FONAR (FONR) 10-Q 10 May 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Mar. 31, 2016	Apr. 30, 2016
Entity Registrant Name	Fonar Corporation
Entity Central Index Key	355,019
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
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	Q3
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	Mar. 31, 2016	Jun. 30, 2015
Current Assets:
Cash and cash equivalents	$ 13,147	$ 9,449
Accounts receivable - net	4,326	3,791
Accounts receivable - Related party	30
Medical receivables -net	10,097	9,082
Management and other fees receivable -net	15,901	14,058
Management and other fees receivable - related medical practices -net	4,059	3,507
Costs and estimated earnings in excess of billings on uncompleted contracts	279	682
Inventories	2,234	2,192
Prepaid expenses and other current assets	834	860
Total Current Assets	50,907	43,621
Deferred income tax asset	8,423	8,423
Property and equipment - net	11,877	12,901
Goodwill	1,767	1,767
Other intangible assets - net	8,066	8,950
Other assets	972	830
Total Assets	82,012	76,492
Current Liabilities:
Current portion of long-term debt and capital leases	2,455	2,490
Accounts payable	1,345	1,783
Other current liabilities	8,638	8,253
Unearned revenue on service contracts	4,350	4,187
Unearned revenue on service contracts - related parties	28
Customer advances	1,511	1,938
Billings in excess of costs and estimated earnings on uncompleted contracts	255	142
Total Current Liabilities	18,582	18,793
Long-Term Liabilities:
Deferred income tax liability	510	510
Due to related medical practices	237	237
Long-term debt and capital leases, less current portion	3,863	5,699
Other liabilities	718	469
Total Long-Term Liabilities	5,328	6,915
Total Liabilities	23,910	25,708
STOCKHOLDERS' EQUITY:
Common Stock	1	1
Paid-in capital in excess of par value	175,448	175,448
Accumulated deficit	(126,989)	(136,349)
Notes receivable from employee stockholders	(26)	(32)
Treasury stock, at cost - 12 shares of common stock at March 31, 2016 and June 30, 2015	(675)	(675)
Total Fonar Corporation Stockholders' Equity	47,759	38,393
Non controlling interests	10,343	12,391
Total Stockholders' Equity	58,102	50,784
Total Liabilities and Stockholders' Equity	$ 82,012	$ 76,492

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	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		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
REVENUES
Product sales - net	$ 20	$ 160	$ 780	$ 1,806
Service and repair fees - net	2,406	2,299	6,970	7,288
Service and repair fees - related parties - net	27	27	83	83
Patient fee revenue, net of contractual allowances and discounts	8,695	7,284	24,596	20,700
Provision for bad debts for patient fee	(3,830)	(3,201)	(10,608)	(9,244)
Management and other fees - net	9,394	8,653	27,180	26,004
Management and other fees - related medical practices - net	1,907	1,874	5,598	5,536
Total Revenues - Net	18,619	17,096	54,599	52,173
COSTS AND EXPENSES
Costs related to product sales	263	352	939	1,674
Costs related to service and repair fees	552	630	1,542	1,611
Costs related to service and repair fees - related parties	6	7	18	18
Costs related to patient fee revenue	2,549	2,044	7,015	5,845
Costs related to management and other fees	5,649	5,285	16,664	15,665
Costs related to management and other fees - related medical practices	1,045	1,284	3,116	3,893
Research and development	395	360	1,243	1,116
Selling, general and administrative	4,533	3,706	12,425	11,108
Provision for bad debts	(470)	762	(300)	1,540
Total Costs and Expenses	14,522	14,430	42,662	42,470
INCOME
Income From Operations	4,097	2,666	11,937	9,703
Interest Expense	(127)	(169)	(416)	(545)
Investment Income	56	52	164	173
Other Income (Expense)			1	(2)
Income Before Provision for Income Taxes and Noncontrolling Interests	4,026	2,549	11,686	9,329
Provision for Income Taxes	145	30	235	99
Net Income	3,881	2,519	11,451	9,230
Net Income - Noncontrolling Interests	(876)	(500)	(2,091)	(2,018)
Net Income - Controlling Interests	$ 3,005	$ 2,019	$ 9,360	$ 7,212
Basic Net Income Per Common Share	$ 0.50	$ 0.33	$ 1.55	$ 1.19
Weighted Average Basic Shares Outstanding	6,050,000	6,050,000	6,050,000	6,050,000
Common Stock
INCOME
Net Income - Controlling Interests	$ 2,810	$ 1,888	$ 8,752	$ 6,743
Basic Net Income Per Common Share	$ 0.46	$ 0.31	$ 1.45	$ 1.11
Diluted Net Income Per Common Share	$ 0.45	$ 0.31	$ 1.42	$ 1.09
Weighted Average Basic Shares Outstanding	6,050,000	6,050,000	6,050,000	6,050,000
Weighted Average Diluted Shares Outstanding	6,178,000	6,178,000	6,178,000	6,178,000
Preferred Stock Class A
INCOME
Net Income - Controlling Interests	$ 145	$ 98	$ 453	$ 350
Class C Common Stock
INCOME
Net Income - Controlling Interests	$ 50	$ 33	$ 155	$ 119
Basic Net Income Per Common Share	$ 0.13	$ 0.09	$ 0.40	$ 0.31
Diluted Net Income Per Common Share	$ 0.13	$ 0.09	$ 0.40	$ 0.31
Weighted Average Basic Shares Outstanding	383,000	383,000	383,000	383,000
Weighted Average Diluted Shares Outstanding	383,000	383,000	383,000	383,000

