As filed with the Securities and Exchange Commission
on July 11, 1997
__________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FONAR CORPORATION
__________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 3845 11-2464137
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Class- Identification No.)
incorporation or ification Code
organization) Number)
110 Marcus Drive
Melville, New York 11747
(516) 694-2929
__________________________________________________________________
(Address, including zip code, and telephone
number of registrant's principal executive offices)
Raymond V. Damadian, M.D.
FONAR CORPORATION
110 Marcus Drive
Melville, New York 11747
(516) 694-2929
__________________________________________________________________
Name, address, including zip code, and telephone
number, including area code, of agent for service)
Please send copies of all communications to:
Henry T. Meyer, Esq.
FONAR Corporation
110 Marcus Drive
Melville, New York 11747
(516) 694-2929
_________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
CALCULATION OF REGISTRATION FEE
Title of each Amt. to be Proposed Proposed Amount of
class of securities registered maximum maximum registration
to be registered offering aggregate fee
price per offering
unit* price
- ------------------------------------------------------------------
Common Stock,
$.0001 par value 2,340,000 $2.91 $6,809,400 $2,348.07
per share
- ------------------------------------------------------------------
Total . . . . . . . 2,340,000 $2.91 $6,809,400 $2,348.07
- ------------------------------------------------------------------
*Pursuant to Rule 457, subsections (h) and (c)
Specified Date: July 9, 1997
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
2,340,000 Shares
FONAR CORPORATION
Common Stock
This Prospectus relates to the sale of 2,340,000 shares (the
"Offered Shares") of the Common Stock of FONAR Corporation (the "Company" or
"Fonar") by Fanavle Partnership (the "Selling Stockholder"), which acquired the
Offered Shares pursuant to the terms of a merger and certain related agreements
(the "Merger Agreements").
Pursuant to the terms of the Merger Agreements, the maximum number
of the Offered Shares which may be sold on any trading day is limited to the
lesser of 15,000 shares or 15% of the trading volume (as reported on the NASDAQ
System) of the Company's Common Stock on the previous day, except that if on any
trading day the trading volume for the Company's Common Stock reaches 500,000
shares, then for that day the maximum number of Offered Shares which may be sold
will be increased to 60,000 shares. In addition, certain of the Offered Shares
are held as security or were issued on a contingent basis and will not be
immediately available for sale. Within the foregoing limits, the Selling
Stockholder may sell the Offered Shares at market prices at such times and
through such broker-dealers as it may elect. The Company will not receive any
proceeds from the sale of shares by the Selling Stockholder. (See "Plan of
Distribution" and "Material Changes.")
FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The price of the shares being sold by the Selling
Stockholder will vary and will depend on the market price of the Company's
Common Stock at the time or times such shares are sold.
The Company expects to pay expenses of this offering of
approximately $17,500.
On July 9, 1997, the closing price for the Common Stock of the
Company (Symbol: FONR) was $2.91 per share, as reported by NASDAQ.
The date of this Prospectus is July 11, 1997.
No person has been authorized by the Company to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer or solicitation to any person in any jurisdiction where
such offer or solicitation would be unlawful. Neither delivery of this
Prospectus nor any sale hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company since
the date hereof.
AVAILABLE INFORMATION
FONAR Corporation is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by FONAR Corporation can be inspected and
copies obtained at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and the Regional Offices of
the Commission at 7 World Trade Center, New York, New York 10048 and at the
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
FONAR Corporation has filed with the Commission in Washington,
D.C. a Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, with respect to the securities to which this Prospectus relates. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement,
including the exhibits thereto. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement and the exhibits thereto. Copies of the Registration Statement may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. Statements contained in this Prospectus
concerning the provisions of documents included as exhibits to the Registration
Statement are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the Commission.
Where any document or part thereof is incorporated by reference in
this Prospectus, the Company will provide without charge to each person to whom
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the information that has been incorporated by reference
in this Prospectus (not including exhibits unless the exhibits are specifically
incorporated by reference). Requests for copies should be directed to the
Company at 110 Marcus Drive, Melville, New York 11747, Attention Stockholder
Relations Department. The telephone number is (516) 694-2929.
