SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Mar. 31, 2025

Accounting Policies [Abstract]

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.

Revenue Recognition

Patient fee revenue

The Company’s revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients and annual management contracts with related and unrelated parties to which the Company provides comprehensive management services. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. The Company’s performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than the Company’s standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

The Company’s patient fee revenue, net of contractual allowances and discounts for the three and nine months ended March 31, 2025 and 2024 are summarized in the following table:

	For the Three Months Ended March 31,
	2025		2024
Commercial Insurance/Managed Care	$	1,251	$	1,258
Medicare/Medicaid		300		314
Workers’ Compensation/Personal Injury		5,207		5,073
Other		2,095		1,969
Patient Fee Revenue, net of contractual allowances and discounts	$	8,853	$	8,614

	For the Nine Months Ended March 31,
	2025		2024
Commercial Insurance/ Managed Care	$	3,629	$	3,674
Medicare/Medicaid		862		869
Workers’ Compensation/Personal Injury		14,589		15,117
Other		5,204		5,851
Patient Fee Revenue, net of contractual allowances and discounts	$	24,284	$	25,511

Management and other fees revenue

HMCA generates management and other fees revenues (including management and other fees revenue from related parties) from providing comprehensive management services, including development, administration, accounting, billing and collection services, together with office space, medical equipment, supplies and non-medical personnel to its clients. Revenues are in the form of fees which are earned under annual management contracts with HMCA clients. Management and other fees revenue are recognized ratably over time as the services are provided throughout the term of the contract.

Revenue on sales contracts for scanners, included in “product sales” is recognized under the percentage-of-completion method in accordance with FASB ASC 606 “Revenue Recognition – Construction-Type and Production-Type Contracts”. The Company manufactures its scanners under specific contracts that provide for progress payments. Production and installation takes approximately three to six months.

Revenue on scanner service contracts is recognized on the straight-line method over the related contract period, usually one year.

Earnings Per Share

Basic earnings per share (“EPS”) is computed based upon the weighted average number of shares of common stock and stock equivalents outstanding, net of common stock. In accordance with ASC Topic 260-10, “Participating Securities and the Two-Class method”, the Company used the Two-Class method for calculating basic income per share and applied the converted method in calculating diluted income per share for the three and nine months ended March 31, 2025 and 2024.

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, 2025 and 2024, diluted EPS for common shareholders includes 128 shares upon conversion of Class C Common.

Earnings Per Share

	Three months ended March 31, 2025								Three months ended March 31, 2024
	Total		Common Stock		Class C Common Stock		Class A Preferred Stock		Total		Common Stock		Class C Common Stock		Class A Preferred Stock
Basic
Numerator:
Net income available to common stockholders	$	2,506	$	2,347	$	40	$	119	$	1,872	$	1,755	$	30	$	87
Denominator:
Weighted average shares outstanding		6,865		6,169		383		313		7,031		6,335		383		313
Basic income per common share	$	0.37	$	0.38	$	0.11	$	0.38	$	0.27	$	0.28	$	0.08	$	0.28
Diluted
Denominator:
Weighted average shares outstanding				6,168		383						6,335		383
Convertible Class C Stock				128		—						128		—
Total Denominator for diluted earnings per share				6,296		383						6,463		383
Diluted income per common share			$	0.37	$	0.11					$	0.27	$	0.08

	Nine months ended March 31, 2025								Nine months ended March 31, 2024
	Total		Common Stock		Class C Common Stock		Class A Preferred Stock		Total		Common Stock		Class C Common Stock		Class A Preferred Stock
Basic
Numerator:
Net income available to common stockholders	$	7,605	$	7,122	$	123	$	360	$	9,737	$	9,130	$	155	$	452
Denominator:
Weighted average shares outstanding		6,941		6,245		383		313		7,106		6,410		383		313
Basic income per common share	$	1.10	$	1.14	$	0.32	$	1.15	$	1.37	$	1.42	$	0.40	$	1.44
Diluted
Denominator:
Weighted average shares outstanding				6,244		383								6,410		383
Convertible Class C Stock				128		—								128		—
Total Denominator for diluted earnings per share				6,372		383								6,538		383
Diluted income per common share			$	1.12	$	0.32							$	1.40	$	0.40

Correction of Immaterial Errors

In conjunction with preparing its interim financial statements for the three and nine months ended March 31, 2025, the Company determined that its calculation of Right-of-Use Assets and Operating Lease Liabilities at the end of the past two annual periods and at September 30, 2024 and March 31, 2024 contained three immaterial errors. The Company evaluated the errors, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. The Company then evaluated whether the cumulative amount of the misstatement was material to its projected fiscal 2025 results of operations, and determined the cumulative amount was not material. Therefore, the Condensed Consolidated Financial Statements for the nine month ended March 31, 2025 include an out-of-period correction of the following three items; a) a reclass of a software license of $1.3 million from Right-of-Use Asset/Liabilities to an intangible asset, b) a decrease to ROU of $1.7 million and an increase to Lease Liability of $1.1 million to correct the discounting of future lease payments, and c) correct the accounting for 6 lease modifications. The correction of these three errors resulted in an out of period charge to expenses of $116 to pre-tax income for the nine months ended March 31, 2025.

Recent Accounting Standards

In December 2023, The Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures”, which requires the annual financial statements to include consistent categories and great disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. The Company is currently evaluating the effect that the adoption of ASU 2023-09 will have on its disclosures.

In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280)”, which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments require disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”) as well as other segment items, extended certain annual disclosures to interim periods, clarify the applicability to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM. The effective date for public entities is for fiscal years beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024. Management expects the adoption of the pronouncement will result in additional segment disclosures in its Consolidated Financial Statements for the fiscal year ended June 30, 2025.

Recent Accounting Standards

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of March 31, 2025 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 2025 or 2024, and it does not believe that any of those standards will have a significant impact on our unaudited consolidated condensed financial statements at the time they become effective.