Statements of Cash Flows

Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash Flows from Operating Activities:
Net income	$ 11,451	$ 9,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,507	2,665
Provision for bad debts	(300)	1,540
Stock issued for costs and expenses		76
Compensatory element of stock issuances		53
(Increase) decrease in operating assets, net:
Accounts, medical receivable(s) and management fee	(3,674)	(4,310)
Notes receivable	17	118
Costs and estimated earnings in excess of billings on uncompleted contracts	403	79
Inventories	(43)	158
Prepaid expenses and other current assets	9	89
Other assets	(143)	18
Increase (decrease) in operating liabilities, net:
Accounts payable	(437)	(178)
Other current liabilities	576	(501)
Customer advances	(427)	(259)
Billings in excess of costs and estimated earnings on uncompleted contracts	112
Other liabilities	249	(230)
Due to related medical practices		(2)
Net cash provided by operating activities	10,300	8,546
Cash Flows from Investing Activities:
Purchases of property and equipment	(534)	(125)
Cost of patents	(65)	(108)
Net cash used in investing activities	(599)	(233)
Cash Flows from Financing Activities:
Repayment of borrowings and capital lease obligations	(1,871)	(2,166)
Distributions to noncontrolling interests	(4,138)	(3,306)
Buyout of noncontrolling interests		(4,971)
Repayment of notes receivable from employee stockholders	6	6
Net cash used in financing activities	(6,003)	(10,437)
Net Increase in Cash and Cash Equivalents	3,698	(2,124)
Cash and Cash Equivalents - Beginning of Period	9,449	9,952
Cash and Cash Equivalents - End of Period	$ 13,147	$ 7,828

