.6 million from $50.0 million for the first six months of fiscal 2025, and total costs and expenses increased by 5.9% to $45.4 million from the first six months of fiscal 2026 as compared to $42.9 million for the first six months of fiscal 2025, respectively. As a result, our operating income decreased to $6.2 million in the first six months of fiscal 2026 as compared to $7.0 million in the first six months of fiscal 2025. An increase in selling, general and other administrative costs and costs related to management and other fees resulted in cost and expenses increase at a much higher percentage as compared to the increase in net revenues.
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Selling, general and administrative expenses increased to $13.1 million in the first six months of fiscal 2026 from $12.1 million in the first six months of fiscal 2025. As detailed above, several factors contributed to this increase, including expenses related to the proposed merger, spending associated with information technology and cybersecurity infrastructure improvement, and the fiscal 2025 adjustment of expense accrual.
Research and development expenses increased by 31.0% to $895,000 for the first six months of fiscal 2026 from $683,000 for the first six months of fiscal 2025.
Interest expense in the first six months of fiscal 2026 decreased by 64.2% to $5 from $14 in the first six months of fiscal 2025.
The results of operations for the first six months of fiscal 2026 reflect an increase in revenues from management, patient and other fees, as compared to the first six months of fiscal 2025 ($46.7 million for the first six months of fiscal 2026 as compared to $45.9 million for the first six months of fiscal 2025), coupled with an increase in the total cost and expenses ($45.4 million for the first six months of fiscal 2026 as compared to $42.9 million for the first six months of fiscal 2025). Revenues were 9.5% from the MRI equipment segment and 90.5% from HMCA, for the first six months of fiscal 2026, as compared to 8.0% from the MRI equipment segment and 92.0% from HMCA for the first six months of fiscal 2025.
Liquidity and Capital Resources
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. The management of the diagnostic imaging centers business segment is being conducted by HDM, operating under the name “Health Management Company of America”. For the sake of simplicity, HMCA, and HDM are referred to as “HMCA”, unless otherwise indicated.
Cash and cash equivalents, and short-term investments decreased from $56.3 million at June 30, 2025 to $53.0 million at December 31, 2025.
Cash provided by operating activities for the first six months of fiscal 2026 was $1.9 million. Cash provided by operating activities was attributable principally to net income of $5.2 million, adjusted for depreciation and amortization of $2.3 million, , increase in accounts payable of $609 and an decrease in prepaid expenses and other current assets of $232, offset primarily by an increase in accounts, management fee receivables and medical receivables of $2.3 million, a recovery for credit losses of $337, a decrease of other assets of $415, and a decrease in other current liabilities of $4.2 million.
Cash used in investing activities for the first six months of fiscal 2026 was $2.8 million. Cash used in investing activities during the first six months of fiscal 2026 consisted of a non-compete agreement of $500, and the purchase of property and equipment of $2.3 million.
Cash used in financing activities for the first six months of fiscal 2026 was $2.5 million. The principal uses of cash in financing activities during the first six months of fiscal 2026 was distributions to non-controlling interests of $2.5 million.
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Total liabilities decreased by 4.3% to $54.4 million at December 31, 2025 from $56.8 million at June 30, 2025. “Other” current liabilities decreased by 52.2% to $3.3 million at December 31, 2025 from $7.0 million at June 30, 2025. Accounts payable increased by 46.2% to $1.9 million at December 31, 2025 as compared to $1.3 million at June 30, 2025. The long-term portion of operating lease liability increased from $35.1 million at June 30, 2025 to $35.8 million at December 31, 2025.
As of December 31, 2025, the total of $3.3 million in “other” current liabilities included accrued salaries and payroll taxes of $1.2 million, utilities payable of $127, software licenses of $219, property taxes of $482 and other general and administrative expenses of $579.
Our working capital increased to $129.4 million at December 31, 2025 from $127.5 million at June 30, 2025. This resulted from a decrease in current assets ($144.7 million at June 30, 2025 as compared to $143.8 million at December 31, 2025), and a larger decrease in current liabilities from $17.1 million at June 30, 2025 to $14.4 million at December 31, 2025.
The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry, and tax planning strategies in making this assessment. At the present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for separate state net operating losses that are not expected to be fully utilized. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance.
