As filed with the Securities and Exchange Commission
On January 11,October 22, 2002
Registration No. ____________
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FONAR CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 3845 11-2464137
- ---------------- ---------------- --------------
(State or other Primary Standard (I.R.S.
jurisdiction of Primary Standard Industrial Employer
incorporation or Classification Identification
organization) Classification Code Number
11-2464137
(I.R.S. Employer Identification No.)
110 Marcus Drive
Melville, New York 11747
(631) 694-2929
- ------------------------------------------------------------------------------------------------------------------------------------
(Address, including zip code, and telephone number of
registrant's principal executive offices)
Raymond V. Damadian, M.D.
FONAR CORPORATION
110 Marcus Drive
Melville, New York 11747
(631) 694-2929
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service) Please send copies of all communications to:
Henry T. Meyer, Esq.
FONAR Corporation
110 Marcus Drive
Melville, New York 11747
(631) 694-2929
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each maximum maximum Amount Proposed proposed Amount of
class of Amount offering aggregate of
securities to to be maximum maximumprice offering registration
securities to registered offering aggregate fee
be registered price offeringregistered per unit price fee
- ------------------------------ ---------- -------- --------------------- ------------
Common Stock 5,000,000 $1.13 $5,650,000 $1,350.35
(1) 2,000,000 $1.09 $2,180,000 $ 200.56
Par value $0.0001
per share
- ------------------------------ ---------- -------- --------------------- ------------
(1)1) Pursuant to Rule 457, subsectionsubsections (c); and (g): Specified date: January 10,October 21,
2002
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8 (a),
may determine.
PROSPECTUS
- ----------
5,000,0002,000,000 Shares
FONAR CORPORATION
Common Stock
This is a prospectus for the resale, from time to time, of up to 5,000,0002,000,000
shares of our common stock 2,000,000 shares of which have beenmay be issued byto the selling stockholders
listed in this prospectus, or by the pledgees or donees of the selling
stockholders or by other transferees who may receive the shares of common stock
in transfers other than public sales. We will not receive any of the proceeds
from the sale of these shares.
The selling stockholders may sell the shares in open market transactions
from time to time at market prices through brokers, dealers or agents. See "PLAN
OF DISTRIBUTION" at page __15 of this prospectus for a more detailed discussion of
the manner in which the shares may be sold.
Our common stock is traded on the Nasdaq Small Cap Market under the symbol
"FONR." On January 10,October 21, 2002, the last reported sales price for our common stock
was $1.13$1.09 per share.
Investing in our common stock involves a high degree of risk. You should
consider carefully the risk factors described in this prospectus before making a
decision to purchase our stock. See "RISK FACTORS" at page __7 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is JanuaryOctober __, 2002.
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide information or to make representations not
contained in this prospectus. This prospectus is neither an offer to sell nor a
solicitation of an offer to buy any securities other than those registered by
this prospectus, nor is it an offer to sell or a solicitation of an offer to buy
securities where an offer or solicitation would be unlawful. Neither the
delivery of this prospectus, nor any sale made under this prospectus, means that
the information contained in this prospectus is correct as of any time after the
date of this prospectus.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS.........................................................PROSPECTUS.......................................................4
ABOUT FONAR CORPORATION........................................................FONAR.................................................................4
ABOUT THIS OFFERING............................................................OFFERING.........................................................6
RISK FACTORS...................................................................
FORWARD-LOOKING STATEMENTS.....................................................FACTORS................................................................7
FORWARD LOOKING STATEMENTS.................................................12
USE OF PROCEEDS................................................................PROCEEDS............................................................12
SELLING STOCKHOLDERS...........................................................STOCKHOLDERS.......................................................12
PLAN OF DISTRIBUTION ................................................................................................................15
LEGAL MATTERS..................................................................
MATERIAL CHANGES...............................................................
EXPERTS .......................................................................MATTERS..............................................................18
EXPERTS....................................................................18
INDEMNIFICATION ..........................................................................................................................18
WHERE YOU CAN FIND MORE INFORMATION............................................INFORMATION........................................18
INCORPORATION OF INFORMATION WE FILE WITH THE SEC..............................SEC..........................18
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission. Under this registration statement the
selling stockholders may sell from time to time up to 5,000,000 shares of common
stock. We may issue up to 5,000,0002,000,000 shares of common
stock to pay certain debt
obligations toissuable upon the selling stockholders in the aggregate amountexercise of $3,613,325.50. Two million (2,000,000) shares have already been issued and may
be sold under this prospectus.our callable warrants.
Periodically, as required, we expect to provide a prospectus supplement that will add,
update or change information contained in this prospectus. You should read both
this prospectus and any prospectus supplement together with the additional
information described below under the heading "Where You Can Find More
Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement and the information incorporated by
reference, contains additional information about the common stock offered under
this prospectus. The registration statement can be read at the Securities and
Exchange Commission's web site or at the Securities and Exchange Commission
offices mentioned below under the heading "Where You Can Find More Information."
ABOUT FONAR CORPORATION
At Fonar we design, manufacture and market magnetic resonance imaging (MRI)
scanners. MRI scanners use magnetic fields to generate images of organs, bones
and tissue inside the human body. The MRI scanner uses a magnetic field which
causes the hydrogen atoms in tissue to align. When the magnetic force is
withdrawn, the atoms fall out of alignment emitting radio signals as they do.
The speed at which the atoms fall out of alignment, or "relaxation time" and
radio signals vary depending on the type of tissue and whether any pathology is
present. The radio signals provide the data from which the scanner's computers
generate an image of the body part being scanned.
Our address is 110 Marcus Drive, Melville, New York 11747, our telephone
number there is (631) 694-2929 and our Internet address is http://www.fonar.com.
Fonar offers the following MRI scanners: the Stand-Up,Stand-Up(TM), also called
Indomitable (TM)Indomitable(TM) , QUAD (TM)QUAD(TM), Fonar-360 (TM)Fonar-360(TM) and Echo (TM)Echo(TM). The Pinnacle (TM)QUAD-S(TM) MRI, a
work-in-progress, recentlyalso has received FDA clearance to market on June 6,
2001.market.
The Stand-Up allows patients to be scanned while standing, sitting or
reclining. This means that an abnormality or injury, such as a slipped disc,
will be able to be scanned under full weight-bearing conditions, or, more often
than not, in the position in which the patient experiences pain. An elevator
built into the floor brings the patient to the desired height in the scanner. An
adjustable bed allows the patients to stand, sit or lie on their backs, sides or
stomachs, at any angle. In the future, the Stand-Up may also be useful for MRI
directed surgical procedures.
The Fonar 360 is an enlarged room sized magnet in which the floor, ceiling
and walls of the room are part of the magnet frame. Consequently, this scanner
allows 360 degree access to the patient. The Fonar 360 is presently marketed as
a diagnostic scanner and is sometimes referred to as the Open Sky MRI.
In the future, we may also further develop the Fonar 360 to function as an
operating room. We sometimes refer to this contemplated version of the Fonar 360
as the OR-360.