NOTE 1 - DESCRIPTION OF BUSINES

NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (USD $)	9 Months Ended
	Mar. 31, 2016
Accounting Policies [Abstract]
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) 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 and nine months ended March 31, 2016, 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 $)	9 Months Ended
	Mar. 31, 2016
Accounting Policies [Abstract]
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships (collectively the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. Earnings Per Share Basic earnings per share (“EPS”) is computed based on weighted average number of shares 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 earnings per share and applied the if converted method in calculating diluted earnings per share for the three and nine months ended March 31, 2016 and March 31, 2015. Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and nine months ended March 31, 2016 and March 31, 2015, 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 Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 3,005 $ 2,810 $ 50 $ 2,019 $ 1,888 $ 33 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.50 $ 0.46 $ 0.13 $ 0.33 $ 0.31 $ 0.09 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 $ 0.45 $ 0.13 $ 0.31 $ 0.09 Nine months ended Nine months ended Total Common Stock Class C Common Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 9,360 $ 8,752 $ 155 $ 7,212 $ 6,743 $ 119 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 1.55 $ 1.45 $ 0.40 $ 1.19 $ 1.11 $ 0.31 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 $ 1.42 $ 0.40 $ 1.09 $ 0.31 Recent Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU No. 2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. The Company is currently assessing the potential impact of ASU No. 2016-09 on the Company’s consolidated condensed financial statements. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which will require entities to present deferred tax assets and deferred tax liabilities as non-current in a classified balance sheet. The ASU simplified the current guidance, which requires entities to separately present deferred tax assets and deferred tax liabilities as current and non-current in a classified balance sheet. This standard is effective for annual periods and interim periods within those fiscal years, beginning after December 15, 2016 but permits entities to early adopt at the beginning of any interim or annual period. During the quarter ended December 31, 2015, the Company elected to early adopt ASU 2015-17 and applied the change retrospectively to all periods present. As a result, the Company presented all deferred assets and liabilities as non-current in its consolidated balance sheet. The adoption of this ASU did not result in a reclassification of the Company’s net deferred tax assets and liabilities as of June 30, 2015. As of March 31, 2016, there was no impact on the Company’s results of operations as a result of the adoption of ASU No. 2015-17 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 March 31, 2016 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 2016 or 2015, and it does not believe that any of those pronouncements will have a significant impact on our condensed 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 $)	9 Months Ended
	Mar. 31, 2016
Receivables [Abstract]
NOTE 3 - ACCOUNTS RECEIVABLE. MEDICAL RECEIVABLES AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $)	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE Receivables, net is comprised of the following at March 31, 2016: Gross Allowance for Net Accounts receivable $ 4,614 $ 288 $ 4,326 Accounts receivable - related party $ 30 — $ 30 Medical receivable $ 36,164 $ 26,067 $ 10,097 Management and other fees receivable $ 28,873 $ 12,972 $ 15,901 Management and other fees receivable - related medical practices ("PC’s") $ 4,462 $ 403 $ 4,059 Receivables, net is comprised of the following at June 30, 2015: Gross Allowance for 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 - 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 Receivable Medical receivables are due under fee-for-service contracts from third party payors, such as hospitals, government sponsored healthcare programs, patient’s legal counsel and directly from patients. Substantially all the revenue relates to patients residing in Florida. 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 59% and 55% of the PCs’ net revenues for the three months ended March 31, 2016 and 2015, respectively, were derived from no-fault and personal injury protection claims. Approximately 60% and 54% of the PCs’ net revenues for the nine months ended March 31, 2016 and 2015, 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 10.2% and 11% of the consolidated net revenues for the three months ended March 31, 2016 and 2015, respectively. Net revenues from management and other fees charged to the related PCs accounted for approximately 10.3% and 10.6% of the consolidated net revenues for the nine months ended March 31, 2016 and 2015, 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 and nine months ended March 31, 2016 and 2015 are summarized in the following tables. For the Three Months Ended 2016 2015 Commercial Insurance/ Managed Care $ 1,245 $ 1,091 Medicare/Medicaid 332 292 Workers' Compensation/Personal Injury 5,453 4,513 Other 1,665 1,388 Patient Fee Revenue, net of contractual allowances and discounts 8,695 7,284 Provision for Bad Debts (3,830 ) (3,201 ) Net Patient Fee for Revenue $ 4,865 $ 4,083 For the Nine Months Ended 2016 2015 Commercial Insurance/ Managed Care $ 3,438 $ 3,245 Medicare/Medicaid 874 896 Workers' Compensation/Personal Injury 15,649 11,354 Other 4,635 5,205 Patient Fee Revenue, net of contractual allowances and discounts 24,596 20,700 Provision for Bad Debts (10,608 ) (9,244 ) Net Patient Fee for Revenue $ 13,988 $ 11,456

NOTE 4 - INVENTORIES

NOTE 4 - INVENTORIES	9 Months Ended
	Mar. 31, 2016
Inventory Disclosure [Abstract]
NOTE 4 - INVENTORIES	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 4 - INVENTORIES Inventories included in the accompanying condensed consolidated balance sheet consist of the following: March 31, June 30, Purchased parts, components and supplies $ 2,033 $ 2,043 Work-in-process 201 149 Total Inventories $ 2,234 $ 2,192

NOTE 5 - COSTS AND ESTIMATED EA

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	9 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 5 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Information relating to uncompleted contracts is as follows: March 31, 2016 June 30, 2015 Costs incurred on uncompleted contracts $ 2,310 $ 1,862 Estimated earnings 1,622 1,371 Subtotal 3,932 3,233 Less: Billings to date 3,908 2,693 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 24 $ 540 Included in the accompanying condensed consolidated balance sheets under the following captions: March 31, 2016 June 30, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 279 $ 682 Less: Billings in excess of costs and estimated earnings on uncompleted contracts 255 142 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 24 540

NOTE 6 - OTHER INTANGIBLE ASSET

NOTE 6 - OTHER INTANGIBLE ASSETS	9 Months Ended
	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
NOTE 6 - OTHER INTANGIBLE ASSETS	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 6 – OTHER INTANGIBLE ASSETS Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheet consist of the following: March 31, 2016 June 30, 2015 Capitalized software development costs $ 7,005 $ 7,005 Patents and copyrights 4,612 4,547 Non-compete 4,100 4,100 Customer relationships 3,800 3,800 Gross Other intangible assets 19,517 19,452 Less: Accumulated amortization 11,451 10,502 Other Intangible Assets $ 8,066 $ 8,950 Amortization of patents and copyrights for the three months ended March 31, 2016 and 2015 amounted to $47 and $46, respectively. Amortization of capitalized software development costs for the three months ended March 31, 2016 and 2015 amounted to $65 and $81, respectively. Amortization of non-compete for the three months ended March 31, 2016 and 2015 amounted to $146 and $146, respectively. Amortization of customer relationships for the three months ended March 31, 2016 and 2015 amounted to $47 and $47, respectively. Amortization of patents and copyrights for the nine months ended March 31, 2016 and 2015 amounted to $141 and $137, respectively. Amortization of capitalized software development costs for the nine months ended March 31, 2016 and 2015 amounted to $227 and $246, respectively. Amortization of non-compete for the nine months ended March 31, 2016 and 2015 amounted to $439 and $439, respectively. Amortization of customer relationships for the nine months ended March 31, 2016 and 2015 amounted to $142 and $142, respectively.

