FONAR (FONR) 10-Q 9 Nov 15 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2015	Nov. 02, 2015
Entity Registrant Name	Fonar Corporation
Entity Central Index Key	355,019
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,016
Common Stock
Entity Common Stock, Shares Outstanding		6,050,840
Class B Common Stock
Entity Common Stock, Shares Outstanding		146
Class C Common Stock
Entity Common Stock, Shares Outstanding		382,513
Preferred Stock Class A
Entity Common Stock, Shares Outstanding		313,438

Balance Sheets

Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Current Assets:
Cash and cash equivalents	$ 10,973	$ 9,449
Accounts receivable - net	4,591	$ 3,791
Accounts receivable - Related party	90
Medical receivables -net	9,442	$ 9,082
Management and other fees receivable -net	14,484	14,058
Management and other fees receivable - related medical practices -net	3,600	3,507
Costs and estimated earnings in excess of billings on uncompleted contracts	682	682
Inventories	2,296	2,192
Prepaid expenses and other current assets	775	860
Total Current Assets	46,933	43,621
Deferred income tax asset	8,423	8,423
Property and equipment - net	12,439	12,901
Goodwill	1,767	1,767
Other intangible assets - net	8,647	8,950
Other assets	818	830
Total Assets	79,027	76,492
Current Liabilities:
Current portion of long-term debt and capital leases	2,478	2,490
Accounts payable	1,595	1,783
Other current liabilities	8,764	8,253
Unearned revenue on service contracts	4,714	$ 4,187
Unearned revenue on service contracts - related parties	83
Customer deposits	1,939	$ 1,938
Billings in excess of costs and estimated earnings on uncompleted contracts	142	142
Total Current Liabilities	19,715	18,793
Long-Term Liabilities:
Deferred income tax liability	510	510
Due to related medical practices	233	237
Long-term debt and capital leases, less current portion	5,088	5,699
Other liabilities	485	469
Total Long-Term Liabilities	6,316	6,915
Total Liabilities	26,031	25,708
STOCKHOLDERS' EQUITY:
Common Stock	1	1
Paid-in capital in excess of par value	175,448	175,448
Accumulated deficit	(133,487)	(136,349)
Notes receivable from employee stockholders	(30)	(32)
Treasury stock, at cost - 12 shares of common stock at December 31, 2014 and June 30, 2014	(675)	(675)
Total Fonar Corporation's Stockholders' Equity	41,257	38,393
Noncontrolling interests	11,739	12,391
Total Stockholders' Equity	52,996	50,784
Total Liabilities and Stockholders' Equity	$ 79,027	$ 76,492

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2015	Jun. 30, 2015
Class A NonVoting Preferred Stock
Preferred Stock, Par Value	$ 0.0001	$ 0.0001
Preferred Stock, Authorized	453,000	453,000
Preferred Stock, Issued	313,000	313,000
Preferred Stock, Outstanding	313,000	313,000
Preferred Stock
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Authorized	567,000	567,000
Preferred Stock, Issued
Preferred Stock, Outstanding
Common Stock
Common Stock, Par Value	$ 0.0001	$ 0.0001
Common Stock, Authorized	8,500,000	8,500,000
Common Stock, Issued	6,062,000	6,062,000
Common Stock, Outstanding	6,051,000	6,051,000
Class B Common Stock
Common Stock, Par Value	$ 0.0001	$ 0.0001
Common Stock, Authorized	227,000	227,000
Common Stock, Issued	146	146
Common Stock, Outstanding	146	146
Class C Common Stock
Common Stock, Par Value	$ 0.0001	$ 0.0001
Common Stock, Authorized	567,000	567,000
Common Stock, Issued	383,000	383,000
Common Stock, Outstanding	383,000	383,000