The QUAD scanner is supported by four posts and is open on four sides,
thereby allowing access to the scanning area from four sides.
The QUAD (TM) 7000
is similar in design to the QUAD 12000 but uses a smaller lower field magnet.
The "Pinnacle" (TM)QUAD-S is a superconductive version of our open iron frame magnet. The Pinnacle received FDA clearance on June 6, 2001.
Fonar also offers a low cost, low field open MRI scanner, the Echo (TM).Echo.
In addition to manufacturing MRI scanning systems, we formed a subsidiary
in 1997, Health Management Corporation of America, which we sometimes call HMCA,
in 1997
to engage in the business of managing MRI imaging facilities and medical
practices. HMCA provides and supervises the non-medical personnel for the
clients at their sites. At HMCA we also provide our clients centralized billing,
collection, marketing, advertising, accounting and financial services. We also
provide office equipment and furnishing, consumable supplies and in some cases
the office space used by our clients. Almost all of HMCA's client professional
corporations are owned by Fonar's founder, President and Chairman of the Board,
Dr. Raymond V. Damadian.
HMCA currently manages 13 MRI facilities, seven physical therapy and
rehabilitation practices and four primary care medical practices. For the 2002
fiscal year, the revenues HMCA recognized from the MRI facilities were
$15,514,294, the revenues recognized from the physical therapy and
rehabilitation practices were $11,493,680 and the revenues recognized from the
primary care medical practices were $1,517,465.
HMCA's address is at 6 Corporate Center Drive, Melville, New York 11747,
its telephone number there is (631) 694-2816 and its internet address is
www.hmca.com.
Approximately 72%64% of our consolidated revenues for the fiscal year ended
June 30, 2002 and 75% for the fiscal year ended June 30, 2001 were from HMCA's
management services.
Approximately 99% of HMCA's revenues and 64% of our consolidated revenues
for the fiscal year ended June 30, 2002 and 98% of HMCA's revenues and 75% of
our consolidated revenues for the fiscal year ended June 30, 2001 and 81% for the fiscal year ended June 30, 2000 were from HMCA's
management services.
Approximately 98% of HMCA's revenues for the fiscal year ended June 30,
2001 and 99% of HMCA's revenues for the fiscal year ended June 30, 2000 were derived
from entitiesprofessional corporations owned by Dr. Raymond V. Damadian.
ABOUT THIS OFFERING
The selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of sales of the shares. They may
sell them in the open market at market prices through brokers, dealers or
agents, or in private transactions on negotiated terms. See "PLAN OF
DISTRIBUTION" for a more detailed discussion of the ways in which the selling
stockholders might sell their shares.
Our common stock is traded on the Nasdaq Small Cap Market.
NASDAQ Symbol..............FONR
RISK FACTORS
An investment in our stock is high risk. You should carefully consider the risk
factors in this prospectus before deciding whether to purchase the shares
offered. See "RISK FACTORS."
RISK FACTORS
An investment in Fonar is highly speculative and subject to a high degree
of risk. Therefore, you should carefully consider the risks discussed below and
other information contained in this prospectus before deciding to invest in
shares of our common stock.
1. We have and continue to experience significant losses.
For the fiscal years ended June 30, 20012002 and June 30, 2000,2001, we experienced
net losses of $15.18$22.9 million and $10.96$15.2 million respectively and net operating
losses of $16.21$19.7 million and $15.51$16.2 million, respectively. For the fiscal quarter
ended September 30, 2001, we experienced a net loss of $3.8 million as compared
to a net loss of $3.9 million for the fiscal quarter end September 30, 2000. Our
operating loss of $3.4 million for the first quarter of fiscal 2002, however,
improved, compared to the operating loss of $4.0 for the first quarter fiscal
2002, due to increased scanner sales. We have been able to
fund our losses to date from the $7,125,000 in funding received from The Tail
Wind Fund Ltd. between May, 2001 and August, 2002 and the $128.7 million
judgment, net amount of $77.2 million after attorney's fees, received from General
Electric Company in 1997 for patent infringement and the settlement proceeds
from other patent litigation settlements with other competitors, thecompetitors. The terms of
whichthese settlement agreements are required to be kept confidential. As of SeptemberJune 30,
2001,2002, however, our balance sheet showsreflected approximately $7.6$7.5 million in cash
and cash equivalents and $5.6 million in marketable securities out of total
current assets of $41.5 million as compared to approximately $14.0 million in
cash or cash equivalents and $6.1 million in marketable securities out of total
current assets of $35.2 million.$40.9 million as at June 30, 2001. We believe that we will be
able to reverse our operating losses with the introduction into the marketplace
of our new MRI scanners, and from the operating income generated byparticularly our subsidiary HMCA.Stand-Up(TM) MRI scanners. HMCA
operating income has declined however from $3.12$2.5 million in fiscal 1999 to $2.48
million in fiscal 2000, and to $1.0
million for fiscal 2001.2001 and to an operating loss of $4.3 million for fiscal
2002. Of the HMCA and consolidated operating incomelosses, $4.7 million was an
impairment loss taken with respect to management agreements for the first quarterprimary care
medical practices as a result of fiscal 2002 declinedlosses recognized by that division of HMCA's
business. Contributing to $550,000, comparedthe net loss was an additional non-cash expense of
$2.4 million in financing costs incurred in connection with the discounts
received on the stock issued to $801,000 for the first quarter of fiscal 2001.The Tail Wind Fund. There can be no assurance,
however, that we can reverse our operating losses.
2. Fonar is dependant on the success of its new products to become profitable.
Our ability to generate future operating profits will depend on our ability
to market and sell our new lines of MRI products. The Stand-Up MRI, also called
"Indomitable(TM), Fonar 360(TM)360
and Echo scanners have all been recently introduced into the market. Although we
are optimistic that these scanners' features will make them competitive, there
can be no assurance as to the degree or timing of market acceptance of these
products. Nevertheless, we received orders for 20 Stand-Up MRI scanners in
fiscal 2002. Revenues from the sales of QUAD(TM)QUAD scanners, introduced in 1995, havehad
not been sufficient to date to generate operating profits. The product we now
are currently promoting most vigorously is the Stand-Up MRI. We believe the
Stand-Up MRI is the most promising because it enableenables scans to be performed on
patients in weight bearing positions, such as sitting, standing or standing.lying at an
angle. The market for the Stand-Up which
received FDA clearance in October 2000, is still being tested.MRI, shows strong initial promise. The
following chart shows the revenues attributable to each model during fiscal 2001
and the
first quarter of fiscal 2002. Please note that we recognize the revenue on scanner sales on a
percentage of completion basis. This means we book revenue not as moneycash is
received or sales are made, but as the scanner is built. Consequently, the
revenues for a fiscal period do not necessarily relate to the orders placed in
that period.
