UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Fonar Corporation

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FONAR CORPORATION

110 Marcus Drive

Melville, New York 11747

(631) 694-2929

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Monday, May 23, 202220, 2024

To The Stockholders:

The Annual Meeting of the stockholders of Fonar Corporation will be held at the Double TreeHilton Long Island Huntington Hotel, Wilmington Downtown, 700 King Street, Wilmington, Delaware 19801 (302-655-0400)598 Broadhollow Road, Melville, New York 11747 (631-845-1000), on Monday, May 23, 2022,20, 2024, at 10:00 a.m. local time for the following purposes:

1. To elect five Directors to the Board of Directors.

2. To approve, on an advisory basis, the compensation of the Company’s named executive officers.

3. To recommend, on an advisory basis, whether the advisory stockholder vote to approve the compensation of the Company’s named executive officers be taken every year, every two years, or every three years.

4. To ratify the selection of Marcum LLP as the Company’s auditors for the fiscal year ending June 30, 2022.2024.

4.5. To transact such other business as may properly come before the meeting.

Only stockholders of record at the close of business on March 28, 202225, 2024 are entitled to notice of, and to vote at, this meeting. A list of such stockholders will be available for examination by any stockholder for any purpose germane to the meeting, during normal business hours, at the principal office of the Company, 110 Marcus Drive, Melville, New York, for a period of ten days prior to the meeting.

Whether or not you expect to attend in person, we urge you to vote your shares at your earliest convenience. You may vote by internet, by phone or by signing, dating, and returning your proxy at your earliest convenience. Voting by internet, telephone or mail will not prevent you from voting your stock at the meeting if you desire to do so, as your proxy is revocable at your option.

BY ORDER OF THE BOARD OF DIRECTORS

 /s/

/s/ Claudette J.V. Chan

Claudette J.V. Chan, Secretary

PROXY STATEMENT

FOR ANNUAL MEETING OF

STOCKHOLDERS TO BE HELD MONDAY, MAY 23, 202220, 2024

This proxy statement, which is first being made available to shareholders on or about April 8, 20222024 on the internet, is furnished in connection with the solicitation of proxies by the Board of Directors of Fonar Corporation (the “Company”"Company"), to be voted at the annual meeting of the stockholders of the Company to be held at 10:00 a.m. on May 23, 202220, 2024 and any adjournment(s) thereof for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. At the same time a paper notice regarding the availability of proxy materials will be mailed to stockholders. Stockholders who execute proxies retain the right to revoke them at any time prior to the exercise of the powers conferred thereby. The cost of solicitation of proxies will be borne by the Company.

The stockholders will have several options as to how to view the materials and vote their shares.

The Company is posting the Notice of Annual Meeting and Proxy Statement, together with the Annual Report on the internet. You may read the materials online or print out a copy. You will also have the ability to vote online.

In the alternative, you may elect to receive an e-mail or the traditional paper copies of the Notice of Annual Meeting and Proxy Statement, and the Annual Report. There is no charge for receiving e-mail or paper copies, BUT you must request thempaper copies if you want them. To facilitate timely delivery please make the request as instructed on or before April 30, 2022.2024.

To view the materials and vote on the internet, have the 1216 Digit Control Number(s) located on the Notice Regarding the Availability of Proxy Materials available and visit: www.proxyvote.com.

Stockholders may request a copy of the Proxy Materials:

1. By internet -– visit www.proxy.com

2. By telephone -– 1-800-579-1639

3. By e-mail -– sendmaterial@proxyvote.com

Only stockholders of record at the close of business on March 28, 202225, 2024, will be entitled to vote at the meeting. Shares of Common Stock are entitled to one vote per share, shares of Class B Common Stock are entitled to ten votes per share and shares of Class C Common Stock are entitled to twenty-five votes per share. At the close of business on March 28, 2022,25, 2024, there were issued and outstanding 6,554,2106,327,570 shares of Common Stock held of record by approximately 993986 stockholders, 146 shares of Class B Common Stock held of record by 1112 stockholders and 382,513 shares of Class C Common Stock held of record by 3 stockholders.5 shareholders. The 313,438 shares of Class A Nonvoting Preferred Stock 313,438 shareswere held of record by approximately 1,1541,008 stockholders at the close of business on March 28, 2022,25, 2024, are not entitled to vote. Except for the shares of Class A Nonvoting Preferred Stock, there are no shares of Preferred Stock issued and outstanding.

Any proxy may be revoked at any time before it is exercised by delivery of a written instrument of revocation or a later dated proxy to the Secretary of the Company at the principal executive office of the Company or, while the meeting is in session, to the Secretary of the meeting, without, however, affecting any vote previously taken. The presence of a stockholder at the meeting will not operate to revoke his proxy. The casting of a ballot by a stockholder who is present at the meeting, however, will revoke his proxy, but only as to the matters on which the ballot is cast and not as to any matters on which he does not cast a ballot or as to matters previously voted upon.

Proxies received by management will be voted at the meeting or any adjournment thereof. EACH PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE THEREIN BY THE PERSON GIVING THE PROXY. TO THE EXTENT NO CHOICE IS SPECIFIED, HOWEVER, THE PROXY WILL BE VOTED FOR MANAGEMENT’S PROPOSALS. All of management’s proposals have been unanimously approved by the Board of Directors.

1. ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION

Five directors are to be elected at the annual meeting, to hold office until the next annual meeting of stockholders and until their successors are elected and qualified. It is intended that the accompanying proxy will be voted in favor of the following nominees to serve as directors unless the stockholder indicates to the contrary on the proxy. All of the nominees are currently directors. Management expects that each of the nominees will be available for election.

NOMINEES FOR ELECTION OF DIRECTORS

1. Raymond V.Timothy Damadian

2. Claudette J.V. Chan

3. Ronald G. Lehman

4. Richard E. Turk

5. John CollinsJessica Maher

BIOGRAPHIES FOR DIRECTORS AND OFFICERS

Raymond V.Timothy Damadian M.D. (age 86)59) has been the Chairman of the Board since its inception in 1978September 7, 2022 and Treasurer since February, 2001. Up until February 11, 2016, Dr. Damadian also served as the President and Chief Executive Officer of Fonar. Dr. Damadian was employed by the State University of New York, Downstate Medical Center, New York, as an Associate Professor of Biophysics and Associate Professor of Internal Medicine from 1967 until September 1979. He received an M.D. degree in 1960 from Albert Einstein College of Medicine, New York, and a B.S. degree in mathematics from the University of Wisconsin in 1956. In addition, Dr. Damadian conducted post-graduate work at Harvard University, where he studied extensively in the fields of physics, mathematics and electronics. Dr. Damadian is the author of numerous articles and books on the nuclear magnetic resonance effect in human tissue, which is the theoretical basis for the Fonar MRI scanners. He is a 1988 recipient of the National Medal of Technology. In 1989 he was inducted into the National Inventors Hall of Fame, for his contributions in conceiving and developing the application of magnetic resonance technology to medical applications including whole body scanning and diagnostic imaging. Dr. Damadian is the President, Treasurer and director of Health Management Corporation of America (“HMCA”), a Manager of Imperial Management Services, LLC (“Imperial”) and a Manager of Health Diagnostics Management, LLC (“HDM”) which three entities are subsidiaries of Fonar. Dr. Damadian is the father of Timothy Damadian and brother of Claudette J.V. Chan.

Timothy Damadian (age 57) has been the President and Chief Executive Officer of FonarFONAR since February 11, 2016. He has also served as Treasurer since August 3, 2022. From 2010 to 2016 he served as an independent consultant, with a focus on the Company’s MRI facility management business. Timothy Damadian began his career at FonarFONAR in 1985, installing MRI scanners and components for FonarFONAR customers. Over the course of the following 16 years, he held positions of increasing authority, eventually becoming Vice President of Operations. In 1997, Timothy Damadian was appointed President of the newly formed Health Management Corporation of America (HMCA), a wholly-owned subsidiary of FonarFONAR that was formed to manage medical and diagnostic imaging offices. In 2001, Timothy Damadian left FonarFONAR to form Integrity Healthcare Management, Inc., a diagnostic imaging management company that would eventually manage 11 MRI scanning centers in New York and Florida. The company was a success and was sold to Health Diagnostics, LLC in 2007.

Mr. Damadian returned to Fonar as a consultant in 2010 and was appointed as Fonar’sFONAR’s Chief Executive Officer and President on February 11, 2016. He also serves as a Manager of Imperial Management Services, LLC and a Manager of Health Diagnostics Management LLC, which are subsidiaries of HMCA. Timothy Damadian is the son of Dr. Raymond V. Damadian and nephew of Claudette J.V. Chan.LLC.

Luciano B. Bonanni (age 66)68) has served as Chief Operating Officer (COO) and Executive Vice President (EVP) for FonarFONAR Corporation since June 27, 2016. Prior to his appointment as COO, Mr. Bonanni had served the Company as Vice President since 1989, during which time he oversaw general operations, research and development, manufacturing, service, sales, finance, accounting and regulatory compliance. Prior to 1989, Mr. Bonanni held the title of Vice President of Production and Engineering from the time of Fonar’sFONAR’s initial public offering in 1981. Mr. Bonanni joined the Company as an electrical engineer in 1978. He holds a Bachelor of Electrical Engineering degree from Manhattan College.

Claudette J.V. Chan (age 84)86) has been a Director of FonarFONAR since October 1987 and Secretary of FonarFONAR since January 2008. Mrs. Chan was employed from 1992 through 1997 by Raymond V. Damadian, M.D. MR Scanning Centers Management Company and since 1997 by HMCA, as "sitesite inspector," in which capacity she is responsible for supervising and implementing standard procedures and policies for MRI scanning centers. From 1989 to 1994 Mrs. Chan was employed by St. Matthew's and St. Timothy's Neighborhood Center, Inc., as the director of volunteers in the "Meals on Wheels" program, a program which cares for the elderly. From approximately 1983 to 1989, Mrs. Chan was President of the Claudette Penot Collection, a retail mail-order business specializing in women's apparel and gifts. Mrs. Chan practiced and taught in the field of nursing until 1973, when her son was born. She received a bachelorBachelor of scienceScience degree in nursing from Cornell University in 1960. Mrs. Chan is the sister of Raymond V. Damadian and aunt of Timothy Damadian.

Ronald G. Lehman (age 45)47) has been a Director of FonarFONAR since April, 2012, when he was unanimously appointed by the remaining four Directors to fill the vacancy resulting from the death of the former Director Robert Djerejian.2012. From October, 2009 to the present, Mr. Lehman has served as Managing Director of Investment Banking with Bruderman Brothers, LLC, a private New York-based broker-dealer registered with the Securities and Exchange Commission and which is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). Mr. Lehman directly manages all facets of the firm’s transaction processes, from deal origination, to sourcing capital, to negotiating deal structures, through documentation and closing. The firm provides buy and sell-side advisory, capital raising, and consulting services to lower middle-market companies. Mr. Lehman specializes in advising healthcare services companies and has recently completed several recapitalizations in the industry. He also participates in the firm’s merchant banking investments and oversees many of these assignments. From May, 2008 to October, 2009, Mr. Lehman served as Senior Vice President of Acquisitions at Health Diagnostics, LLC, where he managed the company’s acquisition and corporate finance activities. From March, 2000 to May, 2008, Mr. Lehman worked for various Bruderman entities as a buy and sell-side advisor and as a principal in several private equity transactions. From September, 1998 to March, 2000, Mr. Lehman worked at Deutsche Bank Securities, Inc. and last held the position of Associate in their Global Custody Group. Mr. Lehman graduated from Columbia University with a B.A. in 1998.

Richard E. Turk (age 37)39) has been a Director of FonarFONAR since June, 2020, when he was appointed to fill the vacancies on the Board of Directors and Audit Committee of the Board of Directors resulting from the death of his predecessor, Robert J. Janoff. Mr. Turk is the Chief Financial Officer of PRISM Vision Group, a private equity-backed, multi-location, outpatient comprehensive eye care practice headquartered in Union, New Jersey. Since joiningMr. Turk joined PRISM in November, 2018 as the Chief Development Officer and became CFO in March 2021. Mr. Turk has helped source, analyze, and complete 12 acquisitions. He spearheaded growth efforts that helped PRISM expand from a single-specialitysingle-specialty (retina) provider with 17 locations and 21 physicians to a comprehensive, vertically-integrated, multi-specialty, eye care organization with approximately 90190 physicians and more than 5090 locations across New Jersey, Pennsylvania, Delaware, Virginia, Washington, DC, and Maryland. Prior to his tenure at PRISM, Mr. Turk was employed by Professional Physical Therapy, a private equity-backed outpatient physical and occupational therapy company headquartered in Uniondale, New Jersey with more than 180 locations across New York, New Jersey, Connecticut, Massachusetts and New Hampshire. During his four years at Professional Physical Therapy, Mr. Turk sourced, analyzed, and completed 32 acquisitions comprised of 116 clinics, expanding the company’s services and adding three states. From 2007 to 2014, Mr. Turk was employed by Bruderman Brothers, a broker dealer involved in investment banking, merchant banking, investment advisory, and consulting for lower middle market companies ($10M-$250M of enterprise value) in a variety of industries, including healthcare. Mr. Turk was Vice President of Bruderman Brothers from 2011 to 2014. Mr. Turk graduated from Columbia University with a B.A. in American History in 2007.

John CollinsJessica Maher (age 41)26) has been Directora director of FonarFONAR Corporation and a member of the audit committee since November 17, 2021,March 20, 2023, when heshe was unanimously appointed by the remaining four Directors to fill the vacancy resulting from John Collins’ resignation from the deathboard of his predecessor, Charles N. O’Data. Mr. Collinsdirectors and the audit committee. Mrs. Maher is a partner at Brownell Partners, PLLC. Mr. Collins first joined the firm in October of 2018, and he was promoted to Partner in January 2020. The practice provides litigation defense for the Insureds of various commercial and personal lines insurance companies. The practice also deals with insurance coverage disputes and provides risk management consulting services. Mr. Collins has successfully defended all manner of liability claims at both the trial and appellate level. Prior to joining Brownell Partners, Mr. Collins wasan accountant in private practice from 2016 – 2018, working on both contractual and litigation based projects for a variety of corporate and individual clients. Prior to that, he was affiliated with a variety of regional insurance defense firmsat Ives & Sultan, LLP in the greaterWoodbury, New York City area. Mr. Collins graduated magna cum laude from New York Law School in 2012, where he was a John Marshall Harlan Scholar and a staff editor for the New York Law School Law Review. In 2011, Mr. Collins served as a judicial internYork. Mrs. Maher’s expertise at the Southern District of New York, in the chambers of the Honorable Paul A. Crotty. Upon graduation, Mr. Collins completed a Fellowshipfirm included auditing clients’ financial statements and 401(k) plans, overseeing audit testing areas and preparing personal and business tax returns. Her first position after graduating from Fairfield University, was with the Corporation Counsel of the City of New York.PriceWaterhouseCoopers.

CORPORATE GOVERNANCE, THE BOARD AND ITS COMMITTEES

All of the nominees are presently directors of the Company. The five nominees will be elected to hold office for the ensuing year or until their respective successors are elected and qualified. Of the five nominees, Messrs. Ronald G. Lehman, Richard E. Turk and John CollinsJessica Maher are independent, as defined in the Securities and Exchange Commission Regulations and NasdaqNASDAQ Market Place Rules. In making such determinations, there were no transactions, relationships or arrangements not disclosed in our SEC filings to be considered by the Board of Directors, in determining whether the director was independent.

BOARD MEETINGS

During the year ended June 30, 20212023 the Board of Directors unanimously consented to take action in lieu of a meeting on two occasions,one occasion, and the audit committee met four times.

The attendance of the Board of Directors at annual meetings is not required. The Chairman of the Board, Dr. Raymond V. Damadian, however, when he attends the annual meeting of stockholders, acts as Chairman of the Meeting.

