GlobeNewswire Inc | Nov 12, 2020 07:01AM EST

November 12, 2020

-- The negative impact of COVID-19 on scan volume at all MRI imaging centers managed by FONARs subsidiary, Health Management Company of America (HMCA), continued throughout the first quarter of fiscal 2021. However, collective MRI scan volume increased by 50% to 41,566 for the 3-month period ended September 30, 2020, as compared to 27,757 scans for the previous 3-month period ended June 30, 2020. To date, the most severe effects of the pandemic on MRI scan volume occurred during the 3-month ended June 30, 2020. -- Total MRI scan volume at the HMCA-managed sites decreased 13% to 41,566 scans for the three month period ending September 30, 2020 as compared to 47,027 scans one year earlier. The impact from COVID-19 on MRI scan volume for the future cannot be forecasted at this time.

-- Cash and cash equivalents and short term investments increased 5% to $38.8 million at September 30, 2020, as compared to June 30, 2020. -- Total Revenues-Net decreased by 4% to $21.0 million for the quarter ended September 30, 2020, as compared to the fiscal quarter ended one year earlier. -- Net Income decreased 28% to $3.3 million for the quarter ended September 30, 2020, as compared to the fiscal quarter ended one year earlier. The decrease is primarily attributable to a $2.2 million increase in reserves against revenue, which are booked in SG&A. Diluted Net Income per Common Share decreased to $0.36 for the quarter ended September 30, 2020, as compared to the fiscal quarter ended one year earlier. -- The 36th and 37th HMCA-managed MRI scanners installed in Pembroke Pines, FL and Islandia, NY respectively, became operational since June 30, 2020. The company expects to install two more MRI scanners during Fiscal Year 2021.

MELVILLE, N.Y., Nov. 12, 2020 (GLOBE NEWSWIRE) -- FONAR Corporation (NASDAQ-FONR), The Inventor of MR Scanning, reported today its financial results for the first quarter of fiscal 2021 which ended September 30, 2020. FONARs primary source of income and growth is attributable to its diagnostic imaging management subsidiary, Health Management Company of America (HMCA). In 2009, HMCA managed 9 MRI scanners. HMCA currently manages 37 MRI scanners 23 in New York and 14 in Florida.

Financial Results

Cash and cash equivalents and short term investments increased 5% to $38.8 million at September 30, 2020 as compared to $36.8 million at June 30, 2020.

Operating Cash Flow at September 30, 2020, decreased 11% to $3.8 million, compared with $4.2 million for the period ended September 30, 2019. For comparison, Operating Cash Flow for the year ended June 30, 2020 was $20.4 million, an increase of 5% versus $19.4 million for the previous fiscal year ended June 30, 2019.

Total Revenues-Net for the quarter ended September 30, 2020 decreased 4% to $21.0 million as compared to $21.7 million for the corresponding quarter ended September 30, 2019.

Revenues from the diagnostic imaging center segment, consisting of patient fee revenue net of contractual allowances and discounts, and management and other fees of related and non-related medical practices, decreased 2% to $19.0 million for the quarter ended September 30, 2020 as compared to $19.5 million for the quarter ended September 30, 2019.

Total Costs and Expenses for the quarter ended September 30, 2020 increased 3% to $16.8 million as compared to $16.3 million for the corresponding quarter ended September 30, 2019.

Selling, general and administrative (SG&A) expenses increased 44% to $6.2 million for the quarter ended September 30, 2020, as compared to $4.3 million for the corresponding quarter ended September 30, 2019. A large portion of this increase was attributable primarily to reserves against management contracts totaling $2.2 million resulting exclusively from business interruptions due to the COVID-19 pandemic. It is too early to know how much of these reserves will be recovered.

Income from Operations decreased 24% to $4.2 for the quarter ended September 30, 2020 as compared to $5.5 million for the quarter ended September 30, 2019. The 44% increase in the SG&A represents a significant portion of this decrease. Other explanations include the 4% decrease in total revenues and 3% increase in total costs and expenses. All of these factors are the result of the interruption of business caused by the COVID-19 pandemic.

Net Income decreased to $3.3 million for the quarter ended September 30, 2020 as compared to $4.5 million for the quarter ended September 30, 2019.

Diluted Net Income per Common Share available to common stockholders decreased to $0.36 for the quarter ended September 30, 2020 as compared to $0.47 for the corresponding quarter ended September 30, 2019.

Total Current Assets at September 30, 2020 were $99.1 million as compared to $95.9 million at June 30, 2020.

Total Current Liabilities at September 30, 2020 were $18.6 million as compared to $18.7 million at June 30, 2020.

Total Liabilities at September 30, 2020 were $53.2 million as compared to $54.0 million at June 30, 2020.

Total Assets at September 30, 2020 were $181.3 million as compared to $180.3 million at June 30, 2020.

