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<SEC-DOCUMENT>0000355019-02-000001.txt : 20020413
<SEC-HEADER>0000355019-02-000001.hdr.sgml : 20020413
ACCESSION NUMBER:		0000355019-02-000001
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20020114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FONAR CORP
		CENTRAL INDEX KEY:			0000355019
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093]
		IRS NUMBER:				112464137
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-76644
		FILM NUMBER:		2507993

	BUSINESS ADDRESS:	
		STREET 1:		110 MARCUS DR
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
		BUSINESS PHONE:		5166942929

	MAIL ADDRESS:	
		STREET 1:		110 MARCUS DRIVE
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>s3.txt
<TEXT>
              As filed with the Securities and Exchange Commission
                               On January 11, 2002
                          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
(State or other jurisdiction of          Primary Standard Industrial
incorporation or organization)           Classification Code Number

                                   11-2464137
                      (I.R.S. Employer Identification No.)

                                110 Marcus Drive
                            Melville, New York 11747
                                 (631) 694-2929

- -------------------------------------------------------------------------------
                          (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

- -------------------------------------------------------------------------------
(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: As soon as
practicable 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            to be           maximum        maximum         registration
securities to       registered      offering       aggregate       fee
be registered                       price          offering
                                    per unit       price
- -------------       ----------      --------       -----------     ------------
Common Stock         5,000,000      $1.13          $5,650,000      $1,350.35
(1) Par value
$0.0001 per
share
- -------------       ----------      --------       -----------     ------------


(1)  Pursuant to Rule 457, subsection (c); Specified date: January 10, 2002

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
- ----------
                                5,000,000 Shares

                                FONAR CORPORATION

                                  Common Stock

     This is a prospectus for the resale,  from time to time, of up to 5,000,000
shares of our common stock,  2,000,000 shares of which have been issued,  by the
selling stockholders listed in this prospectus,  or by the pledgees or donees of
the selling  stockholders or by other  transferees who may receive the shares of
common stock in transfers  other than public  sales.  We will not receive any of
the proceeds from the sale of these shares.

     The selling  stockholders  may sell the shares in open market  transactions
from time to time at market prices through brokers, dealers or agents. See "PLAN
OF DISTRIBUTION" at page __ 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 January 10, 2002,  the last reported sales price for our common stock
was $1.13 per share.

     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  __ 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 January __, 2002.

     You may rely only on the information contained in this prospectus.  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.

<PAGE>
                                TABLE OF CONTENTS

ABOUT  THIS PROSPECTUS.........................................................
ABOUT FONAR CORPORATION........................................................
ABOUT THIS OFFERING............................................................
RISK FACTORS...................................................................
FORWARD-LOOKING STATEMENTS.....................................................
USE OF PROCEEDS................................................................
SELLING STOCKHOLDERS...........................................................
PLAN OF DISTRIBUTION ..........................................................
LEGAL MATTERS..................................................................
MATERIAL CHANGES...............................................................
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.  Under this  registration  statement  the
selling stockholders may sell from time to time up to 5,000,000 shares of common
stock.  We may issue up to 5,000,000  shares of common stock to pay certain debt
obligations   to  the  selling   stockholders   in  the   aggregate   amount  of
$3,613,325.50.  Two million  (2,000,000) shares have already been issued and may
be sold under this prospectus.

     Periodically,  as required,  we expect to provide a  prospectus  supplement
that will 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.

     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.

     Fonar  offers  the  following  MRI  scanners:  the  Stand-Up,  also  called
Indomitable  (TM),  QUAD (TM),  Fonar-360  (TM) and Echo (TM). The Pinnacle (TM)
MRI, a  work-in-progress,  recently  received FDA clearance to market on June 6,
2001.

     The  Stand-Up  allows  patients to be scanned  while  standing,  sitting or
reclining.  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 any angle. In the future,  the Stand-Up 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 (TM) 7000
is similar in design to the QUAD 12000 but uses a smaller lower field magnet.

     The  "Pinnacle"  (TM) is a  superconductive  version of our open iron frame
magnet. The Pinnacle received FDA clearance on June 6, 2001.

     Fonar also offers a low cost, low field open MRI scanner, the Echo (TM).

