PROSPECTUS Filing pursuant to Rule 424(b)(1)
Registration Statement No. 333-109491
5,000,000 Shares
FONAR CORPORATION
Common Stock
This prospectus will allow us to offer and sell to the public up to 5,000,000
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 10 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 October 17, 2003, the last reported sales price for our common stock
was $1.33 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 5 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 October 20, 2003.
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.
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TABLE OF CONTENTS
ABOUT THIS PROSPECTUS.......................................................2
ABOUT FONAR..................................................................2
RISK FACTORS ................................................................5
FORWARD LOOKING STATEMENTS.. ...............................................10
USE OF PROCEEDS.............................................................10
PLAN OF DISTRIBUTION .......................................................10
LEGAL MATTERS...............................................................13
EXPERTS.....................................................................13
INDEMNIFICATION ............................................................14
WHERE YOU CAN FIND MOREINFORMATION..........................................14
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................14
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 5,000,000 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, QUAD(TM),
Fonar-360(TM) and Echo(TM). The QUAD-S(TM) MRI, a work-in-progress, also has
received FDA clearance to market.
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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.
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-S is a superconductive version of our open magnet.
Fonar also offers a low cost, low field open MRI scanner, the Echo.
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 and physical
rehabilitation and therapy 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 furnishings,
consumable supplies and in some cases the office space used by our clients. 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 11 MRI facilities and six physical therapy and
rehabilitation practices. In April 2003, HMCA sold its subsidiary, A&A Services,
Inc. which managed primary care medical practices. For the 2003 fiscal year, the
revenues HMCA recognized from the MRI facilities were $13,497,837 and the
revenues recognized from the physical therapy and rehabilitation practices were
$9,435,000. The revenues recognized from the management of the primary care
medical practices were $1,179,095 through April 9, 2003, when we sold this part
of our business. These revenues and the results of the operation of this part of
our business are part of discontinued operations and are not included in our
discussion of the results of our consolidated or HMCA's operations for current
or prior periods. Since this sale of A&A Services, Inc., none of HMCA's clients
are parties to capitated or other risk sharing plans with HMO's, managed care
companies or other insurers.
Approximately 56.6% of our consolidated revenues for the fiscal year ended June
30, 2003 and 37.4% for the fiscal year ended June 30, 2002 were from our medical
equipment segment.
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Approximately 43.4% of our consolidated revenues for the fiscal year ended June
30, 2002 and 62.6% for the fiscal year ended June 30, 2002 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 $11.1 million in fiscal 2002 to
$24.3 million in fiscal 2003. Overall, revenues attributable to our medical
equipment segment increased by 85.2% to $30.0 million in fiscal 2003 from $16.2
million in fiscal 2002, which includes an increase in product sales of 115% to
24.9 million in fiscal 2003 from $11.6 million in fiscal 2002. Revenues
attributable to HMCA's continuing operations declined, however, by 15.1% to
$22.9 million in fiscal 2003 from $27.0 million in fiscal 2002. The decrease in
revenues reflected a decline in MRI scan volume prior to upgrading older
scanners and the closing of certain MRI facilities and other facilities we
managed. Presently, HMCA manages three MRI facilities equipped with Stand-Up(TM)
MRI scanners and has leased space in Boca Raton, Florida for a new Stand-Up(TM)
MRI facility to replace the existing MRI facility in Deerfield Beach, Florida.
Approximately 58% of our consolidated revenues and 99% of HMCA's revenues for
the fiscal year ended June 30, 2003 and 78% of our consolidated revenues and 99%
of HMCA's revenues for the fiscal year ended June 30, 2002 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: $7.7 million for fiscal 2003
and $6.5 million for fiscal 2002. Confirming our expectation of increased demand
for our MRI scanners, product sales revenues in the medical equipment segment to
unrelated parties increased by 228% in fiscal 2003 to $17.7 million from $5.4
million in fiscal 2002. This 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."
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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, 2003 and June 30, 2002, we experienced net
losses of $15.0 million and $22.9 million respectively and net operating losses
from continuing operations of $15.1 million and $14.4 million, respectively.