NOTE 7 - OTHER CURRENT LIABILIT

NOTE 7 - OTHER CURRENT LIABILITIES	9 Months Ended
	Mar. 31, 2016
Payables and Accruals [Abstract]
NOTE 7 - OTHER CURRENT LIABILITIES	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 7 – OTHER CURRENT LIABILITIES Other current liabilities in the accompanying condensed consolidated balance sheet consist of the following: March 31, 2016 June 30, 2015 Accrued salaries, commissions and payroll taxes $ 903 $ 992 Accrued interest 117 117 Litigation accruals 493 521 Sales tax payable 2,565 2,539 Legal and other professional fees 307 344 Accounting fees 193 235 Self-funded health insurance reserve 434 510 Interest and penalty - sales tax 2,644 2,509 Other 982 486 Total Other Current Liabilities $ 8,638 $ 8,253

NOTE 8 - SEGMENT AND RELATED IN

NOTE 8 - SEGMENT AND RELATED INFORMATION	9 Months Ended
	Mar. 31, 2016
Segment Reporting [Abstract]
NOTE 8 - SEGMENT AND RELATED INFORMATION	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) 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 Equipment Management of Diagnostic Imaging Centers Totals For the three months ended March 31, 2016 Net revenues from external customers $ 2,454 $ 16,165 $ 18,619 Inter-segment net revenues $ 546 $ — $ 546 (Loss) income from operations $ (207 ) $ 4,304 $ 4,097 Depreciation and amortization $ 79 $ 751 $ 830 Capital expenditures $ 31 $ 117 $ 148 For the three months ended March 31, 2015 Net revenues from external customers $ 2,486 $ 14,610 $ 17,096 Inter-segment net revenues $ 502 $ — $ 502 (Loss) income from operations $ (367 ) $ 3,033 $ 2,666 Depreciation and amortization $ 78 $ 811 $ 889 Capital expenditures $ 111 $ — $ 111 For the nine months ended March 31, 2016 Net revenues from external customers $ 7,833 $ 46,766 $ 54,599 Inter-segment net revenues $ 1,594 $ — $ 1,594 Income from operations $ 18 $ 11,919 $ 11,937 Depreciation and amortization $ 242 $ 2,265 $ 2,507 Capital expenditures $ 390 $ 209 $ 599 For the nine months ended March 31, 2015 Net revenues from external customers $ 9,177 $ 42,996 $ 52,173 Inter-segment net revenues $ 1,504 $ — $ 1,504 Income from operations $ 457 $ 9,246 $ 9,703 Depreciation and amortization $ 229 $ 2,436 $ 2,665 Capital expenditures $ 178 $ 55 $ 233

NOTE 9 - SUPPLEMENTAL CASH FLOW

NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION	9 Months Ended
	Mar. 31, 2016
Supplemental Cash Flow Elements [Abstract]
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 9– SUPPLEMENTAL CASH FLOW INFORMATION During the nine months ended March 31, 2016 and March 31, 2015, the Company paid $280 and $406 for interest, respectively. During the nine months ended March 31, 2016 and March 31, 2015, the Company paid $235 and $99 for income taxes, respectively.

NOTE 10 - COMMITMENTS AND CONTI

NOTE 10 - COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
NOTE 10 - COMMITMENTS AND CONTINGENCIES	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) 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 with the exception of the case with Dr. Shapiro. The case was settled for $258,400 plus interest on February 18. 2016. Other Matters The Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. As of March 31, 2016, the Company has recorded tax obligations of approximately $2,565 plus interest and penalties of approximately $2,644. 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 March 31, 2016 and June 30, 2015, the Company had approximately $434 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. In March 2016, the Company signed a 2nd amendment with Signature Bank to extend the terms of the revolving loan to September 2018. As of March 31, 2016, the Company has not been advanced any money under this revolving loan.