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
REVENUES
Product sales - net	$ 18	$ 1,271
Service and repair fees - net	2,284	2,491
Service and repair fees - related parties - net	28	28
Patient fee revenue, net of contractual allowances and discounts	8,114	6,787
Provision for bad debts for patient fee	(3,507)	(3,146)
Management and other fees - net	8,829	8,738
Management and other fees - related medical practices - net	1,845	1,816
Total Revenues - Net	17,611	17,985
COSTS AND EXPENSES
Costs related to product sales	112	1,085
Costs related to service and repair fees	543	507
Costs related to service and repair fees - related parties	7	6
Costs related to patient fee revenue	2,228	1,899
Costs related to management and other fees	5,419	5,590
Costs related to management and other fees - related medical practices	1,058	979
Research and development	436	397
Selling, general and administrative	3,775	3,578
Provision for bad debts	418	506
Total Costs and Expenses	13,996	14,547
INCOME
Income From Operations	3,615	3,438
Interest Expense	(150)	(204)
Investment Income	50	62
Income Before Provision for Income Taxes and Noncontrolling Interests	3,515	3,296
Provision for Income Taxes	50	40
Net Income	3,465	3,256
Net Income - Noncontrolling Interests	(603)	(721)
Net Income - Controlling Interests	$ 2,862	$ 2,535
Basic Net Income Per Common Share	$ 0.47	$ 0.42
Weighted Average Basic Shares Outstanding	6,050,000	6,050,000
Common Stock
INCOME
Net Income - Controlling Interests	$ 2,676	$ 2,370
Basic Net Income Per Common Share	$ 0.44	$ 0.39
Diluted Net Income Per Common Share	$ 0.43	$ 0.38
Weighted Average Basic Shares Outstanding	6,050,000	6,050,000
Weighted Average Diluted Shares Outstanding	6,178,000	6,178,000
Preferred Stock Class A
INCOME
Net Income - Controlling Interests	$ 139	$ 123
Class C Common Stock
INCOME
Net Income - Controlling Interests	$ 47	$ 42
Basic Net Income Per Common Share	$ 0.12	$ 0.11
Diluted Net Income Per Common Share	$ 0.12	$ 0.11
Weighted Average Basic Shares Outstanding	383,000	383,000
Weighted Average Diluted Shares Outstanding	383,000	383,000

Statements of Cash Flows

Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash Flows from Operating Activities:
Net income	$ 3,465	$ 3,256
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	829	888
Provision for bad debts	$ 418	506
Compensatory element of stock issuances		53
Stock issued for costs and expenses		76
(Increase) decrease in operating assets, net:
Accounts, management fee and medical receivable(s)	$ (2,186)	(2,111)
Notes receivable	$ 11	81
Costs and estimated earnings in excess of billings on uncompleted contracts		(860)
Inventories	$ (104)	22
Prepaid expenses and other current assets	73	284
Other assets	12	(5)
Increase (decrease) in operating liabilities, net:
Accounts payable	(187)	323
Other current liabilities	1,120	865
Customer deposits	1	(357)
Other liabilities	16	(123)
Due to related medical practices	(4)	(6)
Net cash provided by operating activities	3,464	2,892
Cash Flows from Investing Activities:
Purchases of property and equipment	(45)	(26)
Cost of patents	(19)	(46)
Net cash used in investing activities	(64)	(72)
Cash Flows from Financing Activities:
Repayment of borrowings and capital lease obligations	(623)	(921)
Distributions to noncontrolling interests	(1,255)	(1,191)
Repayment of notes receivable from employee stockholders	2	2
Net cash used in financing activities	(1,876)	(2,110)
Net Increase in Cash and Cash Equivalents	1,524	710
Cash and Cash Equivalents - Beginning of Period	9,449	9,952
Cash and Cash Equivalents - End of Period	$ 10,973	$ 10,662

NOTE 1 - DESCRIPTION OF BUSINES

NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (USD $)	3 Months Ended
	Sep. 30, 2015
Accounting Policies [Abstract]
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business Effective July 1, 2015, the Company restructured the corporate organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely integrate the operations of Health Management Corporation of America and HDM. Imperial contributed all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2% interest in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8% in HDM, and the original investors in HDM retained a 30.0% ownership interest in the newly expanded HDM. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under the name, ”Health Management Company of America”. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2016. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed on September 29, 2015 for the fiscal year ended June 30, 2015.

NOTE 2 - SUMMARY OF SIGNIFICANT

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (USD $)	3 Months Ended
	Sep. 30, 2015
Accounting Policies [Abstract]
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. Earnings Per Share Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the if converted method in calculating diluted income per share for the three months ended September 30, 2015 and 2014. Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three months ended September 30, 2015 and 2014, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common. Three months ended Three months ended Total Common Stock Class C Common Total Common Stock Class C Common Basic Numerator: Net income available to common stockholders $ 2,862 $ 2,676 $ 47 $ 2,535 $ 2,370 $ 42 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.47 $ 0.44 $ 0.12 $ 0.42 $ 0.39 $ 0.11 Diluted Denominator: Weighted average shares outstanding 6,050 383 6,050 383 Convertible Class C Stock 128 — 128 — Total Denominator for diluted earnings per share 6,178 383 6,178 383 Diluted income per common share $ 0.43 $ 0.12 $ 0.38 $ 0.11 Recent Accounting Pronouncements The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “ Simplifying the Measurement of Inventory FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of September 30, 2015 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2015 or 2014, and it does not believe that any of those pronouncements will have a significant impact on our consolidated financial statements at the time they become effective. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on reported consolidated net income for any periods presented.

