NOTE 9 - CONTROLLING AND NONCONTROLLING INTERESTS

12 Months Ended

Jun. 30, 2017

Noncontrolling Interest [Abstract]

NOTE 9 - CONTROLLING AND NON CONTROLLING INTERESTS

FONAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017, 2016 and 2015

NOTE 9 – CONTROLLING AND NONCONTROLLING INTERESTS

On February 13, 2013 the Company entered into an agreement with outside investors to acquire a 50.5% controlling interest in a newly formed limited liability company, Health Diagnostics Management LLC (HDM). According to the February 13, 2013 LLC operating agreement of HDM there are two classes of members; Class A members and one Class B member. The Class A members have an ownership interest of 49.5% of HDM. The Class B member (HMCA) has an ownership of 50.5% of HDM. On all matters on which members may vote every member is entitled to cast the percentage of votes equal to their percentage of ownership interest. Profits and losses on all items of income, gain or loss, deductions or other allocations of the Company will be allocated among the members in the same proportions as their membership interests in the Company bear to all the Class A and Class B membership interests of the Company in the aggregate outstanding. All of the depreciation and amortization of the assets of the Company will be allocated solely to the Class A members, unless and until their interests have been redeemed by the Company in full pursuant to the provisions of the operating agreement. The Company contributed $20,200,000 to HDM and the group of outside investors contributed $19,800,000 for its non-controlling membership interest.

On March 5, 2013 HDM purchased from Health Diagnostics, LLC (“HD”) and certain of its subsidiaries, a business managing twelve (12) Stand-Up MRI Centers and two (2) other scanning centers located in the States of New York and Florida for a total purchase price (including consideration of $1.5 million to outside investors) aggregating $35.9 million. Concurrently with the acquisition, HDM entered into several consulting and non-competition agreements for a consideration of $4.1 million. The acquisition was accounted for using the purchase method in accordance with ASC 805, “Business Combinations”. The Company recognized and measured goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

On January 8, 2015, the Company purchased 20% of the Class A members ownership interest at a cost of $4,971,094. The Company has a 60.4% ownership interest in HDM after this transaction.

Amount of each class of HDM members’ equity as of June 30, 2017, 2016 and 2015

		June 30, 2017					June 30, 2016						June 30, 2015
		Class A Members			Class B Member			Class A Members			Class B Member			Class A Members		Class B Member
Opening Members’ Equity	$	8,396,575		$	23,314,842		$	10,752,169		$	22,043,621		$	17,659,698		$21,113,266
Share of Net Income		4,058,177			16,947,624			2,886,006			13,229,621			1,988,915		5,704,999
Buyout		—			—			—			—			(4,971,094	)	—
Distributions		(6,981,953	)		(12,273,484	)		(5,241,600	)		(11,958,400	)		(3,925,350	)	(4,774,644)
Ending Members’ Equity	$	5,372,799		$	27,988,982		$	8,396,575		$	23,314,842		$	10,752,169		$22,043,621

On May 2, 2011, the Company completed a private placement of equity and succeeded in raising $6,000,000. The offering consisted of Preferred Class A membership interests in a newly formed limited liability company, Imperial Management Services, LLC (“Imperial”). The Class B membership interests in Imperial, all of which were retained by the Company’s subsidiary, HMCA, hold a 75% equity interest in Imperial. The Class A membership interests are entitled to receive a dividend of 18% per annum of their cash capital contribution of $6,000,000. HMCA contributed all of its assets, together with its liabilities, to Imperial as HMCA’s capital contribution. The Imperial operating agreement provides for the Class A members to receive priority distributions until their original capital contributions are returned. Dividends are payable quarterly beginning August 1, 2011. On May 2, 2016, May 1, 2015 and on May 1, 2014, the Company returned a portion of the Class A Members capital contribution in the amount of $1,125,000, $1,125,000 and $1,125,100, respectively. As of June 30, 2016, the Company’s subsidiary, HMCA, now owns approximately 100% interest in Imperial Management Services.

Amount of each class of Imperial members’ equity as of June 30, 2016 and 2015

	June 30, 2016					June 30, 2015
		Class A Members			Class B Member		Class A Members			Class B Member
Opening Members’ Equity	$	1,279,446		$	15,000,446	$	2,403,812		$	11,079,317
Share of Net Income		—			—		405,634			3,921,129
Distributions		(202,500	)		—		(405,000	)		—
Buyout		48,054
Redemption		(1,125,000	)		—		(1,125,000	)		—
Ending Members’ Equity	$	—		$	15,000,446	$	1,279,446		$	15,000,446

 The Company has a 50% controlling interest in an entity which the Company consolidates, that provides management services to a diagnostic center in the New York Metropolitan area. The center began operations during January 2012. On June 30, 2016, the Company purchased the remaining 50% interest in the entity making it a wholly owned subsidiary for the Company. The Company paid $1,780,000 to acquire this additional ownership interest.