SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported): April 8, 2003
FONAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-10248 11-2464137
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(State or other (Commission File I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
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 office)
Item 2. Acquisition or Disposition of Assets
Disposition of Business
On April 8, 2003, Fonar Corporation's (the "Company" or "Fonar")
wholly-owned subsidiary, Health Management Corporation of America ("HMCA") sold
all of the issued and outstanding stock of A&A Services, Inc. ("A&A Services"),
a physician practice management services organization engaged in the business of
managing four primary care practices located in Queens County, New York (the
"Practices"). The sale was made to Drs. Glenn Muraca and Giovanni Marciano, the
former owners, for a purchase price of $3,000,000, payable as follows: $500,000
at closing, $2,350,000 due 75 days after closing and $150,000 six months
following closing, together with a release of indebtedness in the approximate
amount of $1.1 million. The purchase price was the result of negotiations
settling outstanding litigation and was not based on earnings, book value or
other similar criteria.
The repurchase by the Buyers of the stock was the principal part of a
settlement of three lawsuits which had been instituted by the parties. The first
was instituted by HMCA and Fonar against the Buyers for fraud, failure of
consideration and breach of the contract with respect to the original
acquisition by HMCA of A&A Services, and the second was instituted by
professional corporations managed by HMCA against the Buyers for breach of their
employment agreements. The third case was commenced by M&M Properties, LLC, a
limited liability company in which the Buyers have an interest, against A&A
Services for nonpayment of rent. The case was settled before the defending
parties answered the complaints. As part of the settlement, the parties released
each other of all claims, including approximately $1,090,562 remaining due to
the Buyers with respect to the purchase of A&A Services and approximately
$21,167 owed to M&M Properties, LLC by A&A Services for past due rents. HMCA
took over cash of approximately $20,000 and receivables (net of doubtful
accounts) of approximately $280,000 as of the closing and accounts payable of
approximately $134,000.
There is no family, business or other material relationship between either
of the Buyers and any of Fonar, HMCA, or any of their respective affiliates,
directors, officers or any associate of any such director or officer.
A&A Services provided the Practices with management services, office space,
equipment, repair and maintenance service for the equipment and clerical and
other non-medical personnel. The Practices are primary care practices
specializing in family medicine located in Woodhaven, Richmond Hill, Corona and
Ridgewood in Queens County, New York.
During the first six months of fiscal 2003, A&A Services suffered a net
loss of $224,703 and an operating loss of $77,978, and for fiscal 2002, suffered
a net loss of $5,363,044 and an operating loss of $120,889. For the year ended
June 30, 2002, A&A Services' net loss included a $4.7 million loss in impairment
of A&A Services' management contracts with the Practices which resulted from
declining revenues from the Practices. As at April 7, 2003, the net carrying
value of A&A Services' management contracts was approximately $3.3 million.
Effective March 20, 1998, HMCA had purchased A&A Services from the Buyers
for ten million dollars ($10,000,000) payable in a combination of cash,
promissory notes and HMCA stock. In reselling the Practices to the Buyers, HMCA
has sold a nonprofitable business and elected not to be involved in the
management of primary care practices, but to focus on the management of MRI
scanning centers and physical therapy and rehabilitation facilities.
Item 7. Financial Statements and Exhibits
Financial Statements
The financial statement required by this item will be filed no later than
June 23, 2003.
Exhibits
2. Stock Repurchase and Settlement Agreement dated April 8, 2003
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FONAR CORPORATION
(Registrant)
By: /s/ Raymond V. Damadian
Raymond V. Damadian
President and Chairman
Dated: April 23, 2003