SUMMARY INFORMATION
FONAR Corporation (the "Company" or "FONAR") designs, manufactures
and markets magnetic resonance imaging ("MRI") scanners which utilize
non-superconductive magnet technology for the detection and diagnosis of human
disease. The Company's address is 110 Marcus Drive, Melville, New York 11747
and its telephone number there is (516) 694-2929.
Effective June 30, 1997, the Company's 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 and one physical rehabilitation
center in New York. The transaction was effected through a merger between HMCM
Inc., a wholly-owned subsidiary of HMC 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.
Pursuant to the merger and other related agreements effecting the
merger (the "Merger Agreements"), Fanavle Partnership (the "Selling
Stockholder"), a partnership formed by the shareholders of Affordable, received
2,740,000 shares of the Common Stock of Fonar Corporation. This Prospectus
relates to 2,340,000 of said shares which are being offered for sale by the
Selling Stockholder (the "Offered Shares").
The Merger Agreements restrict the volume of sales which may be
made of Offered Shares to the lesser of 15,000 shares or 15% of the trading
volume (as reported on the NASDAQ system) of Fonar's Common Stock on the
previous trading day, except that the limit is increased to 60,000 shares on any
day on which the trading volume of Fonar Common Stock reaches 500,000 shares.
In addition, 375,000 Offered Shares serve as security under the Merger
Agreements and will not be available to be sold for at least seven months, and
576,000 Offered Shares have been issued on a contingent basis and will not be
available for sale any earlier than June 30, 1998. (See "Material Changes.")
Subject to such restrictions, the Selling Stockholder may sell the
shares from time to time at market prices through a broker-dealer of its
selection.
The offering of the shares on behalf of the Selling Stockholder is
being made on a "best efforts" basis. The offering price of the shares will
vary and will depend on the market price of the Company's Common Stock at the
times the shares are sold.
Commissions and any other fees in connection with the sale of the Offered Shares
will be agreed upon and paid by the Selling Stockholder (See "Plan of
Distribution").
NASDAQ Symbol . . . . . . . FONR
Risk Factors . . . . . . . Certain risk factors concerning the
Company should be considered carefully
before deciding whether to purchase
the shares offered. See "RISK
FACTORS."
This summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
RISK FACTORS
Investment in the Company is highly speculative and subject to
numerous and substantial risks. Therefore, prospective purchasers should
carefully consider the risks associated with the business of the Company and the
purchase of the Shares, including the risk factors discussed below.
1. Financial Risks. For the fiscal years ended June 30, 1996 and
June 30, 1995, the Company experienced net losses of $3.38 million and $1.76
million respectively and net operating losses of $8.9 million and $6.4 million
respectively. For the nine months ended March 31, 1997, the Company
experienced net income of $369,000 but an operating loss of $9.5 million. On
July 2, 1997, however, the Company received $128.7 million from General Electric
Company (net $77.2 million after attorneys' fees and expenses) in payment of the
judgment rendered against General Electric Company for infringement of the
Company's original MRI (Cancer Detection) patent and Multi-Angle Oblique (MAO)
patent (Fonar Corporation et ano. v. General Electric Company et ano.,
92-CV-4196 (LDW), U.S. District Court for the Eastern District of New York).
The payment by General Electric Company of the judgment followed the denial of
its application for a stay by the U.S. Court of Appeals for the Federal Circuit
and Chief Justice Rehnquist of the U.S. Supreme Court. The payment of the
judgment, however, does not preclude General Electric Company from petitioning
the Supreme Court to hear the case. Although the Company regards the
possibility as remote, there is a risk that the Supreme Court may elect to hear
the case and then decide the case adversely to the Company. The Company
believes that it will be able to reverse its operating losses with the cash
infusion from its patent litigation, the introduction into the marketplace of
its new Quad 7000 and Quad 12000 MRI scanners, continuation of its cost
containment programs, restructuring and liquidation of its interest bearing debt
and sales of upgrades and service to its existing customer base.