The Company’s effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year’s taxable income on a periodic basis as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.
Critical to our business plan are the improvement and expansion of the MRI facilities managed or owned by HMCA, and increasing the number of scans preformed at those facilities. In addition, our business plan calls for a continuing commitment to providing our customers with enhanced equipment service and maintenance capabilities and delivering state-of-the-art, innovative and high quality equipment and upgrades at competitive prices.
We have committed to making material capital expenditures in the 2026 fiscal year. We intend to open an additional location on Long Island, New York, and we hope to have that center operational before the end of the calendar year. The expected costs of this project will be approximately $400,000 for the purchase of a new scanner and approximately $500,000 in related buildout costs.
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Management is seeking to promote wider market recognition of FONAR’s scanner products, and to increase demand for Upright® scanning at the facilities HMCA owns or manages. Given the liquidity and credit constraints in the markets, and the high level of competition in the marketplace, the sale of medical equipment has and may continue to suffer.
We are not aware of any other trends or events that would materially affect our capital requirements or liquidity. We believe that our existing cash balances, internal cash generating capabilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures and other operating activities for at least the next 12 months. The Company also believes that its business plan has been responsible for its profitability in the past ten consecutive fiscal years and first six months of fiscal 2026, and that its capital resources will be adequate to support operations through a year from the date of filing. The future effects on our business of healthcare legislation, the tariffs on sales of foreign made medical equipment, reimbursement rates, public health conditions and the general economic and business climate are not known at the present time. Nevertheless, there is a possibility of adverse consequences to our business operations from these and other causes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company maintains its funds in liquid accounts. None of our investments are in fixed rate instruments.
All of our revenue, expense and capital purchasing activities are transacted in United States dollars.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended June 30, 2025, we determined that certain material weaknesses in our internal controls over financial reporting existed as of June 30, 2025. Those material weaknesses are described below and are in process of being remediated.
We maintain disclosure controls and procedures to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Operating Officer, Executive Vice President and acting Principal Financial Officer (“COO”), to allow timely decisions regarding required disclosures.
After evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), our CEO and COO have concluded that these disclosure controls and procedures were not effective as of December 31, 2025.
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Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The following material weakness was identified as of June 30, 2025 and continues to exist as of December 31, 2025:
•Management did not maintain effective information technology general controls in the areas of logical access management within its systems supporting the Company’s accounting and reporting processes.
This material weaknesses did not result in any material misstatement of our consolidated financial statements for the periods presented, there is a possibility they could lead to a material misstatement of account balances or disclosures.
Management’s Plan for Remediation
In response to the material weaknesses, management, with oversight of the Audit Committee of the Board of Directors, has identified and is implementing steps to remediate the material weaknesses. While the Company has made progress during the first fiscal quarter of 2026, the remediation efforts are ongoing, as additional time is needed to complete the remediation and allow for the internal controls to be tested by management. Our continued internal control remediation efforts include the following:
•Enhancing risk assessment processes.
•Implementing new and more secure user authentication procedures.
•Implementing new monitoring controls to enforce appropriate system access.
As we continue to evaluate and improve our internal control over financial reporting and disclosure controls, we may decide to modify the remediation actions described above, or to take additional measures to address control deficiencies. We anticipate that these efforts, when implemented and tested for a sufficient period of time, will remediate the material weakness described above.
Changes in Internal Control Over Financial Reporting
Other than the material weakness and the remediation plan described above, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the first two quarters of fiscal year 2026.
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PART II – OTHER INFORMATION
Item 1 – Legal Proceedings: Other than as described under Note 14, Subsequent Events, of Part I, Item 1 of this Form 10-Q, there have been no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2025.
Item 1A – Risk Factors:
Risks Relating to an Investment in FONAR
An investment in the securities of the Company is subject to various risks, the most significant of which are summarized below.
1. Proposed New York Tort Reform. On January 13, 2026 New York Governor Kathy Hochul proposed a series of tort reform measures related to the New York automotive insurance industry. These proposals include changes to the New York comparative negligence law, imposing caps on non-economic damages recoverable in automotive lawsuits, and extending time periods for insurers to investigate fraud claims. Florida enacted similar changes to those proposed by Governor Hochul in 2023 which resulted in more unpaid bills, higher administrative costs, lower volume, and lower reimbursement rates.
