NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Sep. 30, 2011

Notes to Financial Statements

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited 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.

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 ASC topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic earnings per share and applied the if converted method in calculating diluted earnings per share for the three months ended September 30, 2011 and September 30, 2010.

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. For the three months ended September 30, 2011 and September 30, 2010, the number of common shares potentially issuable upon the exercise of certain options of 20,000 and 68,000; respectively, have not been included in the computation of diluted EPS since the effect would be antidilutive.

	Three months ended				Three months ended
	September 30, 2011				September 30, 2010
	(000's omitted, except per share data)
			Class C				Class C
		Common		Common		Common		Common
Basic	Total	Stock		Stock	Total	Stock		Stock
Numerator:
Net income available to   common stockholders	$1,409	$1,409		$27	$363	$356		$7
Denominator:
Weighted average shares   outstanding	5,669	5,669		383	5,012	5,012		383
Basic income per common   share	$0.27	$0.25		$0.07	$0.07	$0.07		$0.02
Diluted
Denominator:
Weighted average shares   outstanding		5,669		383		5,012		383
Stock options		-		-		-		-
Convertible Class C   Stock		128		-		128		-
Total Denominator for   diluted earnings per   share		5,797		383		5,140		383
Diluted income per   common share		$0.24		$0.07		$0.07		$0.02

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This guidance improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. The guidance provided by this update becomes effective for annual periods beginning on or after December 15, 2011. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations.

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of June 30, 2011 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2011 or 2010, and it does not believe that any of those pronouncements will have a significant impact on our consolidated financial statements at the time they become effective.

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 income (losses) for any periods presented.