NOTE 3 - ACCOUNTS RECEIVABLE, M

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $)	3 Months Ended
	Sep. 30, 2015
Receivables [Abstract]
NOTE 3 - ACCOUNTS RECEIVABLE. MEDICAL RECEIVABLES AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $)	NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE Accounts Receivable, Medical Receivable and Management and Other Fees Receivable Receivables, net is comprised of the following September 30, 2015, and June 30, 2015: September 30, 2015 Gross Receivable Allowance for doubtful accounts Net Accounts receivable $ 4,953 $ 362 $ 4,591 Accounts receivable - related party $ 90 — $ 90 Medical receivable $ 28,408 $ 18,966 $ 9,442 Management and other fees receivable $ 28,174 $ 13,690 $ 14,484 Management and other fees receivable from related medical practices ("PC’s") $ 4,003 $ 403 $ 3,600 June 30, 2015 Gross Receivable Allowance for doubtful accounts Net Accounts receivable $ 4,153 $ 362 $ 3,791 Accounts receivable - related party $ — — $ — Medical receivable $ 24,541 $ 15,459 $ 9,082 Management and other fees receivable $ 27,330 $ 13,272 $ 14,058 Management and other fees receivable from related medical practices ("PC’s") $ 3,910 $ 403 $ 3,507 The Company's customers are concentrated in the healthcare industry. Accounts Receivable Credit risk with respect to the Company’s accounts receivable related to product sales and service and repair fees is limited due to the customer advances received prior to the commencement of work performed and the billing of amounts to customers as sub-assemblies are completed. Service and repair fees are billed on a monthly or quarterly basis and the Company does not continue providing these services if accounts receivable become past due. The Company controls credit risk with respect to accounts receivable from service and repair fees through its credit evaluation process, credit limits, monitoring procedures and reasonably short collection terms. The Company performs ongoing credit authorizations before a product sales contract is entered into or service and repair fees are provided. Medical Receivables Medical receivables are due under fee-for-service contracts from third party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. The carrying amount of the medical receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. The Company continuously monitors collections from its clients and maintains an allowance for bad debts based upon the Company’s historical collection experience. The Company determines allowances for contractual adjustments and uncollectible accounts based on specific agings, specific payor collection issues that have been identified and based on payor classifications and historical experience at each site. Management and Other Fees Receivable The Company's receivables from the related and non-related professional corporations (PC's) substantially consist of fees outstanding under management agreements. Payment of the outstanding fees is dependent on collection by the PC's of fees from third party medical reimbursement organizations, principally insurance companies and health management organizations. Payment of the management fee receivables from the PC’s may be impaired by the inability of the PC’s to collect in a timely manner their medical fees from the third party payors, particularly insurance carriers covering automobile no-fault and workers compensation claims due to longer payment cycles and rigorous informational requirements and certain other disallowed claims. Approximately 60% and 54% of the PCs’ net revenues for the three months ended September 30, 2015 and 2014, respectively, were derived from no-fault and personal injury protection claims. The Company considers the aging of its accounts receivable in determining the amount of allowance for doubtful accounts. The Company generally takes all legally available steps to collect its receivables. Credit losses associated with the receivables are provided for in the condensed consolidated financial statements and have historically been within management's expectations. Net revenues from management and other fees charged to the related PCs accounted for approximately 10.5% and 10.1% of the consolidated net revenues for the three months ended September 30, 2015 and 2014, respectively. Tallahassee Magnetic Resonance Imaging, PA, Stand Up MRI of Boca Raton, PA and Stand Up MRI & Diagnostic Center, PA (all related medical practices) entered into a guaranty agreement, pursuant to which they cross guaranteed all management fees which are payable to the Company, which have arisen under each individual management agreement. The Company’s patient fee revenue, net of contractual allowances and discounts less the provision for bad debts for the three months ended September 30, 2015 and 2014 are summarized in the following table. For the Three Months Ended September 30, 2015 2014 Commercial Insurance/ Managed Care $ 1,071 $ 1,080 Medicare/Medicaid 275 297 Workers' Compensation/Personal Injury 5,308 3,695 Other 1,460 1,715 Patient Fee Revenue, net of contractual allowances and discounts 8,114 6,787 Provision for Bad Debts (3,507 ) (3,146 ) Net Patient Fee for Revenue $ 4,607 $ 3,641