Model Revenues Recognized
Fiscal Year Ended June 30, 2001 2002
Stand-Up $ 1,640,6151,625,615 $ 11,089,675
Fonar 360 0 0
QUAD $3,043,308$ 3,043,308 0
Echo $1,052,182
Fiscal Quarter Ended September 30, 2001
Stand-Up $1,581,378
QUAD 48,000$ 1,052,182 0
Beta (used) 0 361,000
3. We must compete in a highly competitive market against competitors with
greater financial resources than we have.
The medical equipment industry is highly competitive and characterized by
rapidly changing technology and extensive research and development. The market
demand for a continuing supply of new and improved products requires that we be
engaged continuously in research and development. New products also require
continuous retooling or at least modifications to our manufacturing facilities,
and our sales and marketing force must continuously adjust to new products and
product features. This is highly expensive and companies with substantially
greater financial resources than we have engage in the marketing of magnetic
resonance imaging scanners which compete with the Company's scanners.
Competitors include large, multinational companies or their affiliates such as
General Electric Company, Siemens A.G., Marconi International, Philips N.V.,
Toshiba Corporation and Hitachi Corporation. There can be no assurance that
Fonar's products will be able to successfully compete with products of its
competitors.
4. The success of some of the businesses purchased by HMCA depends on the
continued employment of the former owners of those businesses.
The businesses acquired by HMCA are essentially service organizations whose
continued success depends on retaining and developing existing business
relationships. These relationships are often heavily dependantdependent on the personal
efforts of key persons in the acquired company or medical practices managed by
the acquired company. HMCA has sought to retainretained certain of these key people through
employment agreements which include both noncompetition covenants and financial
incentives. Nevertheless, there can be no assurance that these key people will
remain as employees or produce results sufficient to make the acquired companies
profitable.
5. The decline in profitability of the primary care medical practices managed
by HMCA resulted in an impairment loss of $4.7 million in fiscal 2002.
HMCA manages 13 MRI facilities, seven physical therapy and rehabilitation
practices and four primary care medical practices. During 2002 fiscal year, the
primary care medical practices, which are managed by the Company's subsidiary
A&A Services, Inc. experienced a significant overall decline in patient volume
and related operating cash flows which led to the inability of the medical
practices to fully and timely pay management fees. The business of managing
these practices had been acquired by HMCA in fiscal 1998. As a result of the
continued negative trend, HMCA incurred an impairment loss of $4.7 million in
fiscal 2002 related to those management agreements which reduced the carrying
value of such agreements to approximately $3.5 million at June 30, 2002. We
presently do not expect any further impairment, but there can be no assurance
that we will be able to prevent further declines in the management fees received
from the primary care medical practices.
6. HMCA'S profitability depends on its ability to successfully perform billing
and collection services for its clients.
HMCA performs billing and collection services for the medical practices and
MRI facilities it manages. The viability of HMCA's clients and their ability to
remit management fees to HMCA depends on HMCA's ability to collect the clients'
receivables. Collectibility of these receivables can be adversely affected by
the longer payment cycles and rigorous informational requirements of some
insurance companies or other third party payors. Proper authorizations,
referrals and confirmation of coverage for patients, as well as issues of
medical necessity, need to be addressed prior to the rendering of service to
assure prompt payment of claims. HMCA believes it is properly addressing billing
and collection requirements and issues for its clients and that its collection
rates are good. Nevertheless, the regulations and requirements applicable to
medical billing and collections could change in the future and result in reduced
or delayed collections. Approximately 98%99% of HMCA's revenues for the year ended
June 30, 2001receivables billed and
collected by HMCA are from entitiesprofessional corporations owned by Raymond V.
Damadian.
6.7. Capitated insurance programs could adversely affect HMCA's clients by
shifting a part of the financial responsibility for patient care to the
medical providers.
Certain HMO's and insurers have instituted managed care programs where the
physician or physician group is paid on a capitated basis. Under these plans,
the physician is not paid according to the services provided, but is paid a
fixed monthly fee per patient, which in HMCA's experience is based on age and
gender. Currently, less than two percentIn fiscal 2002 and fiscal 2001, respectively, 2.5% and 2.2% of HMCA's
clients' revenues arewere from capitated programs. All of these were attributable
to primary medical care practices managed by A&A Services, Inc., representing
46% and 26% of their revenues in fiscal 2002 and fiscal 2001, respectively.
Under capitated insurance programs, the physician or physician practice in
effect bears some of the risk in the event a patient requires extensive
treatment. In the event that HMCA's client primary care practices experience a
shortfall between the capitated payments and the cost of providing services, the
ability of those practices to pay for HMCA's services may be impaired.
7.8. The profitability of HMCA could be adversely affected if medical insurance
reimbursement rates change.
HMCA receives substantially all of its revenue from medical practices and
providers of MRI services. Consequently, HMCA would be indirectly affected by
changes in medical insurance reimbursement policies, HMO policies, referral
patterns, no-fault and workers compensation reimbursement levels and other
factors affecting the profitability of a medical practice or MRI facility. The
types of medical providers served by HMCA are (a) MRI facilities, (b) primary
care practices and (c) physical therapy and rehabilitation practices. There are
approximately 2013 MRI facilities served by HMCA located in New York, Florida and
Georgia. The primary care practices served by HMCA consist of four offices in
New York and the physical therapy and rehabilitation practices consist of eightseven
offices located primarily in New York. Approximately 57%52% of HMCA's clientsclients' revenues for the year ended June 30,in
fiscal 2002 as compared to approximately 56% of HMCA's clients' in fiscal 2001
were generated from the no-fault and personal injury protection claims. Although
we do not know of any pending adverse development affecting these types of
facilities, future changes in the reimbursement levels for MRI, primary care,
workers compensation or no fault reimbursement, or changes in utilization
policies for MRI or physical rehabilitation therapy could adversely affect the
ability of HMCA's clients to pay HMCA's fees. In addition, HMCA depends on the
ability of the medical practices and providers to attract and retain physicians
and other professional staff.
8.9. The amortization of the management agreements on our balance sheet will
reduce future profits.
HMCA acquired businesses which were essentially service businesses for
purchase prices based on earnings multiples rather than net tangible assets. As
the historical costfair value of the tangible assets was small relative to the purchase price,
the consolidated balance sheet of Fonar HMCA and Fonar'sits subsidiaries reflects an
allocation of the purchase price in excess of the fair value of the tangible
assets exclusively to management agreements, an intangible asset with a net
carrying value of approximately $20.4 million in management agreements as at June 30, 2001 and $20.1$14.5 million
as at SeptemberJune 30, 2001. Before amortization,
the aggregate2002. The initial amount ofallocated to management agreements
attributable to the acquisitions, was approximately $23.4 million. AmortizationPrior to the
write down of thesethe value of the management agreements for the primary care
medical practices of $4.7 million in fiscal 2002, amortization of management
agreements, which is over a period of twenty (20) years, will reducereduced net profits by
approximately $1.2 million annually. This is a non-cash annual expense. 9.It is expected
that the amortization of management agreements after the write-down for the
impairment loss will be $983,700 annually.
10. Professional liability claims against HMCA or its clients may exceed
insurance coverage levels.