Dr.Timothy Damadian receives no compensation for serving on the Board. The other directors are each paid a minimum of $20,000 per year in their capacities as directors. This is the sole compensation payable to the directors.

Board Leadership Structure. The current Board Chairman is Dr. Raymond V.Timothy Damadian. In addition, although the Company has not selected a lead independent director, Ronald G. Lehman effectively functions as such. The Company believes that the Company’s current leadership structure is appropriate for the Company in the context of the specific circumstances facing the Company. Consideration of the Company’s leadership structure is a continuing process which the Board of Directors and Management of the Company undertake in coordination with each other.

The lead independent director, Ronald G. Lehman, acts as the Chairman of the Audit Committee. As such he plays a leading role in the engagement of auditors and the review of the Company’s financial statements. Under certain circumstances, he will also serve as a contactthe principal point for employees.

The Company believes its present leadership structure is successfully meeting the Company’s current needs, including:

The Company believes its present leadership structure is successfully meeting the Company’s current needs, including:

The Company's Board of Directors has an audit committee. There is no standing compensation committee, nominating committee or other committee of the Board.

In accordance with the NasdaqNASDAQ Marketplace Rules, the Board of Directors adopted a written charter for the audit committee which took effect in June, 2001 and was revised on November 17, 2004. All of the directors on the audit committee are independent.

Stockholders may communicate with directors by writing to them at the Company in accordance with the Company’s corporate governance policies and code of conduct, or in any other manner the particular director may provide. Depending on the sensitivity and timing of a matter raised by a stockholder and the need for disclosure of matters to be made not to just one stockholder, but to the stockholders as a whole, it may not be possible for the director to reply to the stockholder.

The shareholdings of the Company’s Chairman of the Board, Dr. Raymond V.Timothy Damadian, haveas trustee and individually, controls more than 50% of the voting power of the Company’s outstanding stock. Consequently, the Company is a controlled company for purposes of NASDAQ Marketplace Rule 4350(c).

AUDIT COMMITTEE

The Audit Committee, which is comprised solely of independent directors, is governed by a Board approved charter that contains, among other things, the Committee’s membership requirements and responsibilities. The audit committee oversees the Company’s accounting, financial reporting processes, internal controls and audits, and consults with management and the independent public accountants on, among other items, matters related to the annual audit, the published financial statements and the accounting principles applied. As part of its duties, the audit committee appoints, evaluates and retains the Company’s independent public accountants. It also maintains direct responsibility for the compensation, termination and oversight of the Company’s independent public accountants and evaluates the independent public accountants’ qualifications, performance and independence.

Financial Expert on Audit Committee: The Board has determined that Mr. Ronald G. Lehman, is the audit committee financial expert. The Board made a qualitative assessment of Mr. Lehman’s level of knowledge and experience based on a number of factors, including his formal education and experience.

Board Oversight of Risk Management. The Company faces risk in many different areas, including business strategy; government regulation; financial condition; health care compliance; product research and development; competition for talent; business vitality; operational efficiency; quality assurance; reputation; intellectual property; cybersecurity; and trade secrets, among others. The oversight function is carried out in the quarterly and annual Audit Committee meetings and by communication and meetings with the Company’s Management, which exercises the responsibility for oversight of risk management.

AUDIT COMMITTEE REPORT

The audit committee has (a) reviewed and discussed the audited financial statements with management, (b) discussed with the independent auditors the matters required to be discussed by SAS 61 (Statement on Auditing Standards No. 61) and (c) has received the written disclosures and the letter from the independent accountantsauditors required by Independence Standards Board, Standard No. 1 and has discussed with the independent accountantsauditors the independent accountant’saccountants’ independence.

Based on the foregoing review and discussions, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.2023.

The members of the audit committee are Messrs. Ronald G. Lehman, Richard E. Turk and John Collins. Messrs. Lehman, Turk and CollinsJessica Maher, all of whom are independent directors, as defined in the Securities and Exchange Commission Regulations and NasdaqNASDAQ Market Place Rules.

NOMINATING COMMITTEE

The Board of Directors does not believe it requires a separate standing nominating committee because the Board of Directors is relatively small and can make the nominations acting as a whole. The Board does not have a policy with regard to director candidates recommended by stockholders because the absence of such recommendations makes a formal policy unnecessary. Historically, there usually has not been a need for a committee to identify new nominees in the case of the resignation or death of an existing director. The remaining directors evaluate a new nominee based on histhe nominee’s integrity, loyalty, competence and experience, and how histhe nominee’s background complements that of the remaining directors.

Promoting diversity in the selection of nominees has not yet been considered, but the Board follows a policy of nondiscrimination and equal opportunity.

COMPENSATION COMMITTEE

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors does not believe it requires a separate standing compensation committee because the management, under the authority of the Chairman of the Board and the Chief Executive Officer, is best equipped to make compensation decisions. The Board reserves the right to change this policy at any time.

Dr. Raymond V.Timothy Damadian, who serves as the Chairman of the Board, and Timothy Damadian, who serves as Chief Executive Officer and President of the Company, participateparticipates in the deliberation and determination of executive officer and director compensation.

VOTE REQUIRED AND BOARD RECOMMENDATION

The directors will be elected by the vote of a plurality of the votes represented at the meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES FOR THE DIRECTORS OF THE COMPANY.

INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of the Company's common shares held by holders of at least 5% of the shares of any class, by the nominees for directors, the Company's Chief Executive Officer, and the directors and executive officers as a group as of the close of business on March 18, 202225, 2024 unless otherwise noted.

CONTINUATION

  ___________________________

* Less than one percent

 ___________________________

1.(1). Address provided for each beneficial owner owning more than five percent of the voting securities of Fonar.FONAR.

(2). Timothy Damadian is the trustee under testamentary trusts holding such shares established for the benefit of Timothy Damadian, and Jevan Damadian and Keira Reinmund.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 13, “Certain Relationships and Related Transactions” of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20212023, which is specifically incorporated by reference herein. A copy of the Form 10-K is included in the Annual Report to Stockholders which is being sent to the Company’s stockholders with this Proxy Statement.)

The Company believes that each of the related transactions described therein were on terms at least as favorable to the Company as were available from non-affiliated parties.

COMPENSATION DISCUSSION AND ANALYSIS OF DIRECTORS AND EXECUTIVE OFFICERS

The compensation of the Company’s executive officers is based on a combination of salary and bonuses based on performance. Decisions concerning compensation are made on a case by case basis and not pursuant to standardized formulas, programs, policies or criteria, except for commissions in the case of sales. The Board of Directors does not have a compensation committee and does not believe such a committee is required, in view of the manner in which compensation matters are handled. Dr. Raymond V.Timothy Damadian and Claudette J.V. Chan are executive officers as well as members of the Board of Directors. Dr.Mr. Damadian, who also has voting control of the Company and serves as Chairman of the Board, Timothy Damadian,and who has served as PEOCEO and President of the Company since February 11, 2016, and Luciano Bonanni the Executive Vice President and Chief Operating Officer of the Company since June 27, 2016, participate in the determination of executive compensation for the Company’s officers.

As noted above, the Company's compensation policy is primarily based upon the practice of pay-for-performance. Section 162(m) of the Internal Revenue Code imposes a limitation on the deductibility of nonperformance-based compensation in excess of $1 million paid to the Principal Executive Officer. No officer of the Company received compensation in excess of $1 million in fiscal 20162023 or in any previous fiscal year. The Board currently believes that the Company should be able to continue to manage its executive compensation program for others so as to preserve the related federal income tax deductions.

The Company does not believe that there are any risks arising from its compensation policies and practices for its employees that are likely to have a material adverse effect on the Company.

The Company maintains no pension or deferred compensation plans except for a 401(k) plan.

SUMMARY COMPENSATION TABLE

The following table discloses compensation received for the three years ended June 30, 2019,2021, June 30, 20202022 and June 30, 20212023 by the Company’s Principal Executive Officer, the Company’s Principal Financial Officer and any officer of the Company receiving at least $100,000 for the year.

No executive officer has a written or unwritten employment agreement with the Company. Salaries, bonuses and discretionary stock and stock option awards comprise the full amount of total compensation. The only exceptions are commissions, based on a percentage of the sales prices, payable to salesmen.

Compensation Pursuant to Stock Options and SAR Grants

No stock options or stock appreciation rights were granted to the Company’s Principal Executive Officer and Principal Financial Officer during fiscal 2020.2023.

Option/SAR Exercises and Year End Values

No options or stock appreciation rights were exercised by the Company’s Chief Executive Officer during fiscal 2020.2023. The Company’s Chief Executive Officer did not hold any unexercised stock options or stock appreciation rights at the end of fiscal 2020.

DIRECTOR COMPENSATION2023.

The following table shows the compensation paid to the Directors for fiscal 2021:2023:

With the exception of Dr.Timothy Damadian who receives no compensation for serving as a director, each director is entitled to receive a minimum of $20,000 per annum for his or her services as a director of the Company, including service on any committee of the Board of Directors. No other fees are paid to the directors for their services as directors of the Company.

2. ADVISORY VOTE ON COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS

The following proposal provides the Company’s stockholders with an opportunity to vote to approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement. In considering your vote, you may wish to review with care the “Compensation Discussion and Analysis” section, which provides details as to the Company’s compensation policies, procedures and decisions, as well as the Summary Compensation Table and other related compensation tables, notes and narrative disclosures under the executive compensation section of this proxy statement. This vote is not intended to address any specific element of the Company’s executive compensation program, but rather the overall compensation program for the Company’s named executive officers. This vote currently is being taken on an annual basis at the Company’s annual meeting.

In accordance with Section 14A of the Securities Exchange Act of 1934, we are asking stockholders to approve the following advisory resolution at the Annual Meeting of Stockholders

RESOLVED, that the stockholders of Fonar Corporation (the “Corporation”) approve, on an advisory basis, the overall compensation of the Corporation’s named executive officers disclosed in the Compensation Discussion and Analysis, Summary Compensation Table and related compensation tables, notes and narrative discussion in this Proxy Statement for the Annual Meeting of Stockholders.

The Board of Directors recommends a vote FOR this resolution because it believes that the policies and practices described in the Compensation Discussion and Analysis are effective in achieving the Company’s goals of rewarding sustained financial and operating performance and leadership excellence and aligning the executives’ long-term interests with those of the stockholders, as well as motivating the executives to remain with the Company for long and productive careers.

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board will review and consider the voting results when evaluating our executive compensation program.

3. ADVISORY VOTE ON FREQUENCY OF AN ADVISORY VOTE ON COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS

3.

The following proposal provides the Company’s stockholders with an opportunity to vote, on an advisory basis, on the frequency of the stockholders’ advisory vote on the compensation of the Company’s named executive officers. On the proxy card, stockholders will be able to select one of four options for this proposal: one year; two years; three years; or abstain. Section 14A of the Securities Exchange Act requires the Company to hold at least once every six years this advisory stockholder vote on the frequency of the stockholders’ advisory vote on executive compensation.

After careful consideration of this proposal, the Company’s Board of Directors recommends that the advisory vote on executive compensation continue to occur each year. The Board believes that holding the advisory vote annually provides Management and the Board with more frequent stockholder feedback on compensation disclosures. You are not voting to approve or disapprove the Board of Directors’ recommendation for an annual vote. Rather, you are being asked to select the frequency of advisory stockholder votes on executive compensation that is preferable to you.

The Board of Directors will review and take the voting results of this proposal into account in making a determination concerning the frequency of future advisory votes on executive compensation. However, this advisory vote is not binding upon the Board of the Company and the Board may decide in the future to conduct the advisory vote on executive compensation on a less frequent basis. 

The Board of Directors recommends that stockholders vote to conduct future advisory votes on the compensation of the Company’s named executive officers EVERY YEAR.

4. RATIFICATION OF SELECTION OF AUDITORS

The Board of Directors selected Marcum LLP, as the Company's independent auditors for the fiscal year ending June 30, 2022.2024. The stockholders will be asked to ratify this action by the Board. Marcum LLP were the Company’s auditors for the fiscal years ended June 30, 2019,2021, June 30, 20202022 and June 30, 2021.2023.

One or more representatives of Marcum LLP, may be present at the Meeting with the opportunity to make a statement if they desire to do so, and to be available to respond to appropriate questions.

The affirmative vote of shares holding a majority of the votes represented at the meeting is required to ratify the selection of auditors by the Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.

AUDIT FEES

The aggregate fees billed by Marcum LLP for the audit of the Company’s annual financial statements for the fiscal year ended June 30, 20212023, and the reviews of the financial statements included in the Company’s Forms 10-Q for the fiscal year ended June 30, 20212023 were $345,000.$374,000.

The aggregate fees billed by Marcum LLP for the audit of the Company’s annual financial statements for the fiscal year ended June 30, 2020,2022 and the reviews of the financial statements included in the Company’s Forms 10-Q for the fiscal year ended June 30, 20202022 were $409,000.$379,000.

All work on the audits in each of the last two fiscal years was performed by full-time permanent employees of Marcum LLP.

AUDIT-RELATED FEES

No fees were billed by Marcum LLP for the fiscal years ended June 30, 20212023 and June 30, 20202022 for services related to the audit or review of our financial statements that are not included under the caption “AUDIT FEES”.

TAX FEES

No fees were billed by Marcum LLP for tax compliance, tax advice or tax planning in the fiscal years ended June 30, 20212023 and June 30, 2020.2022.

ALL OTHER FEES

No fees were billed by Marcum LLP for any other services during the fiscal years ended June 30, 20212023 and June 30, 2020.2022.

Since January 1, 2003, the audit committee has adopted policies and procedures for pre-approving all non-audit work performed by its auditors. Specifically, the committee must pre-approve the use of the auditors for all such services. The audit committee has pre-approved all non-audit work since that time and in making its determination has considered whether the provision of such services was compatible with the independence of the auditors. Marcum LLP has not provided any services in addition to audit services in fiscal 20212023 and 2020.2022.

Our audit committee believes that the provision by Marcum LLP of services in addition to audit services in previous years were compatible with maintaining their independence.

PROPOSALS OF STOCKHOLDERS

Proposals of stockholders intended to be presented at next year’s annual meeting of stockholders must be received by the Company no later than January 19, 202315, 2025 to be included in the Company's proxy statement and form of proxy related to that meeting.

SOLICITATION OF PROXIES

The proxy accompanying this proxy statement is solicited by the Board of Directors of the Company. Proxies may be solicited by officers, directors, and regular supervisory and executive employees of the Company, none of whom will receive any additional compensation for their services. Such solicitations may be made personally, or by mail, e-mail, facsimile, telephone, telegraph, or messenger. The Company will pay persons holding shares of stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks, and other fiduciaries, for the expense of forwarding solicitation materials to their principals. All of the costs of solicitation of proxies will be paid by the Company.

VOTING TABULATION

The election of the Company's directors requires a plurality of the votes represented in person or by proxy at the meeting. The ratification of proposals and the selection of auditors requires the affirmative vote of a majority of the votes represented in person or by proxy at the meeting. Votes cast by proxy or in person at the meeting will be tabulated by the Company.

A stockholder who abstains from voting on any or all proposals will be included in the number of shareholders present at the meeting for the purpose of determining the presence of a quorum. Abstentions will not be counted either in favor of or against the election of the nominees or other proposals. Under the rules of the National Association of Securities Dealers,Financial Industry Regulatory Authority, brokers holding stock for the accounts of their clients who have not been given specific voting instructions as to a matter by their clients in certain cases may vote their clients' proxies in their own discretion. Where a proposal requires a majority of the votes present for its passage, an abstention or broker non-vote will have the same effect as a negative vote.

OTHER MATTERS

The Board of Directors does not intend to bring any other business before the meeting, and so far as is known to the Board, no matters are to be brought before the meeting except as specified in the notice of the meeting. However, as to any other business which may properly come before the meeting, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies, where the authorization to do so has been granted.

