FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended    MARCH 31, 2007
                                           --------------

      [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
      For the transition period from              to
                                     ------------     -------------
      Commission file number 0-10248
                             -------

                                FONAR CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                              11-2464137
       --------------------------------    ------------------------------------
       (State or other jurisdiction of     (I.R.S. Employer Identification No.)
       incorporation or organization)

       110 Marcus Drive     Melville, New York                 11747
       ----------------------------------------              ----------
       (Address of principal executive offices)              (Zip Code)


       Registrant's telephone number, including area code: (631) 694-2929
                                                           ---------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.           YES  X     NO
                                                 ---       ---

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).  YES  X     NO
                                                 ---       ---

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the close of the latest practicable date.


            Class                                  Outstanding at April 30, 2007
- -----------------------------------------          -----------------------------
Common Stock, par value $.0001                               4,865,186
Class B Common Stock, par value $.0001                             158
Class C Common Stock, par value $.0001                         382,513
Class A Preferred Stock, par value $.0001                      313,451





FONAR CORPORATION AND SUBSIDIARIES
INDEX



PART I - FINANCIAL INFORMATION                                      PAGE


Item 1.  Financial Statements

   Condensed Consolidated Balance Sheets - March 31, 2007
     (Unaudited) and June 30, 2006

   Condensed Consolidated Statements of Operations for
     the Three Months Ended March 31, 2007 and
     March 31, 2006 (Unaudited)

   Condensed Consolidated Statements of Operations for
     the Nine Months Ended March 31, 2007 and
     March 31, 2006 (Unaudited)

   Condensed Consolidated Statements of Comprehensive
     Loss for the Three Months Ended
     March 31, 2007 and March 31, 2006 (Unaudited)

   Condensed Consolidated Statements of Comprehensive
     Loss for the Nine Months Ended
     March 31, 2007 and March 31, 2006 (Unaudited)

   Condensed Consolidated Statements of Cash Flows for
     the Nine Months Ended March 31, 2007 and
     March 31, 2006 (Unaudited)


   Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About
        Market Risk

Item 4. Controls and Procedures

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

Signatures

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's OMITTED)

ASSETS                                                 March 31,   June 30,
                                                         2007         2006
                                                      (UNAUDITED)
Current Assets:                                        ---------    -------
  Cash and cash equivalents                              $ 2,812    $ 4,557

  Marketable securities                                    2,971      4,938

  Accounts receivable - net                                4,769      3,359

  Accounts receivable - related parties - net                389        499

  Medical receivables                                      3,431      6,053

  Management fee receivable - related medical
    practices - net                                        7,327      7,323

  Costs and estimated earnings in excess
    of billings on uncompleted contracts                     209      2,958

  Inventories                                              6,149      7,077

  Investment in sales-type lease                               -        279

  Current portion of advances and notes to related
    medical practices                                        213         90

  Current portion of note receivable less discount
    for below market interest                                569        459

  Prepaid expenses and other current assets                1,322      1,280
                                                          ------     ------
        Total Current Assets                              30,161     38,872
                                                          ------     ------

Property and equipment - net                               5,563      6,667

Advances and notes to related medical practices - net        518        676

Notes receivable less discount for below market interest   5,290      5,719

Other intangible assets - net                              5,282      4,930

Other assets                                               1,665        366
                                                        --------   --------
        Total Assets                                    $ 48,479   $ 57,230
                                                        ========   ========




See accompanying notes to condensed consolidated financial statements
(unaudited).



FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's OMITTED)


                                                       March 31,   June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                     2007         2006
                                                      (UNAUDITED)
Current Liabilities:                                  ----------   --------
  Current portion of long-term debt and
    capital leases                                       $   239    $   234
  Accounts payable                                         3,892      4,886
  Other current liabilities                                6,499      6,102
  Unearned revenue on service contracts                    5,202      4,238
  Unearned revenue on service contracts - related parties    454        544
  Customer advances                                       11,268      5,464
  Customer advances - related party                           42         42
  Income taxes payable                                         -          8
  Billings in excess of costs and estimated
    earnings on uncompleted contracts                      1,642      2,979
  Billings in excess of costs and estimated
    earnings on uncompleted contracts - related party          -        137
                                                          ------     ------
      Total Current Liabilities                           29,238     24,634

Long-Term Liabilities:
  Due to related medical practices                            93         93
  Long-term debt and capital leases,
    less current portion                                   1,012      1,172
  Other liabilities                                          170        215
                                                          ------     ------
      Total Long-Term Liabilities                          1,275      1,480
                                                          ------     ------
      Total Liabilities                                   30,513     26,114
                                                          ------     ------
Minority interest                                            571        697
                                                          ------     ------
See accompanying notes to condensed consolidated financial statements
(unaudited).

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's OMITTED, except share data)

                                                      March 31,    June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                    2007          2006
  (continued)                                        (UNAUDITED)
                                                    ------------    --------
STOCKHOLDERS' EQUITY

Class A non-voting preferred stock $.0001 par value;
1,600,000 authorized, 313,451 issued and outstanding
At March 31, 2007 and June 30, 2006                         -          -

Common Stock $.0001 par value; 30,000,000 shares
authorized at March 31, 2007 and June 30, 2006,
4,872,829 issued at March 31, 2007 and
4,599,804 at June 30, 2006; 4,861,186 outstanding at
March 31, 2007 and 4,588,161 at June 30, 2006               -          -

Class B Common Stock $ .0001 par value; 800,000
shares authorized, (10 votes per share), 158 issued
and outstanding at March 31, 2007 and June 30, 2006         -          -

Class C Common Stock $.0001 par value; 2,000,000 shares
authorized, (25 votes per share), 382,513 issued
and outstanding at March 31, 2007 and June 30, 2006         -          -

Paid-in capital in excess of par value                   171,999    168,425
Accumulated other comprehensive loss                    (     94)  (    246)
Accumulated deficit                                     (153,309)  (136,333)
Notes receivable from employee stockholders             (    526)  (    752)
Treasury stock, at cost - 11,643 shares of common stock
  at March 31, 2007 and June 30, 2006                   (    675)  (    675)
                                                         -------    -------
      Total Stockholders' Equity                          17,395     30,419
                                                         -------    -------
      Total Liabilities and Stockholders' Equity        $ 48,479   $ 57,230
                                                         =======    =======






See accompanying notes to condensed consolidated financial statements
(unaudited).

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(000's OMITTED, except per share data)
                                                     FOR THE THREE MONTHS ENDED
                                                             MARCH 31,
                                                         -------------------
                                                           2007       2006
REVENUES                                                 --------   --------
  Product sales - net                                   $  3,220    $ 1,285
  Product sales - related parties - net                        1        397
  Service and repair fees - net                            2,314      2,079
  Service and repair fees - related parties - net            243        250
  Management and other fees - related medical
    practices - net                                        3,004      3,092
                                                         --------   --------
     Total Revenues - Net                                  8,782      7,103
                                                         --------   --------
COSTS AND EXPENSES
  Costs related to product sales                           3,128      1,670
  Costs related to product sales - related parties             1        585
  Costs related to service and repair fees                 1,203      1,291
  Costs related to service and repair
    fees - related parties                                   126        153
  Costs related to management and other
    fees - related medical practices                       2,236      2,051
  Research and development                                 1,509      1,683
  Selling, general and administrative,
    inclusive of compensatory element of stock
    issuances of $ 0 and $ 268 for the three months
    ended March 31, 2007 and 2006, respectively            5,794      6,253
  Provision for bad debts                                    100        775
                                                         --------   --------
     Total Costs and Expenses                             14,097     14,461
                                                         --------   --------
Loss From Operations                                     ( 5,315)   ( 7,358)

Interest Expense                                         (    60)   (    50)
Investment Income                                            178        207
Interest Income - Related Parties                             10          3
Other Income                                                  26         44
Minority Interest in Income of Partnerships              (   240)   (   203)
                                                          ------    -------
NET LOSS                                                $( 5,401)  $( 7,357)
                                                          =======    =======
Basic and Diluted Loss Per Common Share                 $  (1.11)  $  (1.65)
                                                         ========   ========

Weighted Average Number of Shares Outstanding           4,860,418   4,460,878




See accompanying notes to condensed consolidated financial statements
(unaudited).

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(000's OMITTED, except per share data)

                                                     FOR THE NINE MONTHS ENDED
                                                              MARCH 31,
                                                         -------------------
                                                           2007       2006
REVENUES                                                 --------   --------
  Product sales - net                                    $ 7,619    $ 7,125
  Product sales - related parties - net                      143      2,914
  Service and repair fees - net                            6,806      5,617
  Service and repair fees - related parties - net            722        740
  Management and other fees - net                           -           648
  Management and other fees - related medical
    practices - net                                        8,947      9,526
  License fees and royalties                                -         1,227
                                                         --------   --------
     Total Revenues - Net                                 24,237     27,797
                                                         --------   --------
COSTS AND EXPENSES
  Costs related to product sales                           7,939      7,378
  Costs related to product sales - related parties           147      2,655
  Costs related to service and repair fees                 3,503      3,722
  Costs related to service and repair
    fees - related parties                                   371        490
  Costs related to management and other fees                   -        528
  Costs related to management and other
    fees - related medical practices                       6,459      6,724
  Research and development                                 4,320      5,248
  Selling, general and administrative,
    inclusive of compensatory element of stock
    issuances of $ 121 and $ 1,337 for the nine months
    ended March 31, 2007 and 2006, respectively           18,017     19,526
  Provision for bad debts                                    286        825
  Amortization of management agreements                     -            37
  Termination costs paid with common stock                  -         1,600
                                                         --------   --------
     Total Costs and Expenses                             41,042     48,733
                                                         --------   --------
Loss From Operations                                     (16,805)   (20,936)

Interest Expense                                         (   203)   (   214)
Investment Income                                            606        617
Interest Income - Related Parties                             32          9
Other Income                                                 104        262
Minority Interest in Income of Partnerships              (   710)   (   769)
                                                         -------    -------
NET LOSS                                                $(16,976)  $(21,031)
                                                         =======   ========
Basic and Diluted Loss Per Common Share                 $  (3.52)  $  (4.80)
                                                        ========   ========

Weighted Average Number of Shares Outstanding           4,817,860  4,384,245



See accompanying notes to condensed consolidated financial statements
(unaudited).