NOTE 4 - INVENTORIES

NOTE 4 - INVENTORIES	3 Months Ended
	Sep. 30, 2015
Inventory Disclosure [Abstract]
NOTE 4 - INVENTORIES	NOTE 4 - INVENTORIES Inventories included in the accompanying condensed consolidated balance sheets consist of the following: September 30, 2015 June 30, 2015 Purchased parts, components and supplies $ 2,207 $ 2,043 Work-in-process 89 149 TOTAL INVENTORIES $ 2,296 $ 2,192

NOTE 5 - COSTS AND ESTIMATED EA

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	3 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Information relating to uncompleted contracts is as follows: September 30, 2015 June 30, 2015 Costs incurred on uncompleted contracts $ 1,862 $ 1,862 Estimated earnings 1,371 1,371 Subtotal 3,233 3,233 Less: Billings to date 2,693 2,693 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 540 $ 540 Included in the accompanying condensed consolidated balance sheets under the following captions: September 30, 2015 June 30, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 682 $ 682 Less: Billings in excess of costs and estimated earnings on uncompleted contracts 142 142 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 540 540

NOTE 6 - OTHER INTANGIBLE ASSET

NOTE 6 - OTHER INTANGIBLE ASSETS	3 Months Ended
	Sep. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
NOTE 6 - OTHER INTANGIBLE ASSETS	NOTE 6 – OTHER INTANGIBLE ASSETS Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following: September 30, June 30, Capitalized software development costs $ 7,005 $ 7,005 Patents and copyrights 4,566 4,547 Non-compete 4,100 4,100 Customer relationships 3,800 3,800 Gross Other intangible assets 19,471 19,452 Less: Accumulated amortization 10,824 10,502 Other Intangible Assets $ 8,647 $ 8,950 Amortization of patents and copyrights for the three months ended September 30, 2015 and 2014 amounted to $47 and $45, respectively. Amortization of capitalized software development costs for the three months ended September 30, 2015 and 2014 amounted to $81 and $83, respectively. Amortization of non-compete for the three months ended September 30, 2015 and 2014 amounted to $146 and $146, respectively. Amortization of customer relationships for the three months ended September 30, 2015 and 2014 amounted to $48 and $48, respectively.

NOTE 7 - OTHER CURRENT LIABILIT

NOTE 7 - OTHER CURRENT LIABILITIES	3 Months Ended
	Sep. 30, 2015
Payables and Accruals [Abstract]
NOTE 7 - OTHER CURRENT LIABILITIES	NOTE 7 – OTHER CURRENT LIABILITIES Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following: September 30, 2015 June 30, 2015 Accrued salaries, commissions and payroll taxes $ 807 $ 992 Accrued interest 117 117 Litigation accruals 497 521 Sales tax payable 2,597 2,539 Legal and other professional fees 412 344 Accounting fees 162 235 Self-funded health insurance reserve 450 510 Interest and penalty - sales tax 2,556 2,509 Other 1,166 486 Other Current Liabilities $ 8,764 $ 8,253

NOTE 8 - SEGMENT AND RELATED IN

NOTE 8 - SEGMENT AND RELATED INFORMATION	3 Months Ended
	Sep. 30, 2015
Segment Reporting [Abstract]
NOTE 10 - SEGMENT AND RELATED INFORMATION	NOTE 8 - SEGMENT AND RELATED INFORMATION The Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic imaging centers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as disclosed in the Company’s 10-K as of June 30, 2015. All inter-segment sales are market-based. The Company evaluates performance based on income or loss from operations. Summarized financial information concerning the Company's reportable segments is shown in the following table: Medical Management Totals For the three months ended Sept. 30, 2015 Net revenues from external customers $ 2,330 $ 15,281 $ 17,611 Inter-segment net revenues $ 524 $ — $ 524 (Loss) Income from operations $ (63 ) $ 3,678 $ 3,615 Depreciation and amortization $ 78 $ 751 $ 829 Capital expenditures $ 19 $ 45 $ 64 For the three months ended Sept. 30, 2014 Net revenues from external customers $ 3,790 $ 14,195 $ 17,985 Inter-segment net revenues $ 501 $ — $ 501 Income from operations $ 378 $ 3,060 $ 3,438 Depreciation and amortization $ 76 $ 812 $ 888 Capital expenditures $ 46 $ 26 $ 72

NOTE 9 - SUPPLEMENTAL CASH FLOW

NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION	3 Months Ended
	Sep. 30, 2015
Supplemental Cash Flow Elements [Abstract]
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION	NOTE 9 – SUPPLEMENTAL CASH FLOW INFORMATION During the three months ended September 30, 2015 and September 30, 2014, the Company paid $102 and $159 for interest, respectively. During the three months ended September 30, 2015 and September 30, 2014, the Company paid $50 and $40 for income taxes, respectively.