Although with one exception, HMCA does not provide medical services, it is possible that a
patient suing one of HMCA's client medical practices or MRI facilities would
also sue HMCA. In Florida, where the corporate practice of
medicine is legally permissible, a subsidiary of HMCA in one case provides
medical care through employee doctors and could be subject to professional
liability claims in the event of malpractice. Neither HMCA nor its clients carry professional liability
insurance but physicians working for HMCA's clients or for HMCA's subsidiaries
are required to maintain professional liability insurance in the minimum amount
of $1,000,000/$3,000,000. Such insurance would not cover HMCA or a client
professional corporation, however, in the event a claim were made which was not
covered by the physician's insurance. Claims in excess of insurance coverage
might also have to be satisfied by HMCA or its clients if they were named as
defendants.
10.11. We do not carry product liability insurance and would have to pay any
claims from our revenues and capital resources.
Fonar does not carry product liability insurance but is self-insured.
Consequently, Fonar would have to pay from its own resources any valid products
liability claim. To date, Fonar has not had to pay any such claims.
11.12. We are dependantdependent upon the services of Dr. Damadian.
Our success is greatly dependent upon the continued participation of Dr.
Raymond V. Damadian, Fonar's founder, Chairman of the Board and President. Dr.
Damadian has acted as our CEO since 1978 and will continue to do so for the
foreseeable future. In addition to providing general supervision and direction,
he provides active direction, supervision and management of our sales, marketing
and research and development efforts. In connection with the physician and
diagnostic management services business conducted by HMCA, Dr. Damadian owns
most of the professional corporations which are HMCA clients. With the exception
of four professional corporations which provided management fees to HMCA of
approximately $374,000$422,500 in the aggregate duringfor fiscal 2001,2002, all of the professional
corporations are owned by Dr. Damadian. Loss of the services of Dr. Damadian
would have a material adverse effect on our business. We do not have an
employment or noncompetition agreement with Dr. Damadian. We do not currently
carry "key man" life insurance on Dr. Damadian.
12.13. Dr. Raymond V. Damadian has voting control of Fonar; the management cannot
be changed or the company sold without his agreement.
Dr. Raymond V. Damadian, the President, Chairman of the Board and principal
stockholder of Fonar is and will continue to be in control of Fonar and in a
position to elect all of the directors of Fonar. As of September 30, 2001,19, 2002, there
were outstanding 60,033,49073,569,791 shares of common stock, having one vote per share,
4,211 shares of Class B common stock, having ten votes per share and 9,562,824
shares of Class C common stock, having 25 votes per share. Of these totals Dr.
Damadian owned 2,488,274 shares of common stock and 9,561,174 shares of Class C
common stock, giving him over 80% of the voting power of Fonar's voting stock.
This means that the holders of the common stock will not be able to control
decisions concerning any merger or sale of Fonar, the election of directors or
the determination of business and management policy.
13. The dilution which may result from the payment of its debentures in common
stock could be significant.
In May, 2001, the Company issued convertible debentures in the principal
amount of $4.5 million. As of January 11, 2002, the outstanding principal amount
of the debentures was $2.7 million. The debentures can be converted at a price
of $2.047 per share, which would result in 1,319,004 shares of common stock
being issued if the remaining principal balance of the debentures were
converted. At the times when the market price for our common stock is less than
$2.047 per share, however, the holders will not be likely to convert and we
would be left with the alternative of paying the debentures in cash or in shares
of common stock valued, for the purpose of payment, at a discount from the then
current market value for the common stock. This discounted value would be the
lesser of (1) 90% of the average of the four lowest closing bid prices during
the preceding calendar month or (2) the average of the four lowest closing bid
prices during the preceding calendar month less $0.125. If for example, we were
paying the remaining principal balance of the debentures in full in January,
2002 then the number of shares we would have to issue based on the formula would
be 2,523,365, or approximately 91% more shares than would be issued on
conversion in full. Since this alternative is based on market price, there is no
limit on how low the determined value could be. The payments for October,
November and December 2001 and for January 2002, were made through the issuance
of 1,788,742 shares of common stock. No part of the debentures have been
converted to date. Fonar does retain the option, however, to pay the debentures
in cash if they are not converted.
14. The provisions of the debentures would subject Fonar's stockholders to
further dilution if we were to issue common stock at prices below market or
below the conversion price in the debentures.
In addition to provisions providing for proportionate adjustments in the
event of stock splits, stock dividends, reverse stock splits and similar events,
the debentures provide for an adjustment of the conversion price if Fonar issues
shares of common stock at prices lower than the conversion price or the then
prevailing market price. This means that if we need to raise equity financing at
a time when the market price for Fonar's common stock is lower than the
conversion price, or if we need to provide a new equity investor with a discount
from the then prevailing market price, then the conversion price will be reduced
and the dilution to stockholders increased.
15. The provisions of theour warrants provide for reductions in the exercise price
if we issue common stock at prices below market or below the warrant
exercise prices.
In addition to provisions providing for proportionate adjustments in the
event of stock splits, stock dividends, reverse stock splits and similar events,
the warrants provide for a reduction of the exercise price if Fonar issues
shares of common stock at prices lower than the exercise price or lower than the
then prevailing market price. The number of shares issuable under the warrants
would change in this case in inverse proportion, but we would receive the same
amount of proceeds if the warrants were subsequently exercised in full.
16. The dilution which may result from the payment of the indebtedness to the
selling stockholders in common stock could be significant.
Pursuant to a stock payment agreement entered into as of December 20, 2001,
the selling stockholders agreed to permit us to pay certain indebtedness we have
to them in shares of our common stock. The indebtedness to be paid in common
stock is in the aggregate amount of $3,613,325.50. Under the terms of the stock
payment agreement, the net proceeds from the sale of the shares will be applied
toward the indebtedness. For the purpose of illustration, at the January 10,
2002 closing price of $1.13 per share, 3,197,634 shares would be needed to pay
the indebtedness. If the price of our common stock falls, then the number of
shares increases. Conversely, if the price rises, the number of shares will
decrease. The foregoing illustration does not take into account commissions and
other transactional costs, if any, which will be deducted from the proceeds of
sale to determine net proceeds. The only cap on the number of shares which can
be issued, which is at our option, is 5,000,000 in the aggregate.
FORWARD-LOOKING STATEMENTS
We make statements in this prospectus and the documents incorporated by
reference that are considered forward-looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private
Securities Litigation Reform Act of 1995 contains the safe harbor provisions
that cover these forward-looking statements. We are including this statement for
purposes of complying with these safe harbor provisions. We base these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties and assumptions including,
among other things:
- continued losses and cash flow deficits;
- the continued availability of financing in the amounts, at the times
and on the terms required to support our future business;
- uncertain market acceptance of our products; and
- reliance on key personnel.
Words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate" and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Because of these risks, uncertainties
and assumptions, the forward-looking events discussed or incorporated by
reference in this document may not occur.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling stockholders
of the common stock.stock they receive upon the exercise of the warrants. If the
warrants are exercised, however, we will receive the exercise price of the
underlying shares purchased. We can not, however, guarantee the amount of the
proceeds we may receive from the exercise of warrants.
