Melville-based Fonar's 2Q profits rise 33%

Fonar Corp., which makes magnetic imaging machines that allow patients to sit up during the test rather than lie down, reported a 33 percent rise in profits in its fiscal second quarter Tuesday, creating a frenzy among investors trading the company's stock.

More than 4 million shares were traded Tuesday -- the average daily trading volume is 32,730 shares -- as Fonar's stock rose 14.43 percent to close at $2.22.

Profits at the small Melville firm, which is perhaps best known for its founder's 2003 feud with the Nobel Prize board, rose to $1.81 million in the October to December period, from $1.36 million in the corresponding quarter a year earlier. Sales were $9.3 million, up from $8 million a year ago.

An investor familiar with the stock, David Sandberg -- founder and portfolio manager at Red Oak Partners, a Manhattan hedge fund -- said it's "a common thing" for shares of Fonar to make big swings in price. Sandberg, previously the largest holder of Fonar's common shares, said he sold all his Fonar holdings late last year.

Dr. Raymond Damadian, president and chairman of Fonar, said investors are noticing the company's improved performance, which he attributed to doctors and patients seeing the value in Fonar's upright machines. First introduced in 2000, there are now more than 150 installed, mostly in labs across the United States, some managed by Fonar. Each machine costs about $1.6 million, Damadian said.

Fonar says its machines capture more effective images of a patient's spine in a seated position, and are less claustrophobic for patients.

Sales in Fonar's division that manages the clinics increased 39 percent in the October to December quarter to $4.9 million. Revenue from new product sales fell to $1.6 million, from $1.8 million a year earlier.

Damadian, a pioneer of MRI technology, purchased full-page advertisements in U.S. newspapers in 2003, criticizing the Nobel Prize committee that awarded the Nobel Prize in Medicine, based on MRI breakthroughs, to two other scientists. The advertisements, published in The New York Times and other papers, cost hundreds of thousands of dollars.

Fonar's website calls the award a "calculated affront to the truth of science."