2. Reliance on New Products. The Company's principal products
are its new "Quad" series of MRI scanners, which were approved for sale by the
United States Food and Drug Administration (the "FDA") in 1995. The Quad 7000
MRI scanner received FDA approval in April, 1995, and the Quad 12000 received
FDA approval in November, 1995. The Quad scanners are unique in that four sides
are open, thus allowing access to the scanning area from four vantage points.
With the Quad 12000, the Company has introduced the first open high field MRI
scanner in the industry. Although the Company believes its new products are
responsive to the demands of the market place, there can be no assurance as to
the future market acceptance of the Quad scanners.
3. Dependence Upon Services of Dr. Damadian. The Company's
success is greatly dependent upon the continued participation of Dr. Raymond V.
Damadian, its founder, Chairman of the Board and President. Loss of the
services of Dr. Damadian would have a material adverse effect upon the
development of the Company's business. The Company does not currently carry
"key man" life insurance on Dr. Damadian.
4. Competition and Obsolescence. The medical equipment industry
is highly competitive and characterized by rapidly changing technology and
extensive research. Numerous companies, many of which have substantially
greater financial resources than those available to the Company, engage in the
marketing of magnetic resonance imaging scanners which compete with the
Company's scanners. Competitors include large, multinational companies or their
affiliates such as General Electric Company, Siemens A.G., Picker International,
Elscint Ltd., Philips N.V., Toshiba Corporation, Hitachi Corporation and
Shimadzu Corporation. In addition, there can be no assurance that the Company's
products will not be rendered obsolete by future products employing technologies
superior to those utilized by the Company.
5. Dilution. The purchasers of the shares of Common Stock being
offered hereby will sustain an immediate and substantial dilution in that the
net tangible book value of the shares will be significantly lower than the
offering price. The pro-forma net tangible book value of the Common Stock
(retroactively adjusted to March 31, 1997 and to take account of the issuance of
the Offered Shares) is approximately $0.84 per share, or approximately $2.07
less than the offering price (market price as of July 9, 1997) of $2.91 per
share. The foregoing assumes that all of the shares are sold at current market
prices by the Selling Stockholder. The pro-forma net tangible book value used
herein, however, does not take into account the value of the assets and business
transferred to the Company in consideration for the issuance of the Offered
Shares to the Selling Stockholder. The actual dilution experienced by the
purchasers of the shares will depend on the actual sales prices and the
Company's actual net tangible assets at the time of sale. (See "Dilution.")
6. Control of the Company. The Company's Certificate of
Incorporation does not provide for cumulative voting in the election of
directors. Dr. Raymond V. Damadian, the President, Chairman of the Board and
principal stockholder of the Company, will continue to be in control of the
Company and be in a position to elect all of the directors of the Company.
DILUTION
The net tangible book value of the Company's Common Stock at March
31, 1997 was $0.88 per share. "Net tangible book value per share" represents
the amount of the Company's tangible assets less the amount of its liabilities,
divided by the number of shares outstanding. Taking into account the issuance
of 2,740,000 shares of Fonar Common Stock to the Selling Stockholder under the
Merger Agreements, the pro-forma net tangible book value retroactively adjusted
to March 31, 1997 is $0.84 per share. The foregoing does not take into account,
however, the value of the assets and businesses transferred to the Company and
its subsidiaries in consideration for the Offered Shares. The Company will not
receive any proceeds from sales of the Offered Shares by the Selling
Stockholder.
For the purposes hereof, the pro-forma net tangible book value of
the Company's Common Stock has been retroactively adjusted to March 31, 1997 to
give effect to the issuance of the 2,740,000 shares issued to the Selling
Stockholder under the Merger Agreements. It has not been adjusted to take
account of any other events since March 31, 1997.
Purchasers of the Common Stock pursuant to this offering will
experience an immediate dilution of $2.07 per share. "Dilution per share"
represents the difference between the price per share of Common Stock paid by
the purchasers less the pro-forma net tangible book value of the Common Stock.