     In addition to manufacturing MRI scanning systems,  we formed a subsidiary,
Health Management  Corporation of America, which we sometimes call HMCA, in 1997
to engage in the business of managing imaging  facilities and medical 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  furnishing,  consumable  supplies  and in some cases the
office  space  used by our  clients.  Almost all of HMCA's  client  professional
corporations are owned by Fonar's founder,  President and Chairman of the Board,
Dr. Raymond V. Damadian.

     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.

     Approximately  72% of our  consolidated  revenues for the fiscal year ended
June 30,  2001 and 81% for the fiscal  year ended June 30, 2000 were from HMCA's
management services.

     Approximately  98% of HMCA's  revenues  for the fiscal  year ended June 30,
2001 and 99% of HMCA's  revenues  for the fiscal  year ended June 30,  2000 were
derived from entities owned by Dr. Raymond V. Damadian.


                               ABOUT THIS OFFERING

     The selling  stockholders  will act independently of us in making decisions
with  respect to the timing,  manner and size of sales of the  shares.  They may
sell them in the open  market at  market  prices  through  brokers,  dealers  or
agents,   or  in  private   transactions  on  negotiated  terms.  See  "PLAN  OF
DISTRIBUTION"  for a more  detailed  discussion of the ways in which the selling
stockholders might sell their shares.

     Our common stock is traded on the Nasdaq Small Cap Market.

NASDAQ Symbol..............FONR


                                  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."

<PAGE>
                                  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, 2001 and June 30, 2000, we  experienced
net losses of $15.18 million and $10.96 million  respectively  and net operating
losses of $16.21 million and $15.51 million respectively. For the fiscal quarter
ended  September 30, 2001, we experienced a net loss of $3.8 million as compared
to a net loss of $3.9 million for the fiscal quarter end September 30, 2000. Our
operating  loss of $3.4 million for the first  quarter of fiscal 2002,  however,
improved,  compared to the operating  loss of $4.0 for the first quarter  fiscal
2002, due to increased  scanner  sales.  We have been able to fund our losses to
date  from the  $128.7  million  judgment,  net  amount of $77.2  million  after
attorney's  fees,  received  from  General  Electric  Company in 1997 for patent
infringement   and  from  other  patent   litigation   settlements   with  other
competitors, the terms of which agreements are required to be kept confidential.
As of September 30, 2001,  however,  our balance sheet shows  approximately $7.6
million in cash or cash  equivalents  and $6.1 million in marketable  securities
out of total current assets of $35.2 million. We believe that we will be able to
reverse our operating losses with the  introduction  into the marketplace of our
new MRI scanners and from the operating income generated by our subsidiary HMCA.
HMCA  operating  income has declined  from $3.12 million in fiscal 1999 to $2.48
million in fiscal  2000 and to $1.0  million  for fiscal  2001.  HMCA  operating
income for the first  quarter of fiscal 2002  declined to $550,000,  compared to
$801,000 for the first quarter of fiscal 2001. There can be no assurance 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 new lines of MRI products.  The Stand-Up MRI, also called
"Indomitable(TM),  Fonar  360(TM)  and Echo  scanners  have  all  been  recently
introduced  into the market.  Although we are  optimistic  that these  scanners'
features will make them competitive,  there can be no assurance as to the degree
or timing of market  acceptance  of these  products.  Revenues from the sales of
QUAD(TM)  scanners,  introduced  in 1995,  have not been  sufficient  to date to
generate  operating  profits.  The  product  we  are  currently  promoting  most
vigorously  is the  Stand-Up  MRI.  We  believe  the  Stand-Up  MRI is the  most
promising  because it enable scans to be performed on patients in weight bearing
positions,  such as sitting or  standing.  The  market for the  Stand-Up,  which
received FDA clearance in October  2000,  is still being  tested.  The following
chart shows the revenues  attributable  to each model during fiscal 2001 and the
first  quarter of fiscal  2002.  Please  note that we  recognize  the revenue on
scanner sales on a percentage of  completion  basis.  This means we book revenue
not as money 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.

                 Model          Revenues Recognized

Fiscal Year Ended June 30, 2001

                 Stand-Up       $ 1,640,615
                 Fonar 360                0
                 QUAD            $3,043,308
                 Echo            $1,052,182

Fiscal Quarter Ended September 30, 2001

                 Stand-Up        $1,581,378
                 QUAD                48,000

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.,  Marconi  International,  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.  These  relationships are often heavily dependant on the personal
efforts of key persons in the acquired company or medical  practices  managed by
the  acquired  company.  HMCA has  sought to retain  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.