Total net losses from continuing operations for fiscal 2003 and fiscal 2002 were
$15.2 million and $17.0 million respectively. In fiscal 2003, we recognized a
total net gain of $194,000 from discontinued operations as compared to a loss of
$5.9 million in fiscal 2002. The gain in fiscal 2003 was attributable to a gain
of $510,000 realized from the sale of the discontinued operations. 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 $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. The terms of
these settlement agreements are required to be kept confidential. More recently,
we have improved our liquidity and cash position not only through revenues
generated by the sale of Stand-Up(TM) MRI scanners but by the issuance of
5,433,077 shares of our common stock in connection with the payment of vendors
and suppliers of goods and services. The greater number of these shares were
used in lieu of cash to pay the costs of manufacturing our MRI scanners. As of
June 30, 2003, our balance sheet reflected approximately $9.3 million in cash
and cash equivalents and $5.8 million in marketable securities out of total
current assets of $35.3 million as compared to approximately $7.5 million in
cash or cash equivalents and $5.6 million in marketable securities out of total
current assets of $45.1 million as of June 30, 2002. We believe that we will be
able to reverse our operating losses by continuing the marketing of our new MRI
scanners, particularly our Stand-Up(TM) MRI scanners. HMCA operating losses from
continuing operations have increased, however to $3.8 million in fiscal 2003
from $1.1 million in fiscal 2002. Contributing to the operating loss of HMCA,
was an impairment loss of $795,235 on a management agreement with an
unprofitable physical rehabilitation and therapy facility which ceased
operations in the beginning of the second quarter of fiscal 2003. Since that
time all HMCA managed facilities have been owned by Dr. Damadian. Although we
are optimistic that we can restore HMCA to profitability principally by
upgrading scanners at MRI facilities we manage to Stand-Up(TM) MRI scanners,
only three of our 11 managed MRI facilities have the Stand-Up(TM) MRI. 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 of MRI products. The Stand-Up(TM) MRI, Fonar 360 and Echo
scanners have all 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 or timing of market acceptance of these products. We
have received orders, however, for 20 Stand-Up(TM) MRI scanners in fiscal 2002
and orders for 22 Stand-Up(TM) MRI Scanners in fiscal 2003. Revenues from the
sales of QUAD scanners, introduced in 1995, had not been sufficient to generate
operating profits. The product we now are currently 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 2002. 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.
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Revenues Recognized
Model Fiscal Year Fiscal Year
2003 2002
------------ ------------
Stand-Up $ 24,298,460 $ 11,089,675
Fonar 360 $ 0 $ 0
QUAD $ 0 $ 0
Echo $ 0 $ 0
Beta (used) $ 100,000 $ 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., 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. Although these acquisitions have been essentially integrated with
the business of HMCA, or in the case of the management of primary care medical
practices, discontinued, some of these relationships still depend on the
personal efforts of key persons in the acquired company. HMCA has retained
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.
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5. 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 99% of the receivables billed and
collected by HMCA in fiscal 2003 were from professional corporations owned by
Raymond V. Damadian.
6. The profitability of HMCA could be adversely affected if medical insurance
reimbursement rates change.
HMCA receives substantially all of its revenue 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 medical practice or MRI facility. The
types of medical providers served by HMCA are MRI facilities and physical
therapy and rehabilitation practices. There are 11 MRI facilities served by HMCA
located in New York, Florida and Georgia. The physical therapy and
rehabilitation practices consist of six offices located in New York.
Approximately 57.7% of HMCA's clients' revenues in fiscal 2003 and approximately
43.2% of HMCA's clients' revenues in fiscal 2002 were generated from no-fault
and personal injury protection claims. Approximately 11.1% of HMCA's clients'
revenues were from workers' compensation claims in fiscal 2003 as compared to
8.7% in fiscal 2002. In addition, in fiscal 2003, approximately 11.8% of the
revenues of HMCA's clients were attributable to Medicare and 0.5% were
attributable to Medicaid. In fiscal 2002, approximately 8.8% of the revenues of
HMCA's clients were attributable to Medicare and 0.17% 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 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 its clients to attract and retain physicians and other
professional staff.