NOTE 10 - COMMITMENTS AND CONTI

NOTE 10 - COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
NOTE 12 - COMMITMENTS AND CONTINGENCIES	NOTE 10 – COMMITMENTS AND CONTINGENCIES Litigation The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. There were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2015. Other Matters The Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. As of September 30, 2015, the Company has recorded tax obligations of approximately $2,597 plus interest and penalties of approximately $2,556. The Company is in the process of determining the regulatory requirements in order to become compliant. The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $100 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of September 30, 2015 and June 30, 2015, the Company had approximately $450 and $510, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the condensed consolidated balance sheets. The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant adjustments recorded in the periods covered by this report.

NOTE 11 - INCOME TAXES

NOTE 11 - INCOME TAXES	3 Months Ended
	Sep. 30, 2015
Income Tax Disclosure [Abstract]
NOTE 13 - INCOME TAXES	NOTE 11 - INCOME TAXES ASC topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits”. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC topic 740. In accordance with ASC topic 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as “Interest expense, net”. Penalties if incurred would be recognized as a component of “Selling, general and administrative” expenses. The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2009. The Company recorded a deferred tax asset of $8,423 and a deferred tax liability of $510 as of September 30, 2015, primarily relating to net operating loss carryforwards of approximately $122,926 available to offset future taxable income through 2034. The net operating losses begin to expire in 2019 for federal tax purposes and in 2015 for state income tax purposes. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. At present, the Company does have a sufficient history of income and anticipates profitability in the coming years and has concluded that it is more-likely-than-not that the Company will be able to realize a portion of its tax benefits in the near future and therefore a valuation allowance was established for the partial value of the deferred tax asset. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation. Should the Company continue to remain profitable in future periods with supportable trends, the valuation allowance will be reversed accordingly.

NOTE 12 - SUBSEQUENT EVENTS

NOTE 12 - SUBSEQUENT EVENTS	3 Months Ended
	Sep. 30, 2015
Subsequent Events [Abstract]
NOTE 14 - SUBSEQUENT EVENTS	NOTE 12 – SUBSEQUENT EVENTS The Company has evaluated events that occurred subsequent to September 30, 2015 and through the date the condensed consolidated financial statements were issued.

NOTE 2 - SUMMARY OF SIGNIFICA18

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Sep. 30, 2015
Note 2 - Summary Of Significant Accounting Policies Policies
Principles of Consolidation	Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.
Earnings Per Share	Earnings Per Share Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the if converted method in calculating diluted income per share for the three months ended September 30, 2015 and 2014. Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three months ended September 30, 2015 and 2014, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common. Three months ended Three months ended Total Common Stock Class C Common Total Common Stock Class C Common Basic Numerator: Net income available to common stockholders $ 2,862 $ 2,676 $ 47 $ 2,535 $ 2,370 $ 42 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.47 $ 0.44 $ 0.12 $ 0.42 $ 0.39 $ 0.11 Diluted Denominator: Weighted average shares outstanding 6,050 383 6,050 383 Convertible Class C Stock 128 — 128 — Total Denominator for diluted earnings per share 6,178 383 6,178 383 Diluted income per common share $ 0.43 $ 0.12 $ 0.38 $ 0.11
Recent Accounting Pronouncements	Recent Accounting Pronouncements The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “ Simplifying the Measurement of Inventory FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of September 30, 2015 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2015 or 2014, and it does not believe that any of those pronouncements will have a significant impact on our consolidated financial statements at the time they become effective.
Reclassifications	Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on reported consolidated net income for any periods presented.