Total Fonar Corporation Stockholders Equity increased to $128.7 million at September 30, 2020, as compared to $126.2 million at June 30, 2020.

The Current Ratio (Current Assets / Current Liabilities) is 5.3 at September 30, 2020, compared to 5.1 at June 30, 2020.

The Total Assets / Total Liabilities ratio is 3.4 at September 30, 2020, compared to 3.3 at June 30, 2020.

Working Capital increased 4% to $80.5 million at September 30, 2020, compared to $77.2 million at June 30, 2020.

Significant Event

FONAR Celebrates the 50th Anniversary of the Origination and discovery of the MRI

Its been fifty years since Raymond V. Damadian, M.D., FONAR Founder and Chairman of the Board, took the first step to develop a human-sized scanner using the principles of magnetic resonance to detect cancer. In his September 17, 1969 letter to Dr. George S. Mirick of the Health Research Council of the City of New York, Raymond V. Damadian, FONAR Founder and Chairman of the Board, requested financial support for equipment to pursue his promising line of research. In the letter, Dr. Damadian states his intention to proceed with the development of instrumentation and probes that can be used to scan the human body externally for early signs of malignancy. Dr. Damadians September 17, 1969 letter to Dr. George S. Mirick may be viewed online at fonar.com/nobel.htm#1969_letter.

On June 18, 1970, Dr. Damadian performed the experiment whereby he discovered the distinctly elongated time-lapsed signal marking differences between normal and cancerous tissue, as well as differences among various normal organs themselves. This was an eureka moment. The results were published in the journal Science on March 19, 1971. Upon that publication, scientists around the world began their own research, marking the birth of the MRI industry.

On July 3, 1977, Dr. Damadian, and two collaborators, Lawrence Minkoff and Michael Goldsmith, performed the worlds first MRI scan, which was of Minkoffs chest. It took 4 hours and 20 minutes to complete the scan. Now, fifty years after Dr. Damadians discovery, tens of millions of MRI scans are conducted throughout the world every year, each scan seeing magnificently into the human body.

Perhaps Professor Donlin Long, M.D., former Chairman of Neurosurgery, Johns Hopkins University, says it best: MRI is The Single Most Important Diagnostic Discovery in the History of All of Medicine. Professor Long made this statement on November 10, 2018, when Dr. Damadian was awarded the Excellence in Medicine Medal of Honor from the Chiari & Syringomyelia Foundation at Brookss in London, England. He was joined by Fraser Henderson, M.D., a neurosurgeon and member of the steering committee for the Chiari & Syringomyelia Foundation, who said, Raymond Damadian revolutionized medicine with the discovery and development of MRI.

Management Discussion

President and CEO, Timothy R. Damadian, said, The COVID-19 pandemic has had a significant negative impact on our management subsidiary, HMCA. MRI scan volume in the quarter ending June 30, 2020 was just 27,757, which was 38% lower than the scan volume in the prior quarter (45,123). Thankfully, scan volume for the quarter ending September 30, 2020 grew by 50% to 41,566, bringing us to approximately 90% of our pre-COVID scan volume. Barring any future waves of COVID-19, we expect, in fiscal 2021, a full return to pre-pandemic levels and then steady growth from that point forward. The impact from COVID-19 on MRI scan volume for the current fiscal year cannot be forecasted at this time.

Our business first experienced the effects of COVID-19 in the latter part of the quarter ending March 30, 2020. Our HMCA management team, comprised of non-controlling-interest group members, quickly and skillfully implemented procedures, practices, and policies that have protected employees and patients from the coronavirus. Further, wherever practical, the team reduced expenses in accordance with reduced scan volume, largely through reduced employee workloads and furloughs. As scan volume has been returning to pre-COVID levels, I am pleased that we have been adding hours to our workforce and welcoming back furloughed employees as needed.

In regard to growth, continued Mr. Damadian, Prior to the pandemic disruption, we had planned to invest between $4 million and $6 million dollars at four (4) HMCA-managed MRI scanning centers in Fiscal 2020. We installed a second MRI scanner in the Ormond Beach, Florida facility in October, 2019, and the first MRI of what will be a two-MRI facility in Pembroke Pines, Florida in June, 2020. COVID-19 delayed the installation of an additional MRI in our Islandia, New York center, but has now been operational since the beginning of October, 2020. Also delayed by the pandemic has been the installation of a second MRI in our Westchester County facility. We now expect it will be installed in mid-fiscal 2021.

Our vertical growth strategy of installing a second or even a third MRI at high-volume, high-patient-backlog facilities has been very successful, so we are naturally watching for such opportunities in the future. As always, we are also actively searching for promising locations that are currently underserved by FONARs UPRIGHT MRI technology and would enhance and/or expand our existing networks of managed facilities. Beyond the four installations I previously mentioned, we are expecting to establish a de novo center in Bronx County, New York in the latter part of fiscal 2021, making it the third installation expected in fiscal 2021.