DATED: Melville, New York, April 8, 20222024

A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 2021 2023 CONTAINING INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE UPON REQUEST. PLEASE WRITE TO:

INVESTOR RELATIONS DEPARTMENT

FONAR CORPORATION

110 MARCUS DRIVE

MELVILLE, NEW YORK 11747 

FONAR CORPORATION

Proxy - Annual Meeting of Stockholders

May 23, 2022,20, 2024, 10:00 AM

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, a stockholder of FonarFONAR Corporation (the "Company"), hereby revoking any proxy heretofore given, does hereby appoint Raymond V. Damadian, Luciano Bonanni, Daniel Culver and Ellen Yeske, and each of them, proxies with full power of substitution, for and in the name of the undersigned to attend the Annual Meeting of the Stockholders of the Company to be held at the Double TreeHilton Long Island Huntington Hotel, Wilmington Downtown, 700 King Street, Wilmington, Delaware598 Broadhollow Road, Melville, New York on May 23, 2022,20, 2024, at 10:00 a.m., local time, and at any adjournment(s) thereof, and there to vote upon all matters specified in the notice of said meeting, as set forth herein, and upon such other business as may properly and lawfully come before the meeting, all shares of stock of the Company which the undersigned would be entitled to vote if personally present at said meeting.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR ALL PROPOSALS.

The Board of Directors Recommends you vote FOR the following:

No. 1. Election of Directors

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark "FOR ALL EXCEPT" and circle or cross out the name(s) of those nominee(s).

01 - Raymond V.– Timothy R. Damadian, 02 -– Claudette J. V. Chan, 03 -– Ronald G. Lehman,

04 -– Richard E. Turk, 05 - John Collins– Jessica Maher

The Board of Directors recommends you vote for proposals 2, 34, and 4:5:

No. 2. On an advisory basis, to approve the executive compensation.

No. 3.4. To ratify the selection of Marcum LLP as the Company's independent auditors for the fiscal year ended June 30, 2022.2023.

No. 4.5. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.

__________________________________ _______________________

Signature Date

__________________________________ _______________________

Signature (Joint owners) Date

Please sign exactly as your name(s) appear(s) hereon or on your stock certificate(s). When signing as an attorney, executor, proxy, administrator, trustee, guardian or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation, please sign in full corporate name, by an authorized officer. If a partnership, limited liability company or other entity, please sign in the company’s name by an authorized person, indicating your capacity.

ANNUAL REPORT

2024

FONAR CHAIRMAN’S LETTER TO SHAREHOLDERS

MAY 2022

APRIL 2024

Dear Shareholders,

WhenIt’s once again that time of the Coronavirus reached Americayear when I have the privilege of addressing FONAR stockholders. Naturally you’ll want to hear about how the company is doing and what its future looks like. While these things are, of course, important for investors in Marchany kind of 2020,business, when it comes to FONAR, I firmly believe that to do that properly, it must be done in the light of the company’s extraordinary history.

Many of you are already familiar, to various degrees, with our history. For others, what follows may be entirely new to you. Whichever the case, from my experience, upon learning the history of our company, investors take pride in being part of something very special and important.

A BRIEF HISTORY OF FONAR

FONAR’s history begins with a man, my late father Raymond V. Damadian, M.D., and his idea – an idea that he was confident, if it could be transformed into reality, would revolutionize the field of medicine.

A native of Queens, New York, my father earned his medical degree from Albert Einstein College of Medicine in Bronx, New York, in 1960. After he completed his internships and fellowships in internal medicine, nephrology, and biophysics, Dr. Damadian, in 1967, joined the faculty at the State University of New York Downstate Medical Center in Brooklyn, New York, as a professor and scientific researcher.

While working on a research project there, Professor Damadian was introduced to a physical phenomenon known as Nuclear Magnetic Resonance (NMR). NMR spectrometers, which had been used by chemists for years, are able to detect signals from the contents of a test tube for the purpose of analyzing chemical composition. Captivated by this tool, in 1969 Dr. Damadian conceived the Ideaof using NMR on a much, much larger scale. He envisioned a machine that could noninvasively and harmlessly (unlike x-rays) look inside the human body, not just inside a tiny test tube. In the next year, 1970, he discovered that the relaxation times of NMR signals from normal and cancerous tissues of the same type were markedly different, as were the signals of different types of tissues. Every MRI image ever made rests upon his Seminal Discovery. In theory, Dr. Damadian’s discovery would enable cancer to be noninvasively detected in vivo. He filed to obtain a patent for his idea of such a machine in 1972. Granted in 1974, U.S. Patent #3,789,832 is the World’s First MRI Patent. [Today there are over 4,500 patents in MRI.] However, Dr. Damadian’s idea had yet to be proven. Unfortunately, and surprisingly, his idea was met with resistance and even ridicule from the scientific community. One prominent scientist at the time dismissed it as “visionary nonsense.” Undaunted, Dr. Damadian was determined to transform his idea into reality.

In 1976, Dr. Damadian and his two post-graduate students, Lawrence Minkoff and Michael Goldsmith, began the construction of the World’s First NMR Whole-Body Human Scannerin Dr. Damadian’s Downstate laboratory. [In the medical field, the term “NMR” has been replaced by “MRI.”] It took a year and a half to finish; they named it Indomitable; and on July 3, 1977, it produced the World’s First Human MRI Scan, that of Minkoff’s chest. That historical scan is referred to as MINK5. [Indomitable is now the property of the Smithsonian Institution in Washington, D.C.]. Apparently, Dr. Damadian’s idea was not “visionary nonsense” after all.

Encouraged by the team’s success and driven by his desire to introduce his invention to the world, Dr. Damadian, the physician, scientist, and discoverer, left academia and took on yet another role – entrepreneur, which, of course, was accompanied by another set of challenges, not the least of which was securing financial support. In 1978, Dr. Damadian formed the World’s First MRI Company, later known as FONAR Corporation.

FONAR manufactured and sold the World’s First Commercial MRIscanner in 1980. Named the QED80, the World’s First Clinical Trials in MRIwere conducted on it in 1981. The potential of MRI to revolutionize diagnostic medicine quickly caught the attention of those in the established diagnostic imaging industry. Within a few years, thirteen companies, including well-heeled corporate giants like Johnson & Johnson, General Electric, Philips, Siemens, and Hitachi started manufacturing their own MRI scanners and soon collectively dominated the newborn industry. A David-versus-Goliath battle ensued, fought in the marketplace and in the courts. Despite the challenges, thanks to FONAR’s technological innovations, an immediate crushing effect on medical providers, patients,ever-improving product line, extraordinary perseverance, the help of devoted family members, friends, and employees, and thereforeGod’s blessing, Dr. Damadian kept FONAR Service Revenue and afloat through years of financial uncertainty. Yet through it all, FONAR installed more than 400 MRI scanners all over the globe.

HMCA Management Fees. The crisis left us withFormed in 1997

FONAR spent its first twenty years battling the giants of medical imaging. It was a very disappointing fourth quarter (fiscal 2020)competitive and alsoerratic marketplace, making it especially difficult for a relatively small company like FONAR to survive. Ironically, FONAR was fighting for a fair share of the urgency for usMRI industry that owed its very existence to recover as quickly as possible. Even though the effects of this relentless pandemic continued to hamper our business, to the credit of our management team and our employees, we have to date prevailed and as of December 31, 2021 FONAR posted 47 consecutive quarters of positive net income and positive income from operations.FONAR.

FONAR’s primaryThroughout that period, FONAR worked with hundreds of customers, most of them independent MRI business owners. We became well acquainted with their day-to-day operations, their sales and marketing strategies, and the interests and needs of their referring physicians. Quite naturally, we were inadvertently learning how an MRI center should be run, and we appreciated that their revenues and expenses were relatively stable, in comparison to what we had been experiencing solely as a manufacturing company. And so, in 1997, in order to obtain a much-needed steady and reliable source of income and growth is attributable to itsrevenue, FONAR expanded into the diagnostic imaging management business by forming our subsidiary, Health Management Company of America (HMCA).

The Birth of HMCA in 1997

FONAR, the original MRI company, introduced the world’s first MRI scanner in 1980 and from there grew solely by selling and servicingprovides its ever-innovative line of MRI products. But eventually, after years of competing with well-heeled corporate giants and struggling with the financial uncertainties that accompanied an erratic MRI equipment sales market, FONAR, in 1997, expanded by forming its diagnostic imaging management subsidiary, Health Management Company of America (HMCA) in order to provide the companyclients with a steady and reliable sourcefull range of revenue.

Up until that time, FONAR had been working with hundreds of customers for nearly 20 years, most of them independent MRI business owners. As a result of our ongoing relationships with them, we became very familiar with how they managed their businesses, their successes and their failures. We observed which of their methods, practices and strategies worked and which ones didn’t. What we learned from their experiences made FONAR’s expansion into the diagnostic imaging management business a natural one, and so we developed a business plan that would eventually result in HMCA becoming the company’s leading source of revenue and profit.

A New Management Team in 2010

non-medical services. By 2009, annual scan volume at theHMCA was managing nine MRI facilities, managed by HMCA (sixsix in New York and three in Florida) reachedFlorida. Annual scan volume was 29,000, withand FONAR Total Revenues-Net ofwere $31.8 million (fiscal(Fiscal 2010). When my son, Timothy R. Damadian, who is currently President and CEO of FONAR, returned to FONAR in 2010 his first order of business was to assemble a new management team. Each one chosen was trustworthy, had worked with Tim for many years, and had a record of success in managing and growing MRI scanning centers and businesses. Together they launched a growth strategy based upon the ever-growing appeal among patients and their physicians of our FONAR UPRIGHT® Multi-Position™ MRI, also known as the Stand-Up® MRI. From that point on, the company has grown steadily, enjoying remarkable success. Today, HMCA manages 39 MRI scanners: 25 in New York and 14 in Florida. In 2021, annual scan volume at HMCA-managed facilities was 178,000 with Total Revenues-Net of $89.9 million (fiscal 2021).

New Management Team

In 2010, we assembled a new management team comprised of an outstanding group of experienced, proven professionals that launched what has been a very successful growth strategy. At its core are the features and benefits of the FONAR UPRIGHT® MRI, also known as the STAND-UP® MRI, namely the scanner’s enormous appeal as the “Non-Claustrophobic MRI,” and its unique ability to scan patients in any position, including weight-bearing positions. In particular, an MRI scan of the spine conducted with the patient lying down, which is how they must be done on any other MRI scanner, can, in the absence of the spine bearing the full weight of the body as it normally does, underestimate the patient’s problem or miss it entirely.

The HMCA Growth Strategy

HMCA’s growth strategy is three-pronged: 1) Grow by increasingHMCA helps to grow the scan volume at existing sites by applying1) employing proven marketing techniques and providing outstanding service to patients and their physicians.physicians, 2) Acquireacquiring or establishestablishing de novo sites in locations that would enhance or expand ourHMCA’s existing networks. To pinpoint a de novo site, we conduct thorough demographic studies, identify the primary major medical insurance carriers in the region,networks, and access the competitive landscape. 3) Installinstalling additional MRI scanners at sites in needwhen the demand for MRIs approaches their scanning capacities, or where the introduction of reducing patient backlog and/or sites thathigh-field MRI technology would benefit by expanding MRI services in their regions. Vertical growth, by addingexpand the referring physician base. Adding a second or even a third MRI to a site is very cost effective. Aside from the expense of the added equipment, the only other major costs are those associated with the additional space needed to house the equipmentthat would be required, and a minimal increase in staff to accommodate the increase in patient volume.

The Effect of the COVID-19 Pandemic on HMCA Updates

When COVID-19 arrived in March of 2020, all HMCA-managed sites were considered “essential businesses,” which allowed themOur strategy has worked well, recently having helped HMCA to continue to serve patients in need of diagnostic testing. Forwithstand the safety of patients and employees at the sites and at HMCA headquarters, sanitary policies and procedures were immediately implemented and Personal Protective Equipment (PPE) distributed, while, as expected, scan volume at every HMCA site immediately plummeted. In the last quarter of fiscal 2020, when the Coronavirus first took hold, HMCA’s total scan volume, which depends entirely on referrals from medical providers who were also suffering from the effects of COVID-19, was 42% lower than it was in the corresponding quarterongoing, negative impact of the previous fiscal year. Our management team responded without delay by shortening business hours, reducing staff by either cutting work hours or furloughing, and where possible, allowingCOVID pandemic. As reported earlier, the COVID-19 pandemic left us with a significantly reduced labor pool from which to draw competent employees, to work from their homes in order to maintain productivity.particularly among MRI technologists. As thea result, of a devastating fourth quarter, the total scan volume for fiscal 2020 (166,698 scans) was down 9% in comparison to fiscal 2019 (184,028 scans).

HMCA’s recovery began in the early part of Fiscal 2021. Over the course of the year, business hours were expanded to accommodate the slowly rising demand. At the same timereduced, which has, for years, hampered growth in scan volume and in spite of the pandemic, we persevered to complete four major projects that had previously been scheduled for Fiscal 2021: the establishment of a new site in Pembroke Pines, Florida in July of 2020; the addition of a second MRI scanner in Islandia, New York in October of 2020; the addition of a second MRI scanner in the White Plains, New York site in January of 2021; and the acquisition of an existing MRI facility in Yonkers, New York in March 2021. With the increase in scans attributable to the completion of these projects together with the partial, company-wide return to pre-COVID scan volumes, we finished fiscal 2021 with 178,364 scans, which was 7% more than we completed in fiscal 2020 and just 3% shy of ourincreased patient backlogs. The scan volume in pre-COVID fiscal 2019. We are both grateful and proud to have posted Total Revenue-Net of $89.9 million in fiscal 2021, 5%Fiscal 2023 (188,348) was higher than that of fiscal 2020.Fiscal 2022, but only by 1%.

But through the use of innovative recruitment strategies and hard work, we have weathered the worst of the COVID storm and are currently no longer experiencing staffing shortages at most of the managed sites. Scan volume in the first six months of Fiscal 2024 was a record 101,990, which was 13.5% higher than the scan volume of 89,888 in the corresponding six months of Fiscal 2023.

Looking AheadSwiftMR™ Incorporated at HMCA-Managed Centers

Unfortunately, illnesses due to COVID-19 or its variants, as well as quarantining requirements and vaccination/masking mandates continue to hamper patient volume and also make it very challenging for HMCA to keep the sites and headquarters properly staffed. Yet, we continue to succeed. HMCA scan volume in the first half of fiscal 2022 was the highest first six months in the history of the company and 9.8% higher than the scan volume in the first half of fiscal 2021. I enthusiastically congratulate our management team and all of our employees for their competence, loyalty, and hard work.

Projects already completed in fiscal 2022 or currently underway: the equipment upgrade of one of the two MRI scanners in the White Plains, New York site was completed in July of 2021; a second MRI scanner was installed in the Pembroke Pines, Florida site in November of 2021; the uptown Manhattan site (77th Street) was relocated to midtown Manhattan (55th Street) in December of 2021; a de novo site in the South Bronx, New York is planned to open byTowards the end of fiscal 2022; and a de novo site in Central Florida is scheduled to open shortly after that.

FONAR is the Inventor of MR Scanning™. We introduced the world’s first commercial MRI in 1980, went public in 1981, and have installed over 400 MRIs all over the world. We are located in Melville, New York, where we continue to manufacture, sell, service, and upgrade FONAR scanners. Our signatureCalendar 2023, an image enhancement software product is the FONAR UPRIGHT® Multi-Position™ MRI (also known as SwiftMR™ was installed on almost every HMCA-managed MRI scanner. SwiftMR™, an FDA 510(k)-cleared product from AIRS Medical, enhances the STAND-UP® MRI). The successquality of HMCA is largely attributableMRI images through denoising and sharpening techniques. Reading radiologists and referring physicians have been very pleased with the improvements in image quality, and the reduced exam times have enabled the scanning centers to this unique product for two primary reasons:perform more scans per hour.