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 98% of HMCA's revenues for the year ended
June 30, 2001 are from entities owned by Raymond V. Damadian.

6.   Capitated  insurance  programs  could  adversely  affect HMCA's  clients by
     shifting a part of the  financial  responsibility  for patient  care to the
     medical providers.

     Certain HMO's and insurers have instituted  managed care programs where the
physician or physician  group is paid on a capitated  basis.  Under these plans,
the  physician is not paid  according to the  services  provided,  but is paid a
fixed  monthly fee per patient,  which in HMCA's  experience is based on age and
gender.  Currently,  less than two percent of HMCA's clients'  revenues are from
capitated  programs.  Under  capitated  insurance  programs,  the  physician  or
physician  practice  in  effect  bears  some of the risk in the  event a patient
requires  extensive  treatment.  In the event that HMCA's  client  primary  care
practices  experience a shortfall between the capitated payments and the cost of
providing  services,  the ability of those  practices to pay for HMCA's services
may be impaired.

7.   The profitability of HMCA could be adversely  affected if medical insurance
     reimbursement rates change.

     HMCA receives  substantially  all of its revenue from medical 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 (a) MRI facilities,  (b) primary
care practices and (c) physical therapy and rehabilitation practices.  There are
approximately 20 MRI facilities served by HMCA located in New York,  Florida and
Georgia.  The primary care  practices  served by HMCA consist of four offices in
New York and the physical therapy and rehabilitation  practices consist of eight
offices  located  primarily  in New York.  Approximately  57% of HMCA's  clients
revenues for the year ended June 30, 2001 were  generated  from the no-fault and
personal  injury  protection  claims.  Although  we do not  know of any  pending
adverse development  affecting these types of facilities,  future changes in the
reimbursement  levels for MRI,  primary care,  workers  compensation or no fault
reimbursement,   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 the  medical
practices and providers to attract and retain physicians and other  professional
staff.

8.   The  amortization  of the  management  agreements on our balance sheet will
     reduce future profits.

     HMCA acquired  businesses  which were  essentially  service  businesses for
purchase prices based on earnings  multiples rather than net tangible assets. As
the historical cost of the assets was small relative to the purchase price,  the
consolidated  balance sheet of Fonar, HMCA and Fonar's  subsidiaries  reflects a
net carrying value of approximately $20.4 million in management agreements as at
June 30, 2001 and $20.1 million as at September 30, 2001.  Before  amortization,
the aggregate amount of management  agreements  attributable to the acquisitions
was approximately  $23.4 million.  Amortization of these management  agreements,
which is over a period  of  twenty  (20)  years,  will  reduce  net  profits  by
approximately $1.2 million annually. This is a non-cash annual expense.

9.   Professional  liability  claims  against  HMCA or its  clients  may  exceed
     insurance coverage levels.

     Although with one exception,  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.  In Florida,  where the  corporate  practice of
medicine  is legally  permissible,  a  subsidiary  of HMCA in one case  provides
medical  care  through  employee  doctors  and could be subject to  professional
liability claims in the event of malpractice. Neither HMCA nor its clients carry
professional  liability  insurance but physicians  working for HMCA's clients or
for  HMCA's  subsidiaries  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.

10.  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.

11.  We are dependant 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 owns
most of the professional corporations which are HMCA clients. With the exception
of four  professional  corporations  which provided  management  fees to HMCA of
approximately  $374,000  in  the  aggregate  during  fiscal  2001,  all  of  the
professional corporations 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.

12.  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 September 30, 2001, there
were outstanding  60,033,490 shares of common stock,  having one vote per share,
4,211 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 owned 2,488,274  shares of common stock and 9,561,174 shares of Class C
common stock,  giving him over 80% 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.

