FONAR Corporation (NASDAQ-FONR), the Inventor of MR
Scanning™, reported today its financial results for the first
quarter of fiscal 2020 which ended September 30, 2019. FONAR’s
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 facilities.
Currently, HMCA manages 25 diagnostic imaging centers (18 in New
York and 7 in Florida) collectively equipped with 35 MRI scanners.
Financial Results
Total Revenues-Net for the quarter ended
September 30, 2019 increased 5% to $21.7 million as compared to
$20.7 million for the corresponding quarter ended September 30,
2018.
Income from Operations remained approximately
the same at $5.5 million for the quarters ended September 30, 2019
and 2018.
Net Income remained approximately the same
at $4.5 million for the quarters ended September 30, 2019 and
2018. This includes a provision for income taxes of $(1.1) million.
The Company is required at the end of each interim period to
determine the best estimate of its annual effective tax rate and
apply that rate to year-to-date ordinary income. The
resulting tax expense is adjusted for the tax effect of specific
events, if any, required to be discretely recognized in the interim
period as they occur. For the three months ended September 30, 2019
and 2018, the Company recorded current income tax expenses of
$(0.6) million and deferred income tax expense of $(0.5) million
for a total of $(1.1) million. However, considering the Company has
substantial net operating loss carryforwards, a substantial portion
of the income tax expense for the quarter will not require cash
outlay.
Diluted Net Income per Common Share Available to
Common Stockholders, for the quarter ended September 30, 2019, was
$0.47 as compared $0.48 for the corresponding quarter ended
September 30, 2018.
Cash and cash equivalents and short term
investments remained approximately the same at $29.0 million at the
quarter ended September 30, 2019 and the fiscal year ended June 30,
2019.
A recent accounting pronouncement required a
Right to Use Asset of $30.9 million and an operating lease
liability of $32.6 million to be recorded as of quarter end,
representing the present value of future lease payments, less
year-end deferred rent balances and any tenant improvements
committed to by landlords. There are no comparable assets or
liabilities recorded for prior periods. Details on the recent
accounting pronouncement may be found in the Company’s 10-Q for the
quarter ended September 30, 2019.
Total Current Assets at September 30, 2019 were
$87.0 million, as compared to $85.1 million at June 30, 2019.
Total Current Liabilities at September 30, 2019
were $13.9 million, as compared to $14.1 million at June 30, 2019.
Total current liabilities is impacted by the Recent accounting
pronouncement.
Total Assets at September 30, 2019 were $166.9
million as compared to $133.6 million at June 30, 2019. This
includes the Right-of-use Assets-net of $30.9 million included in
Fiscal 2020. Right-of-use Assets-net were not included in Fiscal
2019.
Total Liabilities at September 30, 2019 were
$44.0 million, as compared to $15.4 million at June 30, 2019. This
includes Lease liability-net of current portion at $29.5 million
and Lease liability (current) at $3.1 million included in Fiscal
2020. Lease liability-net of current portion and Lease
liability (current) were not included in Fiscal 2019.
The Total Assets / Total Liabilities ratio for
the quarter ended September 30, 2019 was 3.8 compared to 8.6 as of
June 30, 2019. This difference is predominantly due to the
effect of the recently adopted accounting pronouncement which
required $30.9 million and $32.6 million of assets and liabilities
respectively to be recorded as of September 30, 2019.
Working Capital increased 3% to $73.1 million
for the quarter ended September 30, 2019, versus $71.0 million for
the year ended June 30, 2019.
Operating Cash Flow at September 30, 2019,
increased 13% to $4.2 million, compared with $3.8 million for the
period ended September 30, 2018.
Significant Event
FONAR celebrated a historic anniversary in the
first quarter of fiscal 2020. It was fifty years ago, on
September 17, 1969, that Raymond V. Damadian, M.D., founder and
chairman of FONAR Corporation, took the first step in his quest to
invent and then build the MRI scanner. On that day Dr. Damadian
sent a letter to Dr. George Mirick of the Health Research Council
of the City of New York requesting financial support to purchase
equipment he needed to pursue his promising research.
In that letter, Dr. Damadian wrote, “I will make
every effort myself and through collaborators, to establish that
all tumors can be recognized by their potassium relaxation
times or H2O-proton spectra and proceed with the development of
instrumentation and probes that can be used to scan the human body
externally for early signs of malignancy. Detection of internal
tumors during the earliest stages of their genesis should bring us
very close to the total eradication of this disease,” The letter
may be viewed online at
http://fonar.com/nobel.htm#1969_letter.
