|
||||||||||||||||||||||||||||||||||
PRESIDENT'S MESSAGE TO STOCKHOLDERS From the Desk of May 19, 2003 Dear Stockholders: I am pleased to report to you that the Stand-Up(TM) MRI is proving itself to be all that we hoped it would be, and that I am very optimistic about the future of our Company. The Stand-Up(TM) MRI - A Remarkable Product Because of its revolutionary magnet configuration, the Stand-Up(TM) MRI is the only MRI that can perform Position Imaging(TM) (pMRI(TM)), i.e. patients can be scanned sitting, standing, bending, in flexion and extension, or lying down. Its unique ability to scan patients in weight-bearing positions and to scan patients in their positions of pain or symptoms has enabled it to detect pathologies that went undetected on conventional lie-down (recumbent) MRI scanners. The proof is beginning to accumulate, making the Stand-Up(TM) MRI the most exciting and talked-about advancement in the field of MRI. Indeed, the best image is the one that sees the pathology. Operating on a proven platform of 0.6 Tesla technology, the Stand-Up(TM) MRI makes images of extraordinary quality. A full range of advanced software features and state-of-the-art pulse sequences provides the user with all the tools necessary to achieve remarkable diagnostic precision. Besides its unique diagnostic advantages and extraordinary image quality, the Stand-Up(TM) MRI is also the most patient-friendly MRI in the industry. Stand-Up(TM) MRI patients typically sit and watch TV throughout their scans. A pleasant experience in a Stand-Up(TM) MRI is a far cry from having to lie down and be pushed into a "tunnel." Very large or anxious patients who had repeatedly failed to tolerate other MRIs, including "open" MRIs, have traveled hundreds of miles, some from Europe to New York, to be scanned in a Stand-Up(TM) MRI. These patients are invariably relieved and extremely grateful to finally have their problems properly addressed and to get on with their treatment plans and their lives. Early results are confirming our expectation that the Stand-Up(TM) MRI's ability to scan patients in weight-bearing positions, either sitting, standing, or bending would be extremely useful for accurately diagnosing back and neck problems. As you know, back problems are very common. The National Center for Health Statistics reports that "14% of new patient visits to physicians each year are due to low back pain, and almost 13 million physician visits per year are required to care for chronic low back pain." Back pain is second only to the common cold as a cause of lost time from work. So it is no surprise that roughly half of all MRI scans performed today are of the spine. This is a huge market for the Stand-Up(TM) MRI practitioner, because the Stand-Up(TM) MRI is the only MRI that enables visualization of the spine under weight-bearing conditions. Back pain can be most acute or might only be present when the patient is in an upright, weight-bearing position. Only the Stand-Up(TM) MRI can see the complete picture of what is occurring in the spinal region when the patient is upright. Should surgery be required, the Stand-Up(TM) MRI provides the surgeon with the most comprehensive evaluation of the patient's spine. Dr. Manuel S. Rose, a board-certified diagnostic radiologist who owns two Stand-Up(TM) MRIs in Florida, says, "If the problem is a herniated disk, it is quite possible that the herniation, when visualized with the patient in a supine position, could appear far less severe that it actually is, or it could disappear altogether. We've seen this happen on several occasions. Through no fault of their own, surgeons are at a serious disadvantage, consequently resulting in failed surgeries. With the Stand-Up(TM) MRI, the surgeon can, for the first time, visualize pathology in both the supine and upright positions, allowing him to accurately evaluate the full extent of the problem." According to the June 1, 2002 issue of American Family Physician, a peer review journal for family practice physicians, MRI is already "the procedure of choice for diagnostic imaging of neurologic structures related to lower back pain." So when it comes to tools for diagnosing back problems, the Stand-Up(TM) MRI is the preferred of the preferred. While diagnosing spine and joint problems is at present the most obvious and most common usage of the Stand-Up(TM) MRI, I expect that its ability to see inside the human body with the patient in an upright position will, in the near future, make it a valuable, perhaps indispensable, diagnostic and therapeutic tool in many areas of medicine. Repeat Sales Sales and Marketing have become top priorities at FONAR. At this writing, we have sold 38 Stand-Up(TM) MRIs and installed 18. I might add that our manufacturing and installation departments are doing an excellent job in accommodating our customers' installation schedules. Most sales have been to independent, free-standing, diagnostic imaging businesses. Three sales have been to hospitals, including Scotland's prestigious University of Aberdeen. Six customers have already purchased more than one system; one customer has purchased eight and has six installed. Stand-Up(TM) MRIs in operation. Other multiple-purchase customers are expected. Repeat sales indicate the remarkable appeal of the Stand-Up(TM) MRI to patients and physicians, and they demonstrate the Stand-Up(TM) MRI's ability to create thriving enterprises. Since the time we first introduced the Stand-Up(TM) MRI, we have never had as many serious sales prospects as we have right now. Marketing In the past, our major marketing event has been our exhibition at the annual meetings of the Radiological Society of North America (RSNA) in Chicago. The show typically draws 60,000, making it the largest medical meeting in the world. At the last RSNA show in November/December 2002, FONAR exhibited the Stand-Up(TM) MRI with its beautifully restyled magnet configuration. The Stand-Up(TM) MRI, because of its unique ability to do weight-bearing and Position Imaging(TM), has special appeal to orthopedic surgeons. In order to reach that very important market for the Stand-Up(TM) MRI, FONAR, for the first time, exhibited at the meeting of the American Academy of