2. 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. 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.
3. Inflation. 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. 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.
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4. 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 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. 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. 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. The cost of maintaining and improving our information technology security to protect ourselves from these threats, and to comply with associated regulatory requirements related to cybersecurity, has increased substantially and will continue to increase in the future. 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. 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.
5. 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. 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.
6. Recent and future changes in Florida Insurance Law. On March 24, 2023, Florida enacted House Bill 837. 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, lower volume, and lower reimbursement rates. 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 2025. A similar proposal is proceeding in the 2026 legislative sessions in the form of Senate Bill 522 and House Bill 1181. 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.
7. 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. 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.
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8. 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. Healthcare providers participating in managed care plans may be required to refer diagnostic imaging tests to certain providers depending on the plan in which a covered patient is enrolled. In addition, managed care contracting has become very competitive. 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.
9. 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. A shift in payor mix from managed care and other private payors to government payors or an increase in the number of uninsured patients may result in a reduction in the rates of reimbursement or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in net revenue. Policies now being offered under various insurance plans are expected to reduce demand for MRI scans as they become less affordable. Changes in the eligibility requirements for governmental programs such as the Medicaid program and state decisions on whether to participate in the expansion of such programs also could increase the number of patients who participate in such programs and the number of uninsured patients. 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.
10. Federal and state privacy and information security laws. We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act. 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.
11. Demand for MRI Scanners. 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.
12. Manufacturing Competition. Many if not most of our competing scanner manufacturers have significantly greater financial resources, production capacity, and other resources than we do. Such competitors would include General Electric, Siemens, Hitachi and Phillips. Although FONAR is the only company which can manufacture and sell the unique Stand-Up® (Upright®) MRI scanner, potential customers must be convinced that the purchase of a FONAR scanner is their best choice. 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.
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13. Other changes in Domestic and Worldwide Economic Conditions. 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.
Risks Relating to the Merger Agreement and the Merger
The Merger may not be completed on the terms or timeline currently contemplated or at all, which could adversely affect our stock price, business, financial condition and results of operations.
As previously disclosed, on December 23, 2025, FONAR entered into the Merger Agreement providing for our acquisition by FONAR, LLC (Parent) through a Merger with FONAR Acquisition Sub, Inc. (Merger Sub). Parent and Merger Sub are entities affiliated with and owned and controlled, directly or indirectly, by Timothy Damadian, the Company’s Chief Executive Officer and Chairman of our Board Directors, and the sole manager of Parent. The completion of the Merger is subject to the satisfaction of various conditions, including, among other things: (i) the approval by the Company’s stockholders in favor of the adoption of the Merger Agreement providing for the Merger by the Requisite Company Vote (consisting of the Company Stockholder Approval and the Disinterested Stockholder Approval) at the Special Meeting; (ii) the expiration or termination of any applicable waiting periods; (iii) that the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction; (iv) the receipt of all consents, approvals and other authorizations of any governmental entity required to consummate the Merger and the other transactions contemplated by the Merger Agreement, free of any condition that would reasonably be expected to have a Company Material Adverse Effect or a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by the Merger Agreement; (v) the accuracy of the parties’ representations and warranties, subject to certain qualifiers; and (vi) the parties’ compliance in all material respects with their respective pre-closing covenants, subject to the terms of the Merger Agreement. While FONAR currently expects to complete the Merger in FONAR’s third fiscal quarter of 2026 (and no later than the End Date of March 12, 2026, as may be extended in accordance with the terms of the Merger Agreement), there can be no assurance that the foregoing conditions will be satisfied in a timely manner or at all, or that events will not occur that could delay or prevent satisfaction of these conditions.
