FONAR CHAIRMAN’S LETTER TO SHAREHOLDERS
I am pleased to report to our shareholders that as of December
31, 2016, FONAR has posted 26 consecutive quarters of positive
net income and positive income from operations.
|Fiscal Year Ended June 30
|Total FONAR Net (Loss) Income
|Diluted Net (Loss) Income Per Common Share
FONAR stock (FONR on NASDAQ Capital Markets) continues
to enjoy substantial interest among institutions and mutual funds.
As of December 31, 2016, institutional ownership was 42%, compared
to 33% one year earlier. As of the same date, mutual fund ownership
was 9%, bringing total ownership by institutions and mutual funds
to 51%, an increase of 21% over last year.
FONAR’s diagnostic imaging management subsidiary,
Health Management Company of America (HMCA), continues to be the
company’s primary source of income and growth. When my son,
Timothy, returned to FONAR in February, 2010, HMCA was managing
9 MRI facilities (6 in New York and 3 in Florida) that had completed
approximately 29,000 MRI scans in calendar 2009.
Upon Tim’s return, he immediately assembled
a proven management team to work with him to grow the company
by increasing scan volume at HMCA’s existing facilities,
establishing de novo centers, and making key acquisitions. The
transition has been not only seamless, but dynamic. Today HMCA
manages 26 facilities (19 in New York and 7 in Florida) collectively
equipped with 33 MRI scanners that completed nearly 160,000 MRI
scans in calendar 2016. Twenty-four (24) of the centers are equipped
with FONAR UPRIGHT® Multi-Position™ MRI
In applying his extensive experience in managing
MRI centers, his thorough understanding of the MRI marketplace,
and the technical MRI know-how he acquired when working in FONAR’s
Field Service and Manufacturing divisions, Tim has helped the
company achieve steadily-increasing profitability and has set
the course for continuing growth and new product development.
Appropriately, Tim was named President and Chief Executive Officer
of FONAR on February 11, 2016.
FONAR formed HMCA, the diagnostic imaging management
segment of our business, in 1997. Since its inception, HMCA has
provided a steady source of income for FONAR. Years ago, when
MRI sales had dropped precipitously nationwide, we redirected
our resources to growing HMCA. HMCA has since emerged as the company’s
leading source of revenue and profit, helping FONAR deliver to
its shareholders a steady annual growth rate of 6% over the past
The Growth of HMCA
The business plan for growing HMCA remains the same:
increase scan volume at existing facilities, establish de novo
centers, and make acquisitions.
Increasing Scan Volume
Diagnostic imaging providers across the country
continue to face unremitting, decreasing reimbursement rates by
payers of all kinds, including Medicare, Medicaid, Workers’
Compensation and many commercial insurance carriers. In order
to survive these cuts, providers must do what they can to control
expenses and/or increase scan volume. HMCA keeps a tight rein
on expenses and has been able to increase scan volume at its existing
centers by improving marketing strategies, changing center management
where necessary, enhancing customer service, and increasing awareness
of the features and benefits of FONAR technology in the medical
community and the general public.
HMCA is constantly conducting demographic and competitive studies
in search of promising de novo locations in New York and Florida.
The company’s most recent de novo center, Stand-Up MRI of
Great Neck, opened in February 2016 in Great Neck, New York.
In March of 2013, we acquired the majority interest in a limited
liability company that brought the number of HMCA-managed centers
from eleven (11) to twenty five (25).
In July of 2016, HMCA purchased 100% of the equity in Turnkey Services
of New York, LLC and 100% of the equity in TK2 Equipment Management,
LLC. Also, HMCA, which had been a 50%-equity holder of Yonkers Diagnostic
Management Services, LLC, purchased the remaining 50%, making it
a wholly-owned subsidiary of HMCA.
In April of 2017, HMCA purchased all interests and assets, including
an MRI system, of Radwell Leasing, LLC and Radwell, LLC, located
in the Westchester Medical Pavilion at 311 North Street, White Plains,
New York, bringing the total number of HMCA-managed centers to 26.
These acquisitions have contributed significantly to the growth
and financial stability of the company, and so we continue to search
for acquisition opportunities that are compatible with our business
plan and would add quickly and significantly to net revenues and
FONAR is headquartered in Melville, Long Island, New York. Incorporated
in 1978, FONAR became a publicly-traded company in 1981. The company
installed the world’s first commercial whole-body MRI, the
QED 80, in 1980, thereby launching the entire MRI industry. The
company has since installed approximately 300 recumbent-OPEN MRI
and 160 FONAR UPRIGHT® Multi-Position™ MRI installations
The company continues to manufacture the UPRIGHT® Multi-Position™
MRI (also known as the Stand-Up® MRI), its premier product,
while the FONAR R&D team continues to develop new products as
well as hardware and software upgrades that keep our UPRIGHT®
MRI customers highly competitive.