NOTE 11 - INCOME TAXES

NOTE 11 - INCOME TAXES	9 Months Ended
	Mar. 31, 2016
Income Tax Disclosure [Abstract]
NOTE 11 - INCOME TAXES	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) 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 March 31, 2016, 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	9 Months Ended
	Mar. 31, 2016
Subsequent Events [Abstract]
NOTE 12 - SUBSEQUENT EVENTS	FONAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2016 and 2015 (Amounts and shares in thousands, except per share amounts) (UNAUDITED) NOTE 12- SUBSEQUENT EVENTS On May 2, 2016, the Company repaid the balance of the Class A Stockholders capital contribution in the amount of $1,125. As a result, the Company’s subsidiary, HMCA, owns a 100% interest in Imperial Management Services.

NOTE 2 - SUMMARY OF SIGNIFICA18

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Mar. 31, 2016
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	(Amounts and shares in thousands, except per share amounts) (UNAUDITED) Earnings Per Share Basic earnings per share (“EPS”) is computed based on weighted average number of shares 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 earnings per share and applied the if converted method in calculating diluted earnings per share for the three and nine months ended March 31, 2016 and March 31, 2015. Diluted EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the average market price of common shares outstanding during the period. For the three and nine months ended March 31, 2016 and March 31, 2015, 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 Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 3,005 $ 2,810 $ 50 $ 2,019 $ 1,888 $ 33 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.50 $ 0.46 $ 0.13 $ 0.33 $ 0.31 $ 0.09 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 $ 0.45 $ 0.13 $ 0.31 $ 0.09 Nine months ended Nine months ended Total Common Stock Class C Common Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 9,360 $ 8,752 $ 155 $ 7,212 $ 6,743 $ 119 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 1.55 $ 1.45 $ 0.40 $ 1.19 $ 1.11 $ 0.31 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 $ 1.42 $ 0.40 $ 1.09 $ 0.31
Recent Accounting Pronouncements	Recent Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU No. 2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. The Company is currently assessing the potential impact of ASU No. 2016-09 on the Company’s consolidated condensed financial statements. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which will require entities to present deferred tax assets and deferred tax liabilities as non-current in a classified balance sheet. The ASU simplified the current guidance, which requires entities to separately present deferred tax assets and deferred tax liabilities as current and non-current in a classified balance sheet. This standard is effective for annual periods and interim periods within those fiscal years, beginning after December 15, 2016 but permits entities to early adopt at the beginning of any interim or annual period. During the quarter ended December 31, 2015, the Company elected to early adopt ASU 2015-17 and applied the change retrospectively to all periods present. As a result, the Company presented all deferred assets and liabilities as non-current in its consolidated balance sheet. The adoption of this ASU did not result in a reclassification of the Company’s net deferred tax assets and liabilities as of June 30, 2015. As of March 31, 2016, there was no impact on the Company’s results of operations as a result of the adoption of ASU No. 2015-17 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 March 31, 2016 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 2016 or 2015, and it does not believe that any of those pronouncements will have a significant impact on our condensed 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)	9 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Earnings Per Share	(Amounts and shares in thousands, except per share amounts) (UNAUDITED) Earnings Per Share Three months ended Three months ended Total Common Stock Class C Common Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 3,005 $ 2,810 $ 50 $ 2,019 $ 1,888 $ 33 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 0.50 $ 0.46 $ 0.13 $ 0.33 $ 0.31 $ 0.09 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 $ 0.45 $ 0.13 $ 0.31 $ 0.09 Nine months ended Nine months ended Total Common Stock Class C Common Stock Total Common Stock Class C Common Stock Basic Numerator: Net income available to common stockholders $ 9,360 $ 8,752 $ 155 $ 7,212 $ 6,743 $ 119 Denominator: Weighted average shares outstanding 6,050 6,050 383 6,050 6,050 383 Basic income per common share $ 1.55 $ 1.45 $ 0.40 $ 1.19 $ 1.11 $ 0.31 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 $ 1.42 $ 0.40 $ 1.09 $ 0.31

