As filed with the Securities and Exchange Commission
On August 8, 2005
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
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(State or other Primary Standard (I.R.S.
jurisdiction of Industrial Employer
incorporation or Classification Identification
organization) Code Number No.)
110 Marcus Drive
Melville, New York 11747
(631) 694-2929
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(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
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(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:
At any time and from time to time 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
Title of each Amount Proposed Proposed Amount of
class of securities to be maximum maximum
registration
to be registered registered offering aggregate fee
price offering
Per Unit price
------------------- ---------- -------------- ----------- -----------
Common Stock (1)
Par value $0.0001 10,000,000 $1.18 $11,800,000 $1,388.86
per share
1) Pursuant to Rule 457, subsection (c): Specified date: August 4, 2005
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
----------
10,000,000 Shares
FONAR CORPORATION
Common Stock
This prospectus will allow us to offer and sell to the public up to
10,000,000 shares of our common stock from time to time in one or more
issuances.
We may sell the shares in open market transactions from time to time at
market prices through dealers, brokers, or agents, to underwriters or
dealers, or directly to investors. See "PLAN OF DISTRIBUTION" at page 12 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 August 4, 2005, the last reported sales price for our common
stock was $1.18 per share.
This prospectus provides you with a general description of the shares that
we may offer. Each time we sell shares, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More
Information" before you make your investment decision.
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 August __, 2005.
You may rely only on the information contained in this prospectus and in any
prospectus supplement, including the information incorporated by reference.
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.....................................................................
ABOUT FONAR....................................................................
RISK FACTORS ..................................................................
FORWARD LOOKING STATEMENTS ...................................................
USE OF PROCEEDS...............................................................
PLAN OF DISTRIBUTION .........................................................
LEGAL MATTERS.................................................................
EXPERTS ......................................................................
INDEMNIFICATION ..............................................................
WHERE YOU CAN FIND MORE INFORMATION...........................................
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process we may issue and sell from time to time in one or
more offerings up to 10,000,000 shares of our common stock in the aggregate.
Each time we sell shares of our common stock, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also 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.
Fonar offers the following MRI scanners: the Stand-Up(tm) MRI and Fonar-
360(tm). For the 2004 fiscal year, the revenues recognized by our medical
equipment segment (including product sales, service and certain license fees
and royalties product) were $48.6 million and for the first nine months of
fiscal 2005 the revenues recognized by our medical equipment segment were
$62.3 million.
The Stand-Up(tm) MRI allows patients to be scanned while standing, bending,
sitting or lying down. 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 an intermediate
angle or in any of the conventional recumbent positions. In the future, the
Stand-Up(tm) 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.
In addition to manufacturing MRI scanning systems, we formed a subsidiary in
1997, Health Management Corporation of America, which we sometimes call
HMCA. HMCA is engaged in the business of managing MRI imaging facilities.
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 furnishings, consumable supplies and in
some cases the office space used by our clients. All of HMCA's MRI client
professional corporations are owned by Fonar's founder, President and
Chairman of the Board, Dr. Raymond V. Damadian.
From August, 1998 to July 28, 2005, HMCA was also in the business of
managing physical therapy and rehabilitation facilities. On July 28, 2005
we sold this portion of our business and the related assets for a purchase
price of $6.6 million, payable pursuant to a promissory note in 120 monthly
installments. The first 12 months consist of interest only and the
remaining 108 monthly installments consist of equal payments of principal
and interest of $76,014 each. The note is subject to prepayment provisions
if the buyer resells all or part of the assets and business or if the buyer
utilizes the assets purchased as collateral in any debt financing.
Previously, in the fourth quarter of fiscal 2005, Dr. Damadian ceased
operating the physical therapy and rehabilitation facilities, and new
professional corporations, owned by independent practitioners, began
operating the facilities, who had no financial or investment interest with
HMCA, Dr. Damadian or his affiliates, other than the P.C.'s management
agreements with HMCA. Consequently, as of the date of this prospectus,
neither Fonar, HMCA nor Dr. Damadian has any involvement in the management
or operation of physical therapy and rehabilitation facilities. HMCA
decided to sell the physical therapy and rehabilitation management business
and focus its efforts and capital on expanding its MRI facility management
business, which was its first business and with which it is most familiar.