13.  The dilution  which may result from the payment of its debentures in common
     stock could be significant.

     In May, 2001, the Company  issued  convertible  debentures in the principal
amount of $4.5 million. As of January 11, 2002, the outstanding principal amount
of the debentures  was $2.7 million.  The debentures can be converted at a price
of $2.047 per share,  which would  result in  1,319,004  shares of common  stock
being  issued  if  the  remaining  principal  balance  of  the  debentures  were
converted.  At the times when the market price for our common stock is less than
$2.047 per share,  however,  the  holders  will not be likely to convert  and we
would be left with the alternative of paying the debentures in cash or in shares
of common stock valued, for the purpose of payment,  at a discount from the then
current market value for the common stock.  This  discounted  value would be the
lesser of (1) 90% of the  average of the four lowest  closing bid prices  during
the preceding  calendar  month or (2) the average of the four lowest closing bid
prices during the preceding calendar month less $0.125. If for example,  we were
paying the  remaining  principal  balance of the  debentures in full in January,
2002 then the number of shares we would have to issue based on the formula would
be  2,523,365,  or  approximately  91%  more  shares  than  would be  issued  on
conversion in full. Since this alternative is based on market price, there is no
limit on how low the  determined  value  could be.  The  payments  for  October,
November and December 2001 and for January 2002,  were made through the issuance
of  1,788,742  shares  of  common  stock.  No part of the  debentures  have been
converted to date. Fonar does retain the option,  however, to pay the debentures
in cash if they are not converted.

14.  The  provisions of the debentures  would subject  Fonar's  stockholders  to
     further dilution if we were to issue common stock at prices below market or
     below the conversion price in the debentures.

     In addition to provisions  providing for  proportionate  adjustments in the
event of stock splits, stock dividends, reverse stock splits and similar events,
the debentures provide for an adjustment of the conversion price if Fonar issues
shares of common  stock at prices  lower than the  conversion  price or the then
prevailing market price. This means that if we need to raise equity financing at
a time  when the  market  price  for  Fonar's  common  stock  is lower  than the
conversion price, or if we need to provide a new equity investor with a discount
from the then prevailing market price, then the conversion price will be reduced
and the dilution to stockholders increased.

15.  The provisions of the warrants provide for reductions in the exercise price
     if we issue  common  stock at prices  below  market  or below  the  warrant
     exercise prices.

     In addition to provisions  providing for  proportionate  adjustments in the
event of stock splits, stock dividends, reverse stock splits and similar events,
the  warrants  provide for a reduction  of the  exercise  price if Fonar  issues
shares of common stock at prices lower than the exercise price or lower than the
then prevailing  market price.  The number of shares issuable under the warrants
would change in this case in inverse  proportion,  but we would receive the same
amount of proceeds if the warrants were subsequently exercised in full.

16.  The dilution which may result from the payment of the  indebtedness  to the
     selling stockholders in common stock could be significant.

     Pursuant to a stock payment agreement entered into as of December 20, 2001,
the selling stockholders agreed to permit us to pay certain indebtedness we have
to them in shares of our common  stock.  The  indebtedness  to be paid in common
stock is in the aggregate amount of $3,613,325.50.  Under the terms of the stock
payment agreement,  the net proceeds from the sale of the shares will be applied
toward the  indebtedness.  For the purpose of  illustration,  at the January 10,
2002 closing price of $1.13 per share,  3,197,634  shares would be needed to pay
the  indebtedness.  If the price of our common stock  falls,  then the number of
shares  increases.  Conversely,  if the price  rises,  the number of shares will
decrease.  The foregoing illustration does not take into account commissions and
other  transactional  costs, if any, which will be deducted from the proceeds of
sale to determine net  proceeds.  The only cap on the number of shares which can
be issued, which is at our option, is 5,000,000 in the aggregate.

                           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 PROCEEDS

     We will not receive any proceeds from the sale by the selling  stockholders
of the common stock.

                              SELLING STOCKHOLDERS

     Pursuant to a stock payment  agreement  dated  December 20, 2001 between us
and Dr. Muraca and Dr.  Marciano,  Dr. Muraca and Dr.  Marciano agreed to accept
payment  of certain  debt  obligations  in shares of common  stock and we issued
1,000,000 shares of our common stock to each of them, or 2,000,000 shares in the
aggregate.

     The shares are being issued to pay four promissory  notes which were issued
by our subsidiary,  Health Management Corporation of America or HMCA, in partial
payment of the purchase  price for the  acquisition  of A&A  Services,  Inc. The
total  balance of principal  and interest due under the notes as of December 20,
2001 was  $3,076,791.20  in the  aggregate,  or  $1,538,395.60  to each  selling
stockholder. Payments under the notes were due quarterly.