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(000'S OMITTED)
                                                     FOR THE THREE MONTHS ENDED
                                                              MARCH 31,
                                                        --------------------
                                                           2007       2006
                                                        ---------  ---------
Net loss                                                 $(5,401)   $(7,357)

Other comprehensive income, net of tax:
    Unrealized gains on securities,
      net of tax                                              40         50
                                                        ---------  ---------
Total comprehensive loss                                 $(5,361)   $(7,307)
                                                        =========  =========





                                                      FOR THE NINE MONTHS ENDED
                                                              MARCH 31,
                                                        --------------------
                                                           2007       2006
                                                        ---------  ---------
Net loss                                                $(16,976)  $(21,031)

Other comprehensive income (loss), net of tax:
    Unrealized gains (losses) on securities,
      net of tax                                             152     (   97)
                                                        ---------  ---------
Total comprehensive loss                                $(16,824)  $(21,128)
                                                        =========  =========


See accompanying notes to condensed consolidated financial statements
(unaudited).





FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000'S OMITTED)
                                                      FOR THE NINE MONTHS ENDED
                                                              MARCH 31,
                                                        --------------------
                                                           2007       2006
                                                        ---------  ---------
Cash Flows from Operating Activities:
 Net loss                                               $(16,976)  $(21,031)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
    Minority interest in income of partnerships              710        769
    Depreciation and amortization                          1,987      2,430
    Provision for bad debts                                  286        825
    Compensatory element of stock issuances                  121      1,337
    Stock issued for costs and expenses                    1,839      3,001
    Termination costs paid with common stock                -         1,600
    Amortization of unearned compensation                   -           291
    Gain on sale of equipment                               -       (     3)
    Loss from sale of physical medicine
      management business                                   -           144
    (Increase) decrease in operating assets, net:
       Accounts, management fee and medical receivable(s)  1,032    (   630)
       Notes receivable                                      319    (     3)
       Costs and estimated earnings in excess of
         billings on uncompleted contracts                 2,748      6,062
       Inventories                                           928      2,182
       Principal payments received on sales type lease       279        128
       Prepaid expenses and other current assets         (    41)       475
       Other assets                                      (    65)        26
       Advances and notes to related medical practices        35    (    27)
    Increase (decrease) in operating liabilities, net:
       Accounts payable                                  (   995)   ( 3,655)
       Other current liabilities                           1,271        662
       Customer advances                                   5,804      1,843
       Billings in excess of costs and estimated
         earnings on uncompleted contracts               ( 1,474)       739
       Other liabilities                                 (    45)   (    38)
       Due to related medical practices                        -    (    28)
       Income taxes payable                              (     8)   (    11)
                                                        ---------  ---------
Net cash used in operating activities                    ( 2,245)   ( 2,912)
                                                        ---------  ---------




See accompanying notes to condensed consolidated financial statements
(unaudited).

FONAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000'S OMITTED)

                                                      FOR THE NINE MONTHS ENDED
                                                               MARCH 31,
                                                        --------------------
                                                           2007       2006
                                                        ---------  ---------
Cash Flows from Investing Activities:
  Purchases of marketable securities                        -       (   300)
  Sales of marketable securities                           2,119      3,210
  Purchases of property and equipment                    (   332)   ( 1,592)
  Costs of capitalized software development              (   497)   (   557)
  Cost of patents and copyrights                         (   406)   (   371)
  Proceeds from sale of equipment                           -            97
                                                        ---------  ---------
Net cash provided by investing activities                    884        487
                                                        ---------  ---------

Cash Flows from Financing Activities:
  Distributions to holders of minority interests         (   836)   (   604)
  Proceeds from long-term debt                              -           478
  Repayment of borrowings and capital
    lease obligations                                    (   155)   (   255)
  Net proceeds from exercise of stock options
    and warrants                                              50        662
  Net proceeds from sale of stock                            373          -
  Repayment of notes receivable from employee
    stockholders                                             184        216
                                                        ---------  ---------
Net cash (used in) provided by financing activities      (   384)       497
                                                        ---------  ---------

Net Decrease in Cash and Cash Equivalents                 (1,745)   ( 1,928)

Cash and Cash Equivalents - Beginning of Period            4,557      5,517
                                                        ---------  ---------
Cash and Cash Equivalents - End of Period                $ 2,812    $ 3,589
                                                        =========  =========





See accompanying notes to condensed consolidated financial statements
(unaudited).

                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION & LIQUIDITY & CAPITAL RESOURCES

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
nine months ended March 31, 2007 are not  necessarily  indicative of the results
that may be  expected  for the fiscal year  ending  June 30,  2007.  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
20, 2006 for the fiscal year ended June 30, 2006.


Liquidity and Capital Resources

The Company's  principal source of liquidity has been derived from revenues,  as
well as cash  provided  by previous  debt and equity  financing.  Management  is
expecting this to continue.  At March 31, 2007, the Company had working  capital
of $923,000.  For the nine months ended March 31, 2007,  the Company  incurred a
net loss of $17.0 million which included non-cash charges of $4.2 million.

Sales levels remain weaker than expected and the Company  continues to focus its
efforts on increased  advertising  and  marketing  campaigns,  and  distribution
programs to strengthen the demand for Fonar's products.  Management  anticipates
that Fonar's capital resources will improve as Fonar's MRI scanner products gain
wider market recognition and acceptance resulting in increased product sales. If
the Company is not  successful  with its current  marketing  efforts to increase
sales, then the Company will experience a shortfall in cash necessary to sustain
operations at their current levels. Should weak demand continue, the Company has
determined  it will be  necessary  to reduce  overhead  expenses  or seek  other
sources of funds  through the  issuance of equity or debt  financing in order to
maintain  sufficient  funds  available to operate  through  March 31, 2008.  The
reduction in overhead  expenses  might need to be  substantial  in order for the
Company to streamline operations to an efficient level.




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The 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.

Reverse Stock Split

On April 17, 2007, the Company effected a  one-for-twenty-five  reverse split of
its issued and  outstanding  common stock,  Treasury Shares of the Common Stock,
the Class B Common  Stock,  the Class C Common  Stock and the Class A Non-Voting
Preferred Stock and Preferred  Stock. The  accompanying  condensed  consolidated
financial  statements,  notes and other  references  to share and per share data
have been  retroactively  restated to reflect the reverse  stock  splits for all
periods presented.

At the same time  reduce the number of shares of stock which the Company has the
authority to issue 36,400,000  shares from 182,000,000  shares.  The Classes and
the  aggregate  number of shares of stock of every class which the Company shall
have the authority to issue are as follows:

                        Common Stock          30,000,000
                        Class B Common Stock     800,000
                        Class C Common Stock   2,000,000
                        Preferred Stock        2,000,000
                        Class A Non-Voting
                        Preferred Stock        1,600,000
                                              ----------
                                              36,400,000
                                              ==========

Earnings (Loss) Per Share

Basic earnings  (loss) per share ("EPS") is computed  based on weighted  average
shares outstanding and excludes any potential dilution.  In accordance with EITF
03-6,  "Participating  Securities and the Two-Class  method under FASB Statement
No. 128" ("EITF  03-6"),  the Company's  participating  convertible  securities,
which include Class B common stock and Class C common stock, are not included in
the  computation  of basic EPS for nine  months  ended  March 31, 2007 and 2006,
because the  participating  securities do not have a  contractual  obligation to
share in the losses of the Company.

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.  The  number of common  shares
potentially  issuable  upon the  exercise  of certain  options  and  warrants or
conversion of the participating  convertible  securities that were excluded from
the diluted EPS calculation was  approximately  279,000 and 281,000 because they
are  antidilutive  as a result of a net loss for the nine months ended March 31,
2007 and 2006, respectively.

                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock Options and Warrants and Similar Equity Instruments

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment"  SFAS 123R.  SFAS 123R  requires  the  compensation  cost  relating  to
stock-based  payment  transactions be recognized in financial  statements.  That
cost  will be  measured  based on the  fair  value of the  equity  or  liability
instruments issued on the grant date of such instruments, and will be recognized
over the period  during which an  individual  is required to provide  service in
exchange for the award (typically the vesting  period).  SFAS 123R covers a wide
range  of  stock-based   compensation   arrangements  including  stock  options,
restricted stock plans, performance-based awards, stock appreciation rights, and
employee  stock purchase  plans.  SFAS 123R replaces SFAS 123 and supersedes APB
Opinion 25.

On July 1, 2005,  the Company  adopted SFAS 123R using the modified  prospective
method, in which  compensation  cost is recognized  beginning with the effective
date (a) based on the  requirements  of SFAS 123R for all  share-based  payments
granted  after the  effective  date and (b) based on the fair value as  measured
under SFAS 123 for all awards  granted to employees  prior to the effective date
of SFAS 123R that remain unvested on the effective date.

Accordingly,  the  adoption  of SFAS  123R's  fair  value  method did not have a
significant impact on our result of operations.  SFAS 123R requires the benefits
of tax deductions in excess of recognized  compensation cost to be reported as a
financing  cash flow,  rather than as an operating  cash flow as required  under
current literature. It is unlikely that the Company will have near term benefits
from tax deductions.  This  requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption.  The Company cannot
estimate  what those amounts will be in the future  because of various  factors,
including  but not limited to the timing of employee  exercises  and whether the
Company  will be in a taxable  position.  At this  time,  there  would be no tax
impact related to the prior periods since the Company has a net loss.

Recent Accounting Pronouncements

In February  2006,  the FASB issued SFAS NO. 155,  Accounting for Certain Hybrid
Financial  Instruments-An Amendment of FASB No. 133 and 140. The purpose of SFAS
statement No. 155 is to simplify the  accounting  for certain  hybrid  financial
instruments by permitting  fair value  re-measurement  for any hybrid  financial
instrument  that contains an embedded  derivative  that otherwise  would require
bifurcation.  SFAS No. 155 also eliminates the restriction on passive derivative
instruments that a qualifying  special-purpose  entity may hold. SFAS No. 155 is
effective for all financial  instruments  acquired or issued after the beginning
of any entity's first fiscal year beginning after September 15, 2006. We believe
that the  adoption  of this  standard  on July 1, 2007 will not have a  material
effect on our condensed consolidated financial statements.






                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In March  2006,  the FASB  issued  SFAS No. 156,  Accounting  for  Servicing  of
Financial  Assets,  an Amendment of SFAS No. 140. SFAS No. 156 requires separate
recognition of a servicing  asset and a servicing  liability each time an entity
undertakes  and  obligation  to service a  financial  asset by  entering  into a
servicing  contract.  This  statement  also requires that  servicing  assets and
liabilities be initially recorded at fair value and subsequently adjusted to the
fair value at the end of each reporting  period.  This statement is effective in
fiscal years beginning after September 15, 2006. We believe that the adoption of
this  standard on July 1, 2007 will not have a material  effect on our condensed
consolidated financial statements.