Fonar has experienced accelerated growth from its MRI manufacturing and has
elected to focus its and HMCA's corporate efforts on MRI related business.
HMCA currently manages 10 MRI facilities. The professional corporations
managed are owned by Dr. Damadian. None of HMCA's clients are parties to
capitated or other risk sharing plans with HMO's, managed care companies or
other insurers. For the 2004 fiscal year the revenues recognized for the
MRI facilities were $13.3 million and the revenues recognized from the
physical therapy and rehabilitation practices were $9.7 million. For the
first nine months of fiscal 2005, the revenues recognized by HMCA from the
MRI facilities were $10.4 million and the revenues recognized from the
physical therapy and rehabilitation practices were $7.2 million.
HMCA is seeking to increase revenues from the MRI facilities by continuing
its program of replacing older scanners at sites we manage with Fonar Stand-
Up(tm) MRI scanners and opening new sites with Stand-Up(tm) MRI scanners and
establishing new MRI sites equipped with Stand-Up(tm) MRI scanners. Of the
10 MRI sites presently managed, seven are equipped with Stand-Up(tm) MRI
scanners. HMCA is planning to open three new sites equipped with Stand-
Up(tm) MRI scanners within the next 12 months and replace one older scanner
with a Stand-Up(tm) MRI scanner.
Approximately 78% of our consolidated revenues for the first nine months of
fiscal 2005, and 68.6% of our consolidated revenues for the fiscal year
ended June 30, 2004 were from our medical equipment segment. Approximately
22% of our consolidated revenues for the first nine months of fiscal 2005,
and 32% of our consolidated revenues for the fiscal year ended June 30, 2004
were from HMCA's management services.
This change is principally due to the increased sales revenues from our
Stand-Up(tm) MRI scanners, which increased from $42.7 million in fiscal 2004
to $55.4 million for only the first nine months of fiscal 2005. Revenues
attributable to HMCA's operations were $23 million for 2004, compared to
$17.6 million for the first nine months of fiscal 2005. The number of
facilities with new scanners managed by HMCA, however, has been increasing.
Approximately 28.6% of our consolidated revenues and 100% of HMCA's revenues
for the first nine months of fiscal 2005 and 40.2% of our consolidated
revenues and 100% of HMCA's revenues for the fiscal year ended June 30, 2004
were derived from professional corporations and other entities controlled by
Dr. Raymond V. Damadian or members of his family. The consolidated revenues
include revenues from sales and service by Fonar to such entities: $5.2
million for the first nine months of fiscal 2005, and $5.8 million for
fiscal 2004. Confirming our expectation of increased demand for our MRI
scanners, product sales revenues in the medical equipment segment to
unrelated parties increased from $37.7 million in fiscal 2004 to $51.8
million for the first nine months of fiscal 2005, already surpassing the
total for the full fiscal 2004 year. In addition, service and repair fees
from unrelated parties increased from $2.7 million in fiscal 2004 to $3.5
million for the first nine months of fiscal 2005, already surpassing last
year's total. This increase in product sales to and service fees from
unrelated parties is the principal reason for the reduction of the
percentage of our revenues derived from sales to related parties.
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.
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.
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. In the past we have experienced significant losses and may in the
future incur losses.
For the fiscal years ended June 30, 2004 and June 30, 2003, we experienced
net losses of $9.5 million and $15.0 million respectively and losses from
operations of $8.4 million and $15.1 million, respectively. Total net
losses from continuing operations for fiscal 2004 and fiscal 2003 were $9.5
million and $15.2 million respectively, as included in the June 30, 2004 10-
K filed on September 14, 2004. In the first quarter of fiscal 2005 we
achieved profitability, realizing net income of $786,000. For the first
nine months of fiscal 2005, we had net income of $1.4 million and income
from operations of $2.1 million as compared to a net loss of $7.9 million
and a loss from operations of $7.6 million for the first nine months of
fiscal 2004.