The following table illustrates the above described per share
dilution:
Public Net Tangible Net Tangible Dilution Gain For
Offering Book Value Book Value For New Existing
Price Before Offering After Offering Investors Shareholders
- ------------------------------------------------------------------
$2.91 $0.84 $0.84 $2.07 $0.00
- ------------------------------------------------------------------
The shares of Common Stock offered hereby will be sold from time
to time at market prices. For the purpose of illustration, the closing price
for the Company's Common Stock on July 9, 1997, as reported on the NASDAQ
System, is being utilized. The actual dilution experienced by purchasers of the
Common Stock offered hereby will vary depending on the actual sales prices and
the Company's actual net tangible assets at the times of the sales.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Offered Shares by the Selling Stockholder.
DETERMINATION OF OFFERING PRICE
The shares of Common Stock being offered hereby will be sold from
time to time at market prices, and as such, the prices will fluctuate.
DESCRIPTION OF FONAR'S SECURITIES
The following table shows the shares of FONAR's securities
authorized and outstanding as of March 31, 1997:
CLASS AUTHORIZED ISSUED AND OUTSTANDING
Common Stock,
par value $.0001
per share 60,000,000 47,643,871
Class B Common Stock,
par value $.0001
per share 4,000,000 5,411
Class C Common Stock,
par value $.0001
per share 10,000,000 9,562,824
Class A Non-voting
Preferred Stock, par
value $.0001 per share 8,000,000 7,855,627
Preferred Stock, par
value $.001 per share 10,000,000 0
Voting Rights
The Class C Common Stock has 25 votes per share, the Class B Common
Stock has 10 votes per share and the Common Stock has one vote per share in the
election of directors and on all other matters upon which stockholders are en
titled to vote. All three classes will vote together except where otherwise
required by law. The Class A Non-voting Preferred Stock does not have voting
rights except as required under the Delaware General Corporation Law.
Cash Dividends
With respect to any discretionary cash dividends which may be declared
by the Board of Directors on the Company's stock, a share of the Common Stock is
entitled to a cash dividend 20% higher than the cash dividend on a share of the
Class B Common Stock, as and when any cash dividends may be declared. A share
of the Class C Common Stock is entitled to one-third (1/3) of the dividend
declared on a share of the Class B Common Stock. The Class A Non-voting
Preferred is entitled to the same discretionary cash dividends as the Common
Stock.
Special Dividend on Common Stock
The Common Stock, but not the Class B Common Stock, the Class C Common
Stock, or the Class A Non-voting Preferred Stock, is entitled to a dividend
equal to a percentage of the amount of any cash award (in the form of damages,
royalties or otherwise) collected by the Company in connection with enforcement
by the Company of United States Patent No. 3,789,832 as follows: 3 1/4% of the
first $10 million of any such cash award collected by the Company, 4 1/2/% of
the next $20 million of any such cash award collected by the Company and 5 1/2%
of the amount of any such cash award in excess of $30 million collected by the
Company. This patent, which was issued to the President of the Company, Dr.
Raymond V. Damadian, in 1974 and subsequently exclusively licensed by him to the
Company, expired in February 1992. Damages for infringements occurring before
its expiration, however, are still recoverable.
Special Dividends on Class A Non-voting Preferred Stock
The Class A Non-voting Preferred Stock is entitled to a dividend equal
to a percentage of any award or settlement collected by the Company in
connection with the enforcement of five of its patents in certain patent
lawsuits, less the special dividend payable on the Common Stock with respect to
U.S. Patent No. 3,789,832 as follows: 3 1/4% of the first $10 million of any
such cash awards or settlements collected by the Company, 4 1/2% of the next $20
million of any such cash awards or settlements collected by the Company and 5
1/2% of the amount of any such cash awards or settlements in excess of $30
million collected by the Company. The five patents are as follows: Apparatus
and Method for Detecting Cancer in Tissue, 2/5/74 U.S. Patent No. 3,789,832;
Apparatus Including Permanent Magnet Configuration, 6/23/87, U.S. Patent No.