First, it is the only whole-body MRI that performs Position Imaging™ (pMRI™), which means it scans patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as the conventional lie-down position. The UPRIGHT® MRI has detected problems that were underestimated or missed entirely on “weightless-only” MRI scanners, particularly scansFONAR UPDATES

Exclusive Distributorship with AIRS Medical

In light of the spine. With its ability to “see it all,” the UPRIGHT® MRI provides referring physicians the means to achieve BETTER OUTCOMES FOR THEIR PATIENTS. Most MRI studies aresuccess of the spine, and itSwiftMR™ product at the HMCA-managed centers, together with AIRS Medical’s recognition of FONAR’s 45 years of experience in MRI, we have entered into an agreement with AIRS Medical whereby FONAR is widely reported that about 80%now the exclusive distributor of adults experience low back pain at some point inSwiftMR™ to FONAR customers for use on their lifetimes. This explains why the UPRIGHT®FONAR MRIs or on any other MRI has gained traction in the medical community.scanner they own.

Second, a significant portionJohn Greenhalgh, Ph.D., Vice President of Research and Development at FONAR Corporation, shared his experience in successfully implementing SwiftMR™ in FONAR Upright® MRI systems at the 109th Scientific Assembly and Annual Meeting of the patient population seek to avoid or flatly refuse to have their MRI examsRadiological Society of North America (RSNA) in a claustrophobia-inducing “tunnel” or “tube” MRI, which is typical of most MRIs. The comfort and openness of the UPRIGHT® MRI make it the Patient-Friendly™ MRI. Our scanner is very appealing to patients and also to referring physicians who want to accommodate patients whoChicago, in November, 2023.

We are fearful of or cannot tolerate confining, conventional MRI scanners. To their relief, the UPRIGHT® MRI allows most patientsproud to be scanned while sittingworking with AIRS Medical and watchinglook forward to a wide-screen TV.long and prosperous relationship.

FONAR users have, for years, benefitted substantially from these highly-prized features and, since the design of the UPRIGHT® MRI remains patent-protected by FONAR, they will continue to enjoy this competitive advantage in the future.

Ongoing Research

MRI has brought a new dimension to MEDICAL TREATMENT,Up until the power to VISUALIZE ANATOMIC DETAIL in the body's VITAL SOFT TISSUES (brain, heart, kidney, liver, spleen, lungs, pancreas, intestines) plus MRI's new power to non-invasively QUANTIFY (e.g. measure T1, T2, diffusion, chemical spectra) the responsetime of these VITAL TISSUES to treatment.

Regarding ourhis passing, Dr. Damadian was conducting research efforts, over the past few years we have been making cinés (movies) of theon cerebrospinal fluid (CSF) as it flows up and downflow in the neck and in and aroundbrain. Utilizing the brain. Thanks to theFONAR UPRIGHT® MRI’s unique ability to scan patients in weight-bearingboth recumbent and upright positions, as well ashe and his team found significant position-dependent differences in the recumbent, non-weight-bearing position, we are finding significant postural differences in CSF flow. These differences may provide clues which will enable physicians to find solutions to a varietyflow of unsolved medical problems and the power to quantify the degree to which the impaired CSF flow responsible for the patient’s symptoms has been rectified by the patient’s surgical and non-surgical CCJ (craniocervical junction) treatment. Currently, our research is focused on quantifying CSF flow and the velocity at which it navigates through the neck and head. We’ve beencerebrospinal fluid. They were able to use this quantitative CSF data collected from asymptomatic patients to identifyto investigate the degree to which CSF flow impairment is responsible for thea patient’s symptoms and the degree to which thea patient’s surgical or non-surgical CCJ (craniocervical junction) treatment has restored the patient’s criticalnormal brain and central nervous system’s physiologysystem function. Dr. Damadian believed that appreciating the postural differences in CSF flow might enable physicians to normal.

This important researchaddress a variety of the imagingunsolved medical problems and quantifying of cerebrospinal fluid (CSF) flow as it circulates from the brain, down the spine and throughout the brain, I believe, is research that will lead to a newbetter understanding of the role of CSF physiology for the neurodegenerative diseases Multiple Sclerosis, Alzheimer’s, Parkinson’s, Amyotrophic Lateral Sclerosis (ALS) and childhood autism. Although progress has been temporarily slowed by the pandemic in fiscal 2021, the Company will, in the future, continue with this valuable research made possible by the introduction of FONAR’s UPRIGHT® MRI imaging technology.

The Highlight of Fiscal 2021: The 50th Birthday of MRI

March 9, 2021 was a very special day for menormal physiological function, as well as for FONAR employees, HMCA employees, FONAR users, FONAR stockholders, Nasdaq, family and friends, as it has been 50 years since my discovery of MRI was published in the scientific journal Science on March 19, 1971. In celebration, FONAR had the honorpathophysiology of ringing the Nasdaq closing bell on March 9, 2021. Dueneurodegenerative diseases such as Multiple Sclerosis. I am pleased to COVID-19, it was a virtual ceremonyreport that could be viewed via a Nasdaq-provided live-stream link.this important research is on-going.

Excerpts from FONAR’s March 9, 2021 press release follow:

FONAR To Ring The Nasdaq Stock Market Closing Bell, As It Celebrates 50th Birthday of MRI

MELVILLE, NEW YORK, March 9, 2021 - FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning™, will ring the Nasdaq Stock Market Closing Bell on March 9, 2021. Nasdaq and FONAR selected this day as it is 50 years since the discovery of MRI by Raymond V. Damadian, M.D., FONAR’s founder and chairman, was published in the widely-read, peer-reviewed scientific journal Science on March 19, 1971.

Dr. Damadian said, “I got my first idea for MRI in 1969, and in 1970 made the discovery that is the basis for the making of every MRI image ever produced and the foundation of the MRI industry. This discovery is that there is a marked difference in the relaxation times of the NMR (MRI) signals between normal and cancerous tissues of the same type, as well as between different types of normal tissues. This discovery, published in the peer-reviewed journal ‘Science,’ marked the beginning of the MRI industry.”

The discovery resulted in the generation of the pronounced pixel contrast that was deficient in traditional medical imaging technology (x-ray, CT: 4%) and was needed for adequate visualization of the body's vital organs and assessment of their well-being. The pixel contrast provided by MRI imaging was raised to 131%. As reported in edubilla.com: “But without this discovery of the profound sensitivity of the relaxation time to different tissue types and malignant tissue THERE WOULD BE NO PICTURE AT ALL.”

Prior to this 1971 article in the journal Science, there was no realization that existing NMR test tube technology could be transformed into a scannerOpening of the live human body. Soon scientists aroundRaymond V. Damadian, M.D. Memorial Museum

On December 20, 2023, we opened the world began researching the discovery.

Dr. Damadian’s discovery, as reportedRaymond V. Damadian, M.D. Memorial Museum at our corporate headquarters in Science 1971, soon ledMelville, New York. Adjacent to the first patent in MRI.** In 1977, with his two post-doctorate students, Lawrence Minkoff, Ph.D., and Michael Goldsmith. Ph.D., he went on to makefront lobby, the world’s first MRI scanner.

Dr. Minkoff recalledmuseum includes a recreation of the preparations for the world’s first MRI scan. He said: “Dr. Damadian agreed to be the first to go into a huge magnetic field and have resonating radio frequencies directed at his body and specifically the area around his heart. This was a risk as no one in the world to our knowledge had done this before. So the first time, a cardiologist was on hand to help if there was a problem. Unfortunately, the scan did not work. It was later determined that the coil needed further development. So, finally on the eveningmaking of July 2, we were able to get an NMR (MRI) signal from my chest. With this successful achievement we were then able to proceed and make the world’s first MRI image of a live human being.”

Dr. Damadian began FONAR,on the world’s first dedicated MRI Company, in 1978, and the Company installed the world’s first commercial MRI in 1980. In 1981 FONAR became a NASDAQ-listed company. The Company, today, isscanner, Indomitable, at the Nasdaq Stock Market Closing Bell Ceremony delightedly celebrating the 50th anniversaryDownstate Medical Center in Brooklyn, New York, on July 2 and 3, 1977.

The recreation includes an exact replica of Indomitable along with life-size figures of the birththree inventors: Dr. Raymond V. Damadian and his two post-graduate students, Lawrence Minkoff and Michael Goldsmith. The walls of the museum are lined with panels of captioned pictures, documents, and publications covering Dr. Damadian’s personal and family history; his discovery that made and continues to make MRI possible; the building of Indomitable; the making of the first MRI image; the formation and history of FONAR Corporation; and Dr. Damadian’s achievements, honors, awards, victories, disappointments, and his expression of gratitude to God. The museum also includes an interactive display of photos and video, some of Dr. Damadian’s personal items, and many historical artifacts.

If you are interested in making an appointment to visit the museum, please contact Daniel Culver, Director of Communications, at RVDmuseum@fonar.com.

CONCLUSION

FONAR’s early years were difficult, but Dr. Damadian never gave up the fight. In his tenacious, tireless, and passionate pursuit to transform an idea into reality, he, against overwhelming odds and resistance, invented a machine, created a company, even an entire industry, that has helped, even saved, the lives of millions of people the world over. Family, friends, employees, and investors who stood by him can take pride for the part they played in helping Dr. Damadian achieve his goal. Not too long ago, very few people had even heard of MRI. Today it’s a household word.

We struggled financially for decades but are now on a steady path of growth and profitability. As of December 31, 2023, FONAR posted 55 consecutive quarters of positive net income and positive income from operations. FONAR will continue its tradition of product innovation and research, and our subsidiary, HMCA, which currently manages 42 MRI scanners (25 in New York and 17 in Florida), is committed to continuing growth for years to come.

*

Thank you for your support.

Sincerely,

Timothy R. Damadian “Tumor Detection by Nuclear Magnetic Resonance,” Science, Volume 171, pp.1151-1153. This paper was referenced by other Scientist-Authors in the field so frequently that it was recognized as a ‘Citation Classic’ by the Institute for Scientific Information, Philadelphia, PA, whose mission it is to monitor scientific citations.

Chairman, President and CEO

** U.S. Patent #3,789,832, “Apparatus and Method for Detecting Cancer in Tissue,” (1974) that patented the relaxation differences and their use in medical scanning. It was acknowledged and enforced by the U.S. Supreme Court in 1997. There are currently more than 4,500 patents on MRI issued by the U.S. Patent Office.  FONAR Corporation

Conclusion

When COVID-19 reached our shores, many thought it would run its course in a matter of weeks, maybe a couple of months. Now it’s in its third year, and we are still unsure of when it will be gone, if ever. We are grateful that not only have we successfully coped with what many describe as one of the most formidable crises Americans have ever faced, but we have remained profitable through it all. The credit belongs to FONAR’s enduring technology; the skillful management of our diagnostic imaging management subsidiary, HMCA; the competence, loyalty and hard work of our employees; and the loyal support of our stockholders. We long for a full return to a pandemic-free business environment in which we can expect even greater success. 

Sincerely,

Raymond V. Damadian

Chairman and Founder

FONAR Corporation

 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedJune 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 0-10248

Securities Registered pursuant to Section 12(b) of the Act

IndicateSecurities Registered pursuant to Section 12(g) of the Act

None 

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. Yes ☒ No ☐ .

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Web site,website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for suchsuch shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers, pursuant to Item 405 of Regulation S-K, §229.405 of this Chapter, is not contained, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this 10-K or any amendment to the Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ .

The aggregate market value of the shares of Common Stock held by non-affiliates as of December 31, 20202022 based on the closing price of $17.36$16.75 per share on such date as reported on the NASDAQ System, was approximately $110$106.2 million. The other outstanding classes do not have a readily determinable market value.

As of September 15, 2021, 6,554,2108, 2023, 6,450,882 shares of Common Stock, 146 shares of Class B Common Stock, 382,513 shares of Class C Common Stock and 313,438 shares of Class A Non-voting Preferred Stock of the registrant were outstanding.

 No

DOCUMENTS INCORPORATED BY REFERENCE

NONE

DOCUMENTS INCORPORATED BY REFERENCEFONAR CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

 FONAR CORPORATION AND SUBSIDIARIES

PART I

ITEM 1. BUSINESS

GENERAL

FonarFONAR Corporation, sometimes referred to as the “Company” or “Fonar”“FONAR”, is a Delaware corporation which was incorporated on July 17, 1978. Our address is 110 Marcus Drive, Melville, New York 11747 and our telephone number is 631-694-2929. FonarFONAR also maintains a website at www.fonar.com. FonarFONAR provides copies of its filings with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K and amendments to these reports to stockholders on request.

We conduct our business in two segments. Our medical equipment segment is conducted directly through Fonar.FONAR. Our physician management and diagnostic services segment is conducted through our subsidiary Health Diagnostic Management LLCCorporation of America (“HMCA”), also called Health Management Company of America.. HMCA provides management services, administrative services, billing and collection services, credentialing services, contract negotiations, compliance consulting, purchasing, IT services, hiring, conducting interviews and managing personnel, storage of medical records, office space, equipment, repair, maintenance service, and clerical and other non-medical personnel to medical providers engaged in diagnostic imaging. In addition to acting as a management company, HMCA owns and operates fourfive diagnostic imaging facilities in Florida, where the corporate practice of medicine is permitted.

We restructured the corporate organization of our physician and diagnostic services management segment of our business effective July 1, 2015. Imperial Management Services, LLC (“Imperial”), a subsidiary which owned the assets used in the business of its parent, Health Management Corporation of America (which is wholly-owned by Fonar), transferred those assets to Health Diagnostics Management, LLC (“HDM”), which is another subsidiary of Health Management Corporation of America. As a result, going forward our physician and diagnostic management business will be conducted entirely through HDM, which is operating under the assumed name Health Management Company of America.

FonarFONAR is engaged in the business of designing, manufacturing, selling and servicing magnetic resonance imaging scanners, also referred to as “MRI” or “MR” scanners, which utilize MRI technology for the detection and diagnosis of human disease, abnormalities, other medical conditions and injuries. Fonar’sFONAR’s founders built the first MRI scanner in 1977 and FonarFONAR introduced the first commercial MRI scanner in 1980. FonarFONAR is also the originator of the iron-core non-superconductive and permanent magnet MRI technology.

Fonar’sFONAR’s iron frame technology made FonarFONAR the originator of “open” MRI scanners. We introduced the first “open” MRI in 1980. Since that time we have concentrated on further application of our “open” MRI, introducing most recently the Upright® Multi-Position™” MRI scanner (also referred to as the “Upright®” or “Stand-Up®” MRI scanner) and the FonarFONAR 360™ MRI scanner. The FonarFONAR 360™ MRI is not presently being marketed.

See Note 1716 to the Consolidated Financial Statements for separate financial information regarding our medical equipment and physician and diagnostic management services segments.

FONAR CORPORATION AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS.

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the plans and objectives of Management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of business. These assumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Annual Report will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Among the risks and assumptions which must now be taken into account is the COVID-19 virus, which adds additional uncertainties to future expectations. Although the impact will be negative, the severity, duration and recurrence of new strains of the COVID-19 virus such as the Delta variant adds a new dimension to the difficulties facing our business and the world economy in general.MEDICAL EQUIPMENT SEGMENT

THE UPRIGHT® MRI SCANNERPRODUCTS

The Upright® MRI scanner is the product we are presently promoting.

The Upright® MRI (also known as the “Stand-Up® MRI”) is a “whole-body” MRI, meaning that it can be used to scan virtually any part of the body. Unlike

The Upright® MRI differs from conventional recumbent MRI scanners wherein that it is not limited to scanning patients in the patient must lie on his or her back, the Upright® MRI permits MRI scans to be taken in a weight-bearing state. Patientsrecumbent posture. For example, patients can be scanned while sitting, standing, sitting, bending, or lying down. This means that an abnormality or injury, such as a slipped disk, may be scanned in a weight-bearing posture, which more often than not is the position in which patients experience pain. An adjustable bed allows patients to stand, sit or lie on their backs, sides or stomachs.