In June, 2006, the FASB issued Interpretation No. 48, "Accounting of Uncertainty
in  Income   Taxes-an   interpretation   of  FASB   Statement  No.  109".   This
Interpretation  prescribes a recognition threshold and measurement attribute for
the financial  statement  recognition and measurement of a tax position taken or
expected to be taken in a tax return,  and provides  guidance on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure,  and transition.  This  Interpretation is effective for fiscal years
beginning  after  December 31, 2006. The Company is assessing the impact of this
Interpretation on its condensed consolidated financial statements,  but does not
expect it to have a material effect.

In September,  2006,  the FASB issued SFAS No. 157,  "Fair Value  Measurements",
which defines fair value,  establishes a framework for measuring fair value, and
expands disclosures about fair value  measurements.  This standard applies under
other accounting  pronouncements that require or permit fair value measurements,
but does not require any new fair value  measurements.  SFAS No. 157 will become
effective for us in 2009. We are currently assessing the impact of SFAS No. 157;
however,  we do not believe the adoption of this  standard  will have a material
effect on our condensed consolidated financial statements.

In September,  2006,  the FASB issued SFAS No. 158,  "Employers'  Accounting for
Defined Benefit Pension and Other  Postretirement  Plans",  which requires us to
recognize  the funded status of our defined  benefit  plans in the  consolidated
balance sheets and changes in the funded status in  comprehensive  income.  This
standard  also  requires us to recognize  the  gains/losses,  prior year service
costs and transition  assets/obligations  as a component of other  comprehensive
income upon adoption,  and provide  additional annual  disclosure.  SFAS No. 158
does  not  affect  the  computation  of  benefit   expense   recognized  in  our
consolidated statements of operations. The recognition and disclosure provisions
are  effective in 2007.  In  addition,  SFAS No. 158 requires us to measure plan
assets and benefit  obligations as of the year-end  balance sheet date effective
in 2009. We are required to apply the provisions of this standard prospectively.
We are  currently  assessing  the  impact  of  SFAS  No.  158  on our  condensed
consolidated financial statements.





                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In September,  2006, the SEC staff issued Staff Accounting  Bulletin ("SAB") No.
108,  "Considering  the  Effects of Prior Year  Misstatements  when  Quantifying
Misstatements  in Current Year Financial  Statements".  This guidance  indicates
that the materiality of a misstatement must be evaluated using both the rollover
and iron curtain approaches. The iron curtain approach quantifies a misstatement
based  on the  amount  of the  error  originating  in the  current  year  income
statement.  SAB No. 108 is effective for our 2007 annual consolidated  financial
statements. We are currently assessing the impact of SAB No. 108; however, we do
not believe the  adoption of this  standard  will have a material  effect on our
condensed consolidated financial statements.

In February,  2007,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of Financial  Accounting  Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (FAS 159). FAS 159 provides Companies
with an option to report  selected  financial  assets  and  liabilities  at fair
value.  FAS 159's  objective  is to reduce both  complexity  in  accounting  for
financial instruments and the volatility in earnings caused by measuring related
assets and liabilities  differently.  FAS 159 also establishes  presentation and
disclosure  requirements  designed to facilitate  comparisons  between Companies
that choose  different  measurement  attributes  for similar types of assets and
liabilities.  FAS 159 requires Companies to provide additional  information that
will help  investors  and other  users of  financial  statements  to more easily
understand the effect of the Company's choice to use fair value on its earnings.
It also  requires  entities  to  display  the fair  value of  those  assets  and
liabilities  for which the  Company  has chosen to use fair value on the face of
the balance sheet. FAS 159 is effective as of the beginning of an entity's first
fiscal year beginning after November 15, 2007. Early adoption is permitted as of
the  beginning of the previous  fiscal year  provided that the entity makes that
choice in the first 120 days of that  fiscal  year and also  elects to apply the
provisions of Statement 157. The Company did not early adopt FAS 159.

In March 2007,  the Financial  Accounting  Standards  Board (FASB)  ratified the
Emerging Issues Task Force (EITF) consensus on EITF Issue No. 06-10, "Accounting
for Collateral Assignment Split Dollar Life Insurance." This EITF indicates that
an employer should recognize a liability for postretirement  benefits related to
collateral assignment split-dollar life insurance arrangements. In addition, the
EITF provides  guidance for the  recognition of an asset related to a collateral
assignment  split-dollar life insurance  arrangement.  The EITF is effective for
fiscal years  beginning after December 15, 2007. The Company will adopt the EITF
as  required  and  management  does  not  expect  it to have any  impact  on the
Company's results of operations, financial condition and liquidity.




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In June 2006,  the EITF reached a consensus on Issue No. 06-3 ("EITF  06-3"),  "
Disclosure  Requirements  for Taxes  Assessed  by a  Governmental  Authority  on
Revenue-Producing  Transactions  ." The  consensus  allows  companies  to choose
between two  acceptable  alternatives  based on their  accounting  policies  for
transactions  in which the company  collects  taxes on behalf of a  governmental
authority,  such as sales taxes.  Under the gross  method,  taxes  collected are
accounted  for as a  component  of sales  revenue  with an  offsetting  expense.
Conversely,  the net method allows a reduction to sales  revenue.  If such taxes
are reported gross and are significant,  companies should disclose the amount of
those  taxes.  The  guidance  should be applied  to  financial  reports  through
retrospective application for all periods presented, if amounts are significant,
for interim and annual  reporting  beginning  after December 15, 2006 with early
adoption  is  permitted.  We do not expect the  adoption  of EITF 06-3 to have a
material effect on our condensed consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year
presentation.   The  reclassifcations  did  not  have  any  effect  on  reported
consolidated net losses for any periods presented.

NOTE 3 - MEDICAL RECEIVABLES, ACCOUNTS RECEIVABLE AND MANAGEMENT FEE RECEIVABLE

Medical Receivables

The  Company  was  assigned  medical  receivables  valued  at  $11,775,000,   in
connection with the  satisfaction  of the management  fees and termination  fees
related to a  Termination  and  Replacement  Agreement  dated May 23, 2005.  The
balance of the medical receivables as of March 31, 2007 was $3,431,000.

Accounts Receivable and Management Fee Receivable

Receivables, net is comprised of the following at March 31, 2007:
                              (000's Omitted)

                             Gross          Allowance for
                             Receivable     doubtful accounts         Net
                             ----------     -----------------     -----------
Receivables from equipment
sales and service contracts   $  5,499           $   730             $ 4,769
                             ==========     =================     ===========
Receivables from equipment
sales and service contracts-
related parties               $  1,035           $   646             $   389
                             ==========     =================     ===========
Management fee receivables
from related medical
practices ("PC's")            $ 10,530           $ 3,203             $ 7,327
                             ==========     =================     ===========

                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 3 - MEDICAL RECEIVABLES, ACCOUNTS RECEIVABLE AND MANAGEMENT FEE RECEIVABLE
         (Continued)

Accounts Receivable and Management Fee Receivable (Continued)

The Company's customers are concentrated in the healthcare industry.

The Company's  receivables  from the related PC's consist  substantially of fees
outstanding under management agreements, service contracts and lease agreements.
Payment of the outstanding  fees is based on collection by the PC's of fees from
third party medical reimbursement organizations, principally insurance companies
and health management organizations.

Collection  by the  Company of its  accounts  receivable  may be impaired by the
uncollectibility of the PC's medical fees from 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 39% and 48% of the PC's net revenues for
both the nine months ended March 31, 2007 and 2006,  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 and contractual  allowances.  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.

Certain no-fault  insurers have raised issues  concerning  whether the Company's
clients the "P.C.'s" are in  compliance  with certain laws,  including,  but not
limited to, laws governing their corporate  structure  and/or  licensing,  their
entitlement  or standing to seek and/or obtain  no-fault  benefits,  and/or laws
prohibiting the corporate practice of medicine,  fee-splitting  and/or physician
self referrals.  To the extent any claims are asserted  against the P.C.'s,  the
settlement  of such claims  could result in the P.C.'s  waiving  their rights to
collect certain of their insurance claims.  Management believes that the company
and the P.C.'s are not in violation of any of the above  mentioned  laws.  Since
the resolution or settlement of these claims with the insurance  companies could
have a material  impact on the collection of management fees by the Company from
its P.C.'s,  the Company has provided reserves for uncollectable fees related to
this matter.




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 3 - MEDICAL RECEIVABLES, ACCOUNTS RECEIVABLE AND MANAGEMENT FEE RECEIVABLE
         (Continued)

Accounts Receivable and Management Fee Receivable (Continued)

On February 8, 2006,  the Deficit  Reduction Act of 2005 ("DRA") was signed into
law by  President  George W. Bush.  The DRA would result in caps on Medicare and
Medicaid  payment  rates  for  most  imaging  services,  including  MRI  and CT,
furnished in physicians'  offices and other non-hospital  based settings.  Under
the cap,  payments  for these  imaging  services  could not exceed the  hospital
outpatient payment rates for those services. This change is to apply to services
furnished by the P.C.'s on or after January 1, 2007.  Although the  professional
corporations  managed by HCMA bill for scans on a "global" basis,  which means a
single  fee per  scan,  the  limitation  is  applicable  only  to the  technical
component  of the  services,  which is the  payment or  portion  of the  payment
attributable  to the  non-professional  services.  If the fee for the  technical
component of the service (without including geographic  adjustments) exceeds the
hospital  outpatient  payment  amount for the service  (also  without  including
geographic  adjustments),  under the Physician  Fee  Schedule,  then the payment
would be limited to the Physician Fee Schedule rate. Based on the Company's scan
volumes  for  2006,  the  Company  estimates  that  the  implementation  of  the
reimbursement reduction contained in the DRA may have the impact of reducing the
Company's management fee revenues by approximately $800,000 annually.

Currently,  a statute in the State of Florida requires all drivers,  licensed in
the State of Florida,  to carry a $10,000  no-fault  insurance  policy  covering
personal injury  protection  benefits.  This statute is due to expire in October
2007 unless  extended by legislative  actions.  Management does not believe that
the  expiration  of this  statute will have a material  impact on the  Company's
condensed consolidated financial position or results of consolidated  operations
in the future.

While the  Company has  prepared  certain  estimates  of the impact of the above
discussed  changes and possible  changes,  it is not possible to fully  quantify
their impact on its business. There can be no assurance that the impact of these
changes  will not be  greater  than  estimated  or that any future  health  care
legislation  or  reimbursement  changes will not adversely  affect the Company's
business.