NOTE 3 - ACCOUNTS RECEIVABLE,20

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE (USD $) (Tables)	9 Months Ended
	Mar. 31, 2016
Receivables [Abstract]
Receivables - net	(Amounts in thousands) (UNAUDITED) Receivables, net is comprised of the following at March 31, 2016: Gross Allowance for Net Accounts receivable $ 4,614 $ 288 $ 4,326 Accounts receivable - related party $ 30 — $ 30 Medical receivable $ 36,164 $ 26,067 $ 10,097 Management and other fees receivable $ 28,873 $ 12,972 $ 15,901 Management and other fees receivable - related medical practices ("PC’s") $ 4,462 $ 403 $ 4,059 Receivables, net is comprised of the following at June 30, 2015: Gross Allowance for 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 - related medical practices ("PC’s") $ 3,910 $ 403 $ 3,507
Patient fee revenue - net	(Amounts in thousands) (UNAUDITED) The Company’s patient fee revenue, net of contractual allowances and discounts less the provision for bad debts for the three and nine months ended March 31, 2016 and 2015 are summarized in the following tables. For the Three Months Ended 2016 2015 Commercial Insurance/ Managed Care $ 1,245 $ 1,091 Medicare/Medicaid 332 292 Workers' Compensation/Personal Injury 5,453 4,513 Other 1,665 1,388 Patient Fee Revenue, net of contractual allowances and discounts 8,695 7,284 Provision for Bad Debts (3,830 ) (3,201 ) Net Patient Fee for Revenue $ 4,865 $ 4,083 For the Nine Months Ended 2016 2015 Commercial Insurance/ Managed Care $ 3,438 $ 3,245 Medicare/Medicaid 874 896 Workers' Compensation/Personal Injury 15,649 11,354 Other 4,635 5,205 Patient Fee Revenue, net of contractual allowances and discounts 24,596 20,700 Provision for Bad Debts (10,608 ) (9,244 ) Net Patient Fee for Revenue $ 13,988 $ 11,456

NOTE 4 - INVENTORIES (Tables)

NOTE 4 - INVENTORIES (Tables)	9 Months Ended
	Mar. 31, 2016
Inventory Disclosure [Abstract]
Inventories	(Amounts in thousands) (UNAUDITED) Inventories included in the accompanying condensed consolidated balance sheet consist of the following: March 31, June 30, Purchased parts, components and supplies $ 2,033 $ 2,043 Work-in-process 201 149 Total Inventories $ 2,234 $ 2,192

NOTE 5 - COSTS AND ESTIMATED 22

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Tables)	9 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Information relating to uncompleted contracts	(Amounts in thousands) (UNAUDITED) Information relating to uncompleted contracts is as follows: March 31, 2016 June 30, 2015 Costs incurred on uncompleted contracts $ 2,310 $ 1,862 Estimated earnings 1,622 1,371 Subtotal 3,932 3,233 Less: Billings to date 3,908 2,693 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 24 $ 540
Included in the accompanying condensed consolidated balance sheets	(Amounts in thousands) (UNAUDITED) Included in the accompanying condensed consolidated balance sheets under the following captions: March 31, 2016 June 30, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 279 $ 682 Less: Billings in excess of costs and estimated earnings on uncompleted contracts 255 142 Total Costs and estimated earnings in excess of billings on uncompleted contracts $ 24 540

NOTE 6 - OTHER INTANGIBLE ASS23

NOTE 6 - OTHER INTANGIBLE ASSETS (Tables)	9 Months Ended
	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Other intangible assets - net	(Amounts in thousands) (UNAUDITED) Other intangible assets, net of accumulated amortization, in the accompanying condensed consolidated balance sheet consist of the following: March 31, 2016 June 30, 2015 Capitalized software development costs $ 7,005 $ 7,005 Patents and copyrights 4,612 4,547 Non-compete 4,100 4,100 Customer relationships 3,800 3,800 Gross Other intangible assets 19,517 19,452 Less: Accumulated amortization 11,451 10,502 Other Intangible Assets $ 8,066 $ 8,950

NOTE 7 - OTHER CURRENT LIABIL24

NOTE 7 - OTHER CURRENT LIABILITIES (Tables)	9 Months Ended
	Mar. 31, 2016
Payables and Accruals [Abstract]
Other current liabilities	(Amounts in thousands) (UNAUDITED) Other current liabilities in the accompanying condensed consolidated balance sheet consist of the following: March 31, 2016 June 30, 2015 Accrued salaries, commissions and payroll taxes $ 903 $ 992 Accrued interest 117 117 Litigation accruals 493 521 Sales tax payable 2,565 2,539 Legal and other professional fees 307 344 Accounting fees 193 235 Self-funded health insurance reserve 434 510 Interest and penalty - sales tax 2,644 2,509 Other 982 486 Total Other Current Liabilities $ 8,638 $ 8,253