We intend to use the net proceeds, if any, from the exercise of warrants
for general corporate purposes, including working capital to fund operating
losses, expenses and capital expenditures. As of the date of this prospectus, we
cannot specify with certainty the particular uses for any net proceeds we may
receive upon the exercise of the warrants. Accordingly, our management will have
broad discretion in the application of any net proceeds received. Pending such
uses, we intend to invest the net proceeds, if any, from the exercise of the
warrants in short-term, interest-bearing, investment grade securities.
SELLING STOCKHOLDERS
Pursuant to a stock paymentsecurities purchase agreement dated December 20,May 24, 2001 between us
and Dr. MuracaThe Tail Wind Fund Ltd. stockholders, we issued and Dr. Marciano, Dr. Muracasold, for an aggregate
purchase price of $4.5 million:
4% convertible debentures due June 30, 2002 in the aggregate principal
amount of $4.5 million, convertible into shares of our common stock at a
conversion price of $2.047 per share, subject to adjustment;
purchase warrants to purchase an aggregate of 959,501 (includes 300,000
issuable to the placement agent) shares of our common stock at an initial
exercise price of $1.801 per share, subject to adjustment; and
Dr. Marciano agreedcallable warrants to accept
paymentpurchase an aggregate of certain debt obligations2,000,000 shares of our
common stock at a fluctuating exercise price which will vary depending on
the market price for our common stock
In connection with the issuance of the debentures, purchase warrants and
callable purchase warrants to The Tail Wind Fund Ltd. we paid a placement fee to
Roan Meyers, Inc. in the amount of $157,500. The 300,000 purchase warrants to
have been issued to Roan Meyers, Inc. will be issued to designees of Roan
Meyers, Inc. instead.
The debentures were convertible at the option of the holder at a price of
$2.047 per share. The Tail Wind Fund Ltd did not elect to convert, but we still
had the right to pay the debentures in shares of our common stock and did so.
The stock was valued, in accordance with the terms of the debentures, at the
lesser of a) 90% of the average of the four lowest closing bid prices during the
preceding month or b) the average of the four lowest closing bid prices during
the preceding calendar month less $0.125. We issued a aggregate amount of
4,931,576 shares to pay the debentures (with interest of $132,022) in full.
The purchase warrants cover 959,501 shares of common stock and have an
exercise price of $1.801 per share, subject to adjustment. The exercise period
extends to May 24, 2006. If all of the purchase warrants are exercised at such
price, we would receive proceeds in the approximate amount of $1.7 million. The
Tail Wind Fund Ltd. has not exercised any of the purchase warrants. All of the
purchase warrants are still outstanding.
The original callable warrants covered 2,000,000 shares of common stock and
had a variable exercise price. Subject to a maximum price of $6.00 per share and
a minimum price of $2.00 per share, which was subject to adjustment pursuant to
the terms of the warrants, the exercise price was to be calculated to be equal
to the average closing bid price of Fonar's common stock for the full calendar
month preceding the date of exercise. The exercise period extended to May 24,
2004.
In order to induce The Tail Wind Fund Ltd. to exercise the callable
warrants we agreed to lower the exercise price to $1.50 per share for the period
from June 24, 2002 through July 31, 2002. At the same time we agreed not to
exercise our right to redeem any callable warrants during the months of July,
2002 and August, 2002. Prior to June 30, 2002, The Tail Wind Fund Ltd. then
exercised callable warrants for 1,000,000 shares of common stock for an
aggregate exercise price of $1,500,000. On August 16, 2002 we agreed to a
further reduction of the exercise price to $1.125 per share for the period ended
on August 22, 2002. The Tail Wind Fund Ltd. then exercised on the same day the
remaining callable warrants for a total of 1,000,000 shares at an aggregate
exercise price of $1,125,000.
As part of the agreement under which we reduced the exercise price of the
original callable warrants, we have now issued 1,000,000to The Tail Wind Fund Ltd.
replacement callable warrants for 2,000,000 shares of our common stock on the
same terms as the original callable warrants. Since the exercise price varies,
the amount of proceeds, if any, which we may receive cannot be predicted. At the
minimum exercise price of $2.00 per share we would receive proceeds of $4
million. At the maximum exercise price of $6.00 per share we would receive
proceeds of $12 million. The replacement callable warrants will be exercisable
until August 30, 2005.
We do have the option, however, of redeeming up to each200,000 callable
warrants per month at a price of them, or 2,000,000 shares in$0.01 per underlying warrant share, if the
aggregate.
The shares are being issued to pay four promissory notes which were issued
by our subsidiary, Health Management Corporationaverage closing bid price of America or HMCA, in partial
paymentFonar's common stock is greater than 115% of the
purchasewarrant price in effect for the acquisition of A&A Services, Inc. The
total balance of principal and interest due under the notes as of December 20,
2001 was $3,076,791.20five consecutive trading days in the aggregate, or $1,538,395.60 to each selling
stockholder. Payments under the notes were due quarterly.
In order to induce the selling stockholders to accept payment in stock and
in the manner provided in the stock payment agreement, we agreed to pay a
premium on the note obligations. The premium was calculated by adding the
remaining payments which would come due under the notes, $3,136,103.64 in the
aggregate, which includes future interest, plus additional interest of $2,959.33
on each of two notes which were previously extended, and multiplying the sum by
One Hundred and Fifteen percent (115%). Applying the foregoing premium
calculation, the total amount now due as a result is $3,613,325.50 in the
aggregate, or $1,806,662.70 to each selling stockholder.
Under the terms of the stock payment agreement, Fonar will issue shares,
and the net proceeds from the sale of the shares will be applied to the
indebtedness. The quarterly payment due dates were waived, but the net proceeds
received by the selling stockholders must be sufficient to pay the full
indebtedness for each note, including the premium on the note, by the final
maturity date of the note: September 20, 2002 in the case of two of the notes
and December 20, 2002 in the case of two of the notes. If a note, including the
premium, is not satisfied in full by the time of its final maturity date, then
interest will accrue on the unpaid balance at the rate of 6% per annum and the
selling stockholders could require the difference to be paid in cash. The
selling stockholders could also continue to receive stock in lieu of cash under
the terms of the stock payment agreement. The selling stockholdersany calendar month.
We also have the option of reducing the exercise price under the callable
warrants to receive cashany lower exercise price that was previously in lieueffect.
No proceeds can be expected to be received from the exercise of stock if trading in Fonarthe
warrants unless the market price of our common stock is suspendedhigher than the
applicable exercise prices since otherwise the holders are unlikely to exercise.
The warrants provide for five or more days orproportionate adjustments in the event of stock
splits, stock dividends and reverse stock splits. In addition, the insolvency or bankruptcy
of Fonar.
Initially, we issued 1,000,000 shares to each selling stockholder. The
selling stockholdersexercise
prices will be permitted to sellreduced, with certain specified exceptions, if we issue shares at
lower prices then the warrant exercise prices, or less than market price for our
common stock.