It was in the following year, on June 18, 1970,
that Dr. Damadian performed the first experiments 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. “That was
my ‘Eureka!’ moment,” said Dr. Damadian. The results of his
experiments were subsequently published in the journal Science on
March 19, 1971.
Among the awards Dr. Damadian has received for
the MRI include: The Excellence in Medicine Medal of Honor from the
Chiari & Syringomyelia Foundation (2018); Induction into the
National Inventors Hall of Fame (1989); The National Medal of
Technology (1988); the National Inventor of the Year 2007Award for
the Upright® MRI; and the Lemelson-MIT Lifetime Achievement Award
Winner for the MRI (2001).
Management Discussion
President and CEO, Timothy R. Damadian, said,
“Our growth strategy is three pronged. First, we strive to
grow by increasing scan volume at existing sites. In that regard,
we are pleased to report that scan volume at existing HMCA-managed
sites in the first quarter of fiscal 2020 was over 47,000, a 5%
increase in comparison to the corresponding quarter of fiscal
2019. Growth at HMCA-managed sites is largely due to
the ever-increasing appeal of the Stand-Up® MRI, also known as the
UPRIGHT ® MRI, among patients and physicians, and also the addition
of second, or even third, MRI scanners at select sites in order to
reduce patient backlog and/or expand MRI services to referring
physicians. In fact, we recently completed the installation
of a second MRI scanner at the HMCA-managed facility in Ormond
Beach, Florida. We’re also adding second MRI scanners at two
of our New York HMCA-managed facilities as well. The property
leases for the additional space needed to accommodate these
scanners have been signed and site preparation is well underway at
both locations.
“The second prong of our growth
strategy is to establish de novo sites. For any new location
under consideration, we conduct a thorough demographic study; we
identify the primary major medical insurance carriers in the area;
we evaluate the competitive landscape; and determine if the
location is a good fit for our existing networks. I’m pleased to
report that we’ve found a perfect location in Florida. The
lease has been signed and we are in the process of installing the
first MRI in what will be a two-MRI facility. The Company is
investing between four and six million dollars in these four
projects.
“Lastly, we continue our search for acquisitions that lie within
our areas of expertise, and would enhance or expand our existing
networks.
“Speaking for my entire management team, which has contributed
substantially to our success, we are proud of our consistent
profitability and are confident that the Company is well-positioned
for growth for the remainder of fiscal 2020.”
Chairman of the Board, Raymond V. Damadian,
M.D., said, “It’s pleasing to me to see FONAR continue to be very
profitable. The Company is maintaining its cash, cash equivalents
and short term investments despite continuing to invest in the
growth of the Company.. HMCA is managed extremely well and
that leads to consistent profits for the Company and, therefore,
its investors. There is another very important reason: superior
technology. FONAR’s UPRIGHT® Multi-Position™ MRI is what
patients and their doctors want and need. The UPRIGHT®, aka the
Stand-Up® MRI, is a one-of-a-kind scanner. It 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.
Dr. Damadian continued, “Regarding our research
efforts, over the past few years we have been making cines (movies)
of the cerebrospinal fluid (CSF) as it flows up and down the neck
and around the brain. Thanks to the UPRIGHT® MRI’s ability to scan
patients in weight-bearing positions as well as in the recumbent,
non-weight-bearing position, we are finding significant postural
differences in CSF flow. These differences may provide clues that
enable physicians to find solutions to their patients’ medical
problems.”
“Currently, our research is focused on
quantifying CSF flow and the velocity at which it navigates through
the neck and head. We’ve been able to use this quantitative CSF
data collected from asymptomatic patients to identify CSF flow
abnormalities in patients with symptoms.”
Dr. Damadian concluded, “We are hopeful that our
research may lead to a new understanding of the role of CSF on
neurologic diseases, such as MS.”
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
world’s first commercial MRI in 1980, and went public in 1981.
FONAR’s 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 and ”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, they’ll 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). This imaging
and quantifying of the dynamics of this vital life-sustaining
physiology of the body’s neurologic system has been made possible
first by FONAR’s 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 may benefit from this new understanding.
FONAR’s 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
central nervous system. FONAR’s 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™, Full
Range of Motion™, Multi-Position™, Upright
Radiology™, The Proof is in the Picture™, True
Flow™, pMRI™, Spondylography™, Dynamic™,
Spondylometry™, CSP™, and Landscape™, 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.