7. The amortization of the management agreements on our balance sheet will
reduce future profits.
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HMCA acquired businesses 1997 and 1998 which were essentially service businesses
for purchase prices based on earnings multiples rather than net tangible assets.
As the fair value of the tangible assets was small relative to the purchase
price, the consolidated balance sheet of Fonar and its subsidiaries has
reflected an allocation of the purchase price in excess of the fair value of the
tangible assets exclusively to management agreements, an intangible asset. For
fiscal 2003 and fiscal 2002, amortization of management agreements, which is
over a period of twenty (20) years, reduced net profits by approximately
$696,000 annually. This is a non-cash expense.
8. 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 client medical practices or MRI facilities would also sue
HMCA. With the exception of one MRI facility, neither HMCA nor its clients carry
professional liability insurance. Physicians working for HMCA's clients or for
HMCA's subsidiaries, however, 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.
9. 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.
10. 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. In connection with the physician and
diagnostic management services business conducted by HMCA, Dr. Damadian now owns
all of the professional corporations which are HMCA clients. With the exception
of one professional corporation which provided management fees to HMCA of
approximately $25,000 in the aggregate in fiscal 2003, all of HMCA's revenues in
fiscal 2003 were provided by professional corporations which 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.
11. Dr. Raymond V. Damadian has voting control of Fonar; the management cannot
be changed or the company sold without his agreement.
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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 3, 2003, there
were outstanding 85,890,712 shares of common stock, having one vote per share,
4,153 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 74% 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.
12. The provisions of our warrants provide for reductions in the exercise price
if we issue common stock at prices below market or below the warrant
exercise prices.
In connection with the issuance of 4% convertible debentures issued to The Tail
Wind Fund Ltd, we issued warrants. Presently, there are outstanding:
purchase warrants to purchase an aggregate of 959,501 shares of our common
stock at an exercise price of $1.801 per share, subject to adjustment; and
callable warrants to purchase an aggregate of 1,800,000 shares of our
common stock at a fluctuating exercise price which will vary depending on
the market price for our common stock.
Of the purchase warrants, 659,501 were issued to The Tail Wind Fund, Ltd. and
300,000 were issued to designees of the placement agent, Roan/Meyers Associates,
L.P. None of the purchase warrants have been exercised and all of the purchase
warrants are still outstanding. The exercise period for the purchase warrants
extends to May 24, 2006.
The callable warrants originally covered 2,000,000 shares of common stock and
have a variable exercise price. Subject to a maximum price of $6.00 per share
and a minimum price of $2.00 per share, which is subject to adjustment pursuant
to the terms of the warrants, the exercise price is 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 callable warrants will be exercisable
until August 30, 2005. Of these warrants, The Tail Wind Fund, Ltd. exercised its
right to buy 200,000 shares of our common stock, at a price of $1.42 per share.
The lower price was the result of our issuing shares at prices lower than the
minimum exercise price of the warrants. These callable warrants were issued to
replace the original callable warrants, which were exercised in full.
We do have the option, however, of redeeming up to 200,000 callable warrants per
month at a price of $0.01 per underlying warrant share, if the average closing
bid price of Fonar's common stock is greater than 115% of the warrant price in
effect for five consecutive trading days in any calendar month. We also have the
option of reducing the exercise price under the callable warrants to any lower
exercise price that was previously in effect.
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Both the purchase warrants and callable warrants provide for proportionate
adjustments in the event of stock splits, stock dividends and reverse stock
splits. In addition, the exercise prices will be reduced, with certain specified
exceptions, if we issue shares at lower prices than the warrant exercise prices
or the then current market price for our common stock.
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, if any, 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 intend to invest the net proceeds, if any, 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;
Page 10
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.
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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.
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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
the shares are sold 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 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.
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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, 2003, which was
filed on September 30, 2003;
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;
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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
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