The Upright® MRI is also, by design, a non-claustrophobic MRI scanner. We have introducedThe Upright® MRI employs a dipole magnet whose magnetic field orientation is transverse to the name “Upright®” as an alternative to “Stand-Up®” becauseaxis of the multiplicitypatient’s body. The gap between the poles of positions inthe magnet is the space into which the patient may beis placed. Because the magnetic field direction is horizontal and transverse to the body, a patient who is scanned whereseated or standing has an unobstructed view out of the gap of the magnet. In typical installations, patients watch television while being scanned, without the aid of special glasses with mirrors.

The fact that the patient space is not standing.

Asunobstructed permits scanning in a variety of June 30, 2021, HMCA manages a total of 39postures that cannot be duplicated in conventional MRI scanners. Twenty-five (25)Most conventional MRI scanners are located in New York and fourteen (14) which are located in Florida. We believe thatuse today employ solenoidal super-conducting magnets whose magnetic field orientation is along the utilization of Fonar UPRIGHT® MRI scanning systems has been a significant factor in maintaining the patient volumeaxis of the scanning facilities and our ability to cope withpatient’s body, which must be placed into the effectsbore of the COVID-19 pandemic. In addition,scanner in either a new facility managed bysupine or prone posture. Our experience is that when presented with a choice between being scanned lying down in a tunnel-like enclosure or seated in an open MRI, most patients will choose the Company has been opened in Pembroke Pines, Florida and a total of four additional MRI scanners were added in New York.

latter.

FONAR CORPORATION AND SUBSIDIARIES

MEDICAL EQUIPMENT SEGMENT

PRODUCTS

The Fonar Upright® MRI is a weight-bearing whole-body open MRI system which enables positional MRI (pMRI®) applications. Operating at a magnetic field strength of 0.6 Tesla, the scanner is a powerful, diagnostically versatile and cost-effective open MRI that provides a broad range of clinical capabilities and a complete set of imaging protocols. Patients can be scanned standing, bending, sitting, upright at an intermediate angle and in the conventional recumbent position. This multi-positional MRI system accommodates an unrestricted range of motion for flexion, extension, lateral bending, and rotation studies of the cervical (upper) and lumbar (lower) spine. Previously difficultfacilitates patient scanning positions can be achieved and compared using the system’s MRI-compatible, three-dimensional, motorizedin a variety of postures thanks to a unique, three-axis patient handling system. The system’s liftmotorized patient table, or bed, can be rotated to any angle between 0 (horizontal) and tilt functions deliver84 degrees (nearly vertical). Unlike a conventional recumbent MRI patient table, which can only move into or out of the targetedscanner’s bore, the Upright® MRI bed can be translated with two degrees of freedom, in/out and up/down. User-friendly software allows the scanner operator to move the anatomical region of interest precisely to the center of the magnet. Truemagnet using a cursor placed on a localizer image. Anatomically true image orientation is assured, regardless of the rotation angle of the bed, via computer read-back of the table’s position. A seat can be hooked onto the bed in a variety of locations, or removed, as needed. Transpolar VersaRests™ and other devices can be used to keep the patient comfortable and motionless throughout the scanning process.

ThereIMAGE QUALITY AND FIELD STRENGTH

Most commercially available MRI scanners range in magnetic field strength from about 0.2 T (Tesla) to 7.0 T, and open MRI scanners range from about 0.2 T to 1.2 T.

Field strength is considerable evidencean important characteristic of MRI scanners, but not the only one. Higher field strengths generally provide higher signal-to-noise ratios (SNR) on account of the Boltzmann distribution, but SNR is not the only determinant of image quality. For example, the spin-lattice relaxation time T1 that characterizes the weight-bearingnuclear magnetic resonance (NMR) signal increases with field strength, decreasing the difference in T1 values between tissues that is an essential contributor to contrast in images. For example, grey/white matter contrast in the brain falls off rapidly above about 1.0 T, and some studies have shown that optimal tissue contrast occurs in the mid-field region, down to 0.2 T. Imaging bandwidth, receiver coil design, pulse sequence design, and scan parameters significantly affect image quality. Indeed, researchers and MRI vendors are pushing the boundaries of MRI technology in both directions, that is, to very low (1 – 199 mT) and very high (7.0 T and above) field strengths for a variety of technical and diagnostic reasons. For instance, one advantage of lower field strengths is that image artifacts arising from metallic implants such as surgical screws diminish as field strength decreases. This is particularly important for surgeons referring their postoperative patients for diagnostic imaging studies.

The Upright® MRI provides medical benefits not duplicated by any otheroperates at a mid-field strength of 0.6 T and enjoys wide acceptance in the radiological community. The scanner is diagnostically versatile and equipped with a broad range of clinically proven imaging protocols that produce images of exceptional quality, and a fully-featured, robust, and user-friendly software interface.

DIAGNOSTIC ADVANTAGES OF POSITIONAL MRI scanner because

Apart from its attractiveness as an open, non-claustrophobic, general-purpose MRI, the Upright® MRI can deliver diagnostically relevant information that correlates with patient positioning plays a critical role in accurately detecting clinically significant pathology.posture.

For instance,example, a variety of injuries to and pathologies of the Fonarspine, such as spondylolisthesis (“slipped disc”), may go undetected in the recumbent posture, but manifest themselves when the patient is scanned in a normal, weight-bearing (“physiological”) position, such as seated, or seated in forward flexion, extension, or standing.

FONAR CORPORATION AND SUBSIDIARIES

The Upright® technologyMRI has demonstrated its key value for patients suffering from scoliosis, who typically undergo regular x-ray exams over a course of years. A study by the National Cancer Institute (2000) of 5,466 women with scoliosis reported a 70% increase in breast cancer resulting from 24.7 chest x-rays received on average over the course of their treatment. Prior to the advent of the Upright® MRI, the x-ray machine was the only imaging modality that could evaluate the condition because the patient must be imaged standing. FONAR has developed an RF receiver coil and a 3D scanning protocol that for the first time allows scoliosis patients to obtain diagnostic, multi-slice images of their spines while standing, without the risks associated with radiation, and with the Arnold-Chiari Syndrome, whichsoft-tissue-contrast benefits of MRI over x-ray.

The utility of upright, weight-bearing MRI is believednot limited to affectthe spine. For example, approximately one in a thousand people (some 200,000 to 500,000 Americans. In this syndrome, brain stem compression and subsequent severe neurological symptoms occur in these patients, when because of weakness in the support tissues within the skull,US) have a congenital condition known as Chiari malformation, an abnormality of the brain stem descends and is compressed and entrappedat the junction with the spine at the base of the skull inskull. In people with Chiari malformation, the lowest lying structures of the brain, the tonsils of the cerebellum, descend into and become entrapped by the foramen magnum, which is the circular bony opening at the base of the skull where the spinal cord exits the skull. The brain structures “entrapped” in Chiari Syndromeexits. While most of these individuals are the lowest lying structuresasymptomatic, many suffer from more severe forms of the syndrome (e.g., type II or Arnold-Chiari syndrome), in which brain the tonsils of the cerebellum.stem compression results in severe neurological symptoms. The Chiari Syndromesyndrome is therefore alternately namedalso called Cerebellar Tonsillar Ectopia (CTE) indicatingbecause of the displacement (ectopia) of these Cerebellar tonsils in this syndrome.the cerebellar tonsils. Classic symptoms of the Chiari Syndromesyndrome include the “drop attack,” wherein which the patientafflicted individual unexpectedly experiences an explosive rush at the base of the brain whichthat runs down the body to the extremities, causing the patient to collapse in a temporary neuromuscular paralysis. These symptoms subside when the patient is lying down. Conventional lie-down MRI scanners cannot make an adequate evaluation of the pathology since the patient’sthis pathology is most visible and the symptoms are most acute when the patient is scanned in the upright, weight-bearing position.

A publication in the Journal “Brain Injury”position (Brain Injury 2010, 24 (7-8) 988-994) of 1,200 neck pain patients reported that the fallen cerebellar tonsils of the brain (CTE) were missed 75% of the time when the patient was scanned only in the recumbent position. It is critical to have an image of the patient in an upright position so that the neurosurgeons can fully evaluate the brain stem and choose the most appropriate surgical approach for an operative repair.

FONAR CORPORATION AND SUBSIDIARIES.

The study was published by 10 authors from distinguished universities inIn the United States and aroundbody, the world. The study reported that Cerebellar Tonsillar Ectopia Herniation (CTE) was missed 75% of the time when the patient was scanned lying down instead of upright. At the current rate of 1,000,000 automobile whiplash injuries in the U.S. per year, 750,000 patients each year would have the pathology responsible for their symptoms go undetected if they were examined solely in a conventional recumbent-only MRI.

The Upright® MRI has also demonstrated its value for patients suffering from scoliosis. Scoliosis patients typically have been subjected to routine x-ray exams for years and must be imaged upright for an adequate evaluation of their scoliosis. Because the patient must be standing for the exam, an x-ray machine has been the only modality that could provide that service. The Upright® MRI is the only MRI scanner that allows the patientbeing utilized in a variety of ways, for example to stand during the MRI exam. Fonar has developed a new RF receiver and scanning protocol that for the first time allows scoliosis patients to obtain diagnostic pictures of their spines without the risks of x-rays. A study by the National Cancer Institute (2000) of 5,466 women with scoliosis reported a 70% increase in breast cancer resulting from 24.7 chest x-rays these patients received on averageimage pelvic organ prolapse in the coursestanding posture, inguinal hernias, defecation in the sitting posture (utilizing cine MRI), and the prostate in the sitting posture (utilizing a flat, multi-channel receiver coil on top of their scoliosis treatment.

Other important new applications are Upright® imaging of the pelvic floor and abdomen to image prolapses and inguinal hernias. Fonar has also developed the first non-invasive method to image the prostate:which the patient simply sits on a flat, seat-like coil.sits).

The Upright® MRI is also the world’s most non-claustrophobic whole-body MRI scanner. Frequently, patients can simply walk into the magnet, stand or sit for their scans and then walk out. The magnet’s front-open and top-open design provides an unprecedented degree of comfort because there is nothing in front of the patient’s face except a large (42”) flat-screen TV that is mounted on the wall. The default position for the bed is a tilt back of six degrees that minimizes patient motion. Special RF receiver coil fixtures, a patient seat, Velcro straps, and transpolar stabilizing bars are also used to keep the patient comfortable and motionless throughout the scanning process.

Full-range-of-motion studies of the joints in multiple directions are possible, an especially useful feature for sports injuries. Full range of motion cines, or movies, of the lumbar spine can also be achieved under full body weight.

The Fonar Upright® MRI operates at a significantly higher magnetic field strength than earlier open MRIs that preceded it, and, therefore, benefits from more of the MRI image-producing signal needed to make high-quality MRI images.

Fonar maximizes image quality through an optimal combination of image signal to noise (S/N) and contrast-to noise (C/N) ratios. Technical improvements incorporated into the scanner design include increased image processing speed, high-S/N Organ Specific(TM) RF receiver coils, high performance front-end electronics featuring high-speed, wide-dynamic-range analog-to-digital conversion and a miniaturized ultra-low-noise pre-amplifier, high-speed automatic tuning, bandwidth-optimized pulse sequences, multi-bandwidth sequences, and off-center FOV imaging capability.

FONAR CORPORATION AND SUBSIDIARIES

In addition to the signal-to-noise ratio, however, a major determinant of image quality that must be considered is contrast, the quality that enables reading physicians to clearly distinguish adjacent, and sometimes minute, anatomical structures from their surroundings. This quality is measured by contrast-to-noise ratios (C/N). Unlike S/N, which increases with increasing field strength, relaxometry studies have shown that C/N peaks in the mid-field range and actually falls off precipitously at higher field strengths. The Upright® MRI scanners operate squarely in the optimum C/N range.

FONAR’s scanners are equipped with a variety of software features which enhance versatility and diagnostic capability. For example, SMART™ scanning allows for same-scan customization of multi-slice scans, each slice with its own thickness, resolution, angle and position. This is an important feature for scanning parts of the body that include small-structure sub-regions requiring finer slice parameters. There is also Multi-Angle Oblique™ (MAO) imaging, and oblique imaging.

During fiscal 2021, sales of our Upright® MRI scanners accounted for approximately 0.8% of our total revenues and 10.0% of our medical equipment revenues, as compared to 0.1% of total revenues and 1.0% of medical equipment revenues in fiscal 2020.PRODUCT MARKETING

FONAR’s principal marketing efforts with respect to its productsin the medical equipment segment have been focused on the Upright® MRI, which we believe is a particularly unique product. It is the only MRI scanner which is both open and allows for weight-bearing imaging. We expect to continue our focus on the Upright® MRI in the immediate future.

The materials and components used in the manufacture of our products (circuit boards, computer hardware components, electrical components, steel and plastic) are generally available at competitive prices. We have not had difficulty acquiring such materials.

PRODUCT MARKETINGgoing forward.

The principal markets for the Company’s scanners are private diagnostic imaging centers and hospitals.hospital outpatient imaging facilities.

We use internal personnel and independent manufacturer’s representatives for domestic and foreign markets. None of Fonar’s competitors are entitled or been licensed to make the Fonar Upright® MRI scanner.sales.

Fonar’s Website includes interactive product information for interested customers.

During fiscal 2021 and previously sales were made to foreign customers. CEO Matthias Schulz of Medserena, Fonar’s principal foreign sales representative and distributor, has said, “The large number of requests coming from our physicians in Germany are arising because of the special medical need for FONAR’s unique technology. This is in spite of an intensely active MRI market in Germany, where there are already many conventional lie-down MRIs installed.”

FONAR CORPORATION AND SUBSIDIARIES

Fonar’s marketing strategy has been designed to reach key purchasing decision makers with information concerning the Upright® MRI. This has led to many inquiries and to some sales of the Upright® MRI scanner and is intended to increase Fonar’sFONAR’s presence in the medical equipment market. FonarFONAR focuses primarily on four target audiences: neurosurgeons, orthopaedicorthopedic surgeons, radiologists, and physicians in general.general physicians.

FONAR CORPORATION AND SUBSIDIARIES

Our advertising for FonarFONAR and HMCA re-enforcesreinforces the unique value provided by Fonarthe FONAR Upright® MRI scanners.scanner. We have increased internet awareness of our product by driving patient traffic to the Upright®HMCA scanning centers we manage via the FonarFONAR website (www.fonar.com) as well as by creating Websitesthrough websites for each HMCA location. These websites give prospective customers of Upright® MRI scanners a view of operating Upright® MRI centers and highlight the benefits of using anthe Upright® MRI scanner. A complete list of the sites managed by HMCA can be found at HMCA’s website, hmca.com.

Our marketing efforts, however, have been compromised by the COVID-19 panademic and economic challenges felt worldwide as a result.www.hmca.com.

SERVICE AND UPGRADES FOR MRI SCANNERS

Our customer base of installed scanners has been and will continue to be an additional source of income, independent of direct sales.

Income is generated from the installed base in two principal areas, namely, service and upgrades. Service and maintenance revenues from our external installed base were approximately $7.5 million in fiscal 2023 and $7.7 million in fiscal 2021 and $8.2 million in fiscal 2020. Our objective is2022.

We expect to maintain service revenues at present levels or better, based on the demonstrated longevity of the technology,Upright® MRI scanner and continued customer satisfaction with the refurbishmentsproduct. Critical to this longevity and customer satisfaction is the stream of software improvements and hardware upgrades whichthat FONAR has delivered over the years to keep the scanners competitive with the latest techniques.

technology in the marketplace. We also anticipate that our installed base of scanners will result ingenerate income from upgrades income in future fiscal years. The potential for upgrades income, originates in the versatility and productivity of the Upright® Imaging technology. New medical uses for MRI technology are constantly being discovered and are anticipated for the Upright® Imaging technology as well. New features can often be added to the scanner by the implementation of little more than versatile new software packages, which when coupled with hardware upgrades can add years of useful life to the scanner.