     In order to induce the selling  stockholders to accept payment in stock and
in the  manner  provided  in the  stock  payment  agreement,  we agreed to pay a
premium  on the note  obligations.  The  premium  was  calculated  by adding the
remaining  payments which would come due under the notes,  $3,136,103.64  in the
aggregate, which includes future interest, plus additional interest of $2,959.33
on each of two notes which were previously extended,  and multiplying the sum by
One  Hundred  and  Fifteen  percent  (115%).   Applying  the  foregoing  premium
calculation,  the  total  amount  now due as a result  is  $3,613,325.50  in the
aggregate, or $1,806,662.70 to each selling stockholder.

     Under the terms of the stock  payment  agreement,  Fonar will issue shares,
and the  net  proceeds  from  the  sale of the  shares  will be  applied  to the
indebtedness.  The quarterly payment due dates were waived, but the net proceeds
received  by the  selling  stockholders  must  be  sufficient  to pay  the  full
indebtedness  for each note,  including  the  premium on the note,  by the final
maturity  date of the note:  September  20, 2002 in the case of two of the notes
and December 20, 2002 in the case of two of the notes. If a note,  including the
premium,  is not satisfied in full by the time of its final maturity date,  then
interest  will accrue on the unpaid  balance at the rate of 6% per annum and the
selling  stockholders  could  require  the  difference  to be paid in cash.  The
selling  stockholders could also continue to receive stock in lieu of cash under
the terms of the stock payment agreement. The selling stockholders also have the
option to  receive  cash in lieu of stock if trading  in Fonar  common  stock is
suspended for five or more days or in the event of the  insolvency or bankruptcy
of Fonar.

     Initially,  we issued  1,000,000  shares to each selling  stockholder.  The
selling  stockholders  will be permitted  to sell the shares  subject to certain
volume limitations,  discussed under the heading "Plan of Distribution". The net
proceeds  to be applied to payment of the  indebtedness  will be  calculated  by
deducting from the gross sales proceeds any commissions  and transaction  costs.
See "Plan of  Distribution".  In the event the net proceeds from the sale of the
2,000,000  shares issued are not  sufficient to pay the  obligations  by July 1,
2002, we will issue additional shares in an amount estimated to be sufficient to
pay the balance due,  based on the average  closing price for Fonar common stock
on the NASDAQ System for the prior 30 trading days.  This review and calculation
will be  performed  quarterly  until the  indebtedness  is paid,  or the selling
stockholders elect to require cash payments in the event the indebtedness is not
paid by the final  maturity  date of the notes.  The  Company has  reserved  the
option  not to  issue  more  than  2,500,000  shares  to  each  of  the  selling
stockholders.

     The table below presents information regarding the selling stockholders and
the shares that they may offer and sell from time to time under this prospectus.
The table assumes that the selling stockholders sell all of the shares. However,
no  assurances  can be given as to the actual number of shares that will be sold
by the selling  stockholders  or that will be held by the  selling  stockholders
after completion of the sales.  Information  concerning the selling stockholders
may change from time to time and any changed  information will be presented in a
supplement to this prospectus if and when necessary and required.

     Beneficial  ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission that deem shares to be beneficially owned by
any person  who has  voting or  investment  power  with  respect to the  shares.
Assuming that the selling stockholders sell all of the shares offered under this
prospectus, the selling stockholders will beneficially own less than one percent
of our outstanding shares of common stock after the completion of this offering.




                             Shares              Shares             Shares
                         Beneficially           Offered          Beneficially
Selling                   Owned Prior           By This          Owned After
Stockholder             to Offering (1)        Prospectus(1)       Offering
- ----------------        ---------------        -------------     ------------

Dr. Glen Muraca            1,000,000            1,000,000              0

Dr. Giovanni Marciano      1,000,000            1,000,000              0

(1) Does not take account of up to an additional  1,500,000  shares which may be
issued to each of the selling stockholders under the stock payment agreement.

Neither selling stockholder nor any of his affiliates,  has held any position or
office or has had any material relationship with us within the past three years.
Each  selling   stockholder  is  employed  as  a  physician  by  a  professional
corporation which is managed by our subsidiary, HMCA.


                              PLAN OF DISTRIBUTION

     We will not receive any of the proceeds of the sales of these shares.