Net  revenues  from  management  and other  fees  charged to the  related  P.C's
accounted for  approximately  36.9% and 34.3% of the condensed  consolidated net
revenues  for the nine  months  ended  March 31,  2007 and  2006,  respectively.
Product  sales  and  service  repair  fees  from  related  parties  amounted  to
approximately 3.6% and 13.1% of condensed consolidated net revenues for the nine
months ended March 31, 2007 and 2006, respectively.




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 3 - MEDICAL RECEIVABLES, ACCOUNTS RECEIVABLE AND MANAGEMENT FEE RECEIVABLE
         (Continued)

Unaudited Financial Information of Unconsolidated Managed Medical Practices

Summarized  income  statement data for the three months ended March 31, 2007 and
2006 related to the  unconsolidated  medical practices managed by the Company is
as follows:

                    (000's omitted)  (Income Tax-Cash Basis)
                                For the three months ended March 31,

                                      2007                2006
                                     ------              ------
Patient Revenue - Net                $4,799              $4,189
                                     ======              ======
Income from Operations               $  228              $   13
                                     ======              ======
Net Income (Loss)                    $    7              $  (183)
                                     ======              ======

Summarized  income  statement  data for the nine months ended March 31, 2007 and
2006 related to the  unconsolidated  medical practices managed by the Company is
as follows:

                    (000's omitted)  (Income Tax-Cash Basis)
                                For the nine months ended March 31,

                                      2007                2006
                                    -------             -------
Patient Revenue - Net               $14,586             $12,587
                                    =======             =======
Income from Operations              $   747             $   123
                                    =======             =======
Net Income (Loss)                   $    55             $  (497)
                                    =======             =======


NOTE 4 - INVENTORIES

Inventories included in the accompanying condensed consolidated balance sheet at
March 31, 2007 consist of:

                               (000's omitted)

Purchased parts, components
   and supplies                       $ 3,491
Work-in-process                         2,658
                                      -------
                                      $ 6,149
                                      =======



                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS AND CUSTOMER
ADVANCES

1)   Information  relating to  uncompleted  contracts as of March 31, 2007 is as
     follows:
                                 (000's omitted)

     Costs incurred on
       uncompleted Contracts        $ 4,957
     Estimated earnings              1,725
                                   ---------
                                      6,682
      Less: Billings to date          8,115
                                   ---------
                                    $(1,433)
                                   =========

Included in the accompanying  condensed  consolidated balance sheet at March 31,
2007 under the following captions:

        Costs and estimated earnings in excess of
      billings on uncompleted contracts                $   209
Less: billings in excess of costs and estimated
      earnings on uncompleted contracts                  1,642
                                                       --------
                                                       $(1,433)
                                                       ========

2)   Customer advances consist of the following as of March 31, 2007:

                                                   Related
                                        Total      Party       Other
                                       --------    --------  -------

Total Advances                         $ 19,425    $     42  $ 19,383
Less: Advances
       on contracts under construction    8,115        --       8,115
                                       --------     -------- --------
                                       $ 11,310    $     42  $ 11,268
                                       ========     ========  =======


NOTE 6 -STOCKHOLDERS' EQUITY

Common Stock

During the three months ended March 31, 2007:

a)   The Company  issued  5,813 shares of common stock for costs and expenses of
     39, 821.

b)   The  Company  cancelled  1,200  shares of Common  Stock  for  option  notes
     receivable of 42,300.

                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 6 -STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)

During the nine months ended March 31, 2007:

a)   The  Company   issued   5,030  shares  of  common  stock  to  employees  as
     compensation valued at $41,699 under stock bonus plan.

b)   The Company issued 7,000 shares of common stock to  consultants  and others
     valued at $78,200.

c)   The Company issued 214,915 shares of common stock for costs and expenses of
     $1,839,010.

d)   The Company  issued 3,680 shares of common stock upon the exercise of stock
     options resulting in proceeds of $49,680.

e)   The Company  issued 43,600 shares of common stock  resulting in proceeds of
     $372,760.

f)   The  Company  cancelled  1,200  shares of Common  Stock  for  option  notes
     receivable of 42,300.

The Company pays premiums for life insurance on its Chief Executive Officer. The
insurance  policies were owned by a life  insurance  trust.  The cash  surrender
value of the life insurance policies, in the approximate amount of $1.2 million,
was  contributed to capital during the first quarter of 2007 pursuant to a split
dollar agreement.


NOTE 7 - OTHER CURRENT LIABILITIES

Other current  liabilities in the accompanying  condensed  consolidated  balance
sheet consist of the following:
                                                  (000's omitted)

                                          March 31,                   June 30,
                                            2007                       2006
                                       --------------             -------------
      Royalties                          $      615                 $     716
      Accrued salaries, commissions si
            and payroll taxes                 1,353                     1,146
      Accrued interest                          535                       535
      Litigation judgements                     193                       193
      Sales tax payable                       2,192                     2,181
      Other                                   1,611                     1,331
                                       --------------             -------------
                                         $    6,499                 $   6,102
                                       ==============             =============




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 8 -SALE OF PHYSICAL MEDICINE MANAGEMENT BUSINESS

On July  28,  2005  Fonar,  HMCA and  Dynamic  entered  into an  Asset  Purchase
Agreement with Health Plus Management Services, L.L.C. ("Health Plus"), pursuant
to which HMCA and its  subsidiary  Dynamic  sold to Health  Plus the  portion of
their  business which was engaged in the business of managing  physical  therapy
and rehabilitation  facilities,  together with the assets used in the conduct of
such business.

The assets sold  consisted  principally of the  management  agreements  with the
physical therapy and rehabilitation  facility management business,  the physical
therapy  equipment,  a portion of the  accounts  receivable  and  furniture  and
fixtures  the  Company  provided  to the  physical  therapy  and  rehabilitation
facilities.

The purchase price under the Asset Purchase Agreement was $6.6 million,  payable
pursuant  to  a  promissory  note  (the  "note")  in  120  monthly  installments
commencing on August 28, 2005. The first twelve  installments  are interest only
and the remaining 108 payments will consist of equal  installments  of principal
and interest in the amount of $76,014 each.  The note is secured by a first lien
on all of the assets of Health Plus, including its accounts receivable. The Note
is subject to  prepayment  provisions  to the extent  Health Plus resells all or
part of the assets and business or utilizes the assets sold as collateral in any
debt financing.  The note provides for interest at 5% per annum.  The fair value
assigned to the note was  $6,078,068  reflecting  a discount of $521,932 for the
below  market  interest  rate.  The Company  recorded a loss of $143,598 on this
transaction during the year ended June 30, 2006.

The two  principals  of Health Plus were  employed by HMCA and Dynamic up to the
time of the closing of the business.  In  consideration  for the  termination of
their  employment  agreement,  these two  individuals  each  became  entitled to
receive  $800,000.  In addition,  each became  entitled to receive  $200,000 for
collection services to be provided on behalf of HMCA and Dynamic with respect to
a  portion  of  the  accounts   receivable  of  certain   physical  therapy  and
rehabilitation facilities which arose during the period when HMCA was engaged in
the  management of those  facilities.  The  $1,000,000  payable to each of these
individuals was satisfied in shares of Fonar common stock in 2006.

For  accounting  purposes in accordance  with  accounting  principles  generally
accepted  in the United  States of  America,  the  Company  determined  that the
classification  of  the  disposed  business   described  above  as  discontinued
operations would not be appropriate.  Accordingly,  the operating results of the
disposed   business  have  been   included  in  continuing   operations  in  the
accompanying condensed consolidated financial statements.




                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)


NOTE 9 - SALE OF SUBSIDIARY

On January 31, 2006, the Company sold 100% of the stock of Tallahassee  Magnetic
Resonance Imaging,  P.A. to Raymond V. Damadian for a diminimus amount since the
liabilities  exceed the  assets.  No gain or loss was  recognized  on this sale.
Revenue  recognized from this entity totaled  $590,883 for the nine months ended
March 31, 2006.


NOTE 10 - SEGMENT AND RELATED INFORMATION

The Company operates in two industry  segments - manufacturing and the servicing
of medical equipment and management of physician practices, including diagnostic
imaging services.

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,  2006.  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:

                                                     (000's omitted)

                                                        Physician
                                                        Management
                                                        and
                                                        Diagnostic
                                            Medical     Imaging
                                           Equipment    Services       Totals
                                           ----------   ----------   ----------
For the three months ended March 31, 2007:

Net revenues from external customers        $  5,778     $  3,004     $  8,782
Inter-segment net revenues                  $    269     $   -        $    269
Foreign Revenue                             $  1,756     $   -        $  1,756
Loss from operations                        $ (4,718)    $   (597)    $ (5,315)
Depreciation and amortization               $    391     $    275     $    666
Compensatory element of stock issuances     $   -        $   -        $   -
Capital expenditures                        $    415     $     81     $    496


For the three months ended March 31, 2006:

Net revenues from external customers        $  4,011     $  3,092     $  7,103
Inter-segment net revenues                  $    152     $   -        $    152
Foreign Revenue                             $  1,200     $   -        $  1,200
Loss from operations                        $ (6,290)    $ (1,068)    $ (7,358)
Depreciation and amortization               $    498     $    273     $    771
Compensatory element of stock issuances     $    254     $     14     $    268
Capital expenditures                        $    413     $    529     $    942


                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)



NOTE 10 - SEGMENT AND RELATED INFORMATION (Continued)

                                                     (000's omitted)

                                                        Physician
                                                        Management
                                                        and
                                                        Diagnostic
                                            Medical     Imaging
                                           Equipment    Services       Totals
                                           ----------   ----------   ----------
For the nine months ended March 31, 2007:

Net revenues from external customers        $ 15,290     $  8,947     $ 24,237
Inter-segment net revenues                  $    782     $   -        $    782
Foreign Revenue                             $  2,236     $   -        $  2,236
Loss from operations                        $(15,330)    $ (1,475)    $(16,805)
Depreciation and amortization               $  1,164     $    823     $  1,987
Compensatory element of stock issuances     $    116     $      5     $    121
Capital expenditures                        $  1,098     $    137     $  1,235
Identifiable assets                         $ 26,030     $ 22,449     $ 48,479


For the nine months ended March 31, 2006:

Net revenues from external customers        $ 17,623     $ 10,174     $ 27,797
Inter-segment net revenues                  $    429     $   -        $    429
Foreign Revenue                             $  2,700     $   -        $  2,700
Income from operations                      $(16,846)    $ (4,090)    $(20,936)
Depreciation and amortization               $  1,497     $    933     $  2,430
Compensatory element of stock issuances     $  1,010     $    327     $  1,337
Termination Costs paid with Common Stock    $   -        $  1,600     $  1,600
Capital expenditures                        $  1,090     $  1,430     $  2,520
Identifiable assets - June 30, 2006         $ 31,264     $ 25,965     $ 57,229



NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended March 31, 2007 and March 31, 2006, the Company paid
$203,000 and $214,000 for interest, respectively.