The shares now being registered are the shares subject to certain
volume limitations, discussed underunderlying the heading "Plan of Distribution".new
replacement callable warrants. The net
proceeds to be applied to payment ofshares underlying the indebtedness will be calculated by
deducting from the gross sales proceeds any commissions and transaction costs.
See "Plan of Distribution". In the event the net proceeds from the sale of the
2,000,000 shares issued are not sufficient to pay the obligations by July 1,
2002, we will issue additional shares in an amount estimated to be sufficient to
pay the balance due, based on the average closing price for Fonar common stock
on the NASDAQ System for the prior 30 trading days. This review and calculation
will be performed quarterly until the indebtedness is paid, or the selling
stockholders elect to require cash payments in the event the indebtedness is not
paid by the final maturity date of the notes. The Company has reserved the
option not to issue more than 2,500,000 shares to each of the selling
stockholders.outstanding purchase
warrants were previously registered.
The table below presents information regarding the selling stockholders and
the shares that they may offer and sell from time to time under this prospectus.
The table assumes that the selling stockholders sell all of the shares.shares they
receive upon the exercise of the warrants. However, no assurances can be given
as to the actual number of shares that will be sold by the selling stockholders
or that will be held by the selling stockholders after completion of the sales.
Information concerning the selling stockholders may change from time to time and
any changed information will be presented in a supplement to this prospectus if
and when necessary and required.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially owned by
any person who has voting or investment power with respect to the shares. Common
stock issuable upon conversion of the debentures or exercise of warrants that
are currently convertible, exercisable or exercisable within 60 days are
considered to be outstanding and to be beneficially owned by the person holding
the debentures and warrants for the purpose of computing beneficiary ownership.
Assuming that the selling stockholders sell all of the shares offered under this
prospectus, the selling stockholders will beneficially own less than one percent
of our outstanding shares of common stock after the completion of this offering.
Shares Shares Shares
Beneficially Offered Beneficially
Selling Owned Prior By This Owned After
StockholderSelling Stockholders to Offering (1) Prospectus(1)Prospectus Offering
- ---------------- --------------- --------------------------------- ------------ Dr. Glen Muraca 1,000,000 1,000,000 0
Dr. Giovanni Marciano 1,000,000 1,000,000 0---------- ------------
The Tail Wind Fund, 3,832,461 2,000,000 1,832,461
Ltd. or assigns (1)
Does not take account(1) Includes 1,172,960 shares of up to an additional 1,500,000common stock held by The Tail Wind Fund Ltd.
as at August 31, 2002 and 2,659,501 shares which may be
issued to each of common stock issuable upon
the exercise of the purchase warrants and replacement callable warrants.
Neither the selling stockholders under the stock payment agreement.
Neither selling stockholder nor any of histheir affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with us within the past three years.
Each selling stockholder is employed as a physician by a professional
corporation which is managed by our subsidiary, HMCA.
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sales of these shares.
WHO MAY SELL AND APPLICABLE RESTRICTIONS. Shares may be offered and sold
directly by the selling stockholders and those persons' pledgees, donees,
transferees or other successors in interest from time to time. The selling
stockholders could transfer, devise or gift shares by other means. The selling
stockholders may also resell all or a portion of their shares in open market
transactions in reliance upon available exemptions under the Securities Act,
such as Rule 144, provided it meetsthey meet the requirements of these exemptions.
Alternatively, the selling stockholders may from time to time offer shares
through brokers, dealers or agents. Brokers, dealers, agents or underwriters
participating in transactions may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders (and, if they act as
agent for the purchaser of the shares, from that purchaser). The discounts,
concessions or commissions might be in excess of those customary in the type of
transaction involved.
The selling stockholders received thewill purchase their shares in the ordinary course
of business pursuant toupon the stock subscription agreement.exercise of warrants. The selling stockholders do not have
any agreements or understandings, directly or indirectly, with any person to
distribute the securities.
Nevertheless, the selling stockholders and any brokers, dealers or agents
who participate in the distribution of the shares may be deemed to be
underwriters, and any profits on the sale of shares by them and any discounts,
commissions or concessions received by any broker, dealer or agent might be
deemed to be underwriting discounts and commissions under the Securities Act. To
the extent thea selling stockholdersstockholder may be deemed to be underwriters,an underwriter, the selling
stockholdersstockholder may be subject to statutory liabilities, including, but not limited
to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Securities Exchange Act. These provisions of the securities laws provide, in
general terms, for liability for fraud, untrue statements contained in a
prospectus or otherwise made in connection with the sale of securities, and the
failure to disclose significant information which is necessary to prevent
information disclosed from being misleading.
To comply with certain states' securities laws, if applicable, the shares
will be sold in such jurisdictions only through registered or licensed brokers
or dealers. In addition, in certain states the shares may not be sold unless the
shares have been registered or qualified for sale in that state or an exemption
from registration or qualification is available and is complied with.
MANNER OF SALES. The selling stockholders will act independently of us in
making decisions with respect to the timing, manner and size of each sale. The
shares may be sold at then prevailing market prices, at prices related to
prevailing market prices, at fixed prices or at other negotiated prices. The
shares may be sold according to one or more of the following methods.
o A block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction.
o Purchases by a broker or dealer as principal and resale by the broker or
dealer for its account as allowed under this prospectus.
o Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
o Pledges of shares to a broker-dealer or other person, who may, in the event
of default, purchase or sell the pledged shares.
o An exchange distribution under the rules of the exchange.
o In private transactions between sellers and purchasers without a
broker-dealer.
o By writing options.
o Any combination of the foregoing, or any other available means allowable
under law.
HEDGING OR SHORT TRANSACTIONS. In addition, the selling stockholders may
enter into option, derivative, hedging or short transactions with respect to the
shares, and any related offers or sales of shares may be made under this
prospectus. For example, the selling stockholders may:
o enter into transactions involving short sales of the shares by
broker-dealers in the course of hedging the positions they assume with the
selling stockholders;
o sell shares short themselvesitself and deliver the shares registered hereby to settle
such short sales or to close out stock loans incurred in connection with
its short positions;
o write call options, put options or other derivative instruments (including
exchange-traded options or privately negotiated options) with respect to
the shares, or which it settles through delivery of the shares;
o enter into option transactions or other types of transactions that require
the selling stockholdersstockholder to deliver shares to a broker, dealer or other
financial institution, who may then resell or transfer the shares under
this prospectus; or
lendo loan the shares to a broker, dealer or other financial institution, who may
sell the loaned shares.
These option, derivative, hedging and short transactions may require the
delivery to a broker, dealer or other financial institution of shares offered
under this prospectus, and that broker, dealer or other financial institution
may resell those shares under this prospectus.
VOLUME LIMITATIONS. Under the terms of the stock payment agreement, each of
the selling stockholders will be restricted until June 30, 2002 to selling no
more than 66,666 shares per month, if the average closing bid price of Fonar
common stock for the prior calendar month is at least $1.50 per share and no
more than 52,083 per month, if the average closing bid price of Fonar common
stock is less than $1.50 per month. In addition, at all times, both before and
after June 30, 2002, each of the selling stockholders will sell no more than the
lesser of 10,000 shares of Common Stock or 10% of the preceding day's trading
volume for Fonar common stock, on any day.