If the Merger is not consummated for any reason, the trading price of our Common Stock may decline to the extent that it reflects positive market assumptions that the Merger will be completed and related benefits realized, and our business, prospects or results of operations may be adversely impacted. We may also be subject to additional risks if the Merger is not completed, including:
| ● | investor confidence in us could decline, additional stockholder litigation could be brought against us, relationships with existing and prospective customers, service providers, investors, lenders and other business partners may be adversely impacted, we may be unable to retain key personnel, and our operating results may be adversely impacted due to costs incurred in connection with the Merger; |
| ● | we have incurred, and will continue to incur, significant expenses for professional services in connection with the Merger for which we will have received little or no benefit if the Merger is not consummated; |
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| ● | any disruptions to our business resulting from the announcement and pendency of the Merger, including adverse changes in our relationships with customers, suppliers, partners and employees, may continue or intensify in the event the Merger is not consummated or is significantly delayed; |
| ● | management’s focus and resources of FONAR may be diverted from operational matters and other strategic opportunities while working to implement the proposed Merger and defend against related stockholder litigation; and |
| ● | the requirement under certain circumstances for FONAR to pay Parent the termination fee of $450,000 in cash (including Parent’s reasonable and documented out-of-pocket fees and expenses). |
Further, FONAR or Parent may terminate the Merger Agreement if the Merger has not been consummated by the End Date, subject to an automatic extension to the later of 90 days following (i) the date the Company’s definitive proxy statement in connection with the Special Meeting is filed and (ii) the date, if applicable, upon which any SEC or other governmental review or investigation is completed. FONAR or Parent also may terminate the Merger Agreement (i) by mutual written consent; (ii) if any governmental entity of competent jurisdiction shall have enacted any law or order making illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement, and such law or order shall have become final and nonappealable (provided, however, that such right to terminate the Merger Agreement shall not be available to any party whose breach of any representation, warranty, covenant, or agreement set forth in the Merger Agreement has been the principal cause of the issuance, promulgation, enforcement, or entry of any such law or order); or (iii) if the Requisite Company Vote is not obtained at the Special Meeting. In addition, Parent may terminate the Merger Agreement if a Company Adverse Recommendation Change occurs, if certain non-solicitation or stockholder meeting covenants are breached, or if other specified Company breaches occur that are not cured, and FONAR may terminate the Merger Agreement to enter into a Company Acquisition Agreement with respect to a Superior Proposal or for specified Parent breaches that are not cured, in each case subject to the conditions and procedures in the Merger Agreement. The occurrence of any of the foregoing could adversely affect our stock price, business, financial condition and results of operations.
If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay the termination fee to Parent, which could require us to use available cash that would have otherwise been available for other uses.
If the Merger is not completed, in certain circumstances, we could be required to pay the termination fee of $450,000 to Parent (including Parent’s reasonable and documented out-of-pocket fees and expenses), payable in cash. If the Merger Agreement is terminated, any termination fee we may be required to pay, if any, could require us to use available cash that would have otherwise been available for general corporate purposes or other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business, results of operations or financial condition, which in turn could adversely affect the trading price of our Common Stock.
We are subject to various uncertainties while the Merger is pending, which could have a material adverse effect on our business, results of operations and financial condition.
Uncertainty about the pendency of the Merger and its effect on employees, customers and other third parties may adversely affect our business, results of operations and financial condition. These uncertainties may impair our ability to attract, retain and motivate key personnel pending consummation of the Merger and divert management attention, and our continuing business relationships with customers, suppliers and other partners may be adversely affected, including potential loss of key personnel and negative perceptions about our prospects. In addition, interim operating covenants and related restrictions may delay or prevent us from undertaking certain strategic or operational initiatives that we might otherwise pursue prior to completion, which could impact our operations. We are currently subject to stockholder litigation and we may become subject to additional stockholder litigation, and we will continue to incur substantial transaction-related costs regardless of whether the Merger is completed.
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These factors, together with the risk that our Common Stock price may fluctuate during the pendency of the Merger and could decline significantly if the Merger is not completed, could materially and adversely affect our business, results of operations, financial condition and trading price.
While the Merger Agreement is in effect, we are subject to certain interim covenants.
The Merger Agreement generally requires us to operate our business in the ordinary course consistent with past practices, including using commercially reasonable efforts to preserve FONAR’s and our subsidiaries’ business organization, retain present officers and key employees and preserve the good will of our customers, suppliers and other persons with whom we have business relationships with, pending consummation of the Merger. It also imposes customary interim operating covenants that restrict us from taking specified actions until the Merger is completed or the Merger Agreement is terminated, subject to certain exceptions, including, but not limited to, restrictions on: amending our organizational documents; declaring dividends or repurchases; issuing or encumbering securities; increasing compensation or accelerating benefits; making acquisitions or significant asset dispositions; incurring or guaranteeing indebtedness; entering into or materially modifying material contracts; instituting, settling or compromising any legal action involving payments by the Company or its subsidiaries exceeding $50,000; making material changes in accounting or tax election; entering joint ventures; adopting stockholder rights plans; and other actions, in each case as detailed in the Merger Agreement. Any of these restrictions could prevent us from pursuing certain financing, strategic, or operational initiatives that may arise prior to the consummation of the Merger and may affect our ability to execute our business strategies, attain financial and other goals, and impact our financial condition, results of operations and cash flows.