Non-Cash Transaction.

During the nine months ended March 31, 2007:

a)   The Company  recorded  the cash  surrender  value of the split  dollar life
     insurance policies of $1,234,000 to additional paid in capital.





                      FONAR CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2007
                                  (UNAUDITED)



NOTE 12 - SUBSEQUENT EVENTS

Company's Common Stock Meets NASDAQ's Continuing Listing Requirements

The  Company  received  written  notification  from The Nasdaq  Stock  Market on
December  22,  2005  that the bid  price  of its  common  stock  for the last 30
consecutive  trading days had closed below the minimum $1.00 per share  required
for continued  listing under Nasdaq  Marketplace  Rule  4310(c)(4) (the "Rule").
Pursuant to Nasdaq Marketplace Rule 4310(c)(8)(D), the Company has been provided
an  initial  period of 180  calendar  days,  or until June 20,  2006,  to regain
compliance.  The notice states that the Company has achieved compliance with the
Rule if at any time before June 20, 2006 the bid price of the  Company's  common
stock closes at $1.00 per share or more for a minimum of 10 consecutive business
days.  The Company had been  granted an extension  to achieve  compliance  until
December 18, 2006.

On  December  19,  2006,  the  Company  received  a Nasdaq  Staff  Determination
indicating  that the  Company  still  fails to comply with the minimum bid price
requirement for continued listing and therefore is subject to delisting from the
Nasdaq  Capital  Market.  The  Company has  requested a hearing  before a Nasdaq
Listing  Qualifications  Panel to review the staff  determination  and presented
their plan for a reverse stock split at a ratio of 1:25 (one new share for every
25  shares)  of its  outstanding  common  stock  and all  other  classes  of its
outstanding stock.

As a result of the hearing held before the NASDAQ Listing  Qualifications  Panel
("Panel") on February 15, 2007,  FONAR's  request for  continued  listing on The
NASDAQ Stock Market was granted,  subject to the condition that on or before May
1, 2007,  the Company  must have  evidenced a closing bid price of $1.00 or more
for a  minimum  of ten  consecutive  trading  days,  which  condition  has  been
satisfied.  The Panel's decision was based on its determination that the reverse
split to be presented at the Annual Meeting on April 16, 2007, when implemented,
would be likely  to cure the bid price  deficiency  and  allow  the  Company  to
maintain compliance for the longer term. Accordingly, the company has effected a
reverse stock split as of April 17, 2007.

Common Stock

During the period from April 1, 2007 through April 30, 2007:

a)   The Company  issued  4,000 shares of common stock for costs and expenses of
     $22,868.




                      FONAR CORPORATION AND SUBSIDIARIES


Item 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS.

     For the nine month period  ended March 31, 2007,  we reported a net loss of
$17.0  million on  revenues  of $24.2  million as  compared to net loss of $21.0
million on revenues of $27.8  million for the nine month  period ended March 31,
2006.

     For the three month  period  ended March 31, 2007 we reported a net loss of
$5.4 million on revenues of $8.8 million as compared to net loss of $7.4 million
on revenues of $7.1 million for the three month period ended March 31, 2006.

     The  Company  notes  improvement  in both its net loss and  revenue for the
quarter  ending March 31, 2007 as compared to the quarter  ended March 31, 2006.
Net losses improved by 26.6%, ($5.4 million) as compared to ($7.4 million), on a
revenue  increase of 23.6%,  to $8.8  million  from $7.1  million.  Particularly
noteworthy was that the revenues for the quarter ending March 31, 2007 accounted
for 36.2% of the revenues of the nine month period ending March 31, 2007.

     There was recent  increased  sales  activity which  management  believes is
attributable to a general increase in utilization of MRI, the increase in demand
for  Upright(TM)  scans and the  reduction of  uncertainty  of the impact of the
Deficit Reduction Act ("DRA").  A recent survey of Fonar  Upright(TM)  customers
shows that the DRA has not had a  substantial  impact on  revenues  and has been
more than offset by an increase in utilization  of MRI and the increased  demand
for Upright(TM) imaging technology.

     In addition,  we are  planning to expand our sales force,  both in terms of
hiring more sales personnel and establishing a network of domestic  distributors
(we already use  distributors  for foreign  sales)  under the  direction  of our
internal sales force.

     We also are  monitoring  the  performance of our existing users in order to
establish teams to assist  underperforming  customers improve their scan volume.
In  addition,  we have held  seminars  to assist  customers  in their  marketing
efforts and are in the process of  developing a web site to assist our customers
in their marketing efforts.

     The number of units sold was 8 during the first nine  months of fiscal 2007
as compared to 13 for the first nine months of fiscal 2006.

     Importantly,  we are  beginning to penetrate the hospital  market.  For the
2006 fiscal year, two Fonar Upright(TM) MRI scanners were sold to hospitals, one
of which is a member of a chain of hospitals. In the first nine months of fiscal
2007,  we sold one  Fonar  Upright(TM)  MRI  scanner  to a  hospital.  The Fonar
Upright(TM) MRI scanner is the only scanner which enables  weight-bearing  scans
of the spine,  which is critical in making a correct diagnosis of spine diseases
such as low back pain and therefore the key to performing the correct surgery of
the spine.

Forward Looking Statements

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

Results of Operations

     The  Company  operates  in  two  industry  segments:  the  manufacture  and
servicing of medical (MRI) equipment,  the Company's  traditional business which
is conducted directly by Fonar, and diagnostic  facilities  management services,
which is conducted through Fonar's  wholly-owned  subsidiary,  Health Management
Corporation  of America,  which we also refer to as HMCA.  During July 2005 HMCA
sold the portion of its business  engaged in the management of physical  therapy
and rehabilitation facilities.

     Trends in the third  quarter of fiscal 2007  include an increase in product
sales revenues. Sales orders for Upright(TM) MRI scanners,  decreased from 13 in
the  first  nine  months of fiscal  2006 to 8 in the first  nine  month of 2007.
Although  unrelated  party sales  revenues  increased  from $12.7 million in the
first nine  months of fiscal  2006 to $14.4  million in the first nine months of
fiscal 2007,  unrelated party scanner sales revenues increased from $7.1 million
in fiscal 2006 to $7.6 million in fiscal 2007. (The inconsistency  between sales
orders and sales  revenues  is a result of our  recognition  of  revenues on the
"percentage  of  completion"  basis,  which means revenues are recognized as the
scanner is  manufactured).  Related party scanner  sales  revenues  decreased in
fiscal  2007,  from $2.9  million  for the nine  months  ended March 31, 2006 to
$143,000 for the nine months ended March 31, 2007.  The Company will continue to
focus on increased  marketing  efforts,  including  advertising,  marketing  and
adding additional sales personnel and distributors, to improve sales performance
in the remaining fiscal 2007.  During the fiscal 2007, the Company also hired an
additional  advertising  and  marketing  executive,   who  had  previously  been
associated with our independent advertising agency.

     For the three month period  ended March 31, 2007,  as compared to the three
month period  ended March 31,  2006,  overall  revenues  from MRI product  sales
increased 91% ($3.2 million  compared to $1.7 million).  Unrelated party scanner
sales ($3.2 million  compared to $1.3  million)  increased at a rate of 151% and
related  party  scanner sales  ($1,000  compared to $397,000)  decreased  99.7%.
Service  revenues,  increased by 11.3% ($2.3  million  compared to $2.1 million)
because of additional  customers entering into service agreements with Fonar for
their  scanners  following  the  expiration  of the  warranty  period  on  their
equipment.  Overall,  for the third  quarter of fiscal  2007,  revenues  for the
medical  equipment  segment increased by 44.1% to $5.8 million from $4.0 million
for the third quarter of fiscal 2006. The revenues  generated by HMCA decreased,
by 2.8% to $3.0 million for the third quarter of fiscal 2007 as compared to $3.1
million for the third quarter of fiscal 2006.

     For the nine month  period  ended March 31,  2007,  as compared to the nine
month period  ended March 31,  2006,  overall  revenues  from MRI product  sales
decreased  22.7%  ($7.8  million  compared  to $10.0  million)  as a result of a
decline in related party sales revenues.  Unrelated party scanner sales revenues
($7.6 million compared to $7.1 million) increased at a rate of 6.9%, but related
party scanner sales ($143 thousand  compared to $2.9 million)  decreased  95.1%.
Service  revenues  increased by 18.4% ($7.5  million  compared to $6.4  million)
because of additional  customers entering into service agreements with Fonar for
their  scanners  following  the  expiration  of the  warranty  period  on  their
equipment.  Overall,  for the first nine months of fiscal 2007, revenues for the
medical equipment segment decreased by 13.2% to $15.3 million from $17.6 million
for the first nine months of fiscal 2006.  The  revenues  generated by HMCA also
decreased,  by 12.1% to $8.9 million for the first nine months of fiscal 2007 as
compared to $10.2 million for the first nine months of fiscal 2006. The decrease
in  revenues  recognized  by HMCA  resulted  primarily  from the sale of  HMCA's
business of managing  physical  therapy and  rehabilitation  centers during July
2005.

     There were  approximately  $2.2  million in foreign  revenues for the first
nine months of fiscal 2007 as compared to approximately  $2.7 million in foreign
revenues  for the first nine months of fiscal 2006,  representing  a decrease in
foreign  revenues of 18.5%. The Company is making a concerted effort to increase
foreign sales,  most recently  through its European  distributor and attending a
foreign trade show.

     Nevertheless,  notwithstanding  the  decrease in our total net  revenues of
12.8%  from  $27.8  million  in the first  nine  months of fiscal  2006 to $24.2
million  in  the  first  nine  months  of  fiscal  2007,  these  decreases  were
accompanied  by a  decrease  of 15.8% in total  costs and  expenses  from  $48.7
million in the first nine months of fiscal 2006 compared to $41.0 million in the
first nine months of fiscal 2007. As a result, our operating loss decreased from
$20.9  million in the first nine months of fiscal  2006 to $16.8  million in the
first nine months of fiscal 2007.