The company boasts an extensive patent portfolio, including the
world’s first-ever MRI patent. The most recent patents include
technology that enables Weight-Bearing MRI, allowing diagnosticians
to view human anatomy in its normal weight-bearing positions, including
sitting, standing and bending.
About Our Product
Our primary product is the FONAR UPRIGHT® Multi-Position™
MRI, the only whole-body MRI that performs Position™ Imaging
(pMRI™) and scans patients in numerous weight-bearing positions,
i.e. standing, sitting, bending, in flexion and extension, as well
as in the conventional lie-down position.
The FONAR UPRIGHT® Multi-Position™ MRI is equipped with
a patient bed that can rotate the patient from the recumbent (lie-down)
position to an upright (sitting of standing) position, making it
the only Position-of-Symptoms MRI and Weight-Bearing MRI.
Certain anatomical regions of the body are very sensitive to position
and gravity. For example, patients with lower back problems are
often most uncomfortable when in a particular weight-bearing position.
If diagnosticians can evaluate the spine in positions of symptoms,
they can minimize the risks of mischaracterizing or underestimating
the patients’ problems and avoid the risk of adopting a treatment
plan that could consequently result in a poor outcome. In fact,
the FONAR UPRIGHT® Multi-Position™ MRI often detects patients’
problems that lie-down-only MRIs cannot. Considering that most MRI
exams are of the spine, this technology is of great importance.
In short, weight-bearing MRI enables more complete diagnoses in
comparison to conventional “weightless,” recumbent-only
MRIs. Since the UPRIGHT® MRI has the power to “see it
all,” the benefits of this unique scanner continue to gain
traction in the medical community because it provides referring
physicians better outcomes for their patients.
- The Most Patient-Friendly™ MRI
The overwhelming majority of patients scanned on the FONAR UPRIGHT®
Multi-Position™ MRI are in a seated position watching their
choice of programming on a large TV. Since there is nothing immediately
above the patient’s head or in front of the patient’s
face, the rate of claustrophobic rejection is nearly zero percent.
It is not unusual to hear of patients travelling hundreds of miles
to the nearest UPRIGHT® MRI center in order to avoid our competitors’
highly claustrophobic “tube” or “tunnel”
The FONAR UPRIGHT® Multi-Position™ MRI can also accommodate
very large patients who simply can’t fit into other MRI scanners,
as well as patients who are physically unable to lie down, such
as kyphotic patients.
New Works-in-Progress Research
Sincerely,FONAR has begun new works-in-progress technology for
visualizing and quantifying the flow of cerebrospinal fluid (CSF)
which circulates throughout the brain and vertebral column at the
rate of 32 quarts per day. This imaging and quantifying of the dynamics
of this vital life-sustaining physiology of the body’s neurologic
system has been made possible first by FONAR’s introduction
of the MRI and now due to this latest works-in-progress for quantifying
CSF in all the normal positions of the body, particularly in its
upright flow against gravity. This complete assessment and measurement
of CSF physiology, in all the normal positions of the human body,
is a unique attribute of the UPRIGHT® Multi-Position™
In September 2011, I wrote a research paper titled The Possible
Role of Craniocervical Trauma and Abnormal Cerebrospinal Fluid (CSF)
Hydrodynamics in the Genesis of Multiple Sclerosis and the Craniocervical
Syndrome. It is clear to me that to properly image cerebrospinal
fluid (CSF), and learn about the role of CSF and disease, that it
must be done in the weight-loaded, upright position. Only on the
FONAR UPRIGHT® Multi-Position™ MRI can CSF be imaged adequately.
Therefore, when practitioners want to understand the role of CSF
for their patients they will have to do it on the FONAR UPRIGHT®
Years of a sluggish economy and ever-decreasing reimbursement rates
have stifled MRI sales across the country. Nevertheless, thanks
to the winning combination of our unique MRI product and our remarkably
successful management subsidiary, FONAR has now achieved 27 consecutive
quarters (6¾years) of profitability.
I remain grateful to our stockholders, our customers and our employees
for their loyal support.
Raymond V. Damadian
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