Provisions within the Merger Agreement, along with certain voting agreements and statements by the Acquisition Group, could deter potential competing acquirers or lead to lower alternative acquisition proposals than might otherwise be offered.
The Merger Agreement contains customary “no-shop” restrictions that, subject to a limited fiduciary out, restrict our ability to solicit or facilitate competing acquisition proposals, provide non-public information, or engage in discussions or negotiations with third parties, except in response to a bona fide, unsolicited written proposal that the Special Committee determines is, or could reasonably be expected to lead to, a Superior Proposal and only after making specified determinations and complying with notice and other obligations under the Merger Agreement. In addition, before the Board of Directors (acting upon the recommendation of the Special Committee) may change its recommendation or terminate the Merger Agreement to enter into a Company Acquisition Agreement in response to a Superior Proposal, the Company must provide Parent with prompt advance written notice, identify the offeror and material terms and negotiate in good faith to make such adjustments in the terms and conditions of the Merger Agreement so that such Takeover Proposal (as defined in the Merger Agreement) ceases to constitute a Superior Proposal. If the Merger Agreement is terminated in certain circumstances, including to accept a Superior Proposal or following a Company Adverse Recommendation Change, we must pay Parent the termination fee of $450,000 (including Parent’s reasonable and documented out-of-pocket fees and expenses). Further, members of the Acquisition Group who are FONAR stockholders have entered into voting agreements to vote their shares in favor of the Merger, and certain public statements by the Acquisition Group that its members may not support or vote in favor of alternative transactions proposed by a third party were considered as part of the Special Committee’s independent process, all of which could deter competing proposals. These provisions and arrangements could discourage a potential competing acquirer from making a proposal, or could cause a potential acquirer to offer a lower price than it might otherwise offer due to the no-shop restrictions, Parent’s negotiation rights and notice periods, the termination fee, and the existing voting commitments and statements made by the Acquisition Group.
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FONAR CORPORATION AND SUBSIDIARIES
We will continue to incur substantial transaction-related costs in connection with the Merger.
We have incurred, and expect to continue to incur, significant legal, advisory and other professional fees and expenses in connection with the Merger, and such costs will be borne by FONAR if the Merger is not completed, and by the surviving corporation if it is completed. We also expect additional costs associated with satisfying closing conditions, including soliciting the Requisite Company Vote at the Special Meeting and making required filings and obtaining approvals from governmental authorities, as well as cooperating in related regulatory processes and current and any future stockholder litigation, each of which may require continued expenditures regardless of whether the Merger is consummated. If the Special Meeting is adjourned or postponed to solicit additional proxies, or if the closing of the Merger is otherwise delayed, our proxy solicitation, advisory and other transaction-related expenses may continue and could increase, including fees payable to our proxy solicitor and other solicitation costs borne by FONAR.
If the Merger is consummated, our stockholders, other than the Acquisition Group members, will not be able to participate in any further upside to our business.
If the Merger is consummated, our stockholders will receive the applicable Per Share Price for their FONAR shares, as follows: $19.00 for each share of Common Stock and Class B Common Stock, $6.34 for each share of Class C Common Stock, and $10.50 for each share of Class A Non-voting Preferred Stock. This consideration will be without interest and subject to applicable tax withholding, and stockholders will not receive any equity interests in the surviving corporation or Parent. As a result, following the Merger, our stockholders will only have the right to receive the applicable Per Share Price and will no longer have any rights as stockholders of FONAR. Instead, all equity of the surviving corporation will be owned, indirectly through Parent, by the Acquisition Group, and Parent will be the sole direct beneficiary of FONAR’s future earnings and growth, if any.
Our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our other stockholders.