EXPENSES ASSOCIATED WITH REGISTRATION. We have agreed to pay the expenses
of registering the shares under the Securities Act, including registration and
filing fees, printing expenses, administrative expenses, legal fees and
accounting fees. If the shares are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts,
underwriting commissions and agent commissions.
INDEMNIFICATION AND CONTRIBUTION. In the registration rights agreement that
we entered into with the selling stockholders, we and the selling stockholders
agreed to indemnify or provide contribution to each other and specified other
persons against some liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act. The selling stockholders
may also agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against some liabilities, including
liabilities arising under the Securities Act.
SUSPENSION OF THIS OFFERING. We may suspend the use of this prospectus if
we learn of any event that causes this prospectus to include an untrue statement
of material fact or omit to state a material fact required to be stated in the
prospectus or necessary to make the statements in the prospectus not misleading
in light of the circumstances then existing. If this type of event occurs, a
prospectus supplement or post-effective amendment, if required, will be
distributed to the selling stockholders.stockholder. Any material changes in this plan of
distribution will be reflected in a post-effective amendment.
Computershare Trust Company, Inc., formerly called American Securities
Transfer & Trust, Inc., located at 12039 W. Alameda Parkway, Lakewood,350 Indiana Street, Suite 800, Golden,
Colorado, 80228,80401 is the transfer agent and registrar for our common stock.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares being
offered by the prospectus will be passed upon by Henry T. Meyer, Esq., 110
Marcus Drive, Melville, New York 11747. Mr. Meyer is Fonar's General Counsel.
EXPERTSExperts
The consolidated financial statements and supplemental financial schedules
contained in Fonar's latest annual report on Form 10-K/A,10-K, incorporated by
reference into this prospectus, hashave been audited by GrassiMarcum & Co., CPA's, P.C.,Kliegman, LLP, to
the extent set forth in their report. Such consolidated financial statements and supplemental consolidated financial
schedules were included therein in reliance upon their reports, given on their
authority as experts in accounting and auditing.
MATERIAL CHANGES
The Company no longer consolidates any medical practices which it manages.
In 1999, 2000 and 2001, the Company had consolidated certain medical practices
managed as a result of the 1998 acquisitions of A & A Services, Inc. and Dynamic
Health Care Management, Inc. The Company also previously consolidated the
practices conducted by Superior Medical Services, P.C. in 1999, 2000 and 2001.
The Company has determined that consolidation of such medical practices is not
appropriate because the underlying management agreements do not meet all of the
six criteria of Emerging Issues Task Force ("EITF") Consensus No. 97-2.
Accordingly, the consolidated financial statements have been restated. The
significant effect of such restated financial statements for 1999, 2000 and 2001
has been to decrease revenue and related costs by $3.7 million, $3.8 million and
$4.2 million respectively. In addition, the balance sheet caption "Excess of
Cost Over Net Assets of Businesses Acquired - Net" has been reclassified to
"Management Agreements - Net".
INDEMNIFICATION
The Delaware General Corporation Law and Fonar's by-laws provide for the
indemnification of an officer or director under certain circumstances against
reasonable expenses incurred in connection with the defense of any action
brought against him by reason of his being a director or officer. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or other persons under Fonar's by-laws or the
Delaware General Corporation Law, Fonar has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Our Securities and Exchange Commission filings are also
available over the Internet at the Securities and Exchange Commission's web site
at http://www.sec.gov. You may also read and copy any document we file at the
Securities and Exchange Commission's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for more information on the public
reference rooms. Our Commission File No. is 0-10248.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means:
- incorporated documents are considered part of this prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the Securities and Exchange Commission will
automatically update and supersede this prospectus.
We are incorporating by reference the documents listed below which were
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934:
- Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 2001, which was filed on November 16, 2001.
- Annual Report on Form 10-K/A10-K for the year ended June 30, 2001,2002, which was
filed on October 30, 2001;7, 2002;
We also incorporate by reference each of the following documents that we
will file with the Securities and Exchange Commission after the date of this
prospectus but before the end of the offering:
- Reports filed under Sections 13(a) and (c) of the Securities Exchange Act
of 1934;
- Definitive proxy or information statements filed under Section 14 of the
Securities Exchange Act of 1934 in connection with any subsequent stockholders'
meeting; and
- Any reports filed under Section 15(d) of the Securities Exchange Act of
1934.
You may request a copy of these filings, at no cost, by contacting us at
the following address or phone number:
Fonar Corporation
110 Marcus Drive
Melville, New York 11747
Attention: Investor Relations
PARTPArt II
INFORMATION NOT REQUIRED IN PROSPECTUSInformation Not Required in prospectus
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the common stock being registered. All amounts
are estimates except the registration fee.
AMOUNT TO BE PAID
SEC Registration Fee $ 1,350.35200.56
Printing 2,500.00*1,000.00
Legal Fees and Expenses 2,500.00*1,000.00
Accounting Fees and Expenses 2,500.00*5,000.00
Blue Sky Fees and Expenses 2,500.00*5,000.00
Transfer Agent and Registrar Fees 2,500.00*5,000.00
Miscellaneous 1,000.00*
----------
Total.............................................1,000.00
-----------
Total.........................................................$ 14,850.35*18,200.56
===========
* estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "Delaware Law") grants corporations the right to limit or eliminate the
personal liability of their directors in certain circumstances in accordance
with provisions therein set forth. Our Certificate of Incorporation contains a
provision eliminating director liability to us and our stockholders for monetary
damages for breach of fiduciary duty as a director. The provision does not,
however, eliminate or limit the personal liability of a director: (i) for any
breach of such director's duty of loyalty to us or our stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under the Delaware statutory provision making
directors personally liable, for improper payment of dividends or improper stock
purchases or redemptions; or (iv) for any transaction from which the director
derived an improper personal benefit. This provision offers persons who serve on
our Board of Directors protection against awards of monetary damages resulting
from breaches of their duty of care (except as indicated above). As a result of
this provision, our ability or a stockholder's ability to successfully prosecute
an action against a director for a breach of his duty of care is limited.
However, the provision does not affect the availability of equitable remedies
such as an injunction or rescission based upon a director's breach of his duty
of care. The SEC has taken the position that the provision will have no effect
on claims arising under federal securities laws.
Section 145 of the Delaware Law grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with the
provisions therein set forth. Our By-laws provide that the corporation shall,
subject to limited exceptions, indemnify its directors and executive officers to
the fullest extent not prohibited by the Delaware Law. Our By-laws provide
further that the corporation shall have the power to indemnify its other
officers, employees and her agents as set forth in the Delaware Law. Such
indemnification rights permit reimbursement for expenses incurred by such
director, executive officer, other officer, employee or agent in advance of the
final disposition of such proceeding in accordance with the applicable
provisions of the Delaware Law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of us
pursuant to these provisions, or otherwise, we have been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
Item 16. Exhibits and Financial Statement Schedules
Exhibits
4.1 * Specimen Common Stock Certificate incorporated herein by
reference to Exhibit 4.1 to the Registrant's registration
statement on Form S-1, Commission File No. 33-13365.