FONAR CORPORATION AND SUBSIDIARIES

RESEARCH AND DEVELOPMENT

During the fiscal year ended June 30, 2021,2023, we incurred expenditures of $1,635,979,$1,567,749, none of which were capitalized, on research and development, as compared to $2,025,376,$1,494,181, none of which were capitalized, during the fiscal year ended June 30, 2020.2022.

Research and development activities have focused principally on software improvements to the user interface of the MRI scanner. The Windows-based Sympulse™ platform controls all of the functions of the Upright® scanner except those of the versatile, multi-position patient table. Separate, dedicated, motion-control software is used to maneuver the Upright® bed, and development of this software is ongoing as well.

While software improvements to the user interface are important in their own right, significant value is added to the MRI scanner by the modification of existing protocols for examining various parts of the body, and the development of new protocols that utilize new underlying capabilities of the pulse sequence software. Over time, FONAR users have become accustomed to the steady improvement in the recommended clinical protocols that accompany new software releases. More significantly, in recent years we have seen increasing adoption of FONAR-recommended clinical protocols over those developed on site. This is a testament to the superior image quality they produce in attractively short scan times.

FONAR CORPORATION AND SUBSIDIARIES

The development of clinically practical scan protocols and software depends on close contact between research and development scientists and engineers, and end users. That close contact is facilitated in part by the relationship with HMCA and the scanning centers. In addition to that collaboration, R&D staff have pursued a variety of novel and Upright® MRI-specific research projects. It is anticipated that these will ultimately lead to new applications that are made available to existing customers as upgrade add-ons to their machines. For example, phase-contrast imaging techniques originally developed for angiography have recently been applied to cerebro-spinal fluid (CSF) flow. Analysis of CSF flow in upright and recumbent postures may prove to be of significant value in the evaluation of a variety of disorders.disorders and lead to a better understanding of human physiology.

BACKLOG

Our backlog of unfilled orders at September 15, 20218, 2023 was approximately $62,000,$608,000, as compared to $457,000$844,000 at September 15, 2020.8, 2022. It is expected that the existing backlog of orders will be filled withinduring the 20222023 fiscal year.

PATENTS AND LICENSELICENSES

We currently have numerous patents in effect which relate to the technology and components of our MRI scanners. We believe that these patents, and the know-how we have developed, are material to our business.

FONAR CORPORATION AND SUBSIDIARIES

One of our patents, issued in the name of Dr. Damadian and licensed to Fonar,FONAR, was United States patent No. 3,789,832, Apparatus and Method for Detecting Cancer in Tissue, also referred to in this report as the “1974 Patent”. The 1974 Patent was the first MRI patent issued by the United States Patent Office. The development of our MRI scanners has been based upon the 1974 Patent, and we believe that the 1974 Patent was the first of its kind to utilize MR to scan the human body and to detect cancer. The 1974 Patent was extended beyond its original 17-year term and expired in February, 1992. A number of FONAR’s existing patents specifically relate to protecting FONAR’s position in the Upright MRI market. The patents further enhance Dr. Damadian’s pioneer patent, the 1974 Patent, that initiated the MRI industry and provided the original invention of MRI scanning. The terms of the patents in FONAR’s portfolio extend to various times.

We have significantly enhanced our patent position within the industry and now possess a substantial patent portfolio which provides us, under the aegis of United States patent law, “the exclusive right to make, use and sell” many of the scanner features which FonarFONAR pioneered and which are now incorporated in most MRI scanners sold by the industry. As of June 30, 2021, 2202023, 225 patents had been issued to Fonar,FONAR, and approximately 118 patents were pending. A numberTwo new patents were issued in fiscal year 2023. One patent describes an equipment calibration system for ultrasound equipment used to non-invasively measure intracranial pressure. The other described a method for identifying the presence and amount of Fonar’s existing patents specifically relate to protecting Fonar’s position in the Upright MRI market. The patents further enhance Dr. Damadian’s pioneer patent, the 1974 Patent, that initiated the MRI industry and provided the original invention of MRI scanning. The terms of the patents in Fonar’s portfolio extend to various times.vascular congestion using MRI.

We also have patent cross-licensing agreements with other MRI manufacturers. We have not licensed, however, any technology relating to Upright® MRI scanning.

PRODUCT COMPETITION

MRI SCANNERS

MRI takes advantage of the nuclear magnetic resonance signal elicited from the body’s tissues and the exceptional sensitivity of this signal for detecting disease discovered by Fonar. Much of the serious disease of the body occurs in the soft tissue of vital organs. The maximum contrast available by x-ray with which to discriminate disease is 4%. Brain cancers differ from surrounding healthy brain by only 1.6% while the contrast in the brain by MRI is 25 times greater at 40%. X-ray contrasts among the body’s soft tissues are maximally 4%. Their contrast by MRI is 32.5 times greater (130%).

The soft tissue contrasts with which to distinguish cancers on images by MRI are up to 180%. In the case of cancer these contrasts can be even more marked making cancers readily visible and detectable anywhere in the body. This is because the nuclear resonance signals from the body’s normal soft tissue vital organs, differ so dramatically from each other (e.g. small intestine 257 milliseconds, brain 595 milliseconds). Liver cancer and healthy liver signals differ by 180% for example.

A majority of the MRI scanners in use in hospitals and outpatient facilities and at mobile sites in the United States are based on high field (1.5 - 3.0 Tesla) air core superconducting magnet technology.

FONAR CORPORATION AND SUBSIDIARIES

Open MRIs manufactured by Fonar’s competitors, are recumbent-only machines basedPRODUCT COMPETITION

MRI SCANNERS

FONAR faces competition for MRI product sales from companies such as Siemens, General Electric, Hitachi, Philips, Canon, and United Imaging. Each of these is primarily focused on Fonar’s original iron-frame vertical magnetic field magnet design. These systemsthe high-field (1.0 T and above) marketplace, though some have been manufactured and sold by many of our largest competitors over the years. They generally operate at low field strengths (0.2 - 0.35 Tesla). Their prevalenceproduced open MRI scanners for imaging in the marketplacerecumbent posture. None of these firms has led toso far introduced an open, upright MRI.

In recent years Paramed and Esaote have introduced MRI scanners aimed at the perceptionupright, weight-bearing MRI market. Their success in the medical communityUS has so far been limited. We believe that Open MRIs are useful only for anxious and claustrophobic patients, that the Open MRI’s image quality is poor, and that the scan times are long. Recently our competitors have introduced higher field strength Openand larger dimensions of the FONAR Upright® MRI products (0.5 – 1.2 Tesla). Significantly better imaging performance (especially at 1.2 T) compared tomagnet, together with the low field strength systems, is beginning to change that perception. However, Fonar continues to maintain itsgreater variety of patient positioning possibilities afforded by the FONAR Upright® MRI bed, give us a competitive advantage at 0.6 Tesla due to our front-open non-claustrophobic configuration in which there is nothing in front ofover the patient’s face, and our unique ability to scan patients in weight-bearing positions. It is also noteworthy that our horizontal transaxial magnetic field allows the Upright MRI, in contrast to the recumbent-only Open MRIs, to use the same flat planar-style radiofrequency receiver coil as the high-field MRI systems to image the lumbar and thoracic spine.products introduced by these companies.

The Upright MRI uses the same configuration RF receiver coil as a high-field MRI system to image the spine other Open MRIs cannot do this. (This is becauseMost of the rule in MRI that the axis of symmetry of the RF receiver coil should be perpendicular to the direction of the main magnetic field). The upright patient sits comfortably with his back against a flat (“planar”) RF receiver coil in our horizontal transaxial magnetic field. In contrast, the vertical magnetic field in the recumbent-only Open MRI precludes the use of this type of receiver coil.

Relative to the high-field systems, the Upright MRI has two major competitive advantages:

Sometimes patient positioning is more consequential than a small increase in the image resolution and decrease in the scan time. As it is critical for physicians to not “miss” anything in the images, they recognize that the position-dependent pathology visualized with the Upright MRI will be invisible (“missed”) if their patients are scanned at a higher field strength.

Image artifacts arising from metal implants such as surgical screws are diminished with the 0.6 Tesla Upright MRI compared to those from the high-field MRIs. It is well known that such artifacts get smaller as the MRI magnet’s field strength is reduced, so the anatomy adjacent to implanted hardware will be less obscured with the Upright MRI. This is particularly valuable for surgeons referring their postoperative patients for diagnostic imaging studies.

Fonar faces competition within the MRI industry from such firms as General Electric Company, Philips N.V., Toshiba Corporation, Hitachi Corporation and Siemens A.G. Most competitors have marketing and financial resources more substantial than those available to us. They have in the past, and may in the future, heavily discount the sales price of their scanners. Such competitors sell both high field air core superconducting MRI scanners and iron frame products. Fonar’s original iron frame design, ultimately imitated by Fonar’s competitors to duplicate Fonar’s origination of “Open” MRI magnets, gave rise to current patent protected Upright® MRI technology with the result that Fonar today is the unique and only supplier of the highest field MRI magnets (0.6 Tesla) that are not superconducting, do not use liquid helium and are not therefore susceptible to severe consequences and downtime cause by a system quench.

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The iron frame, because it controls the magnetic lines of force and places them where wanted and removes them from where not wanted, provides a more versatile magnet design than is possible with air core magnets. Air core magnets contain no iron but consist entirely of turns of current carrying wire.

Fonar expects to be the leader in weight-bearing and positional MRI for providing dynamic visualization of body parts including the spine and extremities.

OTHER IMAGING MODALITIES

Fonar’sFONAR’s MRI scanners also compete with other diagnostic imaging systems, all of which are based upon the ability of energy wavessome form of energetic wave to penetrate human tissue and to be detected by either photographic film or electronic devices for presentation of an image on a display monitor. Three different kinds of energy waves - X-ray,– x-ray, gamma, and sound -– are used in medical imaging techniques whichthat compete with MRI, medical scanning, the first two of which involve exposing the patient to potentially harmful radiation. These other imaging modalities compete with MRI products on the basis of cost, space requirements, and specific clinical applications.

X-rays are the most common energy source used in imaging the body and are employed in three imaging modalities: conventional x-ray systems, computerized tomography (CT), and digital radiography. None of these enjoy the exquisite soft-tissue contrast of MRI, but they do offer high resolution imaging in certain applications and high speed of image acquisition.

Nuclear medicine systems, which are based upon the detection of photons (gamma radiation) generated by radioactive pharmaceuticals introduced into the body, are used to provide information concerning soft tissue and internal body organs and particularly to examine organ function over time.

Ultrasound systems emit, detect, and process high frequency sound waves reflected from organ boundaries and tissue interfaces to generate images of soft tissue and internal body organs. Although the images are substantially less detailed than those obtainable with x-rays or MRI, ultrasound is generally considered harmless and therefore has found applications in imaging the pregnant uterus and the breast, to name two.

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X-ray machines, ultrasound machines, digital radiography systems and(including CT), nuclear medicine, and ultrasound compete with the MRI scanners by offering significantly lower price and space requirements. However, Fonar believeshistory has shown that the utilitysuperior tissue contrast characteristics of MRI have secured its place as the images produced by its MRI scanners is generally superior to the utilitydiagnostic imaging modality of the images produced by those other methodologies.choice for a wide variety of pathologies.

GOVERNMENT REGULATION

FDA Regulation

The Food and Drug Administration in accordance with Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing of Fonar’sFONAR’s MRI scanners. The regulations can be classified as either pre-market or post-market. The pre-market requirements include obtaining marketing clearance, proper device labeling, establishment registration and device listing. Once the products are on the market, FonarFONAR must comply with post-market surveillance controls. These requirements include the Quality Systems Regulation, or “QSR”, also known as Current Good Manufacturing Practices or CGMPs, and Medical Device Reporting, also referred to as MDR regulations. The QSR is a quality assurance requirement that covers the design, packaging, labeling and manufacturing of a medical device. The MDR regulation is an adverse event-reporting program.

Classes of Products

Under the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act, all medical devices are classified by the FDA into one of three classes. A Class I device is subject only to general controls, such as labeling requirements and manufacturing practices; a Class II device must comply with certain performance standards established by the FDA; and a Class III device must obtain pre-market approval from the FDA prior to commercial marketing. Fonar’sFONAR’s products are Class II devices. Class II devices are subject to “General Controls”; General Controls include:

1. Establishment registration of companies which are required to register under 21 CFR Part 807.20, such as manufacturers, distributors, re-packagers and re-labelers.

2. Medical device listing with FDA of devices to be marketed.

3. Manufacturing devices in accordance with the Current Good Manufacturing Practices Quality System Regulation in 21 CFR Part 820.

4. Labeling devices in accordance with labeling regulations in 21 CFR Part 801 or 809.

5. Submission of a Premarket Notification, pursuant to 510(k), before marketing a device.

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In addition to complying with general controls, Class II devices are also subject to special controls. Special controls may include special labeling requirements, guidance documents, mandatory performance standards and post-market surveillance.

On October 3, 2000 FonarFONAR received FDA clearance for the Upright® MRI under the name “Indomitable”.

 FONAR CORPORATION AND SUBSIDIARIES

Premarketing Submission

Each person who wants to market Class I, II and some III devices intended for human use in the U.S. must submit a 510(k) to FDA at least 90 days before marketing unless the device is exempt from 510(k) requirements. A 510(k) is a pre-marketing submission made to FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, SE, to a legally marketed device that is not subject to pre-market approval, PMA. Applicants must compare their 510(k) device to one or more similar devices currently on the U.S. market and make and support their substantial equivalency claims.

The FDA is committed to a 90-day clearance after submission of a 510(k), provided the 510(k) is complete and there is no need to submit additional information or data.

The 510(k) is essentially a brief statement and description of the product. As Fonar’sFONAR’s scanner products are Class II products, there are no pre-market data requirements.

An investigational device exemption, also referred to as IDE, allows the investigational device to be used in a clinical study pending FDA clearance in order to collect safety and effectiveness data required to support the Premarket Approval, also referred to as PMA, application or a Premarket Notification pursuant to 510(k), submission to the FDA. Clinical studies are most often conducted to support a PMA.

For the most part, however, we have not found it necessary to utilize IDE’s. The standard 90 day clearance for our new MRI scanner products classified as Class II products makes the IDE unnecessary, particularly in view of the time and effort involved in compiling the information necessary to support an IDE.

Quality System Regulation

The Quality Management System is applicable to the design, manufacture, administration of installation and servicing of magnetic resonance imaging scanner systems. The FDA has authority to conduct detailed inspections of manufacturing plants, to establish Good Manufacturing Practices which must be followed in the manufacture of medical devices, to require periodic reporting of product defects and to prohibit the exportation of medical devices that do not comply with the law.

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Medical Device Reporting Regulation

Manufacturers must report all MDR reportable events to the FDA. Each manufacturer must review and evaluate all complaints to determine whether the complaint represents an event which is required to be reported to FDA. Section 820.3(b) of the Quality Systems regulation defines a complaint as, “any written, electronic or oral communication that alleges deficiencies related to the identity, quality, durability, reliability, safety, effectiveness, or performance of a device after it is released for distribution.”

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A report is required when a manufacturer becomes aware of information that reasonably suggests that one of their marketed devices has or may have caused or contributed to a death, serious injury, or has malfunctioned and that the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur.

Malfunctions are not reportable if they are not likely to result in a death, serious injury or other significant adverse event experience.

A malfunction which is or can be corrected during routine service or device maintenance still must be reported if the recurrence of the malfunction is likely to cause or contribute to a death or serious injury if it were to recur.