Our directors and executive officers have financial interests in the Merger that may be different from, or in addition to, the interests of our other stockholders. These interests may include:
| ● | continued indemnification and insurance coverage under the Merger Agreement, the Company’s organizational documents, and indemnification agreements the Company has entered into with each of its directors and executive officers; |
| ● | the roles and equity arrangements of certain directors and officers who are members of the Acquisition Group and FONAR stockholders, including: (i) Mr. Damadian (our Chief Executive Officer, President, Treasurer and Chairman of the FONAR Board), who will continue following the Merger as the sole manager of Parent and pursuant to the terms of the Merger Agreement will serve as the President, Chief Executive Officer, Treasurer and sole director of the surviving corporation, will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares) to Parent in exchange for an aggregate of 125,262 Class B membership units of Parent and has also committed to subscribe for an aggregate of 554,714 Class B membership units of Parent for a total subscription price of $10,539,572 in cash; (ii) Mr. Luciano Bonanni (our Chief Operating Officer, Executive Vice President and acting Principal Financial Officer), who pursuant to the terms of the Merger Agreement will serve as the Chief Operating Officer and Executive Vice President of the surviving corporation, will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares)to Parent in exchange for an aggregate of 54,963 Class B membership units of Parent and has also committed to subscribe for an aggregate of 34,211 Class B membership units of Parent for a total subscription price of $650,000 in cash; and (iii) Mr. Ronald Lehman (a director of the Company), who will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares) to Parent in exchange for an aggregate of 4,330 Class B membership units of Parent and has also committed to subscribe for an aggregate of 48,684 Class B membership units of Parent for a total subscription price of $925,000 in cash, pursuant to Parent’s equity financing; and |
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FONAR CORPORATION AND SUBSIDIARIES
| ● | Special one-time cash fees paid to the Company’s disinterested directors for their service on the Special Committee, which were paid in six equal monthly installments beginning in July 2025 and ending in December 2025 and were not contingent on consummation of the Merger or upon any other factor, with Mr. Turk receiving $200,000 as Chair and Mr. Carrino receiving $175,000. |
FONAR or Parent may waive one or more of the conditions to closing of the Merger without re-soliciting stockholder approval.
Under the Merger Agreement, certain closing conditions may be satisfied or waived by the applicable party to the extent permitted by law, including conditions relating to the accuracy of representations and warranties, compliance with covenants, and the absence of certain legal restraints, among others.
The Merger Agreement may also be amended or supplemented, whether before or after receipt of the Disinterested Stockholder Approval, by written agreement signed by FONAR and Parent. However, after receipt of the Requisite Company Vote, no amendment that requires further stockholder approval under the DGCL may be made without such approval.
If the Merger Agreement is terminated under specified circumstances, including to accept a Superior Proposal or following a Company Adverse Recommendation Change, FONAR may be required to pay Parent the termination fee of $450,000, including Parent’s reasonable and documented out-of-pocket fees and expenses. See “—If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay the termination fee to Parent, which could require us to use available cash that would have otherwise been available for other uses.”
If Parent’s financing in connection with the Merger becomes unavailable or is insufficient, the Merger may not be completed.
Parent has obtained financing commitments to fund the Merger, including a $35,000,000 debt commitment from OceanFirst Bank, N.A. pursuant to the bank commitment letter, $10,225,000 of private debt commitments, and an aggregate of $47,440,504 of commitments comprised of rollover equity and new cash pursuant to Parent’s equity financing, together with the Company’s cash on hand to fund the aggregate Per Share Price to be paid to the Company’s unaffiliated stockholders pursuant to the Merger Agreement and all related fees, expenses and other amount required. These financing commitments are subject to conditions, including execution of definitive documentation, specified minimum equity and private debt funding, liquidity and other customary closing conditions. The bank commitment letter terminates on the earliest of the closing of the Merger, the valid termination of the Merger Agreement, or April 22, 2026. Although the bank debt financing is not subject to due diligence or a “market out” provision, which allows lenders not to fund their commitments if certain conditions in the financial markets prevail, there is still a risk that the bank debt financing or any other financing may not be funded when required. As of the date of this Form 10-Q, no alternative financing arrangements or alternative financing plans have been made if the bank debt financing or any other financing is not available as anticipated, which could delay or prevent completion of the Merger. However, the transactions contemplated by the Merger Agreement are not contingent on Parent’s ability to obtain the contemplated financing or any alternative financing.