4,675,609; Apparatus and Method for Multiple Angle Oblique MRI, 10/3/89, U.S.
Patent No. 4,871,966; Solenoidal Surface Coils for Magnetic Resonance Imaging,
12/12/89, U.S. Patent No. 4,887,038; and Eddy Current Control in Magnetic
Resonance Imaging, 10/29/91, U.S. Patent No. 5061897. The patent lawsuits
covered include Fonar Corporation et ano v. General Electric Company et ano
(92-CV-4196 (LDW)) in the Federal District Court for the Eastern District of New
York and each patent litigation commenced thereafter up through October 29,
1997.
The Board of Directors has reserved the right (but would not be
obligated) to expand the dividend to which the Class A Non-voting Preferred
Stock is entitled, to cover additional patents, additional lawsuits, or both and
to increase the percentage of any awards or settlements received in any lawsuits
which would be payable as a dividend.
In addition, the Board of Directors is authorized, in its discretion,
to declare cash dividends from time to time solely on the Class A Non-voting
Preferred Stock or to fix such further dividend rights for the Class A
Non-voting Preferred Stock as it may determine, in its sole discretion.
Other Dividends and Distributions
With respect to dividends and distributions other than cash dividends
and all other rights (other than voting rights), shares of the Common Stock, the
Class B Common Stock and Class A Non-voting Preferred Stock rank equally and
have the same rights, including rights in liquidation. A share of the Class C
Common Stock has one-third (1/3) of such rights.
Conversion
Shares of Class B Common Stock are convertible into Common Stock on a
share for share basis. Shares of Class C Common Stock are convertible into
Common Stock on a three for one basis. Shares of Class A Non-voting Preferred
Stock and shares of Common Stock are not convertible.
Preemptive Rights and Cumulative Voting
Under the Company's Certificate of Incorporation, stockholders have no
preemptive rights to subscribe for new shares on a proportionate basis. The
Company's Certificate of Incorporation does not provide for cumulative voting.
Preferred Stock
No shares of the Company's $.001 par value Preferred Stock have
been issued or are presently planned to be issued. Shares of the $.001 par
value Preferred Stock would have such voting powers and other designations,
preferences, rights and qualifications as the Board of Directors would
establish.
Transfer Agent and Registrar
American Securities Transfer & Trust, Inc., 938 Quail Street,
Suite 101, Lakewood, Colorado 80215 is the transfer agent and registrar for the
Company's Common Stock, Class B Common Stock, Class C Common Stock and Class A
Non-voting Preferred Stock.
SELLING STOCKHOLDER
The Selling Stockholder, Fanavle Partnership, presently holds
2,740,000 shares of the issued and outstanding shares of the Common Stock of
Fonar Corporation. Of those shares, 2,340,000 shares ("Offered Shares") are
being offered hereby. Upon completion of this offering, Fanavle Partnership
will own less than 1% of the issued and outstanding shares of the Company's
Common Stock. One of the five partners in Fanavle Partnership is an employee of
the Company.
MATERIAL CHANGES
Acquisition of New Business
Effective June 30, 1997, the Company's 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") effecting the merger, 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, which is the
Selling Stockholder hereunder. 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
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.
PLAN OF DISTRIBUTION
As previously discussed, the Merger Agreements contain
restrictions on the sale of the Offered Shares. Subject to these restrictions,
the Selling Stockholder, through a selected broker-dealer, may sell the Offered
Shares from time to time at market prices. Such offering will be made on a
"best efforts" basis. There is no minimum number of shares required to be sold.
Commissions and other fees in connection with the sale of Offered Shares will be
agreed upon and paid by the Selling Stockholder. The Company will receive no
proceeds from any sales of the Common Stock by the Selling Stockholders.
VALIDITY OF ISSUANCE
The validity of the shares being offered hereby will be passed
upon by Henry T. Meyer, Esq., 110 Marcus Drive, Melville, New York 11747. Mr.
Meyer is the Company's General Counsel.