We have established and maintained written procedures for implementation of the MDR regulation. These procedures include internal systems that:

provide for timely and effective identification, communication and evaluation of adverse

events;

provide a standardized review process and procedures for determining whether or not an

event is reportable; and

provide procedures to insure the timely transmission of complete reports.

These procedures also include documentation and record keeping requirements for:for information that was evaluated to determine if an event was reportable;

all medical device reports and information submitted to the FDA;

any information that was evaluated during preparation of annual certification reports; and

systems that ensure access to information that facilitates timely follow up and inspection by

FDA.

FDA Enforcement

FDA may take the following actions to enforce the MDR regulation:

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FDA-Initiated or Voluntary Recalls

Recalls are regulatory actions that remove a hazardous, potentially hazardous, or a misbranded product from the marketplace. Recalls are also used to convey additional information to the user concerning the safe use of the product. Either FDA or the manufacturer can initiate recalls.

There are three classifications, i.e., I, II, or III, assigned by the Food and Drug Administration to a particular product recall to indicate the relative degree of health hazard presented by the product being recalled.

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Class I

Is a situation in which there is a reasonable probability that the use of, or exposure to, a violative product will cause serious adverse health consequences or death.

Class II

Is a situation in which use of, or exposure to, a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote. 

Class III

Is a situation in which use of, or exposure to, a violative product is not likely to cause adverse health consequences.

FonarFONAR has initiated six voluntary recalls.recalls, which occurred between 1987-2016.  Five of the recalls were Class II and one was Class III. The recalls involved making minor corrections to the product in the field. Frequently, corrections which are made at the site of the device are called field corrections as opposed to recalls.

Civil Money Penalties

The FDA, after an appropriate hearing, may impose civil money penalties for violations of the FD&C Act that relate to medical devices. In determining the amount of a civil penalty, FDA will take into account the nature, circumstances, extent, and gravity of the violations, the violator’s ability to pay, the effect on the violator’s ability to continue to do business, and any history of prior violations.

Warning Letters

FDA issues written communications to a firm, indicating that the firm may incur more severe sanctions if the violations described in the letter are not corrected. Warning letters are issued to cause prompt correction of violations that pose a hazard to health or that involve economic deception. The FDA generally issues the letters before pursuing more severe sanctions.

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Seizure

A seizure is a civil court action against a specific quantity of goods which enables the FDA to remove these goods from commercial channels. After seizure, no one may tamper with the goods except by permission of the court. The court usually gives the owner or claimant of the seized merchandise approximately 30 days to decide a course of action. If they take no action, the court will recommend disposal of the goods. If the owner decides to contest the government’s charges, the court will schedule the case for trial. A third option allows the owner of the goods to request permission of the court to bring the goods into compliance with the law. The owner of the goods is required to provide a bond or, security deposit, to assure that they will perform the orders of the court, and the owner must pay for FDA supervision of any activities by the company to bring the goods into compliance.

FONAR CORPORATION AND SUBSIDIARIES

Citation

A citation is a formal warning to a firm of intent to prosecute the firm if violations of the FD&C Act are not corrected. It provides the firm an opportunity to convince FDA not to prosecute.

Injunction

An injunction is a civil action filed by FDA against an individual or company. Usually, FDA files an injunction to stop a company from continuing to manufacture, package or distribute products that are in violation of the law.

Prosecution

Prosecution is a criminal action filed by FDA against a company or individual charging violation of the law for past practices.

Foreign and Export Regulation

We obtain approvals as necessary in connection with the sales of our products in foreign countries. In some cases, FDA approval has been sufficient for foreign sales as well. Our standard practice has been to require either the distributor or the customer to obtain any such foreign approvals or licenses which may be required.

Legally marketed devices that comply with the requirements of the Food Drug & Cosmetic Act require a Certificate to Foreign Government issued by the FDA for export. Other devices that do not meet the requirements of the FD&C Act but comply with the laws of a foreign government require a Certificate of Exportability issued by the FDA. All products which we sell have FDA clearance and would fall into the first category.

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Foreign governments have differing requirements concerning the import of medical devices into their respective jurisdictions. The European Union, also referredUnion’s new medical device regulation, EU 2017/745 went into effect on May 25, 2021, and contains significant changes from the prior European regulatory scheme. We have applied to as EU, has some essential requirements described in the EU’s Medical Device Directive, also referred to as MDD. In order to export to one of these countries, we must meet the essential requirements of the MDD and any additional requirements of the importing country. The essential requirements are similar to some of the requirements mandated by the FDA. In addition the MDD requires that we enlist a Notified Body, TUV-SUD, to examineperform a Conformity Assessment of our technical documentation and assess our documentation, a Technical Construction File, and verify that the product has been manufactured in conformity with the documentation. The notified body must carry out or arrange for the inspections and tests necessary to verify that the product complies with the essential requirements of the MDD, including safety performance and Electromagnetic Compatibility, also referred to as EMC. Also required is a Quality System, ISO-13485, assessment by the Notified Body. We were approved for ISO 13485 certification for its Quality Management System in April, 2003.

System.  We received clearance(optimistically) expect to sell the Upright® MRI scanners in the EU in May, 2002.have this completed by end of our third quarter, March 30, 2024.

Other countries require that their own testing laboratories perform an evaluation of our devices. This requires that we must bring the foreign agency’s personnel to the USA to perform the evaluation at our expense before exporting.

Some countries, including many in Latin America and Africa, have very few regulatory requirements, beyond FDA clearance.

To date, FonarFONAR has been able to comply with all foreign regulatory requirements applicable to its export sales.

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PHYSICIAN AND DIAGNOSTIC SERVICES MANAGEMENT BUSINESS

Health Diagnostics Management, LLC (HDM) is owned by Health Management Corporation of America (70%(70.8%) and investors (30%(29.2%). Health Management Corporation of America is owned 100% by FonarFONAR Corporation. During the fiscal year 2022, the Company purchased non-controlling interests from the minority shareholders for $546,000.

HDM operates under the assumed name “Health Management Company of America” (“HMCA”).

The combined business (HDM and Health Management Corporation of America) will be referred to as “HMCA” for all periods before and after July 1, 2015, unless otherwise indicated.

HMCA provides comprehensive non-medical management services to diagnostic imaging facilities. These services include administrative services, billing and collection services, credentialing services, contract negotiations, compliance consulting, purchasing IT services, hiring, conducting interviews, training, supervision and management of non-medical personnel, storage of medical records, office space, equipment, repair maintenance services, accounting, assistance with compliance matters and the development and implementation of practice growth and marketing strategies.

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As of June 30, 2021,2023, HMCA managed a total of 3941 MRI scanners of which twenty-five (25)twenty-four (24) scanners are located in New York and 14seventeen (17) scanners are located in Florida. For the 20212023 fiscal year, the revenues HMCA recognized from the MRI facilities has increased to $80.9$90.4 million from $77.2$89.4 million in fiscal 2020. Five2022. Six of the facilities in Florida are owned by HMCA subsidiaries, where the corporate practice of medicine is permitted.

We believe the utilization of FONAR Upright® MRI scanning systems, which are produced under the protection of our patents, accounts for the historically robust patient volume at the scanning facilities and, most recently, our steady recovery from the effects of the COVID-19 pandemic.facilities. During fiscal 2021, second MRI2023, two scanners were installed in Casselberry, Florida. We completed the consolidation of our two Manhattan centers into their new location in Midtown, removing the scanner previously located at Avenue A. The extremity-only scanner at our facilities in Islandia, New YorkBrooklyn location was deemed to be passed its useful life and White Plains, New York and a new facility was installed in Pembroke Pines, Florida. The Company also acquired an existing facility in West Yonkers, NY in March 2021.removed from service.

HMCA GROWTH STRATEGY

HMCA’s growth strategy focuses on upgrading and expanding the existing facilities it manages and expanding the number of facilities it either owns or manages for its clients, including new sites. In connection with improving the performance of the facilities, we have added high field MRI scanners, extremity scanners and x-ray machines to the Upright® MRI scanners at certain of the sites where such additional diagnostic imaging modalities are expected to produce the greatest return. In addition we plan to install three new facilities in fiscal 2022: one in New York and two in Florida.

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PHYSICIAN AND DIAGNOSTIC MANAGEMENT SERVICES

HMCA’s services to the facilities it manages encompass substantially all of their business operations. Each facility is controlled, however, not by HMCA, but by the physician owner, or in the case of the foursix Florida sites owned by HMCA subsidiaries, by the medical director. All medical services are performed by physicians and other medical personnel under the physician-owner’s supervision. HMCA is the management company and performs services of a non-medical nature. These services include:

1. Offices and Equipment. HMCA identifies, negotiates leases for and/or provides office space and equipment to its clients. This includes technologically sophisticated medical equipment. HMCA also provides improvements to leaseholds, assistance in site selection and advice on improving, updating, expanding and adapting to new technology.

2. Personnel. HMCA staffs all the non-medical positions of its clients with its own employees, eliminating the client’s need to interview, train and manage non-medical employees. HMCA processes the necessary tax, insurance and other documentation relating to employees.

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3. Administrative. HMCA assists in the scheduling of patient appointments, purchasing of office and medical supplies and equipment and handling of reporting, accounting, processing and filing systems. It prepares and files the physician portions of complex applications to enable its clients to participate in managed care programs and to qualify for insurance reimbursement. HMCA assists the clients to implement programs and procedures to ensure full and timely regulatory compliance and appropriate cost reimbursement under no-fault insurance and Workers’ Compensation guidelines, as well as compliance with other applicable governmental requirements and regulations, including HIPAA and other privacy requirements.

4. Billing and Collections. HMCA is responsible for the billing and collection of revenues from third-party payors including those governed by No-Fault and Workers’ Compensation statutes. HMCA is presently using a third party to perform its billing and collection services for its clients’ No-Fault and Workers’ Compensation scanning business.

5. Cost Saving Programs. Based on available volume discounts, HMCA seeks to assist in obtaining favorable pricing for office and medical supplies, medical imaging film, equipment, contrast agents, such as gadolinuim, and magnavist and other inventory for its clients.

6. Diagnostic Imaging and Ancillary Services. HMCA can offer access to diagnostic imaging equipment through diagnostic imaging facilities it manages. The Company is expanding the ancillary services offered in its network to include x-rays, and other MRI equipment such as high-field (1.5 or 3.0 Tesla magnet strength) MRI scanners and extremity MRI scanners.

7. Marketing Strategies. HMCA is responsible for developing and proposing marketing plans for its clients.

8. Expansion Plans. HMCA assists the clients in developing expansion plans including the opening of new or replacement facilities where appropriate.

HMCA’s objective is to free physicians from as many non-medical duties as is practicable, allowing physicians to spend less time on business and administrative matters and more time practicing medicine.

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The exceptions to this general model of operation are fivesix of the facilities located in Florida. These Florida facilities are owned by limited liability companies which, as our subsidiaries, conduct their operations directly and bill and collect their fees from the patients and third partythird-party payors.

The facilities enter into contracts with third partythird-party payors, including managed care companies. None of HMCA’s clients, however, participate in any capitated plans or other risk sharing arrangements. Capitated plans are those HMO programs where the provider is paid a flat monthly fee per patient.

The management fees payable by the facilities to HMCA are flat monthly fees. In fiscal 2020,2023, the aggregate amount of active management fees was $4,530,422$4,860,732 per month. In fiscal 2021,2022, the aggregate amount of active management fees was $4,897,720$4,865,443 per month.

FONAR CORPORATION AND SUBSIDIARIES

Fees under the management agreements are subject to adjustment by mutual agreement on an annual basis.

Dr.Timothy Damadian currently owns three HMCA-managed MRI facilities in Florida. The facilities were owned by Dr. Damadian until his passing in August of 2022. The fees for these three sites in Florida owned by Dr. Damadian are flat monthly fees which are subject to adjustment by mutual agreement on an annual basis. In fiscal 2021,2023 and fiscal 2022, the aggregate monthly amount of management fees payable to HMCA by these sites was $931,561 as compared to $897,745 in fiscal 2020.$995,825.

The six Florida facilities owned by HMCA subsidiaries directly bill their patients or the patients’ insurance carriers. Patient fees net of provision for bad debts were $23,307,389$29,793,993 in fiscal 20212023 as compared to $22,495,260$29,582,238 in fiscal 2020.2022.

HMCA contractshad previously contracted with an outside billing company (located in Melville, New York) to performwhich performed billing and collection for their clients’ No-Fault and Workers’ Compensation business. The fixed monthly fees were $85,000 for HMCA in fiscal 2020 and part of fiscal 2021. This contract was terminated as of January 1, 2021. The Company alsohad entered into a one year renewable agreement to provide IT services to the billing company for a monthly fee of $23,884. This agreement was terminated on May 31, 2023. HMCA has been handling these billing and collection services internally since the termination of this agreement.

HMCA MARKETING

HMCA’s marketing strategy is to expand the business and improve the facilities which it manages. HMCA is seeking to increase the number of locations of those facilities where market conditions are promising and to promote growth of our clients’ and Florida subsidiaries’ patient volume and revenue.

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DIAGNOSTIC IMAGING FACILITIES

Diagnostic imaging facilities managed by HMCA provide diagnostic imaging services to patients referred by physicians. The facilities are operated in a manner which eliminates the admission and other administrative inconveniences of in-hospital diagnostic imaging services. Imaging services are performed in an outpatient setting by trained medical technologists under the direction of physicians. Following diagnostic procedures, the images are reviewed by the interpreting physicians who prepare reports of these tests and their findings. The vast majority of reports for the New York facilities are transcribed by HMCA personnel and the remainder are outsourced to professional transcription services. Reports for the Florida facilities are outsourced to professional transcription services.

HMCA develops marketing programs and educational programs in an effort to establish and maintain referring physician relationships for our clients and Florida subsidiaries.

Managed care providers are an important factor in the diagnostic imaging industry. To further its position, HMCA is seeking to expand the imaging modalities offered at its managed and owned diagnostic imaging facilities. ThreeFour facilities in New York and sixeight facilities in Florida have two or more MRI scanners. One facility in New York and two in Florida also perform X-rays. During fiscal 2020, a second MRI was installed at our Ormond Beach, Florida facility and2023, a new HMCA facility became operationallocation was opened in Pembroke Pines,Casselberry, Florida.

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REIMBURSEMENT

HMCA’s clients receive reimbursements for their services through Medicare, Medicaid, managed care, private commercial insurance, third partythird-party administrators, Workers’ Compensation, No-Fault and other insurance.

Medicare

The Medicare program provides reimbursement for hospitalization, physician, diagnostic and certain other services to eligible persons 65 years of age and over and certain other individuals. Providers are paid by the federal government in accordance with regulations promulgated by the Department of Health and Human Services, HSS, and generally accept the payment with nominal deductible and co-insurance amounts required to be paid by the service recipient, as payment in full. Hospital inpatient services are reimbursed under a prospective payment system. Hospitals receive a specific prospective payment for inpatient treatment services based upon the diagnosis of the patient.

Under Medicare’s prospective payment system for hospital outpatient services, or OPPS, a hospital is paid for outpatient services on a rate per service basis that varies according to the ambulatory payment classification group, or APC, to which the service is assigned rather than on a hospital’s costs. Each year the Centers for Medicare and Medicaid Services, or CMS, publishes new APC rates that are determined in accordance with the promulgated methodology.

Services provided in non-hospital based freestanding facilities are paid under the Medicare Physician Fee Schedule, or MPFS. All of HMCA’s clients are presently in this category. The MPFS is updated on an annual basis and sometimes modified more frequently.

FONAR CORPORATION AND SUBSIDIARIES

We have experienced reimbursement reductions for radiology services provided to Medicare beneficiaries, including reductions pursuant to the Deficit Reduction Act, or DRA.