NOTE 8 - SEGMENT AND RELATED 25

NOTE 8 - SEGMENT AND RELATED INFORMATION (Tables)	9 Months Ended
	Mar. 31, 2016
Segment Reporting [Abstract]
Segment information	(Amounts in thousands) (UNAUDITED) Summarized financial information concerning the Company's reportable segments is shown in the following table: Medical Equipment Management of Diagnostic Imaging Centers Totals For the three months ended March 31, 2016 Net revenues from external customers $ 2,454 $ 16,165 $ 18,619 Inter-segment net revenues $ 546 $ — $ 546 (Loss) income from operations $ (207 ) $ 4,304 $ 4,097 Depreciation and amortization $ 79 $ 751 $ 830 Capital expenditures $ 31 $ 117 $ 148 For the three months ended March 31, 2015 Net revenues from external customers $ 2,486 $ 14,610 $ 17,096 Inter-segment net revenues $ 502 $ — $ 502 (Loss) income from operations $ (367 ) $ 3,033 $ 2,666 Depreciation and amortization $ 78 $ 811 $ 889 Capital expenditures $ 111 $ — $ 111 For the nine months ended March 31, 2016 Net revenues from external customers $ 7,833 $ 46,766 $ 54,599 Inter-segment net revenues $ 1,594 $ — $ 1,594 Income from operations $ 18 $ 11,919 $ 11,937 Depreciation and amortization $ 242 $ 2,265 $ 2,507 Capital expenditures $ 390 $ 209 $ 599 For the nine months ended March 31, 2015 Net revenues from external customers $ 9,177 $ 42,996 $ 52,173 Inter-segment net revenues $ 1,504 $ — $ 1,504 Income from operations $ 457 $ 9,246 $ 9,703 Depreciation and amortization $ 229 $ 2,436 $ 2,665 Capital expenditures $ 178 $ 55 $ 233

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		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Basic Numerator: Net income available to common stockholders	$ 3,005	$ 2,019	$ 9,360	$ 7,212
Basic Denominator: Weighted average shares outstanding	6,050,000	6,050,000	6,050,000	6,050,000
Basic Income Per Common Share	$ 0.50	$ 0.33	$ 1.55	$ 1.19
Common Stock
Basic Numerator: Net income available to common stockholders	$ 2,810	$ 1,888	$ 8,752	$ 6,743
Basic Denominator: Weighted average shares outstanding	6,050,000	6,050,000	6,050,000	6,050,000
Basic Income Per Common Share	$ 0.46	$ 0.31	$ 1.45	$ 1.11
Convertible Class C Stock	128,000	128,000	128,000	128,000
Total Denominator for diluted earnings per share	6,178,000	6,178,000	6,178,000	6,178,000
Diluted Income Per Share	$ 0.45	$ 0.31	$ 1.42	$ 1.09
Class C Common Stock
Basic Numerator: Net income available to common stockholders	$ 50	$ 33	$ 155	$ 119
Basic Denominator: Weighted average shares outstanding	383,000	383,000	383,000	383,000
Basic Income Per Common Share	$ 0.13	$ 0.09	$ 0.40	$ 0.31
Total Denominator for diluted earnings per share	383,000	383,000	383,000	383,000
Diluted Income Per Share	$ 0.13	$ 0.09	$ 0.40	$ 0.31

NOTE 3 - ACCOUNTS RECEIVABLE,27

NOTE 3 - ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE - Receivables, Net - (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Accounts receivable	$ 4,326	$ 3,791
Accounts receivable - Related party	30
Medical Receivables	10,097	9,082
Management and other fees receivable	15,901	14,058
Management and other fees receivable from related medical practices ("PC's")	4,059	3,507
Gross Receivabe
Accounts receivable	4,614	4,153
Accounts receivable - Related party	30
Medical Receivables	36,164	24,541
Management and other fees receivable	28,873	27,330
Management and other fees receivable from related medical practices ("PC's")	4,462	3,910
Allowance for Doubtful Accounts
Accounts receivable	288	362
Medical Receivables	26,067	15,459
Management and other fees receivable	12,972	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		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Patient fee revenue, net of contractual allowances and discounts	$ 8,695	$ 7,284	$ 24,596	$ 20,700
Provision for bad debts for patient fee	(3,830)	(3,201)	(10,608)	(9,244)
Net patient fee revenue	4,865	4,083	13,988	11,456
Commercial Insurance / Managed Care
Patient fee revenue, net of contractual allowances and discounts	1,245	1,091	3,438	3,245
Medicare/Medicaid
Patient fee revenue, net of contractual allowances and discounts	332	292	874	896
Workers Compensation/Personal Injury
Patient fee revenue, net of contractual allowances and discounts	5,453	4,513	15,649	11,354
Other
Patient fee revenue, net of contractual allowances and discounts	$ 1,665	$ 1,388	$ 4,635	$ 5,205

NOTE 4 - INVENTORIES (Details)

NOTE 4 - INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Inventory Disclosure [Abstract]
Purchased parts, components and supplies	$ 2,033	$ 2,043
Work-in-process	201	149
Total inventories	$ 2,234	$ 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	Mar. 31, 2016	Jun. 30, 2015
Notes to Financial Statements
Costs incurred on uncompleted contracts	$ 2,310	$ 1,862
Estimated earnings	1,622	1,371
Subtotal	3,932	3,233
Less: Billings to date	3,908	2,693
Total Costs and estimated earnings in excess of billings on uncompleted contracts	$ 24	$ 540