FONAR CORPORATION AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except
per share amounts)(UNAUDITED)
ASSETS
|
|
September 30, 2019 |
|
June 30, 2019 |
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
13,794 |
|
|
$ |
13,882 |
|
Short term
investments |
|
|
15,213 |
|
|
|
15,095 |
|
Accounts receivable –
net |
|
|
3,765 |
|
|
|
3,737 |
|
Accounts receivable -
related party |
|
|
90 |
|
|
|
— |
|
Medical receivable –
net |
|
|
15,866 |
|
|
|
15,729 |
|
Management and other
fees receivable - net |
|
|
26,666 |
|
|
|
25,709 |
|
Management and other fees receivable – related medical practices –
net |
|
|
6,715 |
|
|
|
6,501 |
|
Inventories |
|
|
1,791 |
|
|
|
1,798 |
|
Costs and estimated earnings in excess of billings on uncompleted
contracts |
|
|
307 |
|
|
|
525 |
|
Income tax
receivable |
|
|
600 |
|
|
|
600 |
|
Prepaid expenses and
other current assets |
|
|
2,230 |
|
|
|
1,513 |
|
Total Current
Assets |
|
|
87,037 |
|
|
|
85,089 |
|
|
|
|
|
|
|
|
|
|
Income taxes
receivable |
|
|
600 |
|
|
|
600 |
|
Deferred income tax
asset |
|
|
19,934 |
|
|
|
20,937 |
|
Property and equipment –
net |
|
|
18,643 |
|
|
|
16,986 |
|
Right-of-use Assets –
net |
|
|
30,876 |
|
|
|
- |
|
Goodwill |
|
|
3,985 |
|
|
|
3,985 |
|
Other intangible assets
– net |
|
|
4,553 |
|
|
|
4,756 |
|
Other assets |
|
|
1,252 |
|
|
|
1,207 |
|
Total Assets |
|
$ |
166,880 |
|
|
$ |
133,560 |
|
FONAR CORPORATION AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except
per share amounts)(UNAUDITED)
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
September 30, 2019 |
|
June 30, 2019 |
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital leases |
|
$ |
41 |
|
|
$ |
41 |
|
Accounts payable |
|
|
1,516 |
|
|
|
1,861 |
|
Other current liabilities |
|
|
4,675 |
|
|
|
7,577 |
|
Unearned revenue on
service contracts |
|
|
3,742 |
|
|
|
3,812 |
|
Unearned revenue on
service contracts – related party |
|
|
83 |
|
|
|
— |
|
Lease liability |
|
|
3,123 |
|
|
|
— |
|
Customer deposits |
|
|
736 |
|
|
|
799 |
|
Total Current Liabilities |
|
|
13,916 |
|
|
|
14,090 |
|
Long-Term
Liabilities: |
|
|
|
|
|
|
|
|
Deferred income tax
liability |
|
|
243 |
|
|
|
243 |
|
Due to related medical
practices |
|
|
93 |
|
|
|
93 |
|
Long-term debt and
capital leases, less current portion |
|
|
266 |
|
|
|
273 |
|
Lease liability – net of
current portion |
|
|
29,487 |
|
|
|
- |
|
Other liabilities |
|
|
21 |
|
|
|
749 |
|
Total Long-Term
Liabilities |
|
|
30,110 |
|
|
|
1,358 |
|
Total Liabilities |
|
|
44,026 |
|
|
|
15,448 |
|
FONAR CORPORATION AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(Amounts and shares in thousands, except
per share amounts)(UNAUDITED) LIABILITIES AND
STOCKHOLDERS’ EQUITY (Continued)
STOCKHOLDERS' EQUITY: |
|
September 30, 2019 |
|
June 30,2019 |
Class A non-voting preferred stock $.0001 par value; 453 shares
authorized at September 30, 2019 and June 30, 2019, 313 issued and
outstanding at September 30, 2019 and June 30, 2019 |
|
$ |
— |
|
|
$ |
— |
|
Preferred stock $.001 par value; 567 shares authorized at September
30, 2019 and June 30, 2019, issued and outstanding – none |
|
|
— |
|
|
|
— |
|
Common Stock $.0001 par value; 8,500 shares authorized at September
30, 2019 and June 30, 2019, 6,459 and 6,369 issued at September 30,
2019 and June 30, 2019, 6,447 and 6,357 outstanding at September
30, 2019 and June 30, 2019 |
|
|
1 |
|
|
|
1 |
|
Class B Common Stock (10 votes per share) $.0001 par value; 227
shares authorized at September 30, 2019 and June 30, 2019; .146
issued and outstanding at September 30, 2019 and June 30, 2019 |
|
|
— |
|
|
|
— |
|
Class C Common Stock (25 votes per share) $.0001 par value; 567