NOTE 2 - SUMMARY OF SIGNIFICA19

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Earnings Per Share	Earnings Per Share Three months ended Three months ended Total Common Stock Class C Common Total Common Stock Class C Common Basic Numerator: Net income available to common stockholders $ 2,862 $ 2,676 $ 47 $ 2,535 $ 2,370 $ 42 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.47 $ 0.44 $ 0.12 $ 0.42 $ 0.39 $ 0.11 Diluted Denominator: Weighted average shares outstanding 6,050 383 6,050 383 Convertible Class C Stock 128 — 128 — Total Denominator for diluted earnings per share 6,178 383 6,178 383 Diluted income per common share $ 0.43 $ 0.12 $ 0.38 $ 0.11

NOTE 3 - ACCOUNTS RECEIVABLE,20

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $) (Tables)	3 Months Ended
	Sep. 30, 2015
Receivables [Abstract]
Receivables - net	Receivables, net is comprised of the following: September 30, 2015 Gross Receivable Allowance for doubtful accounts Net Accounts receivable $ 4,953 $ 362 $ 4,591 Accounts receivable - related party $ 90 — $ 90 Medical receivable $ 28,408 $ 18,966 $ 9,442 Management and other fees receivable $ 28,174 $ 13,690 $ 14,484 Management and other fees receivable from related medical practices ("PC’s") $ 4,003 $ 403 $ 3,600 June 30, 2015 Gross Receivable Allowance for doubtful accounts Net Accounts receivable $ 4,153 $ 362 $ 3,791 Accounts receivable - related party $ — — $ — Medical receivable $ 24,541 $ 15,459 $ 9,082 Management and other fees receivable $ 27,330 $ 13,272 $ 14,058 Management and other fees receivable from related medical practices ("PC’s") $ 3,910 $ 403 $ 3,507
Patient fee revenue - net	The Company’s patient fee revenue, net of contractual allowances and discounts less the provision for bad debts for the three months ended September 30, 2015 and 2014 are summarized in the following table. For the Three Months Ended September 30, 2015 2014 Commercial Insurance/ Managed Care $ 1,071 $ 1,080 Medicare/Medicaid 275 297 Workers' Compensation/Personal Injury 5,308 3,695 Other 1,460 1,715 Patient Fee Revenue, net of contractual allowances and discounts 8,114 6,787 Provision for Bad Debts (3,507 ) (3,146 ) Net Patient Fee for Revenue $ 4,607 $ 3,641

NOTE 4 - INVENTORIES (Tables)

NOTE 4 - INVENTORIES (Tables)	3 Months Ended
	Sep. 30, 2015
Inventory Disclosure [Abstract]
Inventories	Inventories included in the accompanying condensed consolidated balance sheets consist of the following: September 30, 2015 June 30, 2015 Purchased parts, components and supplies $ 2,207 $ 2,043 Work-in-process 89 149 TOTAL INVENTORIES $ 2,296 $ 2,192

NOTE 5 - COSTS AND ESTIMATED 22

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Tables)	3 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Information relating to uncompleted contracts	Information relating to uncompleted contracts is as follows: September 30, 2015 June 30, 2015 Costs incurred on uncompleted contracts $ 1,862 $ 1,862 Estimated earnings 1,371 1,371 Subtotal 3,233 3,233 Less: Billings to date 2,693 2,693 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 540 $ 540
Included in the accompanying condensed consolidated balance sheets	Included in the accompanying condensed consolidated balance sheets under the following captions: September 30, 2015 June 30, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 682 $ 682 Less: Billings in excess of costs and estimated earnings on uncompleted contracts 142 142 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 540 540

NOTE 6 - OTHER INTANGIBLE ASS23

NOTE 6 - OTHER INTANGIBLE ASSETS (Tables)	3 Months Ended
	Sep. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Other intangible assets - net	Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheets consist of the following: September 30, June 30, Capitalized software development costs $ 7,005 $ 7,005 Patents and copyrights 4,566 4,547 Non-compete 4,100 4,100 Customer relationships 3,800 3,800 Gross Other intangible assets 19,471 19,452 Less: Accumulated amortization 10,824 10,502 Other Intangible Assets $ 8,647 $ 8,950

NOTE 7 - OTHER CURRENT LIABIL24

NOTE 7 - OTHER CURRENT LIABILITIES (Tables)	3 Months Ended
	Sep. 30, 2015
Payables and Accruals [Abstract]
Other current liabilities	Other current liabilities in the accompanying condensed consolidated balance sheets consist of the following: September 30, 2015 June 30, 2015 Accrued salaries, commissions and payroll taxes $ 807 $ 992 Accrued interest 117 117 Litigation accruals 497 521 Sales tax payable 2,597 2,539 Legal and other professional fees 412 344 Accounting fees 162 235 Self-funded health insurance reserve 450 510 Interest and penalty - sales tax 2,556 2,509 Other 1,166 486 Other Current Liabilities $ 8,764 $ 8,253