NOTE 5 - COSTS AND ESTIMATED 31

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - Balance Sheet Items - (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Notes to Financial Statements
Costs and estimated earnings in excess of billings on uncompleted contracts	$ 279	$ 682
Less: Billings in excess of costs and estimated earnings on uncompleted contracts	255	142
Total Costs and estimated earnings in excess of billings on uncompleted contracts	$ 24	$ 540

NOTE 6 - OTHER INTANGIBLE ASS32

NOTE 6 - OTHER INTANGIBLE ASSETS - (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Gross Other intangible assets	$ 19,494	$ 19,452
Accumulated amortization	11,451	10,502
Other Intangible Assets - net	8,066	8,950
Capitalized software development costs
Gross Other intangible assets	7,005	7,005
Patents and copyrights
Gross Other intangible assets	4,612	4,547
Non-compete
Gross Other intangible assets	4,100	4,100
Customer relationships
Gross Other intangible assets	$ 3,800	$ 3,800

NOTE 7 - OTHER CURRENT LIABIL33

NOTE 7 - OTHER CURRENT LIABILITIES - (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Payables and Accruals [Abstract]
Accrued salaries, commissions and payroll taxes	$ 903	$ 992
Accrued interest	117	117
Litigation accruals	493	521
Sales tax payable	2,565	2,539
Legal and other professional fees	307	344
Accounting fees	193	235
Self-funded health insurance reserve	434	510
Interest and penalty - sales tax	2,644	2,509
Other	982	486
Total Other current liabilities	$ 8,638	$ 8,253

NOTE 8 - SEGMENT AND RELATED 34

NOTE 8 - SEGMENT AND RELATED INFORMATION - Segment Information - (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Net revenues from external customers	$ 18,619	$ 17,096	$ 54,599	$ 52,173
Inter-segment net revenues	546	502	1,594	1,504
Income from operations	4,097	2,666	11,937	9,703
Depreciation and amortization	830	889	2,507	2,665
Capital expenditures	148	111	599	233
Medical Equipment
Net revenues from external customers	2,454	2,486	7,833	9,177
Inter-segment net revenues	546	502	1,594	1,504
Income from operations	(207)	(367)	18	457
Depreciation and amortization	79	78	242	229
Capital expenditures	31	111	390	178
Management Of Diagnostic Imaging Centers
Net revenues from external customers	16,165	14,610	46,766	42,996
Income from operations	4,304	3,033	11,919	9,246
Depreciation and amortization	751	$ 811	2,265	2,436
Capital expenditures	$ 117		$ 209	$ 55

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		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Common Stock
Shares included upon conversion of Class C Common to calculate a diluted EPS	128,000	128,000	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		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
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	59.00%	55.00%	60.00%	54.00%
Net revenues from management and other fees charged to related PCs	10.20%	11.00%	10.30%	10.60%

NOTE 6 - OTHER INTANGIBLE ASS38

NOTE 6 - OTHER INTANGIBLE ASSETS - (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Patents and copyrights
Amortization of intangible assets	$ 47	$ 46	$ 141	$ 137
Capitalized software development costs
Amortization of intangible assets	65	81	227	246
Non-compete
Amortization of intangible assets	146	146	439	439
Customer relationships
Amortization of intangible assets	$ 47	$ 47	$ 142	$ 142

NOTE 9 - SUPPLEMENTAL CASH FL39

NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION ($)- (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Note 9 - Supplemental Cash Flow Information - Details Narrative
Interest paid	$ 280	$ 406
Income Taxes Paid	$ 235	$ 99

NOTE 10 - COMMITMENTS AND CON40

NOTE 10 - COMMITMENTS AND CONTINGENCIES - (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Recorded tax obligations	$ 2,565
Tax interest and penalties	2,644
Maximum limit for individual claims under stop-loss umbrella policy for health insurance	100
Self-funded health insurance reserve	$ 434	$ 510

NOTE 11 - INCOME TAXES - (Detai

NOTE 11 - INCOME TAXES - (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2016	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

NOTE 12 - SUBSEQUENT EVENTS - (

NOTE 12 - SUBSEQUENT EVENTS - (Details Narrative) $ in Thousands	May. 02, 2016USD ($)
Note 1 - Description Of Business And Basis Of Presentation - Details Narrative
Company's (HMCA) ownership interest of Imperial	100.00%
Repayment of balance of Class A Stockholders capital contribution	$ 1,125