     We recognize MRI scanner sales  revenues on the  "percentage of completion"
basis,  which means the revenues are recognized as the scanner is  manufactured.
Revenues  recognized  in a  particular  quarter do not  necessarily  reflect new
orders or progress  payments  made by  customers in that  quarter.  We build the
scanner as the customer  meets  certain  benchmarks in its site  preparation  in
order to minimize the time lag between  incurring costs of manufacturing and our
receipt  of the cash  progress  payments  from the  customer  which are due upon
delivery. Consequently, there can be a disparity between the revenues recognized
in a fiscal period and the number of product  sales.  Generally,  the recognized
revenue  results from revenues from a scanner sale being  recognized in a fiscal
quarter or quarters following the quarter in which the sale was made.

     We  believe  the  decrease  in product  sales  revenues  reflect  the large
variation in sales revenue that is typical of the sale of high unit cost capital
equipment,  which  variation  is  characteristic  of Fonar's 28 year  experience
selling MRI scanning systems. We also believe that the Deficit Reduction Act may
also have contributed to the decrease in product sales revenues.

     Service and repair  revenues  increased by 9.8%,  from $2.3 million for the
third  quarter of fiscal 2006 to $2.6  million  for the third  quarter of fiscal
2007.

     Service and repair  revenues  increased  by 18.4% from $6.4 million for the
first nine  months of fiscal  2006 to $7.5  million for the first nine months of
fiscal 2007.

     The increases in service and repair  revenues are  occurring  because after
the warranty on the MRI scanner expires,  the owner will ordinarily enter into a
service  contract with us to assure continued  coverage.  We anticipate that for
this  reason  there  will  continue  to be  increases  in  service  revenues  as
warranties on installed scanners expire over time.

     Costs related to product sales  increased by 38.8% from $2.3 million in the
third  quarter  of fiscal  2006 to $3.1  million  in the third  quarter of 2007,
reflecting the corresponding  increase in product sales revenues.  Costs related
to providing service decreased by 8.0% from $1.4 million in the third quarter of
fiscal 2006 to $1.3 million in the third  quarter of 2007,  notwithstanding  the
increase in service revenues.

     Costs related to product sales decreased by 19.4% from $10.0 million in the
first nine  months of fiscal  2006 to $8.1  million in the first nine  months of
2007,  reflecting the  corresponding  decrease in product sales revenues.  Costs
related to  providing  service  decreased by 8.0% from $4.2 million in the first
nine  months of fiscal  2006 to $3.9  million in the first nine  months of 2007,
notwithstanding the increase in service revenues.

     In brief, costs are incurred  concurrently with revenues in accordance with
the percentage of completion method.

     Service and repair revenues  increased at a materially higher rate than the
costs related to providing service and repairs. In fact, such costs decreased by
8.0% from $4.2  million for the first nine months of fiscal 2006 to $3.9 million
for the first nine months of fiscal 2007.  Service contract prices are fixed for
the term of the  contract,  which are usually for a term of one year. We believe
that an important factor in keeping service costs down is our ability to monitor
the  performance  of customers'  scanners  from our  facilities in Melville on a
daily  basis and to detect and repair any  irregularities  before  more  serious
problems result.  We also believe the low cost of providing service reflects the
high quality of our products.

     Overall,  our operating  loss for our medical  equipment  segment was $15.3
million for the first nine months of fiscal 2007 as compared to  operating  loss
of $16.8 million for the first nine months of fiscal 2006.

     HMCA  revenues  decreased  slightly in the third quarter of fiscal 2007, by
2.8% to $3.0 million from $3.1 million for the third quarter of fiscal 2006. For
the first nine months of fiscal 2007,  HMCA revenues  decreased by 12.1% to $8.9
million  from $10.2  million for the first nine months of fiscal  2006.  HMCA is
seeking to increase  revenues from the MRI  facilities by continuing its program
of  replacing  older  scanners  at the  sites we  manage  with  Upright(TM)  MRI
scanners.  We now manage ten sites, as compared to nine sites at March 31, 2006,
equipped with  Upright(TM) MRI scanners.  HMCA  experienced an operating loss of
1.5 million for the first nine months of fiscal 2007 compared to operating  loss
of $4.1  million for the first nine months of fiscal  2006.  The greater loss in
the first nine months of fiscal 2006 was  principally the result of a payment of
$1.6 million for the termination of two employment agreements in connection with
the sale by HMCA of its physical therapy and rehabilitation  facility management
business  and the loss of  revenues  resulting  from  the sale of that  business
during the first quarter of fiscal 2006.

     HMCA cost of revenues  for the third  quarter of fiscal 2007  increased  to
$2.2 million as compared to $2.1  million for the third  quarter of fiscal 2006.
HMCA cost of revenues for the first nine months of fiscal 2007 decreased to $6.5
million as  compared to $7.3  million for the first nine months of fiscal  2006.
Rental costs were reduced in fiscal 2007 while  repairs and  amortization  costs
where higher in fiscal 2006.

     On February 8, 2006,  the Deficit  Reduction Act of 2005 ("DRA") was signed
into law by  President  George W. Bush.  The DRA,  which went into effect in the
beginning of calendar 2007,  places caps on Medicare and Medicaid  payment rates
for most  imaging  services,  including  MRI and CT,  furnished  in  physicians'
offices and other non-hospital based settings. Under the cap, payments for these
imaging services can not exceed the hospital  outpatient payment rates for those
services.  This  change  applies  to  services  furnished  by  the  professional
corporations  managed  by  HMCA  on or  after  January  1,  2007.  Although  the
professional  corporations  managed by HCMA bill for scans on a "global"  basis,
which means a single fee per scan,  the  limitation  is  applicable  only to the
technical  component  of the  services,  which is the  payment or portion of the
payment  attributable  to the  non-professional  services.  If the  fee  for the
technical  component of the service (without including  geographic  adjustments)
exceeds the hospital  outpatient  payment  amount for the service  (also without
including geographic  adjustments),  under the Physician Fee Schedule,  then the
payment would be limited to the Physician Fee Schedule  rate.  Based on our scan
volume  for  2006,  our  estimate  of the  implementation  of the  reimbursement
reduction  contained in the DRA may have the impact of reducing  our  management
fee revenues by approximately $800,000 annually. We believe that the Upright(TM)
MRI is uniquely  designed to  facilitate  increased  volumes to  compensate  any
reductions  due to the DRA.  The  Upright(TM)  MRI with  multiple  positions  is
dynamic  MRI as  compared  with the static  conventional  recumbent-only  single
position MRI.

     Currently,  a statute in the State of Florida requires all drivers licensed
in the State of Florida to carry a $10,000  no-fault  insurance  policy covering
personal injury  protection  benefits.  This statute is due to expire in October
2007 unless it is extended by legislative  action.  Management  does not believe
that  the  expiration  of  this  statute  will  have a  material  impact  on our
consolidated financial position or results of consolidated operations.

     While  we have  prepared  certain  estimates  of the  impact  of the  above
discussed  changes and possible  changes,  it is not possible to fully  quantify
their impact on our business. There can be no assurance that the impact of these
changes  will not be  greater  than  estimated  or that any future  health  care
legislation or reimbursement changes will not adversely affect our business.


Sale of Physical Therapy and Rehabilitation Facility Management Business

     Notwithstanding  our  continuing  efforts  to  increase  revenues  from the
management of MRI scanning  facilities,  HMCA's revenues declined because of the
sale of its business of managing physical therapy and rehabilitation  practices.
The sale was  completed in fiscal 2006 on July 28,  2005.  This sale was made in
connection with HMCA's decision to focus on the management of diagnostic imaging
facilities.

     The sale was made  pursuant to an asset  purchase  agreement to Health Plus
Management Services,  L.L.C., which we also refer to as Health Plus. There is no
material  relationship  between  Health  Plus and Fonar,  HMCA,  or any of their
respective  subsidiaries,  directors  or  officers,  or  associates  of any such
person.  The two  principals of Health Plus were employed by HMCA up to the time
of the closing of the transaction. In consideration for the termination of their
employment  agreements,  these two  individuals  each became entitled to receive
$800,000. In addition,  each became entitled to receive $200,000 for billing and
collection  services to be provided on behalf of HMCA with  respect to a portion
of the  accounts  receivable  of certain  physical  therapy  and  rehabilitation
facilities  which arose during the period when we were engaged in the management
of those  facilities.  The $1,000,000  payable to each of these  individuals was
payable at our option in shares of Fonar common stock.

     The purchase  price under the asset  purchase  agreement  was $6.6 million,
payable pursuant to a promissory note in 120 monthly installments  commencing on
August  28,  2005.  The first  twelve  installments  are  interest  only and the
remaining  108 payments  will  consist of equal  installments  of principal  and
interest  in the amount of  $76,014  each.  The note is  subject  to  prepayment
provisions  to the  extent  Health  Plus  resells  all or part of the assets and
business or utilizes the assets sold as collateral in any debt financing. A loss
from the sale of $143,598 has been recorded  during the quarter ended  September
30, 2005. The note provides for interest at 5% per annum.  The $6.6 million note
was valued at $6,078,068 as a result of a discount for the below market interest
rate.

     As our  consolidated  revenues  increased  by 23.6% to $8.8 million for the
third  quarter of fiscal 2007 from $7.1 million for the third  quarter of fiscal
2006,  the total costs and expenses  decreased by 2.5% to $14.1  million for the
third  quarter of fiscal 2007 from $14.5 million for the third quarter of fiscal
2006.  For the  first  nine  months  of fiscal  2007 the  consolidated  revenues
decreased by 12.8% to $24.2 million from $27.8 million for the first nine months
of fiscal 2006, the total costs and expenses decreased by 15.8% to $41.0 million
for the first nine months of fiscal  2007 from $48.7  million for the first nine
months of fiscal 2006.

     Selling,  general and administrative  expenses decreased by 1.6% from $17.9
million in the first nine months of fiscal 2007 from $18.2  million in the first
nine  months  of  fiscal  2006.  The  compensatory  element  of stock  issuances
decreased  by 90.9% from $1.3 million in the first nine months of fiscal 2006 to
$121,000  in the first  nine  months of fiscal  2007  which is now  included  in
selling  general  and  administrative   expenses.  This  primarily  reflected  a
dramatically  lesser  use of  Fonar's  stock  in lieu of cash to pay  employees,
consultants and professionals for services.

     Research and development  expenses  decreased by 17.7 % to $4.3 million for
the first nine months of fiscal  2007 as compared to $5.2  million for the first
nine months of fiscal 2006.

     Interest  expense in the first nine months of fiscal 2007 decreased by 5.1%
to $203,000 from $214,000 for the first nine months of fiscal 2006.