As of June 30, 2004, our consolidated balance sheet reflected $9.5 million
in cash and cash equivalents and $11.1 million in marketable securities out
of total current assets of $55.1 million as compared to $6.4 million in cash
and cash equivalents and $10.6 million in marketable securities out of total
current assets of $54.5 million as of March 31, 2005, reflecting a decrease
in cash, cash equivalents and marketable securities and the investment of a
greater percentage of cash in marketable securities. We believe that we
will be able to maintain our operating income by continuing the marketing of
our new MRI scanners, particularly our Stand-Up(tm) MRI scanners.
Notwithstanding that we recognized net income of $1.4 million for the first
nine months of fiscal 2005, we experienced a net loss of $480,000 in the
third quarter, and there can be no assurance that we will be able to
maintain profitability.
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 MRI products. The Stand-Up(tm) MRI and Fonar 360
scanners have been introduced into the market. Although we are optimistic
that these scanners' features will make them competitive, and we perceive
that the Stand-Up(tm) MRI is successfully penetrating the market, there can
be no assurance as to the degree, timing or continuation of market
acceptance of these products. We have received orders, however, for 8
Stand-Up(tm) MRI scanners in fiscal 2001, 16 Stand-Up(tm) MRI scanners in
fiscal 2002, 22 Stand-Up(tm) MRI scanners in fiscal 2003, 39 Stand-Up(tm)
MRI scanners in fiscal 2004 and 23 Stand-Up(tm) MRI scanners in the first
nine months of fiscal 2005. The product we are promoting most vigorously is
the Stand-Up(tm) MRI. We believe the Stand-Up(tm) MRI is the most promising
because it enables scans to be performed on patients in weight bearing
positions, such as sitting, standing or lying at an intermediate angle or in
any of the conventional recumbent positions. The following chart shows the
revenues attributable to each model during fiscal year 2003 and fiscal year
2004 and the first nine months of fiscal 2005. Please note that we
recognize the revenue on scanner sales on a percentage of completion basis.
This means we book revenue not as cash 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.
Revenues Recognized
-------------------
Model Fiscal Year Fiscal Year Fiscal Year
2005 (9 months) 2004 2003
----------- --------------- ----------- -----------
Stand-Up $55,401,224 $42,688,377 $ 24,298,460
Fonar 360 $ 705,317 $ 0 $ 0
Beta (used) $ 0 $ 0 $ 100,000
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., 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. 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 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 100% of the
receivables billed and collected by HMCA in fiscal 2004 were from
professional corporations owned by Dr. Raymond V. Damadian and 100% of the
receivables billed and collected by HMCA for the nine months ended March 31,
2005 were from professional corporations owned by Dr. Damadian.
5. The profitability of HMCA could be adversely affected if medical
insurance reimbursement rates change.
All HMCA's revenue has been from physician 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 facility. Since July 28, 2005 (first
quarter of fiscal 2006) the types of medical providers served by HMCA are
MRI facilities. There are currently 10 MRI facilities served by HMCA
located in New York, Florida and Georgia; HMCA sold its physical therapy and
rehabilitation management business on July 28, 2005. Approximately 57.9% of
HMCA's clients' revenues in fiscal 2004 and approximately 57.6% of HMCA's
clients' revenues in fiscal 2003 were generated from no-fault and personal
injury protection claims. Approximately 6.7% of HMCA's clients' revenues
were from workers' compensation claims in fiscal 2004 as compared to 11.1%
in fiscal 2003. For the first nine months of fiscal 2005 approximately
59.5% of HMCA's clients' revenues were generated from no-fault and personal
injury protection claims and 5.9% were generated from workers' compensation
claims. In addition, in fiscal 2004, approximately 8.5% of the revenues of
HMCA's clients were attributable to Medicare and 0.9% were attributable to
Medicaid. In fiscal 2003, approximately 12.0% of the revenues of HMCA's
clients were attributable to Medicare and 0.5% were attributable to
Medicaid. For the first nine months of fiscal 2005, approximately 15.7% of
the revenues of HMCA's clients were attributable to Medicare and 6.9% were
attributable to Medicaid. Although we do not know of any pending adverse
development affecting these types of programs, future changes in the
reimbursement levels for MRI, workers compensation, no fault reimbursement
or Medicare, or changes in utilization policies for MRI could adversely
affect the ability of HMCA's clients to pay HMCA's fees. In addition, HMCA
depends on the ability of its clients to attract and retain physicians and
other professional staff.
