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Fonar Corp. reports swing to profit

Raymond Damadian with the prototype stand-up magnetic resonance

Raymond Damadian with the prototype stand-up magnetic resonance machine invented at the Fonar Corp. in Melville. (Oct. 9, 2003) Photo Credit: Richard Slattery, 2003

Magnetic resonance imaging company Fonar Corp., of Melville, says it swung to a profit in its most recent fiscal year ended June 30, even though its sales of new machines were down sharply, as revenue from its existing machines rose strongly.

Fonar's stock on Monday fell nearly 18 percent in late morning trading, to $1.60. Shares of Fonar, which has 238 employees and a market capitalization of $9.31 million, are up 25 percent this year.

Fonar turned the yearly profit by making more money from the existing network of MRI scanners it operates and manages across the United States, the company said. In the past year it has charged more per scan, and has performed more scans per machine, the company said.

Its annual sales of new machines dropped to $6.68 million for the fiscal year ending June 30, down from $9 million in MRI scanning machines the previous year, the company said.

However its income from management and other fees improved to $15.3 million, up from $11 million the previous year. At the same time Fonar's costs remained stable, the company said.

It earned $3.16 million on $33.1 million of total net revenues for the year ended June 30. In its fiscal 2010, the company lost $3 million on $31.8 million in net revenue, the company said in a filing with the Securities and Exchange Commission. In effect, the company said, its profit rose more than $6 million year-to-year while its revenue improved by $1.3 million.

In recent years Fonar has repeatedly been on the edge of delisting from the Nasdaq stock exchange.

Fonar makes MRI machines designed to take spinal and body images while the patient sits or stands, in contrast to standard MRIs that slide patients, prone, into a tunnel.

The company's profit turnaround was due in part to a 14 percent increase in management fees and scans per month at clinics Fonar operates nationwide, the company said.

"We have worked hard in this difficult economic environment to have five straight quarters of profitability and we are hopeful to continue," Dr. Raymond Damadian, the founder and president, said in a release. Damadian, a medical doctor and research scientist, is known for his failed attempt to persuade the Nobel Prize committee to include him among its 2003 honorees for pioneering MRI work.

"During Fiscal 2011 the average number of scans per month for each of the ten centers increased to 302 from 266 the previous fiscal year, a 14% increase.” Revenues at an affiliated company rose to $15.3 million from $11.1 million a year earlier. “It is remarkable that this occurred while costs and expenses related to revenues were flat,” Damadian said.

A medical study in the July 2010 issue of "Brain Injury" suggested that Fonar's upright MRI scanners can produce images of whiplash injuries that are undetected by standard magnetic resonance imaging machines.

In standard MRI sessions for patients who complain of spinal and neck injuries, most machines are configured to have patients lie down. Fonar’s machines, by contrast, take images of patients in sitting and standing positions.

Commenting on the July 2010 study, Fonar's Damadian said, "for the first time, definitive anatomic evidence of the injuries sustained by whiplash victims in a motor vehicle accident can be provided” through the upright machines.

Photo: Raymond Damadian with the prototype stand-up magnetic resonance machine invented at the Fonar Corp. in Melville.

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