     Inventories  decreased  by  13.1% to $6.1  million  at  March  31,  2007 as
compared  to $7.1  million  at June  30,  2006 as the  Company's  product  sales
revenues   decreased  and  we  decreased  our  purchase  of  raw  materials  and
components.

     Costs and estimated earnings in excess of billings on uncompleted contracts
decreased  by 92.9% to $209,000 at March 31, 2007 from $3.0  million at June 30,
2006.  This  decrease  resulted  from our receipt of  installment  payments upon
delivery to customers whose sites were prepared to receive deliveries.

     Management fee and medical receivables and accounts receivable decreased by
7.6% to $15.9  million at March 31,  2007 from $17.2  million at June 30,  2006,
primarily due to collections on the Company's medical  receivables  offset by an
increase in accounts receivable from the medical segment.

     Our  operating  loss and net loss were  $16.8  million  and $17.0  million,
respectively,  for the first nine months of fiscal 2007 as compared to operating
and net losses of $20.9 million and $21.0 million,  respectively,  for the first
nine months of fiscal 2006.

     The overall  trends  reflected in the results of  operations  for the first
nine months of fiscal 2007 are a decrease in revenues  from  product  sales,  as
compared  to the first nine  months of fiscal  2006 ($7.8  million for the first
nine  months of fiscal  2007 as  compared  to $10.0  million  for the first nine
months of  fiscal  2006),  and a  decrease  in MRI  equipment  segment  revenues
relative to HMCA revenues ($15.3 million or 63.1% from the MRI equipment segment
as  compared  to $8.9  million or 36.9% from HMCA,  for the first nine months of
fiscal 2007, as compared to $17.6 million or 63% from the MRI equipment  segment
and $10.2 million or 37%, from HMCA,  for the first nine months of fiscal 2006).
In addition,  we  experienced  a decrease in unrelated  party sales  relative to
related party sales in our medical  equipment product sales ($7.6 million or 98%
to unrelated  parties and  $143,000 or 2% to related  parties for the first nine
months of fiscal 2007 as compared to $7.1 million,  or 71% to unrelated  parties
and $2.9  million or 29% to related  parties for the first nine months of fiscal
2006).

     We are committed to reversing the trends we have  experienced  in the first
nine months in fiscal 2007.  Nevertheless,  factors beyond our control,  such as
the timing and rate of market growth which depend on economic conditions,  payor
reimbursement rates and policies,  and unexpected  expenditures or the timing of
such expenditures,  make it impossible to forecast future operating results.  We
believe we are pursuing the correct  policies  which should prove  successful in
improving the Company's operating results.

     The Company's  Upright(TM) MRI, and  Fonar-360(TM)  MRI scanners,  together
with the Company's works-in-progress,  are intended to significantly improve the
Company's competitive position.

     The Company's  Upright(TM)  MRI scanner,  which operates at 6000 gauss (0.6
Tesla)  field  strength,  allows  patients  to  be  scanned  while  standing  or
reclining.  As a  result,  for the  first  time,  MRI is able to be used to show
abnormalities and injuries under full  weight-bearing  conditions,  particularly
the spine and joints. A floor-recessed elevator brings the patient to the height
appropriate for the targeted image region.  A custom- built  adjustable bed will
allow  patients  to sit or lie on their  backs,  sides or stomachs at any angle.
Full-range-of-motion  studies of the joints in virtually any  direction  will be
possible, an especially promising feature for sports injuries.

     The  Upright(TM)  MRI will also be useful for MRI directed  neuro- surgical
procedures as the surgeon  would have  unhindered  access to the patient's  head
when the patient is supine with no restrictions in the vertical direction.  This
easy-entry,  mid-field-strength scanner should be ideal for trauma centers where
a quick  MRI-screening  within the first critical hour of treatment will greatly
improve patients' chances for survival and optimize the extent of recovery.

     The Fonar  360(TM) is an  enlarged  room  sized  magnet in which the floor,
ceiling  and walls of the scan room are part of the magnet  frame.  This is made
possible  by  Fonar's  patented  Iron-Frame(TM)   technology  which  allows  the
Company's engineers to control, contour and direct the magnet's lines of flux in
the patient gap where  wanted and almost none outside of the steel of the magnet
where  not  wanted.  Consequently,   this  scanner  allows  surgeons  and  other
interventional  physicians  to walk  inside the magnet  and  achieve  360 degree
access to the patient to perform interventional procedures.

     The Fonar 360(TM)  is  presently  marketed as a  diagnostic  scanner and is
sometimes referred to as the Open Sky(TM) MRI. In its Open Sky(TM) version,  the
Fonar 360(TM) serves as an open patient friendly scanner which allows 360 degree
access to the patient on the  scanner  bed.  To  optimize  the  patient-friendly
character of the Open Sky(TM)  MRI, the walls,  floor,  ceiling and magnet poles
are decorated  with landscape  murals.  The patient gap is twenty inches and the
magnetic field strength, like that of FONAR's Upright(TM) MRI, is 0.6 Tesla.

     In the future, we expect the Fonar 360(TM) to function as an interventional
MRI.  The enlarged  room sized magnet and 360 access to the patient  afforded by
the Fonar  360(TM)  would  permit  surgeons  to walk into the magnet and perform
interventions on the patient inside the magnet. Most importantly the exceptional
quality of the MRI image and its capacity to exhibit tissue detail on the image,
can  then  be   obtained   real  time   during  the   procedure   to  guide  the
interventionalist. Thus surgical instruments, needles, catheters, endoscopes and
the like  could be  introduced  directly  into the human  body and guided to the
malignant  lesion by means of the MRI image.  The number of  inoperable  lesions
should be  greatly  reduced by the  availability  of this new  capability.  Most
importantly  treatment  can be  carried  directly  to  the  target  tissue.  The
interventional  features of the Fonar 360(TM) are expected to be  implemented by
Oxford  Nuffield  Orthopedic  Center in Oxford U.K. in the near  future.  A full
range of MRI compatible  surgical  instruments  using ceramic  cutting tools and
beryllium-copper materials are available commercially.

     The Company expects marked demand for its most commanding MRI products, the
Upright(TM) MRI and the Fonar 360(TM),  first for their exceptional  features in
patient diagnosis and treatment.  These scanners  additionally  provide improved
image quality and higher imaging speed because of their higher field strength of
..6 Tesla.  The geometry of the  Upright(TM) MRI as compared to a single coil, or
multiple  coils on only one axis and its  transverse  magnetic field enables the
use of two  detector  rf coils  operating  in  quadrature  which  increases  the
Upright(TM) MRI signal to noise ratio by 40%,  providing a signal to noise ratio
equal to a .84T recumbent only MRI scanner.


Liquidity and Capital Resources

     Cash,  cash  equivalents  and  marketable  securities  decreased  from $9.5
million at June 30, 2006 to $5.8  million at March 31, 2007.  Principal  uses of
cash during the first nine months of fiscal 2007 included  capital  expenditures
for property and equipment of $332,000,  repayment of long-term debt and capital
lease obligations in the amount of $155,000,  capitalized  software  development
costs of $497,000 and capitalized patent and copyright costs of $406,000,  and a
decrease in accounts payable of $995,000.

     Marketable  securities  approximated  $3.0 million as at March 31, 2007, as
compared  to $4.9  million  at June 30,  2006.  This  reduction  represents  the
maturation  of  marketable  securities  which have not been  reinvested  and the
proceeds of which are available to fund operations if needed. At March 31, 2007,
our  investments  in  U.S.  Government   obligations  were  $1.5  million,   our
investments in corporate and  government  agency bonds were $1.4 million and our
investments  in  certificates  of deposit and deposit notes were  $100,000.  The
investments made have had the intended effect of maintaining a stable investment
portfolio.

     Cash used in operating  activities for the first nine months of fiscal 2007
approximated  2.2 million.  Cash used in operating  activities was  attributable
primarily to the net loss of $17.0 million and the decrease in accounts  payable
of $995,000,  which were offset by a decrease in costs and estimated earnings in
excess of billings  on  uncompleted  contracts  of $2.7  million,  a decrease in
inventories  of $928,000 and the issuance of stock for  compensation,  costs and
expenses in lieu of cash in the amount of $2.0 million.

     Cash provided by investing  activities  for the first nine months of fiscal
2007  approximated  $884,000.  The  principal  source  of  cash  from  investing
activities  during the first nine months of fiscal 2007 consisted of the sale of
marketable  securities of $2.1 million,  offset by expenditures for property and
equipment of approximately $332,000 and capitalized software and patent costs of
approximately $903,000.

     Cash used in financing  activities for the first nine months of fiscal 2007
approximated  $384,000.  The sources of cash from financing  activities were net
proceeds from  exercises of stock options and warrants of $50,000,  repayment of
notes receivable from employee  stockholders of $184,000,  and net proceeds from
the  sale of  stock  of  $373,000.  The  principal  uses  of  cash in  financing
activities during the first nine months of fiscal 2007 consisted of repayment of
principal on  long-term  debt and capital  lease  obligations  of  approximately
$155,000 and distributions to holders of minority interests of $836,000.

     The  Company's  obligations  and the periods in which they are scheduled to
become due are set forth in the following table:

                                (000's OMITTED)
                                 Due in
                                  Less         Due          Due          Due
                                  than 1      in 1-3       in 4-5       after 5
Obligation          Total         year         years        years        years
- --------------   -----------   ----------   ----------   ----------   ----------

Long-term debt   $    548      $     --      $     --    $    --       $   548

Capital lease
Obligation            703            239           376         88           --

Operating
  Leases            7,737          2,431         3,034      1,039        1,233
                 -----------   ----------   ----------   ----------   ----------
Total cash
Obligations      $  8,988      $   2,670     $   3,410   $  1,127      $ 1,781
                 ===========   ==========   ==========   ==========   ==========

     Total  liabilities  increased  by 16.8% to $30.5  million at March 31, 2007
from $26.1 million at June 30, 2006.

     We  experienced a decrease in long-term  debt from $1.2 million at June 30,
2006 to $1.0  million at March 31,  2006,  an increase  in  unearned  revenue on
service  contracts  from $4.8  million to $5.7 million at June 30, 2006 to March
31,  2007, a decrease in billings in excess of costs and  estimated  earnings on
uncompleted  contracts  from $3.1  million at June 30,  2006 to $1.6  million at
March 31,  2007,  a decrease in accounts  payable  from $4.9 million at June 30,
2006 to $3.9 million at March 31, 2007,  an increase in customer  advances  from
$5.5 million at June 30, 2006 to $11.3 at March 31, 2007.