6. The sale of our physical therapy and rehabilitation facilities
management business will reduce HMCA's revenues.
Although we believe in the long-term, focusing HMCA's efforts and capital on
the MRI facility management business will be beneficial, the immediate
impact of the sale of the physical therapy and rehabilitation facilities
management business will be to reduce HMCA's revenues. For the 2004 fiscal
year, HMCA recognized revenues of $23 million, of which $9.7 million
consisted of management fees paid by the physical therapy and rehabilitation
facilities. The pro-forma amounts for fiscal 2004, giving retroactive
effect to the sale on July 28, 2005 for discontinued operations would be
$13.3 million in revenues. For the first nine months of fiscal 2005, HMCA's
consolidated revenues were $17.6 million. After giving retroactive effect
to the sale for discontinued operations, the revenues would have been $10.4
million.
7. Professional liability claims against HMCA or its clients may exceed
insurance coverage levels.
Although HMCA does not provide medical services, it is possible that a
patient suing one of HMCA's MRI facilities would also sue HMCA. All of
HMCA's 10 currently managed MRI facilities carry professional liability
insurance. In addition, physicians working for HMCA's clients, are required
to maintain professional liability insurance in the minimum amount of
$1,000,000/$3,000,000. Such insurance would not cover HMCA, which is not
insured, and claims in excess of insurance coverage might also have to be
satisfied by HMCA if it were named as a defendant.
8. We are dependent 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. Dr. Damadian owns
all of the professional corporations which are HMCA clients. 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.
9. 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 August 2, 2005,
there were outstanding 106,726,328 shares of common stock, having one vote
per share, 3,953 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 owns 2,488,274 shares of common stock and
9,561,174 shares of Class C common stock, giving him approximately 69.8% of
the voting power of Fonar's voting stock. This means that the holders of
the common stock other than Dr. Damadian 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.
10. The provisions of our warrants provide for reductions in the exercise
price if we issue common stock at prices below the warrant exercise prices.
As of August 5, 2005 there were outstanding purchase warrants to purchase an
aggregate of 1,050,000 shares of our common stock at an exercise price of
$0.79 per share, subject to adjustment.
Of the purchase warrants, 1,000,000 are held by The Tail Wind Fund, Ltd. and
50,000 are held by one of the placement agent's designees. The exercise
period for the purchase warrants extends to May 24, 2009.
The antidilution provisions provide for proportionate adjustments in the
event of stock splits, stock dividends and reverse stock splits. In
addition, the antidilution provisions provide that the exercise price would
be reduced if we issue shares at lower prices than the warrant exercise
price.
If Fonar were to sell shares below the warrant exercise price, the exercise
price would be adjusted based on the price and number of shares sold
relative to the total number of shares outstanding before and after the
sale.
Since the exercise price under the purchase warrants is $0.79, adjustments
based on sales below the warrant exercise price would not be made unless the
effective purchase price per share was less than $0.79.
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 PROCEEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering. We intend to use the net proceeds of this offering for
general corporate purposes, including working capital to fund operating
expenses, accounts payable and capital expenditures. Accordingly, our
management will have broad discretion in the application of any net proceeds
received. Pending such uses, we may invest the net proceeds from this
offering in short-term, interest-bearing, investment grade securities.
PLAN OF DISTRIBUTION
We may sell the shares being offered by us in this prospectus:
* through dealers, brokers or agents;
* through underwriters;
* directly to purchasers; or
* through a combination of any of these methods of sale.
We and our agents and underwriters may sell the shares being offered by us
in this prospectus from time to time in one or more transactions:
* at market prices prevailing at the time of sale;
* at prices related to such prevailing market prices;
* at a fixed price or prices, which may be changed; or
* at negotiated prices.
In addition to any underwriters we may use, 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. In any such case, any such underwriters 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.
We may solicit directly offers to purchase shares. We may also designate
agents from time to time to solicit offers to purchase shares. Any agent
that we designate, may then resell such shares to the public at varying
prices to be determined by such agent at the time of resale.