Mr. Damadian concluded, HMCAs success is largely due to the efforts of the non-controlling-interest group members of our management team. All of them have been with me for many years. Their extensive experience, concern for patients and employees, skill, and dedication to the company have been on full display throughout the pandemic, to the benefit of FONAR and its shareholders.

FONAR Founder and Chairman of the Board, Raymond V. Damadian, M.D., said, Its pleasing to me to see FONAR continue to be profitable, despite the COVID-19 pandemic. Among the reasons for the Companys success are its enduring history and ongoing contributions to the MRI industry. The Company has always been recognized as a key player in the MRI industry. Today, we offer the patent-protected UPRIGHT Multi-Position MRI scanner, the worlds only weight-loaded MRI scanner. It is the only MRI scanner in the world to provide UPRIGHT RADIOLOGY. Our superior technology is what patients and their doctors want and need. The UPRIGHT MRI, aka the STAND-UP MRI, is the only whole-body MRI that can scan patients in numerous weight-bearing positions, including sitting, standing, as well as bending in flexion or extension. Most patients sit and watch a large TV while being scanned. Most patients love it. There is no doubt that a key component to the success of HMCA-managed MRI centers is the popularity of the FONAR UPRIGHT MRI among both physicians and patients.

Dr. Damadian concluded, The Company is currently researching Cerebrospinal Fluid (CSF) Flow as it navigates from the brain, down the spine and throughout the brain. It is hopeful that this research will lead to a new understanding of the role of CSF on neurologic diseases, such as MS. In Fiscal 2021, the Company will continue with this valuable research which can only be done on the UPRIGHT MRI.

About FONAR

FONAR, the Inventor of MR Scanning, located in Melville, NY, was incorporated in 1978, and is the first, oldest and most experienced MRI company in the industry. FONAR introduced the worlds first commercial MRI in 1980, and went public in 1981. FONARs signature product is the FONAR UPRIGHT Multi-Position MRI (also known as the STAND-UP MRI), the only whole-body MRI that performs Position Imaging (pMRI) and scans patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as the conventional lie-down position. The FONAR UPRIGHT MRI often detects patient problems that other MRI scanners cannot because they are lie-down, weightless-only scanners. The patient-friendly UPRIGHT MRI has a near-zero patient claustrophobic rejection rate. As a FONAR customer states, If the patient is claustrophobic in this scanner, theyll be claustrophobic in my parking lot. Approximately 85% of patients are scanned sitting while watching TV.

FONAR has new works-in-progress technology for visualizing and quantifying the cerebral hydraulics of the central nervous system, the flow of cerebrospinal fluid (CSF), which circulates throughout the brain and vertebral column at the rate of 32 quarts per day. This imaging and quantifying of the dynamics of this vital life-sustaining physiology of the bodys neurologic system has been made possible first by FONARs introduction of the MRI and now by this latest works-in-progress method for quantifying CSF in all the normal positions of the body, particularly in its upright flow against gravity. Patients with whiplash or other neck injuries are among those who will benefit from this new understanding.

FONARs substantial list of patents includes recent patents for its technology enabling full weight-bearing MRI imaging of all the gravity sensitive regions of the human anatomy, especially the brain, extremities and spine. It includes its newest technology for measuring the Upright cerebral hydraulics of the cerebro-spinal fluid (CSF) of the central nervous system. FONARs UPRIGHT Multi-Position MRI is the only scanner licensed under these patents.

UPRIGHT and STAND-UP are registered trademarks and The Inventor of MR Scanning, CSP, Multi-Position, UPRIGHT RADIOLOGY, The Proof is inthe Picture, pMRI, Videography and Dynamic, are trademarks of FONAR Corporation.

This release may include forward-looking statements from the company that may or may not materialize. Additional information on factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.

CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

ASSETS

September June 30, 30, 2020 2020Current Assets: Cash and cash equivalents $ 38,763 $ 36,802Short term investments 32 32Accounts receivable ? net 4,191 4,313Accounts receivable - related party 102 6Medical receivable ? net 16,293 16,172Management and other fees receivable - net 29,011 27,438Management and other fees receivable ? related medical 7,002 6,896practices ? netInventories 1,698 1,649Costs and estimated earnings in excess of billings on 153 153uncompleted contractsIncome tax receivable ? 671Prepaid expenses and other current assets 1,879 1,758Total Current Assets 99,124 95,890 Accounts receivable ? long term 2,839 2,730Deferred income tax asset 17,961 18,810Property and equipment ? net 20,904 21,364Right-of-use Asset ? operating lease 30,489 31,392Right-of-use Asset ? financing lease 1,276 1,326Goodwill 3,985 3,985Other intangible assets ? net 4,036 4,109Other assets 642 653Total Assets $ 181,256 $ 180,259

CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

LIABILITIES AND STOCKHOLDERS EQUITY

September 30, June 30, 2020 2020Current Liabilities: Current portion of long-term debt and capital leases $ 169 $ 108Accounts payable 1,848 1,965Other current liabilities 7,864 8,185Unearned revenue on service contracts 4,203 4,105Unearned revenue on service contracts ? related party 83 ?Operating lease liability ? current portion 3,433 3,370Financing lease liability ? current portion 136 75Customer deposits 912 855Total Current Liabilities 18,648 18,663 Long-Term Liabilities: Unearned revenue on service contracts 2,761 2,656Deferred income tax liability 234 234Due to related medical practices 93 93Operating lease liability ? net of current portion 29,246 30,105Financing lease liability ? net of current portion 1,201 1,251Long-term debt and capital leases, less current 859 865portionOther liabilities 161 150Total Long-Term Liabilities 34,555 35,354Total Liabilities 53,203 54,017

CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

LIABILITIES AND STOCKHOLDERS EQUITY (Continued)

September June 30, 30, 2020 2020Class A non-voting preferred stock $.0001 parvalue; 453 shares authorized at September 30, 2020 $ ? $ ? and June 30, 2020, 313 issued and outstanding at September 30, 2020 and June 30, 2020Preferred stock $.001 par value; 567 sharesauthorized at September 30, 2020 and June 30, 2020, ? ? issued and outstanding ? noneCommon Stock $.0001 par value; 8,500 shares authorized at September 30, 2020 and June 30, 2020, 6,459 issued at September 30, 2020 and 1 1 June 30, 2020, 6,447 outstanding at September30, 2020 and June 30, 2020Class B Common Stock (10 votes per share) $.0001par value; 227 shares authorized at September 30,2020 ? ? and June 30, 2020; .146 issued and outstandingat September 30, 2020 and June 30, 2020Class C Common Stock (25 votes per share) $.0001par value; 567 shares authorized at September 30,2020 ? ? and June 30, 2020, 383 issued and outstandingat September 30, 2020 and June 30, 2020Paid-in capital in excess of par value 183,076 183,076 Accumulated deficit (53,707 ) (56,215 )Treasury stock, at cost - 12 shares of commonstock at (675 ) (675 ) September 30, 2020 and June 30, 2020Total Fonar Corporation?s Stockholders? Equity 128,695 126,187 Noncontrolling interests (642 ) 55 Total Stockholders' Equity 128,053 126,242 Total Liabilities and Stockholders' Equity $ 181,256 $ 180,259

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Amounts and shares in thousands, except per share amounts)(UNAUDITED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30,REVENUES 2020 2019Patient fee revenue ? net of contractual allowances and $ 5,091 $ 6,045 discountsProduct sales ? net 28 192 Service and repair fees ? net 1,925 2,064 Service and repair fees - related parties ? net 28 28 Management and other fees ? net 11,214 11,028 Management and other fees - related medical practices ? 2,693 2,390 netTotal Revenues ? Net 20,979 21,747 COSTS AND EXPENSES Costs related to patient fee revenue 2,521 2,863 Costs related to product sales 132 330 Costs related to service and repair fees 626 750 Costs related to service and repair fees - related 9 10 partiesCosts related to management and other fees 5,550 6,005 Costs related to management and other fees ? related 1,428 1,537 medical practicesResearch and development 400 472 Selling, general and administrative 6,163 4,294 Total Costs and Expenses 16,829 16,261 Income From Operations 4,150 5,486 Other Expenses (140 ) ? Interest Expense (22 ) (21 )Investment Income 112 148 Income Before Provision for Income Taxes and 4,100 5,613 Noncontrolling InterestsProvision for Income Taxes (849 ) (1,107 )Net Income 3,251 4,506 Net Income - Noncontrolling Interests (743 ) (1,207 )Net Income - Controlling Interests $ 2,508 $ 3,299 Net Income Available to Common Stockholders $ 2,355 $ 3,097 Net Income Available to Class A Non-Voting Preferred $ 114 $ 151 StockholdersNet Income Available to Class C Common Stockholders $ 39 $ 51 Basic Net Income Per Common Share Available to Common $ 0.37 $ 0.48 StockholdersDiluted Net Income Per Common Share Available to Common $ 0.36 $ 0.47 StockholdersBasic and Diluted Income Per Share ? Class C Common $ 0.10 $ 0.13 Weighted Average Basic Shares Outstanding ? Common 6,447 6,432 StockholdersWeighted Average Diluted Shares Outstanding - Common 6,575 6,560 StockholdersWeighted Average Basic and Diluted Shares Outstanding ? 383 383 Class C Common

Contact: Daniel CulverDirector of CommunicationsE-mail: investor@fonar.comwww.fonar.com