     As of  March  31,  2007,  the  total  of  $6.5  million  in  other  current
liabilities  included  primarily  accrued  salaries  and  payroll  taxes of $1.4
million,  accrued  royalties  of  $615,000  and excise  and sales  taxes of $2.2
million.

     Our working capital approximated $923,000 as of March 31, 2007, as compared
to working  capital of $14.2  million as of June 30, 2006,  decreasing by 93.5%.
This resulted principally from an increase in current liabilities ($24.6 million
at June 30, 2006 as compared to $29.2 million at (March 31, 2007),  particularly
an increase in customer  advances of $5.8 million ($5.5 million at June 30, 2006
as  compared  to $11.3  million at March 31,  2007),  and a decrease  in current
assets  ($38.9  million at June 30,  2006 and $30.2  million at March 31,  2007)
including a decrease in cash and cash  equivalents and marketable  securities of
$3.8 million ($9.5 million at June 30, 2006 as compared to $5.7 million at March
31, 2007),  a decrease of cost and  estimated  earnings in excess of billings on
uncompleted contracts of $2.7 million ($3.0 million at June 30, 2006 as compared
to  $209,000  at March  31,  2007)  along  with a  decrease  in  inventories  of
approximately  $1.0 million  ($7.1  million at June 30, 2006 as compared to $6.1
million at March 31, 2007).

     With respect to current liabilities,  the current portion of long-term debt
increased  from  $234,000 at June 30, 2006 to  $239,000 at March 31,  2007,  and
billings  in excess of costs and  estimated  earnings on  uncompleted  contracts
decreased  from $3.1 million at June 30, 2006 to $1.6 million at March 31, 2007.
Customer advances  increased from $5.5 million at June 30, 2006 to $11.3 million
at March 31, 2007 and accounts  payable  decreased from $4.9 million at June 30,
2006 to $3.9 million at March 31, 2007.

     In order to conserve  our capital  resources,  we have issued  common stock
under our stock bonus and stock option plans to  compensate  employees  and non-
employees  for  services  rendered,  but to a materially  lesser  extent than in
previous  years.  In the first  nine  months of fiscal  2007,  the  compensatory
element of stock  issuances  was  $121,000 as  compared to $1.3  million for the
first  nine  months  of  fiscal  2006.  Utilization  of  equity  in lieu of cash
compensation  improved our liquidity since it increased cash available for other
expenditures.  In  addition,  we  used  stock  to  pay $  1.6  million  for  the
termination of two employment  agreements terminated in connection with the sale
of HMCA's physical therapy and rehabilitation  facility  management  business in
the first three months of fiscal 2006.

     Fonar's  capital  resources  are expected to improve as Fonar's MRI scanner
products gain wider market  recognition  and  acceptance  and produce  increased
product sales. The Company is focusing on increased advertising and marketing to
increase demand for its products.

     Inventories  decreased by approximately  $1.0 million ($7.1 million at June
30,  2006 as  compared  to $6.1  million  at March 31,  2007)  resulting  from a
decrease in the  purchasing of raw materials and  components  and in filling our
backlog of orders.

     Fonar has not committed to making  additional  capital  expenditures in the
2007 fiscal year other than its intention to continue  research and  development
expenditures at current levels.

     Our  business  plan  calls  for a  continuing  emphasis  on  providing  our
customers  with enhanced  equipment  service and  maintenance  capabilities  and
delivering  state-of-the-art,  innovative and high quality equipment upgrades at
competitive prices.

     Our  principal  source  of  liquidity  has  been  cash  flows  provided  by
operations.  We  currently  expect this to continue.  At March 31, 2007,  we had
working  capital of  $923,000.  For the nine  months  ended March 31,  2007,  we
incurred a net loss of $17.0 million  which  included  non-cash  charges of $4.2
million.

     In order to conserve  our capital  resources  we have and will  continue to
issue, from time to time, common stock and stock options to compensate employees
and  non-employees for services  rendered.  The Company is focusing on increased
advertising and marketing  campaigns and  distribution  programs to increase the
demand  for  Fonar's  products.  Management  anticipates  that  Fonar's  capital
resources  will  improve as  Fonar's  MRI  scanner  products  gain wider  market
recognition and acceptance  resulting in increased  product sales. If we are not
successful with our current  marketing  efforts to increase sales, then we could
experience a shortfall  in the cash  necessary  to sustain  operations  at their
current levels.

     At March 31, 2007 cash and marketable  securities balance was $5.8 million.
Based upon  current  results of  operations,  we either need to increase  sales,
reduce expenses or seek other sources of funds through the issuance of equity or
debt  financing  in order to  maintain  sufficient  funds  available  to operate
through to March 31, 2008.

     The Company received written  notification  from The Nasdaq Stock Market on
December  22,  2005  that the bid  price of its  common  stock  for the prior 30
consecutive  trading days had closed below the minimum $1.00 per share  required
for continued  listing under Nasdaq  Marketplace  Rule  4310(c)(4) (the "Rule").
Pursuant to Nasdaq Marketplace Rule 4310(c)(8)(D), the Company had been provided
an  initial  period of 180  calendar  days,  or until June 20,  2006,  to regain
compliance  but since Fonar was then in compliance  with NASDAQ's  other listing
requirements, an extension to December 18, 2006 was granted.

     On  December  19, 2006 the Company  received a Nasdaq  Staff  Determination
indicating  that the  Company  still  fails to comply with the minimum bid price
requirement for continued  listing set forth in the Rule and that its securities
are therefore,  subject to delisting from the Nasdaq Capital Market. The Company
has requested a hearing before a Nasdaq Listing  Qualifications  Panel to review
the Staff  Determination which was held on February 15, 2007. As a result of the
hearing held before the NASDAQ Listing  Qualifications Panel ("Panel"),  Fonar's
request for continued listing on the NASDAQ Stock Market was granted, subject to
the condition  that on or before May 1, 2007,  the Company must have evidenced a
closing  bid price of $1.00 or more for a  minimum  of ten  consecutive  trading
days, which condition has been satisfied.  The Panel's decision was based on its
determination  that the reverse  split to be presented at the Annual  Meeting on
April  16,  2007,  when  implemented,  would be  likely  to cure  the bid  price
deficiency  and allow the Company to maintain  compliance  for the longer  term.
Accordingly,  the  Company  has  effected a reverse  stock split as of April 17,
2007.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     Our  investments  are  in  fixed  rate  instruments.  Below  is  a  tabular
presentation of the maturity profile of the fixed rate instruments held by us at
March 31, 2007.

INTEREST RATE SENSITIVITY

PRINCIPAL AMOUNT BY EXPECTED MATURITY

                         WEIGHTED AVERAGE INTEREST RATE

                                  Investments
                       Year of    in Fixed Rate   Weighted Average
                       Maturity   Instruments     Interest Rate
                       --------   -------------   ----------------
                       3/31/08    $          0         0.00%
                       3/31/09       1,000,000         3.85%
                       3/31/10       1,798,062         3.15%
                       3/31/11         200,000         4.41%
                                  -------------
            Total:  $ 2,998,062
                                  =============
                      Fair Value
                      at 3/31/07  $  2,905,235
                                  ==============

     All  of  our  revenue,   expense  and  capital  purchasing  activities  are
transacted in United States dollars.

     See Note 13 to the consolidated Financial Statements in our Form 10-K as of
and for the year ended June 30, 2006 for information on long-term debt.

Item 4.  Controls and Procedures

(a)  Evaluation of disclosure controls and procedures.

     The  Company  maintains  controls  and  procedures  designed to ensure that
information  required to be  disclosed  in the reports  that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported  within  the time  periods  specified  in the  rules  and  forms of the
Securities  and  Exchange  Commission.  Based  upon  their  evaluation  of those
controls and  procedures  performed as of the end of the period  covered by this
report,  the principal  executive and acting principal  financial officer of the
Company concluded that disclosure controls and procedures were effective.

(b)  Change in internal controls.

     The Company continues to enhance its controls and procedures related to the
financial  reporting  process,  improvements  that were  established  during the
latter part of fiscal 2005. This included hiring an outside consultant to assist
with technical  accounting and reporting  issues,  developing more  standardized
closing  procedures and  implementing a more formal process for  documenting the
weekly management meetings to review operating performance and results.

     There have been no changes in our internal control over financial reporting
that  occurred  during  the most  recent  fiscal  quarter  that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings: There were no material changes in litigation for the
     first nine months of fiscal 2007.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds: None

Item 3 - Defaults Upon Senior Securities: None

Item 4 - Submission of Matters to a Vote of Security Holders:

     At the Annual  Meeting of the Company held on April 16, 2007, the following
items were voted upon by the stockholders

     1.   Election of Directors

          a. Raymond V. Damadian    337,219,493 (For)     9,170,995 (Withheld)
          b. Claudette J.V. Chan    338,781,982 (For)     7,608,507 (Withheld)
          c. Robert J. Janoff       339,918,376 (For)     6,456,129 (Withheld)
          d. Charles N. O'Data      340,619,481 (For)     5,755,007 (Withheld)
          e. Robert Djerejian       340,625,357 (For)     5,765,132 (Withheld)

     2.   Authority to Effect Stock Split

          252,581,222 (For)
            7,501,484 (Against)
               39,498 (Abstain)
           86,269,284 (Non-Votes)

     3.   Authority to Effect Reduction of Authorized Shares

          253,107,116 (For)
            6,973,109 (Against)
               40,979 (Abstain)
           86,269,284 (Non-Votes)

     4.   Ratification of Auditors

          342,825,556 (For)
            2,898,567 (Against)
               66,374 (Abstain)

     5.   Limit on Management Compensation

           10,033,145 (For)
          249,336,533 (Against)
              751,526 (Abstain)
           86,269,284 (Non-Votes)


Item 5 -  Other Information:  None

Item 6 -  Exhibits  and  Reports on Form 8-K:  Exhibit  31.1  Certification  See
          Exhibits Exhibit 32.1  Certification  See Exhibits 8-K (earnings press
          release)  filed on September  15, 2006 8-K  (earnings  press  release)
          filed on November 13, 2006 8-K (Nasdaq Staff  Determination)  filed on
          December 21, 2006 8-K (earnings  press  release)  filed on February 9,
          2007


SIGNATURES

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
          the  Registrant has duly caused this report to be signed on its behalf
          by the undersigned thereunto duly authorized.

                                          FONAR CORPORATION
                                          (Registrant)

                                          By:  /s/ Raymond V. Damadian
                                                 Raymond V. Damadian
                                                 President & Chairman
Dated: May 11, 2007