We may engage in at the market offerings of our common stock. An "at the
market" offering is an offering of our common stock at other than a fixed
price to or through a market maker. Under Rule 415(a)(4) of the Securities
Act, the total value of at the market offerings made under this prospectus
may not exceed 10% of the aggregate market value of our common stock held by
non-affiliates.
If we use underwriters to sell shares, we will enter into an underwriting
agreement with the underwriters at the time of the sale to them. The names
of the underwriters will be set forth in the prospectus supplement which
will be used by them together with this prospectus to make sales of the
shares to the public. Details of our arrangement with the underwriter,
including commissions, underwriting discounts or fees paid by us and whether
the underwriter is acting as principal or agent, would be described in the
prospectus supplement. Underwriters may also receive commissions from
purchasers of the shares..
Underwriters may use dealers to sell shares. If this happens, the dealers
may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents.
Any underwriters to whom we sell shares for public offering and sale may
make a market in the shares that they purchase, but the underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. Underwriters and agents also may engage in transactions
with, or perform services for, us in the ordinary course of business.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
- the identity of any underwriters, dealers or agents who purchase
the common stock;
- the material terms of the distribution, including the number of
shares sold and the consideration paid;
- the amount of any compensation, discounts or commissions to be
received by the underwriters, dealers or agents;
- the terms of any indemnification provisions, including
indemnification from liabilities under the federal securities laws; and
- the nature of any transaction by an underwriter, dealer or agent
during the offering that is intended to stabilize or maintain the market
price of the common stock.
In order to comply with certain state securities laws, if applicable, the
shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the shares may not be sold unless the
shares have been registered or qualified for sale in such state or an
exemption from regulation or qualification is available and is complied
with. Sales of shares must also be made by us in compliance with all other
applicable state securities laws and regulations.
MANNER OF SALES. The shares may be sold according to one or more of the
following methods:
* 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.
* Purchases by a broker or dealer as principal and resale by the broker or
dealer for its account.
* Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
* Pledges of shares to a broker-dealer or other person, who may, in the
event of default, purchase or sell the pledged shares.
* An exchange distribution under the rules of the exchange.
* In private transactions without a broker-dealer.
* By writing options.
* Any combination of the foregoing, or any other available means allowable
under law.
EXPENSES ASSOCIATED WITH REGISTRATION. We will 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 we sell the shares through underwriters or broker-
dealers, we will be responsible for underwriting discounts, underwriting
commissions and agent commissions.
INDEMNIFICATION AND CONTRIBUTION. Underwriters, dealers, agents and other
persons may be entitled, under agreements that may be entered into with us,
to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with
respect to payments which they may be required to make in respect of such
liabilities.
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.
Computershare Trust Company, Inc., formerly called American Securities
Transfer & Trust, Inc., located at 350 Indiana Street, Suite 800, Golden,
Colorado, 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.
EXPERTS
The consolidated financial statements contained in Fonar's latest annual
report on Form 10-K, incorporated by reference into this prospectus, have
been audited by Marcum & Kliegman LLP, an independent registered public
accounting firm, to the extent set forth in their report. Such consolidated
financial statements were included therein in reliance upon their reports,
given on their authority as experts in accounting and auditing.
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. and New York, New York. 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:
- Annual Report on Form 10-K for the year ended June 30, 2004, which
was filed on September 14, 2004;
- Quarterly Reports on Form 10-Q for the quarters ended on September
30, 2004, December 31, 2004 and March 31, 2004, which were filed on November 9,
2004, February 9, 2005 and May 10, 2004, respectively.
- Current Report on Form 8-K filed on August 2, 2005.
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
PART II
INFORMATION 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 $ 1,388.86
Printing 1,000.00
Legal Fees and Expenses 1,000.00
Accounting Fees and Expenses 5,000.00
Blue Sky Fees and Expenses 5,000.00
Transfer Agent and Registrar Fees 5,000.00
Miscellaneous 1,000.00
-----------
Total............................................ . $ 19,388.86
===========
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
3.1 * Certificate of Incorporation, as amended, of the Company
incorporated herein by reference to Exhibit 3.1 to the
Registrant's registration statement on Form S-1, Commission
File No. 33-13365
3.2 * 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.