CMS’ 2010 regulatory changes to the MPFS included a downward adjustment to services primarily involving the technical component rather than the physician work component, by adjusting downward malpractice payments for these services. These adjustments have been phased in over a four year period. For our fiscal year ended June 30, 2021,2023, Medicare revenues represented approximately 3.4%2.9% of the revenues for HMCA’s clients and subsidiaries as compared to 3.8%3.2% for the fiscal year ended June 30, 2020.

FONAR CORPORATION AND SUBSIDIARIES2022.

Medicaid

The Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons. In addition to federally-mandated basic services, the services offered and reimbursement methods vary from state to state. In many states, Medicaid reimbursement is patterned after the Medicare program; however, an increasing number of states have established or are establishing payment methodologies intended to provide healthcare services to Medicaid patients through managed care arrangements. In fiscal 2021,2023, approximately 0.09%0.05% of the revenues of HMCA’s clients were attributable to Medicaid, as compared to 0.07% in fiscal 2020. Four of the Florida facilities (those owned by HMCA subsidiaries) do not participate in Medicaid.2022.

Managed Care and Private Insurance.Insurance

Health Maintenance Organizations, or HMO’s, Preferred Provider Organizations, or PPOs, and other managed care organizations attempt to control the cost of healthcare services by a variety of measures, including imposing lower payment rates, preauthorization requirements, limiting services and mandating less costly treatment alternatives. Managed care contracting is competitive and reimbursement schedules in many cases can be at or below Medicare reimbursement levels. Some managed care organizations have reduced or otherwise limited, and other managed care organizations may reduce or otherwise limit, reimbursement in response to reductions in government reimbursement. These reductions could have an adverse impact on our financial condition and results of operations. These reductions have been, and any future reductions may be, similar to the reimbursement reductions previously proposed.

HMCA COMPETITION

The physician and diagnostic management services field is highly competitive. A number of large hospitals have acquired medical practices and this trend may continue. HMCA expects that more competition will develop. Many competitors have greater financial and other resources than HMCA.

FONAR CORPORATION AND SUBSIDIARIES

With respect to the diagnostic imaging facilities managed by HMCA, the outpatient diagnostic imaging industry is highly competitive. Competition focuses primarily on attracting physician referrals at the local market level and increasing referrals through relationships with managed care organizations, as well as emphasizing to potential referral sources the advantages of Upright® MRI scanning. HMCA believes that principal competitors for the diagnostic imaging centers are hospitals and independent or management company-owned imaging centers. Competitive factors include quality and timeliness of test results, ability to develop and maintain relationships with managed care organizations and referring physicians, type and quality of equipment, facility location, convenience of scheduling and availability of patient appointment times. HMCA believes that it will be able to effectively meet the competition in the outpatient diagnostic imaging industry with the FonarFONAR Upright® MRI scanners and strategically placed high field MRI scanners at its facilities.

FONAR CORPORATION AND SUBSIDIARIES

GOVERNMENT REGULATION APPLICABLE TO HMCA

FEDERAL REGULATION

The healthcare industry is highly regulated and changes in laws and regulations can be significant. Changes in the law or new interpretation of existing laws can have a material effect on our permissible activities, the relative costs associated with doing business and the amount of reimbursement by government and other third-party payors.

Federal False Claims Act

The federal False Claims Act and, in particular, the False Claims Act’s “qui tam” or “whistleblower” provisions allow a private individual to bring actions in the name of the government alleging that a defendant has made false claims for payment from federal funds. After the individual has initiated the lawsuit the government must decide whether to intervene in the lawsuit and to become the primary prosecutor. If the government declines to join the lawsuit, the individual may choose to pursue the case alone, although the government must be kept apprised of the progress of the lawsuit, and may intervene later. Whether or not the federal government intervenes in the case, it will receive the majority of any recovery.

When an entity is determined to have violated the federal False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim and the government’s attorneys’ fees. Liability arises when an entity knowingly submits, or causes someone else to submit, a false claim for reimbursement to the federal government. The False Claims Act defines the term “knowingly” broadly, though simple negligence will not give rise to liability under the False Claims Act. Examples of the other actions which may lead to liability under the False Claims Act are set forth below:

Failure to comply with the many technical billing requirements applicable to our Medicare and Medicaid business.business;

Failure to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal healthcare program, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare program.program;

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Failure to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision.

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The Fraud Enforcement and Recovery Act of 2009 expanded the scope of the False Claims Act by, among other things, broadening protections for whistleblowers and creating liability for knowingly retaining a government overpayment, acting in deliberate ignorance of a government overpayment or acting in reckless disregard of a government overpayment. The healthcare reform bills in the form of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, “PPACA”) expanded on changes made by the 2009 Fraud Enforcement and Recovery Act with regard to such “reverse false claims.” Under PPACA, the knowing failure to report and return an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later, constitutes a violation of the False Claims Act. HMCA and its clients have never been sued under the False Claims Act and believe they are in compliance with the law.

Stark Law

Under the federal Self-Referral Law, also referred to as the “Stark Law”, which is applicable to Medicare and Medicaid patients, and the self-referral laws of various States, certain health practitioners, including physicians, chiropractors and podiatrists, are prohibited from referring their patients for the provision of designated health services, including diagnostic imaging and physical therapy services, to any entity with which they or their immediate family members have a financial relationship, unless the referral fits within one of the specific exceptions in the statutes or regulations. The federal government has taken the position that a violation of the federal Stark Law is also a violation of the Federal False Claims Act. Statutory exceptions under the Stark Law include, among others, direct physician services, in-office ancillary services rendered within a group practice, space and equipment rental and services rendered to enrollees of certain prepaid health plans. Some of these exceptions are also available under the State self-referral laws. HMCA believes that it and its clients are in compliance with these laws.

Anti-kickback Regulation

We are subject to federal and state laws which govern financial and other arrangements between healthcare providers. These include the federal anti-kickback statute which, among other things, prohibits the knowing and willful solicitation, offer, payment or receipt of any remuneration, direct or indirect, in cash or in kind, in return for or to induce the referral of patients for items or services covered by Medicare, Medicaid and certain other governmental health programs. Under PPACA, knowledge of the anti-kickback statute or the specific intent to violate the law is not required. Violation of the anti-kickback statute may result in civil or criminal penalties and exclusion from the Medicare, Medicaid and other federal healthcare programs, and according to PPACA, now provides a basis for liability under the False Claims Act. In addition, it is possible that private parties may file “qui tam” actions based on claims resulting from relationships that violate the anti-kickback statute, seeking significant financial rewards. Many states have enacted similar statutes, which are not limited to items and services paid for under Medicare or a federally funded healthcare program. Neither HMCA nor its clients engage in this practice.

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In fiscal 2021,2023, approximately 3.4%2.9% of the revenues of HMCA’s clients were attributable to Medicare and 0.09%0.05% were attributable to Medicaid. In fiscal 2020,2022, approximately 3.8%3.2% of the revenues of HMCA’s clients were attributable to Medicare and 0.07% were attributable to Medicaid.

Deficit Reduction Act (DRA)

On February 8, 2006, the President signed into law the DRA. Effective January 1, 2007, the DRA provides that Medicare reimbursement for the technical component for imaging services (excluding diagnostic and screening mammography) performed in freestanding facilities will be capped. Payment is the lesser of the Medicare Physician Fee Schedule or the Hospital Outpatient Prospective Payment System (OPPS) rates. Implementation of these reimbursement reductions contained in the DRA has had an adverse effect on our business. We have been able to counter this effect by increasing our clients’ scan volumes through our vigorous marketing efforts and reducing our operating expenses.

The DRA also codified the reduction in reimbursement for multiple images on contiguous body parts previously announced by CMS, the agency responsible for administering the Medicare program. In November 2005, CMS announced that it would pay 100% of the technical component of the higher priced imaging procedure and 50% of the technical component of each additional imaging procedure for imaging procedures involving contiguous body parts within a family of codes when performed in the same session. CMS had indicated that it would phase in this 50% rate reduction over two years, so that the reduction was 25% for each additional imaging procedure in 2006 and another 25% reduction in 2007. However, for services furnished on or after July 1, 2010, the PPACA requires the full 50% reduction to be implemented.

Health Insurance Portability and Accountability Act

Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information. HIPAA, among other things, amends existing crimes and criminal penalties for Medicare fraud and enacts new federal healthcare fraud crimes, including actions affecting non-governmental healthcare benefit programs by means of false or fraudulent representations in connection with the delivery of healthcare services is subject to a fine or imprisonment, or potentially both. In addition, HIPAA authorizes the imposition of civil money penalties against entities that employ or enter into contracts with excluded Medicare or Medicaid program participants if such entities provide services to federal health program beneficiaries. A finding of liability under HIPAA could have a material adverse effect on our business, financial condition and results of operations.

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Further, HIPAA requires healthcare providers and their business associates to maintain the privacy and security of individually identifiable protected health information (“PHI”). HIPAA imposes federal standards for electronic transactions, for the security of electronic health information and for protecting the privacy of PHI. The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per occurrence. In 2013 additional legal requirements were adopted to provide further protection for PHI.

In addition, many states have enacted comparable privacy and security statues or regulations that, in some cases, are most stringent than HIPAA requirements. In those cases it may be necessary to modify our operations and procedures to comply with the more stringent state laws, which may entail significant and costly changes for us. We believe that we are in compliance with such state laws and regulations. However, if we fail to comply with applicable state laws and regulations, we could be subject to sanctions.

We believe that we are in compliance with the current HIPAA requirements, as amended by HITECH, together with other legislation and regulations, and comparable state laws, but we anticipate that we may encounter certain costs associated with future compliance. Moreover, we cannot guarantee that enforcement agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with ours, or the interpretations of our contracted radiology practices or their affiliated physicians. A finding of liability under the HIPAA standards may result in significant criminal and civil penalties. Noncompliance also may result in exclusion from participation in government programs, including Medicare and Medicaid. These actions could have a material adverse effect on our business, financial condition, and results of operations.

Civil Money Penalty Law and Other Federal Statutes

The Civil Money Penalty, or CMP, law covers a variety of practices. It provides a means of administrative enforcement of the anti-kickback statute, and prohibits false claims, claims for medically unnecessary services, violations of Medicare participating provider or assignment agreements and other practices. The statute gives the Office of Inspector General of the HHS the power to seek substantial civil fines, exclusion and other sanctions against providers or others who violate the CMP prohibitions.

In addition, in 1996, Congress created a new federal crime: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs such as the Medicare and Medicaid programs.

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Certificates of Need

Some states require hospitals and certain other healthcare facilities and providers to obtain a certificate of need, or CON, or similar regulatory approval prior to establishing certain healthcare operations or services, incurring certain capital projects and/or the acquisition of major medical equipment including MRI and PET/CT systems. We are not operating in any such states.

Patient Protection and Affordable Care Act

On March 23, 2010, President Obama signed into law healthcare reform legislation in the form of PPACA. The implementation of this law has had a significant impact on the healthcare industry. Most of the provisions of PPACA are being phased in over time and can be conceptualized as a broad framework not only to provide health insurance coverage to millions of Americans, but to fundamentally change the delivery of care by bringing together elements of health information technology, evidence-based medicine, chronic disease management, medical “homes,” care collaboration and shared financial risk in a way that will accelerate industry adoption and change. We are unable to predict the full impact of PPACA at this time primarily due to the previous administration’s efforts to repeal and replace the PPACA, or to utilize executive action to modify the Act’s provisions where possible.

State Regulation

In addition to the federal self-referral law and federal Anti-kickback statute, many States, including those in which HMCA and its clients operate, have their own versions of self-referral and anti-kickback laws. These laws are not limited in their applicability, as are the federal laws, to specific programs. HMCA believes that it and its clients are in compliance with these laws.

Various States prohibit business corporations from practicing medicine. Various States, including New York, also prohibit the sharing of professional fees or fee splitting. Consequently, in New York HMCA leases space and equipment to clients and provides clients with a range of non-medical administrative and managerial services for agreed upon fees. Under Florida law a business entity can bill patients and third partythird-party payors directly if that entity is properly licensed through AHCA. All of the eightnine facilities in Florida are licensed healthcare clinics through AHCA.

HMCA’s clients and subsidiaries generate revenue from patients covered by no-fault insurance and workers’ compensation programs. For the fiscal year ended June 30, 20212023 approximately 55.5%58.4% of our clients’ receipts were from patients covered by no-fault insurance and approximately 9.4%8.6% of our client’s receipts were from patients covered by workers’ compensation programs. For the fiscal year ended June 30, 2020,2022, approximately 56.7.57.7.% of HMCA’s clients’ receipts were from patients covered by no-fault insurance and approximately 9.11%8.6% of HMCA’s clients’ receipts were from patients covered by workers’ compensation programs. The foregoing numbers do not include payments from third partythird-party administrators. In the event that changes in these laws alter the fee structures or methods of providing service, or impose additional or different requirements, HMCA could be required to modify its business practices and services in ways that could be more costly to HMCA or in ways that decrease the revenues which HMCA receives from its clients.

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Compliance Program

We maintain a program to monitor compliance with federal and state laws and regulations applicable to the healthcare entities. The compliance program includes the adoption of (i) Standards of Conduct for our employees and affiliates and (ii) a process that specifies how employees, affiliates and others may report regulatory or ethical concerns. We believe that our compliance program meets the relevant standards provided by the Office of Inspector General of the Department of Health and Human Services.

An important part of our compliance program consists of conducting periodic audits of various aspects of our operations and that of the contracted radiology practices. We also assist our clients with educational programs designed to familiarize them with the regulatory requirements and specific elements of our compliance program.

HMCA believes that it and its clients are in compliance with applicable Federal, State and local laws. HMCA does not believe that such laws will have any adverse material effect on its business.

EMPLOYEES

Fonar FONAR and HMCA had approximately   495561 employees as of September 24, 2021.12, 2023. This total number included employees engaged in production, customer support, research and development, information technology, employees engaged in marketing and sales, billing and collection, legal and compliance matters, as well as transcriptionists, Florida technologists, field service technicians and individuals in various administrative positions. A significant number of employees were employed at the MRI facilities managed or owned by HMCA, primarily in administrative positions.

ITEM 1A. RISK FACTORS

An investment in our securities is subject to various risks, the most significant of which are summarized below.

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Further, changes to the evidentiary admissibility rules may lead to a higher percentage of our billings being paid at commercial rates instead of at the presently prevailing PIP schedule, a reduction in reimbursement of approximately 60%. These changes will negatively impact our Florida diagnostic imaging facilities (both those we own and those we manage) with more unpaid bills, and lower reimbursement rates. The full extent of those reductions are unclear at this time.

In addition to the above, Florida legislature continues to propose an outright repeal of Florida’s No-Fault law. SB 586 and its companion statue H 429, again propose a repeal of Personal Injury Protection and replacing it with $25,000 Bodily Injury Coverage and Property Damage Liability Coverage. We cannot predict whether Florida will continue to pursue the repeal of the No-Fault Law in light of the passage of HB 837, and whether such efforts will be successful.

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Information security risks have significantly increased in recent years because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct our operations, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state agents. Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information in our computer systems and networks.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

FonarFONAR and HMCA currently lease approximately 78,000 square feet of office and plant space at its principal offices in Melville, New York. The term of the lease runs through November, 2026. Management believes that the premises will be adequate for its current needs. HMCA also maintains office space for the Facilities owned by its subsidiaries in Florida and for its clients at the clients’ sites in New York and Florida under leases having various terms. HMCA owns the building for the client’s premises in Tallahassee, Florida. The Company received approval from the Suffolk County IDAIndustrial Development Agency on February 29, 2016 of a 50% property tax abatement, valued at $440,000, over a 10 year period commencing January, 2017.

ITEM 3. LEGAL PROCEEDINGS.

There are no material legal proceedings threatened or pending against the Company.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable

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ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded in the Nasdaq SmallCap market under the National Association of Securities Dealers Automated Quotation System, also referred to as “NASDAQ”,on NASDAQ Capital Markets under the symbol FONR. The following table sets forth the high and low trades reported in NASDAQ System for the periods shown.