4.2 * Article Fourth of the Certificate of Incorporation, as amended,
of the Registrant incorporated by reference to Exhibit 4.1 to the
Registrant's registration statement on Form S-8, Commission File
No. 33-62099.
4.3 * Section A of Article FOURTH of the Certificate of Incorporation,
as amended, of the Registrant incorporated by reference to Exhibit
4.3 to the Registrant's registration statement on Form S-3,
Commission File No.333-63782No. 333-63782.
4.4 * Form of 4% Convertible Debentures due June 30, 2002 incorporated
herein by reference to Exhibit 4.1 of the Registrant's current
report on ForForm 8-K filed on June 11, 2001. Commission File No.
0-10248.
4.5 * Form of Purchase Warrants incorporated herein by reference to
Exhibit 4.2 of the Registrant's current report on Form 8-K filed
on June 11, 2001. Commission File No. 0-10248.
4.6 * Form of Callable Warrants incorporated herein by reference to
Exhibit 4.3 of the Registrant's current reports on Form 8-K filed
on June 11, 2001. Commission File No. 0-10248.
4.7 * Amendments dated October 25, 2001 to 4% Convertible Debentures due
June 30, 2002, incorporated by reference to Exhibit 4.7 to the
Registrant's registration statement on Form S-3, Commission file No.
333-63782.
5.of Replacement Callable Warrants. See Exhibits.
5 Opinion of Counsel re: Legality. See Exhibits.
10.1 *10.1* License Agreement between Fonar and Raymond V. Damadian
incorporated herein by reference to Exhibit 10 (e) to Form 10-K
for the fiscal year ended June 30, 1983, Commission File No.
0-10248
10.2 *10.2* 1993 Incentive Stock Option Plan incorporated herein by reference
to Exhibit 28.1 to the Registrant's registration statement on Form
S-8, Commission File No. 33-60154.
10.3 *10.3* 1997 Non-Statutory Stock Option Plan incorporated herein by
reference to Exhibit 28.1 to the Registrant's registration
statement on Form S-8, Commission File No.: 333-27411.
10.4 *10.4* 1997 Stock Bonus Plan incorporated herein by reference to Exhibit
28.2 to the Registrant's registration statement on Form S-8,
Commission File No:No. 333-27411
10.5 *10.5* 2000 Stock Bonus Plan incorporated herein by reference to Exhibit
99.1 to the Registrant's registration statement on Form S-8,
Commission File No. 333- 66760.
10.6* 2002 Stock Bonus Plan incorporated herein by reference to Exhibit
99.1 to the Registrant's registration statement on Form S-8,
Commission File No. 333-89578.
10.7* 2002 Incentive Stock Option Plan incorporated herein by reference
to Exhibit 99.1 to the Registrant's registration statement on Form
S-8, Commission File No. 333-96557.
10.8* Stock Purchase Agreement, dated July 31, 1997 by and between U.S.
Health Management Corporation , Raymond V. Damadian, M.D. MR
Scanning Centers Management Company and Raymond V. Damadian,
incorporated herein by reference to Exhibit 2.1 to the
Registrant's Form 8-K, July 31, 1997, Commission File No: 0-10248.
10.6 *10.9* Merger Agreement and Supplemental Agreement dated June 17, 1997
and Letter of Amendment dated June 27, 1997 by and among U.S.
Health Management Corporation and Affordable Diagnostics Inc. et
al., incorporated herein by reference to Exhibit 2.1 to the
Registrant's 8-K, June 30, 1997, Commission File No: 0-10248.
10.7 *10.10* Stock Purchase Agreement dated March 20, 1998 by and among Health
Management Corporation of America, Fonar Corporation, Giovanni
Marciano, Glenn Muraca et al., incorporated herein by reference to
Exhibit 2.1 to the Registrant's 8-K, March 20, 1998, Commission
File No: 0-10248.
10.8 *10.11* Stock Purchase Agreement dated August 20, 1998 by and among Health
Management Corporation of America, Fonar Corporation, Stuart
Blumberg and Steven Jonas, incorporated herein by reference to
Exhibit 2 to the Registrant's 8-K, September 3, 1998, Commission
File No. 0-10248.
10.9 *10.12* Purchase Agreement dated May 24, 2001 by and between Fonar and The
Tail Wind Fund Ltd. incorporated herein by reference to Exhibit
10.1 to the Registrant's current report on Form 8-K filed June 11,
2001. Commission File No. 0-10248.
10.10 *10.13* Registration Rights Agreement dated May 24,200124, 2001 by and among
Fonar, The Tail Wind Fund Ltd. and Roan Meyers, Inc. incorporated
herein by reference to Exhibit 10.2 to the Registrant's current
report on Form 8-K filed June 11, 2001. Commission File No.
0-10248.
10.11 * Stock Subscription Agreement dated January 17, 2001, between Fonar
and eMajix.com, Inc.. Incorporated herein by reference to Exhibit
10.11 to the Registrant's registration statement on Form S-3 filed on
December 7, 2001. Commission File NO. 333-74810.
10.12 Stock Payment Agreement dated December 20, 2001 among Fonar, Health
Management Corporation of America, Glenn Muraca, M.D. and Giovanni
Marciano, M.D. See Exhibits.10.14* Callable Purchase Warrant.
23.1 Consent of GrassiMarcum & Co., CPA's, P.C.,Kliegman LLP, Certified Public Accountants.
(See Exhibits).
23.2 (Consent of Counsel is included in Exhibit 5).
* Exhibits incorporated by reference.
Financial Statement Schedules
None
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement. (iii)To include any material information
with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(b) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13 (a) or section 15 (d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on January 11,October 22, 2002.
Dated: January 11,October 22, 2002
FONAR CORPORATION
By: /s/ Raymond V. Damadian
Raymond V. Damadian,
President, Acting Chief Financial Officer
and Acting Principal Accounting Officer
Signing in his capacities as Principal
Executive Officer, Principal Financial
Officer and Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
/s/ Raymond V. Damadian Chairman of the Board
- ------------------------ of Directors, President
and a January 11, 2002
/s/Raymond V. Damadian and a Director (Principal Raymond V. DamadianOctober 22, 2002
Executive Officer,
Principal Financial
Officer and Principal
Accounting Officer)
___________________ Director January 11, 2002/s/ Claudette J.V. Chan Director January 11,October 22, 2002
- ------------------------
Claudette J.V. Chan
/s/Robert J. Janoff Robert J. Janoff Director January 11,October 22, 2002
- --------------------
Robert J. Janoff
/s/Charles N. O'Data Director October 22, 2002
- ----------------------
Charles N. O'Data
/s/ Robert Djerejian Director October 22, 2002
Robert Djerejian