     WHO MAY SELL AND  APPLICABLE  RESTRICTIONS.  Shares may be offered and sold
directly  by the  selling  stockholders  and those  persons'  pledgees,  donees,
transferees  or other  successors  in  interest  from time to time.  The selling
stockholders  could transfer,  devise or gift shares by other means. The selling
stockholders  may also  resell all or a portion of their  shares in open  market
transactions  in reliance upon available  exemptions  under the Securities  Act,
such as Rule 144, provided it meets the requirements of these exemptions.

     Alternatively,  the selling stockholders may from time to time offer shares
through brokers,  dealers or agents.  Brokers,  dealers,  agents or underwriters
participating in transactions may receive compensation in the form of discounts,
concessions or commissions  from the selling  stockholders  (and, if they act as
agent for the  purchaser of the shares,  from that  purchaser).  The  discounts,
concessions or commissions  might be in excess of those customary in the type of
transaction involved.

     The selling  stockholders  received  the shares in the  ordinary  course of
business pursuant to the stock subscription agreement.  The selling stockholders
do not have any agreements or understandings,  directly or indirectly,  with any
person to distribute the securities.

     Nevertheless,  the selling stockholders and 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. To
the  extent  the  selling  stockholders  may be deemed to be  underwriters,  the
selling stockholders 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.

     To comply with certain states'  securities laws, if applicable,  the shares
will be sold in such  jurisdictions  only through registered or licensed brokers
or dealers. In addition, in certain states the shares may not be sold unless the
shares have been  registered or qualified for sale in that state or an exemption
from registration or qualification is available and is complied with.

     MANNER OF SALES. The selling  stockholders  will act independently of us in
making  decisions with respect to the timing,  manner and size of each sale. The
shares  may be sold at then  prevailing  market  prices,  at prices  related  to
prevailing  market prices,  at fixed prices or at other negotiated  prices.  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 as allowed under this prospectus.

     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   between  sellers  and  purchasers   without  a
     broker-dealer.

     By writing options.

     Any  combination of the foregoing,  or any other  available means allowable
     under law.

     HEDGING OR SHORT TRANSACTIONS.  In addition,  the selling  stockholders may
enter into option, derivative, hedging or short transactions with respect to the
shares,  and any  related  offers  or sales of  shares  may be made  under  this
prospectus. For example, the selling stockholders may:

     enter  into   transactions   involving   short   sales  of  the  shares  by
     broker-dealers  in the course of hedging the positions they assume with the
     selling stockholders;

     sell shares short  themselves and deliver the shares  registered  hereby to
     settle such short sales or to close out stock loans  incurred in connection
     with its short positions;

     write call options, put options or other derivative  instruments (including
     exchange-traded  options or privately  negotiated  options) with respect to
     the shares, or which it settles through delivery of the shares;

     enter into option  transactions or other types of transactions that require
     the selling  stockholders  to deliver  shares to a broker,  dealer or other
     financial  institution,  who may then resell or transfer  the shares  under
     this prospectus; or

     lend the shares to a broker, dealer or other financial institution, who may
     sell the loaned shares.

     These option,  derivative,  hedging and short  transactions may require the
delivery to a broker,  dealer or other  financial  institution of shares offered
under this prospectus,  and that broker,  dealer or other financial  institution
may resell those shares under this prospectus.

     VOLUME LIMITATIONS. Under the terms of the stock payment agreement, each of
the selling  stockholders  will be restricted  until June 30, 2002 to selling no
more than 66,666  shares per month,  if the  average  closing bid price of Fonar
common  stock for the prior  calendar  month is at least  $1.50 per share and no
more than  52,083 per month,  if the average  closing bid price of Fonar  common
stock is less than $1.50 per month. In addition,  at all times,  both before and
after June 30, 2002, each of the selling stockholders will sell no more than the
lesser of 10,000  shares of Common Stock or 10% of the  preceding  day's trading
volume for Fonar common stock, on any day.

     EXPENSES  ASSOCIATED WITH REGISTRATION.  We have agreed to 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,
the  selling  stockholders  will  be  responsible  for  underwriting  discounts,
underwriting commissions and agent commissions.

     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 to the selling  stockholders.  Any material  changes in this plan of
distribution will be reflected in a post-effective amendment.