3.3 * Section A of Article FOURTH of the Certificate of Incorporation
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. 333-63782.
3.4 * Section A of Article FOURTH the Certificate of Incorporation, as
amended, of the Registrant incorporated by reference to Exhibit 3.3
of the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 2003, Commission File No. 0-10248.
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 * Specimen Class B Common Stock Certificate incorporated herein by
reference to Exhibit 4.2 to the Registrant's registration statement
on Form S-1, Commission File No. 33-13365.
4.3 * Form of 4% Convertible Debentures due June 30, 2002 incorporated
herein by reference to Exhibit 4.1 of the Registrant's current
report on Form 8-K filed on June 11, 2001. Commission File
No. 0-10248.
4.4 * 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.
4.5 * 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.
4.6 * Form of Replacement Callable Warrants incorporated herein by
reference to Exhibit 4.7 of the Registrant's registration statement
on Form S-3, Commission File No. 333-10677.
4.7 * Form of Amended and Restated Purchase Warrant for The Tail Wind
Fund, Ltd. incorporated herein by reference to Exhibit 4.7 of the
Registrant's registration statement on Form S-3, Commission File
No. 333-116908.
4.8 * Form of Amended and Restated Purchase Warrant for Placement Agent
and Designees incorporated herein by reference to Exhibit 4.8 of
the Registrant's registration statement on Form S-3, Commission
File No. 333-116908.
5. Opinion of Counsel re: Legality. See Exhibits.
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 * 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 * 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 * 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. 333-27411
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 * 2003 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.
10.9 * 2003 Supplemental Stock Bonus Plan incorporated herein by reference
to Exhibit 99.1 to the Registrant's registration statement on Form
S-8, Commission File No. 333-106626.
10.10 * 2004 Stock Bonus Plan incorporated herein by reference to Exhibit
99.1 to the Registrant's registration statement on Form S-8,
Commission File No. 333-112577.
10.11 * 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.
10.12 * 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.
10.13 * 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.
10.14 * 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.
10.15 * 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.
10.16 * Registration Rights Agreement dated May 24, 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.
10.17 * Amendment to Callable Warrant dated April 28, 2004 by and between
The Tail Wind Fund, Ltd. and Fonar Corporation incorporated herein
by reference to Exhibit 10.17 to the Registrant's registration
statement on Form S-3, Commission File No. 333-116908.
10.18 * First Amendment to Purchase Warrant dated April 28, 2004 by and
between The Tail Wind Fund, Ltd. and Fonar Corporation incorporated
herein by reference to Exhibit 10.18 to the Registrant's
registration statement on Form S-3, Commission File No. 333-116908.
10.19 * Form of First Amendment to Purchase Warrant dated June 1, 2004 by
and between each of Roan/Meyers Associates, L.P. and its designees
incorporated herein by reference to Exhibit 10.19 to the
Registrant's registration statement on Form S-3, Commission File
No. 333-116908.
10.20 * 2005 Stock Bonus Plan incorporated herein by reference to Exhibit
99.1 to the Registrant's registration statement on Form S-8,
Commission File No. 333-122859.
10.21 * 2005 Incentive Stock Option Plan incorporated herein by reference
to Exhibit 99.2 to the Registrant's registration statement on Form
S-8, Commission File No. 333-122859.
10.22 * 2005 Supplemental Stock Bonus Plan incorporated herein by reference
to Exhibit 99.1 to the Registrant's registration statement on Form
S-8, Commission File No. 333-126658.
23.1 Marcum & Kliegman LLP, Independent Registered Public Accounting
Firm's Consent. (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 August 8, 2005.
Dated: August 8, 2005
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
Raymond V. Damadian Directors, President and August 8, 2005
a Director (Principal
Executive Officer,
Principal Financial
Officer and Principal
Accounting Officer)
/s/ Claudette J.V. Chan Director August 8, 2005
Claudette J.V. Chan
/s/ Robert J. Janoff Director August 8, 2005
Robert J. Janoff
/s/ Charles N. O'Data Director August 8, 2005
Charles N. O'Data
/s/ Robert Djerejian Director August 8, 2005
Robert Djerejian