NOTE 8 - SEGMENT AND RELATED 25

NOTE 8 - SEGMENT AND RELATED INFORMATION (Tables)	3 Months Ended
	Sep. 30, 2015
Segment Reporting [Abstract]
Segment information	Summarized financial information concerning the Company's reportable segments is shown in the following table: Medical Management Totals For the three months ended Sept. 30, 2015 Net revenues from external customers $ 2,330 $ 15,281 $ 17,611 Inter-segment net revenues $ 524 $ — $ 524 (Loss) Income from operations $ (63 ) $ 3,678 $ 3,615 Depreciation and amortization $ 78 $ 751 $ 829 Capital expenditures $ 19 $ 45 $ 64 For the three months ended Sept. 30, 2014 Net revenues from external customers $ 3,790 $ 14,195 $ 17,985 Inter-segment net revenues $ 501 $ — $ 501 Income from operations $ 378 $ 3,060 $ 3,438 Depreciation and amortization $ 76 $ 812 $ 888 Capital expenditures $ 46 $ 26 $ 72

NOTE 2 - SUMMARY OF SIGNIFICA26

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Basic Numerator: Net income available to common stockholders	$ 2,862	$ 2,535
Basic Denominator: Weighted average shares outstanding	6,050,000	6,050,000
Basic Income Per Common Share	$ 0.47	$ 0.42
Convertible Class C Stock	128,000	128,000
Common Stock
Basic Numerator: Net income available to common stockholders	$ 2,676	$ 2,370
Basic Denominator: Weighted average shares outstanding	6,050,000	6,050,000
Basic Income Per Common Share	$ 0.44	$ 0.39
Convertible Class C Stock	128,000	128,000
Total Denominator for diluted earnings per share	6,178,000	6,178,000
Diluted Income Per Share	$ 0.43	$ 0.38
Class C Common Stock
Basic Numerator: Net income available to common stockholders	$ 47	$ 42
Basic Denominator: Weighted average shares outstanding	383,000	383,000
Basic Income Per Common Share	$ 0.12	$ 0.11
Convertible Class C Stock	0	0
Total Denominator for diluted earnings per share	383,000	383,000
Diluted Income Per Share	$ 0.12	$ 0.11

NOTE 3 - ACCOUNTS RECEIVABLE,27

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - Receivables, Net - (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Accounts receivable	$ 4,591	$ 3,791
Accounts receivable - Related party	90
Medical Receivables	9,442	$ 9,082
Management and other fees receivable	14,484	14,058
Management and other fees receivable from related medical practices ("PC's")	3,600	3,507
Accounts Receivabe
Accounts receivable	4,953	$ 4,153
Accounts receivable - Related party	90
Medical Receivables	28,408	$ 24,541
Management and other fees receivable	28,174	27,330
Management and other fees receivable from related medical practices ("PC's")	4,003	3,910
Allowance for Doubtful Accounts, Current
Accounts receivable	$ 362	$ 362
Accounts receivable - Related party
Medical Receivables	$ 18,966	$ 15,459
Management and other fees receivable	13,690	13,272
Management and other fees receivable from related medical practices ("PC's")	$ 403	$ 403

NOTE 3 - ACCOUNTS RECEIVABLE,28

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - Patient Fees Revenue - (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Patient fee revenue, net of contractual allowances and discounts	$ 8,114	$ 6,787
Provision for bad debts for patient fee	3,507	3,146
Net patient fee revenue	4,607	3,641
Commercial Insurance / Managed Care
Patient fee revenue, net of contractual allowances and discounts	1,071	1,080
Medicare/Medicaid
Patient fee revenue, net of contractual allowances and discounts	275	297
Workers Compensation/Personal Injury
Patient fee revenue, net of contractual allowances and discounts	5,308	3,695
Other
Patient fee revenue, net of contractual allowances and discounts	$ 1,460	$ 1,715

NOTE 4 - INVENTORIES (Details)

NOTE 4 - INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Inventory Disclosure [Abstract]
Purchased parts, components and supplies	$ 2,207	$ 2,043
Work-in-process	89	149
Total inventories	$ 2,296	$ 2,192

NOTE 5 - COSTS AND ESTIMATED 30

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - Information relating to uncompleted contracts - (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Notes to Financial Statements
Costs incurred on uncompleted contracts	$ 1,862	$ 1,862
Estimated earnings	1,371	1,371
Subtotal	3,233	3,233
Less: Billings to date	2,693	2,693
Total Costs and estimated earnings in excess of billings on uncompleted contracts	$ 540	$ 540