shares authorized at September 30, 2019 and June 30, 2019, 383
issued and outstanding at September 30, 2019 and June 30, 2019 |
|
|
— |
|
|
|
— |
|
Paid-in capital in excess of par value |
|
|
183,077 |
|
|
|
181,086 |
|
Accumulated deficit |
|
|
(61,157 |
) |
|
|
(64,456 |
) |
Treasury stock, at cost - 12 shares of common stock at September
30, 2019 and June 30, 2019 |
|
|
(675 |
) |
|
|
(675 |
) |
Total Fonar Corporation’s Stockholders’ Equity |
|
|
121,246 |
|
|
|
115,956 |
|
Noncontrolling interests |
|
|
1,608 |
|
|
|
2,156 |
|
Total Stockholders' Equity |
|
|
122,854 |
|
|
|
118,112 |
|
Total Liabilities and Stockholders' Equity |
|
$ |
166,880 |
|
|
$ |
133,560 |
|
FONAR CORPORATION AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF INCOME(Amounts and shares in thousands,
except per share amounts)(UNAUDITED)
|
|
FOR THE THREE MONTHS ENDED SEPTEMBER 30, |
REVENUES |
|
2019 |
|
2018 |
Patient fee revenue – net of contractual allowances and
discounts |
|
$ |
6,045 |
|
|
$ |
5,525 |
|
Product sales – net |
|
|
192 |
|
|
|
50 |
|
Service and repair fees – net |
|
|
2,064 |
|
|
|
2,131 |
|
Service and repair fees - related parties – net |
|
|
28 |
|
|
|
28 |
|
Management and other fees – net |
|
|
11,028 |
|
|
|
10,684 |
|
Management and other fees - related medical practices – net |
|
|
2,390 |
|
|
|
2,287 |
|
Total Revenues – Net |
|
|
21,747 |
|
|
|
20,705 |
|
COSTS AND EXPENSES |
|
|
|
|
|
|
|
|
Costs related to patient fee revenue |
|
|
2,863 |
|
|
|
2,575 |
|
Costs related to product sales |
|
|
330 |
|
|
|
5 |
|
Costs related to service and repair fees |
|
|
750 |
|
|
|
745 |
|
Costs related to service and repair fees - related parties |
|
|
10 |
|
|
|
9 |
|
Costs related to management and other fees |
|
|
6,005 |
|
|
|
5,756 |
|
Costs related to management and other fees – related medical
practices |
|
|
1,537 |
|
|
|
1,382 |
|
Research and development |
|
|
472 |
|
|
|
437 |
|
Selling, general and administrative |
|
|
4,294 |
|
|
|
4,259 |
|
Total Costs and Expenses |
|
|
16,261 |
|
|
|
15,168 |
|
Income From Operations |
|
|
5,486 |
|
|
|
5,537 |
|
Interest Expense |
|
|
(21 |
) |
|
|
(25 |
) |
Investment Income |
|
|
148 |
|
|
|
108 |
|
Other Expense |
|
|
— |
|
|
|
— |
|
Income Before Provision for Income Taxes and Noncontrolling
Interests |
|
|
5,613 |
|
|
|
5,620 |
|
Provision for Income Taxes |
|
|
(1,107 |
) |
|
|
(1,128 |
) |
Net Income |
|
|
4,506 |
|
|
|
4,492 |
|
Net Income - Noncontrolling Interests |
|
|
(1,207 |
) |
|
|
(1,174 |
) |
Net Income - Controlling Interests |
|
$ |
3,299 |
|
|
$ |
3,318 |
|
Net Income Available to Common Stockholders |
|
$ |
3,097 |
|
|
$ |
3,113 |
|
Net Income Available to Class A Non-Voting Preferred
Stockholders |
|
$ |
151 |
|
|
$ |
153 |
|
Net Income Available to Class C Common Stockholders |
|
$ |
51 |
|
|
$ |
52 |
|
Basic Net Income Per Common Share Available to Common
Stockholders |
|
$ |
0.48 |
|
|
$ |
0.49 |
|
Diluted Net Income Per Common Share Available to Common
Stockholders |
|
$ |
0.47 |
|
|
$ |
0.48 |
|
Basic and Diluted Income Per Share – Class C Common |
|
$ |
0.13 |
|
|
$ |
0.14 |
|
Weighted Average Basic Shares Outstanding – Common
Stockholders |
|
|
6,432 |
|
|
|
6,344 |
|
Weighted Average Diluted Shares Outstanding - Common
Stockholders |
|
|
6,560 |
|
|
|
6,472 |
|
Weighted Average Basic Shares Outstanding – Class C Common |
|
|
383 |
|
|
|
383 |
|
Weighted Average Diluted Shares Outstanding – Class C Common |
|
|
383 |
|
|
|
383 |
|
Contact: Daniel CulverDirector of CommunicationsE-mail:
investor@fonar.comwww.fonar.com
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