     Computershare  Trust Company,  Inc.,  formerly called  American  Securities
Transfer & Trust, Inc., located at 12039 W. Alameda Parkway, Lakewood,  Colorado
80228, 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 and supplemental financial schedules
contained  in Fonar's  latest  annual  report on Form  10-K/A,  incorporated  by
reference into this prospectus,  has been audited by Grassi & Co., CPA's,  P.C.,
to the extent set forth in their report. Such consolidated  financial statements
and  supplemental  consolidated  financial  schedules  were included  therein in
reliance upon their reports,  given on their  authority as experts in accounting
and auditing.

                                MATERIAL CHANGES

     The Company no longer  consolidates any medical practices which it manages.
In 1999, 2000 and 2001, the Company had consolidated  certain medical  practices
managed as a result of the 1998 acquisitions of A & A Services, Inc. and Dynamic
Health Care  Management,  Inc.  The Company  also  previously  consolidated  the
practices  conducted by Superior Medical Services,  P.C. in 1999, 2000 and 2001.
The Company has determined that  consolidation of such medical  practices is not
appropriate because the underlying  management agreements do not meet all of the
six  criteria  of  Emerging  Issues  Task Force  ("EITF")  Consensus  No.  97-2.
Accordingly,  the  consolidated  financial  statements  have been restated.  The
significant effect of such restated financial statements for 1999, 2000 and 2001
has been to decrease revenue and related costs by $3.7 million, $3.8 million and
$4.2 million  respectively.  In addition,  the balance sheet caption  "Excess of
Cost Over Net  Assets of  Businesses  Acquired - Net" has been  reclassified  to
"Management Agreements - Net".

                                 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.,
New  York,  New York and  Chicago,  Illinois.  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:

     -    Quarterly  Report on Form 10-Q for the fiscal quarter ended  September
          30, 2001, which was filed on November 16, 2001.

     -    Annual  Report on Form 10-K/A for the year ended June 30, 2001,  which
          was filed on October 30, 2001;

     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


<PAGE>


                                     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                                 $ 1,350.35
Printing                                               2,500.00*
Legal Fees and Expenses                                2,500.00*
Accounting Fees and Expenses                           2,500.00*
Blue Sky Fees and Expenses                             2,500.00*
Transfer Agent and Registrar Fees                      2,500.00*
Miscellaneous                                          1,000.00*
                                                     ----------
  Total.............................................$ 14,850.35*
                                                    ===========

* estimated

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

     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  * 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.

     4.3  * Section A of Article FOURTH of the Certificate of 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

     4.4  * Form of 4%  Convertible  Debentures  due June 30, 2002  incorporated
          herein by reference to Exhibit 4.1 of the Registrant's  current report
          on For 8-K filed on June 11, 2001. Commission File No. 0-10248.

     4.5  * 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.

     4.6  * 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.

     4.7  * Amendments  dated October 25, 2001 to 4% Convertible  Debentures due
          June  30,  2002,  incorporated  by  reference  to  Exhibit  4.7 to the
          Registrant's  registration  statement on Form S-3, Commission file No.
          333-63782.

     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 * 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.

     10.6 * 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.

     10.7 * 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.

     10.8 * 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.

     10.9 * 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.

     10.10 * 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.

     10.11 * Stock Subscription Agreement dated January 17, 2001,  between Fonar
          and  eMajix.com,  Inc..  Incorporated  herein by  reference to Exhibit
          10.11 to the Registrant's  registration statement on Form S-3 filed on
          December 7, 2001. Commission File NO. 333-74810.

     10.12 Stock Payment Agreement  dated December 20, 2001 among Fonar,  Health
          Management  Corporation  of America,  Glenn Muraca,  M.D. and Giovanni
          Marciano, M.D. See Exhibits.

     23.1 Consent of Grassi & Co., CPA's, P.C., Certified Public Accountants.

     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.


<PAGE>



                                   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 January 11, 2002.