EXPERTS
The financial statements and supplemental schedules contained in
the Company's latest annual report on Form 10-K , incorporated by reference into
this Prospectus, has been examined by Tabb Conigliaro & McGann, to the extent
set forth in their report. Such financial statements and schedules were
included therein in reliance upon their reports, given on their authority as
experts in accounting and auditing.
INDEMNIFICATION
The Delaware General Corporation Law and the Company's by-laws
provide for the indemnification of an officer or director under certain
circumstances against reasonable expenses incurred in connection with the
defense of any action brought against him by reason of his being a director or
officer. In addition, pursuant to such underwriting agreements, if any, which
the Company may enter into with any underwriters, the Company may be required to
agree to indemnify the underwriter against any costs or liabilities, including
liabilities under the Securities Act of 1933, as amended (the "1933 Act"),
incurred by the underwriters and their controlling persons by reason of material
misstatements or omissions in the Registration Statement and Prospectus, except
where made in reliance upon information furnished in writing by the underwriter
for use in connection with the preparation thereof, with respect to which the
underwriter may agree to indemnify the Company. Insofar as indemnification for
liabilities arising under the Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
INCORPORATION BY REFERENCE
The following documents are incorporated by reference into this
Prospectus:
1. The Company's latest annual report on Form 10-K, for the
fiscal year ended June 30, 1996.
2. The Company's latest quarterly report on Form 10-Q, for the
fiscal quarter ended March 31, 1997.
3. The description of the Company's Common Stock contained in its
registration statement on Form 8-a under Section 12 of the Securities Exchange
Act of 1934, as amended.
4. All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the termination of this offering.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following statement sets forth all expenses in connection with
the issuance and distribution of the securities being registered, other than
broker/dealer commissions.
SEC registration filing fee $2,348.07
NASD filing fee $2,340.00
Blue Sky fees and expenses $2,500.00*
Printing and Engraving $7,500.00*
Miscellaneous $2,811.93*
TOTAL $17,500.00
* Estimated
Item 14. Indemnification of Directors and Officers
Article Eighth of the Certificate of Incorporation, as amended, of
FONAR Corporation provides as follows:
The personal liability of directors to the Corporation or its
stockholders for monetary damages for breach of their fiduciary duties as
directors is eliminated, provided however, that this provision shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of the law, (iii) under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Article V of the By-Laws of FONAR Corporation generally provides
for indemnification of its officers and directors to the full extent permitted
by Delaware Corporation Law.
Section 145 of the Delaware General Corporation Law permits
indemnification of officers, directors and employees of the Company under
certain conditions and subject to certain limitations.
Item 15. Recent Sales of Unregistered Securities
None.
Item 16. Exhibits and Financial Statement Schedules
Exhibits
2.1 Merger Agreement and Supplemental Agreement dated June 17, 1997 and
Letter of Amendment dated June 27, 1997. See Exhibits.
4.1 Specimen Common Stock Certificate incorporated herein by reference to
Exhibit 4.1 to the Registrant's registration statement on Form S-1, Commission
File No. 33-13365.
4.2 Article Fourth of the Certificate of Incorporation, as amended, of the
Company incorporated by reference to Exhibit 4.1 to the Registrant's
registration statement on Form S-8, Commission File No. 33-62099.
5. Opinion of Counsel re: Legality. See Exhibits.
23.1 Consent of Tabb, Conigliaro & McGann, P.C., Certified Public Accounts.
See Exhibits.
23.2 (Consent of Counsel is included in Exhibit 5).
Financial Statement Schedules
None.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
FONAR CORPORATION
Dated: July 11, 1997
By: /s/ Raymond V. Damadian
Raymond V. Damadian,
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Raymond V. Damadian Chairman of the July 11, 1997
Raymond V. Damadian Board of Directors,
President and a
Director (Principal
Executive Officer)
/s/ Claudette J.V. Chan Director July 11, 1997
Claudette J.V. Chan
/s/ Robert J. Janoff Director July 11, 1997
Robert J. Janoff
/s/ Herbert Maisel Director July 11, 1997
Herbert Maisel