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FONAR CORPORATION AND SUBSIDIARIES
The Company, the members of Board of Directors and Mr. Bonanni are subject to litigation related to the Merger, and we may become subject to further litigation in connection with the Merger, any of which may be costly, prevent the consummation of the Merger, divert management’s attention or otherwise materially harm our business.
FONAR is subject to litigation related to the Merger. On Monday, February 2, 2026, we received notice that a stockholder filed the Complaint challenging the Merger (see Note 14, Subsequent Events, of Part I Item 1of this Form 10-Q for additional information). It is possible that additional claims beyond those which have already been filed will be brought in an effort to enjoin the Merger or seek monetary relief from FONAR. FONAR cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation concerning the Merger could delay or prevent the consummation of the Merger. In addition, the costs of defending the litigation, even if resolved in FONAR’s favor, could be substantial and such litigation could distract FONAR from pursuing the consummation of the Merger and other potentially beneficial business opportunities. Regardless of the outcome of any current or future litigation related to the Merger Agreement and the transactions it contemplates, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the Merger Agreement and the transactions it contemplates may materially adversely affect our business, financial condition and/or operating results. Furthermore, if the Merger is not consummated, for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could negatively impact the trading price of our Common Stock, impair our ability to recruit or retain employees, damage our business relationships, or otherwise materially harm our operations, financial performance and prospects.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds: None
In September 2022, our Board of Directors authorized a program to repurchase up to $9 million of our common stock. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, and other market conditions. The share repurchase program was suspended following receipt of a merger proposal from a group led by the Company’s CEO.
The following table summarizes the number of shares repurchased during the three months ended December 31, 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) | |||||||||||||
| October 1, 2025 – October 31, 2025 | — | — | — | $ | 2,928 | ||||||||||||
| November 1, 2025 – November 30, 2025 | — | — | — | $ | 2,928 | ||||||||||||
| December 1, 2025 – December 31, 2025 | — | — | — | $ | 2,928 | ||||||||||||
| Total | — | — | — | ||||||||||||||
Item 3 - Defaults Upon Senior Securities: None
Item 4 - Mine Safety Disclosures: Not Applicable
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FONAR CORPORATION AND SUBSIDIARIES
Item 5 - Other Information:
Rule 10b5-1 Trading Plan
During the fiscal quarter ended December 31, 2025,
Item 6 - Exhibits and Reports on Form 8-K:
| Exhibit No. | Description | |
| 2.1 | Agreement and Plan of Merger, dated December 23, 2025, by and among FONAR Corporation, FONAR, LLC and FONAR Acquisition Sub, Inc. | |
| 10.1† | Form of Voting Agreement entered into on December 23, 2025 by FONAR Corporation with each member of the Acquisition Group. | |
| 31.1 | Rule 13a-14(a) Certification. | |
| 32.1* | Section 1350 Certification. | |
| 99.1 | Report on Form 8-K filed on November 10, 2025, Item 2.02: Results of Operations and Financial Condition for the quarter ended September 30, 2025. | |
| † | Schedules (or similar attachments) to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of the omitted exhibits and schedules to the SEC on a supplemental basis upon its request. | |
| * | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FONAR CORPORATION | |
| (Registrant) | |
| By: /s/ Timothy Damadian | |
| Timothy Damadian | |
| Chairman of the Board of Directors, President, | |
| Principal Executive Officer and Treasurer | |
| /s/ Luciano Bonanni | |
| Luciano Bonanni | |
| Executive Vice President, Chief Operating Officer, | |
| Acting Principal Financial Officer | |
| Dated: February 13, 2026 |
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FAQ
How did FONAR (FONR) perform financially in the quarter ended December 31, 2025?
What were FONAR (FONR)'s results for the six months ended December 31, 2025?
What is the proposed going-private transaction for FONAR (FONR)?
What per-share consideration will FONAR (FONR) stockholders receive in the merger?
What approvals and conditions are required to close FONAR (FONR)'s merger?
What is the status of FONAR (FONR)'s share repurchase program?
What litigation related to the FONAR (FONR) merger has been disclosed?
