NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2013

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.

Goodwill and Other Intangible Assets

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. Goodwill deemed to have indefinite lives is not amortized but are subject to annual impairment tests. In addition to the annual impairment test for goodwill, the Company tests for impairment at any point where indicators of impairment exist.

The Company’s intangible assets deemed to have definite lives are amortized over their estimated useful lives, on a straight-line basis as follows:

Non compete	7 years
Customer relationships	20 years
Developed software	5 years

Income Per Share

Basic earnings 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 and nine months ended March 31, 2013 and March 31, 2012.

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 and nine months ended March 31, 2013 and March 31, 2012, the number of common shares potentially issuable upon the exercise of certain options of 6,610 and 16,205; respectively, have not been included in the computation of diluted EPS since the effect would be antidilutive.

	Three months ended March 31, 2013						Three months ended March 31, 2012
	(000's omitted, except per share data)
Basic		Total		Stock		Class C Common Stock		Total		Common Stock		Class C Common Stock
Numerator:
Net income Available to common stockholders	$	1,076	$	1,005	$	18	$	1,292	$	1,206	$	22
Denominator:
Weighted average shares outstanding		5,937		5,937		383		5,836		5,836		383
Basic income per common share	$	0.18	$	0.17	$	0.05	$	0.22	$	0.21	$	0.06
Diluted Denominator:
Weighted average shares outstanding				5,937		383				5,836		383
Stock options				—		—				—		—
Convertible Class C Stock				128		—				128		—
Total Denominator for diluted earnings per share				6,065		383				5,964		383
Diluted income per common share			$	0.17	$	0.05			$	0.20	$	0.06

	Nine months ended March 31, 2013						Nine months ended March 31, 2012
	(000's omitted, except per share data)
Basic		Total		Stock		Class C Common Stock		Total		Common Stock		Class C Common Stock
Numerator:
Net income Available to common stockholders	$	3,876	$	3,621	$	65	$	4,342	$	4,051	$	74
Denominator:
Weighted average shares outstanding		5,921		5,921		383		5,744		5,744		383
Basic income per common share	$	0.65	$	0.61	$	0.17	$	0.76	$	0.71	$	0.19
Diluted Denominator:
Weighted average shares outstanding				5,921		383				5,744		383
Stock options				—		—				—		—
Convertible Class C Stock				128		—				128		—
Total Denominator for diluted earnings per share				6,049		383				5,872		383
Diluted income per common share			$	0.60	$	0.17			$	0.69	$	0.19

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Intangibles-Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment. This ASU simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, early adoption is permitted. 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 March 31, 2013 that will become effective in subsequent periods; however, management does not believe that any of those pronouncements will have a significant impact on our condensed 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 for any periods presented.