NOTE 5 - COSTS AND ESTIMATED 31

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - Balance Sheet Items - (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Notes to Financial Statements
Costs and estimated earnings in excess of billings on uncompleted contracts	$ 682	$ 682
Less: Billings in excess of costs and estimated earnings on uncompleted contracts	142	142
Total Costs and estimated earnings in excess of billings on uncompleted contracts	$ 540	$ 540

NOTE 6 - OTHER INTANGIBLE ASS32

NOTE 6 - OTHER INTANGIBLE ASSETS - (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Accumulated Amortization	$ 10,824	$ 10,502
Intangible asset value, net	8,647	8,950
Software Development Costs
Intangible asset value, gross	7,005	7,005
Patents and copyrights
Intangible asset value, gross	4,566	4,547
Non-compete Agreements
Intangible asset value, gross	4,100	4,100
Customer Relationships
Intangible asset value, gross	3,800	3,800
Other Intangible Assets
Intangible asset value, gross	$ 19,471	$ 19,452

NOTE 7 - OTHER CURRENT LIABIL33

NOTE 7 - OTHER CURRENT LIABILITIES - (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Payables and Accruals [Abstract]
Accrued salaries, commissions and payroll taxes	$ 807	$ 992
Accrued interest	117	117
Litigation accruals	497	521
Sales tax payable	2,597	2,539
Legal and other professional fees	412	344
Accounting fees	162	235
Self-funded health insurance reserve	450	510
Interest and penalty - sales tax	2,556	2,509
Other	1,166	486
Total Other current liabilities	$ 8,764	$ 8,253

NOTE 8 - SEGMENT AND RELATED 34

NOTE 8 - SEGMENT AND RELATED INFORMATION - Segment Information - (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Net revenues from external customers	$ 17,611	$ 17,985
Inter-segment net revenues	524	501
Income from operations	3,615	3,438
Depreciation and amortization	829	888
Capital expenditures	64	72
Medical Equipment
Net revenues from external customers	2,330	3,790
Inter-segment net revenues	524	501
Income from operations	(63)	378
Depreciation and amortization	78	76
Capital expenditures	19	46
Management Of Diagnostic Imaging Centers
Net revenues from external customers	$ 15,281	$ 14,195
Inter-segment net revenues
Income from operations	$ 3,678	$ 3,060
Depreciation and amortization	751	812
Capital expenditures	$ 45	$ 26

NOTE 1 - DESCRIPTION OF BUSIN35

NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION - (Details Narrative)	Jul. 01, 2015
Note 1 - Description Of Business And Basis Of Presentation - Details Narrative
The ownership interest of Imperial Management Services after reorganization of newly expanded HDM (percent).	24.20%
The ownership interest of Health Management Corporation of America after reorganization of newly expanded HDM (percent).	45.80%
The ownership interest of the original investors of HDM after reorganization of newly expanded HDM (percent).	30.00%

NOTE 2 - SUMMARY OF SIGNIFICA36

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Details Narrative) - shares	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Accounting Policies [Abstract]
Shares included upon conversion of Class C Common to calculate a diluted EPS	128,000	128,000

NOTE 3 - ACCOUNTS RECEIVABLE,37

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - (Details Narrative)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Note 3 - Accounts Receivable Medical Receivable And Management And Other Fees Receivable - Details Narrative
Net revenues derived from no-fault and personal injury protection claims	60.00%	54.00%
Net revenues from management and other fees charged to related PCs	10.50%	10.10%

NOTE 6 - OTHER INTANGIBLE ASS38

NOTE 6 - OTHER INTANGIBLE ASSETS - (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Patents and copyrights
Amortization of intangible assets	$ 47	$ 45
Software Development Costs
Amortization of intangible assets	81	83
Non-compete Agreements
Amortization of intangible assets	146	146
Customer Relationships
Amortization of intangible assets	$ 48	$ 48

NOTE 9 - SUPPLEMENTAL CASH FL39

NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION ($)- (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Note 9 - Supplemental Cash Flow Information - Details Narrative
Interest paid	$ 102	$ 159
Income Taxes Paid	$ 50	$ 40

NOTE 10 - COMMITMENTS AND CON40

NOTE 10 - COMMITMENTS AND CONTINGENCIES - (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Recorded tax obligations	$ 2,597
Tax interest and penalties	2,556
Maximum limit for individual claims under stop-loss umbrella policy for health insurance	100
Self-funded health insurance reserve	$ 450	$ 510

NOTE 11 - INCOME TAXES - (Detai

NOTE 11 - INCOME TAXES - (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Deferred income tax asset	$ 8,423	$ 8,423
Deferred income tax liability	510	$ 510
Net deferred operating loss carryforwards	$ 122,926