Orthopaedic Surgeons (AAOS) in New Orleans in February of this year. The show was attended by approximately 12,000 domestic and international orthopedic surgeons and other healthcare professionals. FONAR's exhibit was one of the largest on the floor. The physicians were extremely receptive and sales leads are being vigorously pursued. In August 2003, FONAR will be exhibiting for the first time at World Spine II, the 2nd Interdisciplinary Congress on Spine Care. The show, held in Chicago this year, is expected to attract over 1000 physicians from all over the world, most of them orthopedic surgeons (40%) and neurosurgeons (50%). In October 2003 we will be exhibiting, again for the first time, at the annual meeting of the North American Spine Society (NASS) in San Diego. This meeting will be attended by approximately 2500 physicians, most of them orthopedic surgeons and neurosurgeons from North America. As this will be an outstanding marketing opportunity for the Company, we are planning a high-impact presentation, similar to the highly successful one we made at the AAOS meeting earlier this year. FONAR has continued its national media blitz that began in early 2002. The blitz, which includes primarily radio, TV and billboard advertising, targets several fronts. We have two goals for each targeted area: to generate sales leads for the Stand-Up(TM) MRI, and to generate business for any Stand-Up(TM) MRI centers in the targeted areas. In steering patients to Stand-Up(TM) MRI centers through advertising, we are demonstrating to potential buyers the enormous appeal that the Stand-Up(TM) MRI has for physicians and the general public alike. I am pleased to report that the response has been very encouraging and that we are achieving our goals. HMCA Health Management Corporation of America (HMCA), our wholly-owned physician and diagnostic services management subsidiary, has been undergoing some very positive changes. Several diagnostic imaging centers with old FONAR equipment have either been closed or upgraded with Stand-Up(TM) MRIs. This time last year, HMCA managed only one Stand-Up(TM) MRI facility; now it manages three, with plans to upgrade as many others as it can, as quickly as it can. In addition to upgrading existing MRI centers, HMCA is, as financing becomes available, interested in establishing and managing new Stand-Up(TM) MRI centers in promising regions of the country. Management fees from Stand-Up(TM) MRI facilities are excellent sources of revenue for the Company. Our first HMCA-managed Stand-Up(TM) MRI facility in Islandia, New York consistently completes over 400 scans a month. As reported previously, in the first six months of fiscal 2003 (July 1, 2002 through December 31, 2002) HMCA enjoyed operating income of $537,000 from its management of the Islandia facility, clearly demonstrating the value to FONAR of selling Stand-Up(TM) MRIs to HMCA-managed facilities. It is our expectation that our newly-upgraded facilities in Bensonhurst, New York and Staten Island, New York, installed in January and April of 2003 respectively, will repeat the success we have enjoyed in Islandia. A fourth Stand-Up(TM) MRI upgrade will soon commence in Florida. At present, HMCA manages 12 diagnostic imaging centers, primarily in New York and Florida. HMCA closed its only poorly-performing multi-specialty practice late last year, leaving the subsidiary with management revenues from the remaining six, all of them in New York, all of them doing well. In April 2003, HMCA sold for $3.0 million (together with forgiveness of indebtedness of approximately $1.1 million) what had become a poorly-performing group of four primary care offices in Queens, New York. These offices produced losses in fiscal 2002 and in the first six months of fiscal 2003. While closing down or selling poor performers will result in a loss of management revenues, the savings in expenses (and time) will more than compensate, thereby contributing to the profitability and viability of the company. HMCA is doing exactly what it needs to do - growing with the Stand-Up(TM) MRI and trimming where necessary. Revenues Growing, Losses Shrinking I am pleased to report that FONAR revenue, as indicated in the accompanying graph, is continuing its positive trend. In fact, revenues increased 51% during the first six months of fiscal 2003. [FONAR's fiscal 2003 year runs from July 1, 2002 through June 30, 2003]. The first six-month revenues were $30.0 million compared to $19.9 million for the corresponding period a year earlier. The net loss over the same period was $5.6 million, a 34% improvement over that of the previous year. Total Revenues Chart for the past 10 quarters
Shareholder Value I believe that there are two keys to shareholder value. The first is to be successful in operating the business. We are doing that. But the second, which is also important, is to be in close and regular communication with the financial community. We need to do both. To that end we will be devising a plan that will take our story to where it needs to go - to the doorsteps of the financial institutions and funds. Thank You We have a wonderful product, a one of a kind product -- the Stand-Up(TM) MRI. We are seeing the Stand-Up(TM) MRI do what no conventional MRI can or ever will be able to do. Physicians are enthusiastically embracing it for its unique diagnostic advantages, and patients love it because it has transformed a negative, sometimes horrifying, scanning experience into a very pleasant one. It is opening new markets for FONAR and it is growing our subsidiary, HMCA. Revenues are up, and we are anticipating a record year in sales. I remain grateful to FONAR employees and stockholders, especially the ones who have stood by us for so many years. I look forward with great optimism to a prosperous future for our Company. Thank you for your support. Sincerely, Raymond V. Damadian # The President's Message to Stockholders is being released at the same time as the annual report is being sent to shareholders. It has also been previously filed with the SEC with the Company's proxy material on April 28th, 2003 and May 14th, 2003. 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
Copyright © 2003 FONAR- All Rights Reserved |
