SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported): June 30, 1997
FONAR CORPORATION
__________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 0-10248 11-2464137
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
110 Marcus Drive
Melville, New York 11747
(516) 694-2929
__________________________________________________________________
(Address, including zip code, and telephone
number of registrant's principal executive offices)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF NEW BUSINESS
Effective June 30, 1997, Fonar Corporation's (the
"Company" or "Fonar") wholly-owned subsidiary, U.S. Health
Management Corporation ("HMC") acquired the business and assets of
a group of interrelated companies (the "Acquired Companies")
engaged in the business of managing three diagnostic imaging
centers and one physical rehabilitation center in the Bronx,
Westchester and Putnam counties in New York (the "Centers"). The
transaction was effectuated through a merger between HMCM Inc.,
a wholly-owned subsidiary of HMC formed for the purpose of
engaging in the transaction, and Affordable Diagnostics, Inc.
("Affordable"), one of the Acquired Companies, which immediately
prior to the merger had acquired the assets and assumed the
liabilities of the other Acquired Companies (Bronx Diagnostic
Imaging, LLC, Yonkers Diagnostic Imaging, LLC, N.E. Medical
Billing Services, Inc. and Magnetic Connections).
The Acquired Companies provide to the Centers
management services, office space, diagnostic imaging equipment
and other equipment, repair and maintenance service for the
equipment and clerical and other non-medical personnel.
The services provided at the Centers include MRI
scans, CAT scans, x-rays, physical rehabilitation and in
connection with physical rehabilitation, ultrasound and SSEP/EMG
electromygographic diagnostics. The four centers are located in
Brewster, New York (MRI), Yonkers, New York (MRI and X-Ray), the
Bronx, New York (MRI and CAT scanning) and Riverdale, New York
(physical rehabilitation). The assets acquired through the merger
include the three MRI scanners, one CAT scanner, one X-Ray
machine, rehabilitation equipment and ultrasound and
electromygographic machines, which are leased to and used at the
Centers.
CONSIDERATION
Pursuant to the terms of the merger and related
supplemental and consulting agreements (the "Merger Agreements"),
the former shareholders of Affordable have received, in the
aggregate, 2,740,000 shares of the Common Stock of Fonar. At the
request of the Affordable shareholders, the shares were issued to
their partnership, Fanavle Partnership. The shares are being held
in escrow for the principal purpose of implementing the volume
limitations on sales agreed to by the parties in the Merger
Agreements. In addition to the sales volume limitations, however,
375,000 of the shares will be held for seven months as security for
the representations, warranties and indemnifications made to HMC
and HMCM Inc. under the Merger Agreements. Accordingly, said
shares will not be able to be sold for at least the duration of the
seven month period. Furthermore, the issuance of 576,000 of the
shares was made contingent upon the financial performance of the
business acquired during the 12-month period from July 1, 1997
through June 30, 1998.
CONTINGENCIES
In the event that either the average monthly cash
receipts or average monthly net revenue generated by the assets
and the businesses acquired over said 12-month period ("Average
Monthly Performance") is $375,000 or less, all of the contingent
shares will be returned to HMCM Inc. In the event that the
Average Monthly Performance for both cash receipts and net revenue
is $400,000 or more, none of the contingent shares will be
returned. The following chart shows the number of contingent
shares which will be returned to HMCM Inc. at different levels of
Average Monthly Performance between $375,000 and $400,000. Where
the Average Monthly Performance numbers for net revenue and cash
receipts are different, the lesser number will be determinative of
the number of contingent shares to be returned to HMCM Inc.
AVERAGE MONTHLY PERFORMANCE NUMBER OF SHARES TO BE RETURNED
$375,001 - $377,500 480,000
$377,501 - $380,000 432,000
$380,001 - $382,500 384,000
$382,501 - $385,000 336,000
$385,001 - $387,500 288,000
$387,501 - $390,000 240,000
$390,001 - $392,500 192,000
$392,501 - $395,000 144,000
$395,001 - $399,999 96,000
LIMITATIONS ON RESALE OF SHARES
All of the shares in escrow are subject to sales
volume limitations. The number of shares which can be sold on any
day is limited to the lesser of 15,000 shares or fifteen percent
(15%) of the trading volume (as reported on the NASDAQ System) of
Fonar's Common Stock on the previous trading day. In the event,
however, that the trading volume for Fonar Common Stock reaches
500,000 shares on any trading day, then for that day the aggregate
number of shares which may be sold will be increased to 60,000
shares. The net proceeds of any sale (net of commissions and
fees) will be released from escrow to Fanavle Partnership.
U.S. HEALTH MANAGEMENT CORPORATION'S REASONS FOR ACQUISITIONS
U.S. Health Management Corporation ("HMC") was
formed in March 1997 as a subsidiary by the Company in order to
enable the Company to expand into the physician practice
management (PPM) business. The shares of Fonar Common Stock
issued in the merger were provided to HMC and HMCM Inc. by Fonar
for the purpose of enabling the companies to engage in the
transaction. The Company views the acquisition of Affordable and
the other Acquired Companies as a decisive first step into this
new line of business.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
The financial statement required by this item will
be filed no later than September 15, 1997.
EXHIBITS
2.1 Merger Agreement and Supplemental Agreement
dated June 17, 1997 and Letter of Amendment dated June 27, 1997.
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 hereunto duly
authorized.
FONAR CORPORATION
(Registrant)
By: /s/ Raymond V. Damadian
Raymond V. Damadian
President and Chairman
Dated: July 11, 1997