Dated:  January 11, 2002
                                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

                            Chairman of the Board of
                            Directors, President and a          January 11, 2002
/s/Raymond V. Damadian      Director (Principal
Raymond V. Damadian         Executive Officer, Principal
                            Financial Officer and
                            Principal Accounting Officer)

___________________         Director                            January 11, 2002
Claudette J.V. Chan

                            Director                            January 11, 2002
/s/Robert J. Janoff
Robert J. Janoff

                            Director                            January 11, 2002
/s/Charles N. O'Data
Charles N. O'Data



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5
<SEQUENCE>3
<FILENAME>x051.txt
<TEXT>
EXHIBIT 5.1

                                                              January 11, 2002

Fonar Corporation
110 Marcus Drive
Melville, New York  11747

     Re:  Fonar Corporation
          Registration Statement on Form S-3

Gentlemen:

     I  have  represented  Fonar  Corporation,   a  Delaware   corporation  (the
"Company"),  in connection  with the preparation of the  registration  statement
filed with the Securities and Exchange Commission on Form S-3 (the "Registration
Statement")  relating to the resale of up to 5,000,000  shares (the "Shares") of
the Company's common stock, par value $.0001 per share (the "Common Stock"). The
Common Stock is issuable in connection  with Company's  stock payment  agreement
dated  December 20, 2001 to pay certain  obligations of its  subsidiary,  Health
Management Corporation of America, to Dr. Glenn Muraca and Dr. Giovanni Marciano
in shares of Common Stock (the "Stock Payment Agreement"). In this connection, I
have examined  originals or copies of the Stock Payment Agreement and such other
documents,  corporate  records,  certificates  of  public  officials  and  other
documents as I deemed necessary to examine for purposes of this opinion.

     I am of the  opinion  that  the  shares  of  Common  Stock  covered  by the
Registration  Statement  and  issued in  accordance  with the terms of the Stock
Payment  Agreement  are,  or will be upon  issuance,  duly  authorized,  validly
issued, fully paid and nonassessable.

     I hereby  consent  to the  filing  of this  Opinion  as an  Exhibit  to the
Registration Statement.

                                                            Very truly yours,

                                                            /s/  Henry T. Meyer
                                                            Henry T. Meyer, Esq.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>x1012.txt
<TEXT>

EXHIBIT 10.12

                                  STOCK PAYMENT
                                    AGREEMENT


     Agreement  dated as of the 20th day of  December,  2001 by and among HEALTH
MANAGEMENT CORPORATION OF AMERICA ("HMCA"),  FONAR CORPORATION ("Fonar"),  GLENN
MURACA, MD ("Muraca") and GIOVANNI MARCIANO ("Marciano").


                                    RECITALS:

     WHEREAS,  pursuant to a Stock Purchase  Agreement dated March 20, 1998 (the
"Stock Purchase  Agreement"),  HMCA,  formerly known as U.S.  Health  Management
Corporation,  purchased the issued and outstanding shares of A&A Services,  Inc.
("A&A") from Muraca and Marciano;

     WHEREAS,  pursuant to the Stock  Purchase  Agreement,  HMCA has issued,  in
partial payment of the purchase price for the shares of A&A, promissory notes as
hereinafter described (the "Notes").

     a) Promissory Note dated March 20, 1998 by HMCA to Marciano in the original
principal  amount  of  $2,000,000,  payable  in 16 equal  consecutive  quarterly
installments  of  principal  and  interest  in the amount of  $150,021.97  each,
commencing  March 20, 1999,  with interest at the rate of 6% per annum, on which
the  sum  of  the  remaining  quarterly  installment  payments  to  be  made  is
$900,131.82 as of December 20, 2001 (the "1998 Muraca Note");

     b)  Promissory  Note dated March 20, 1998 by HMCA to Muraca in the original
principal  amount  of  $2,000,000,  payable  in 16 equal  consecutive  quarterly
installments  of  principal  and  interest  in the amount of  $150,021.97  each,
commencing  March 20, 1999,  with interest at the rate of 6% per annum, on which
the  sum  of  the  remaining  quarterly  installment  payments  to  be  made  is
$900,131.82 as of December 20, 2001 (the "1998 Muraca Note"); and

     c)  Promissory  Note dated  September  20,  2000 by HMCA to Marciano in the
original  principal  amount  of  $1,000,000,  payable  in  8  equal  consecutive
quarterly  installments  of principal and interest in the amount of  $133,584.00
each,  commencing  December 20, 2000, with interest at the rate of 6% per annum,
on which the sum of the remaining quarterly  installment  payments to be made is
$667,920.00 as of December 20, 2001 (the "2000 Marciano Note");

     d)  Promissory  Note  dated  September  20,  2000 by HMCA to  Muraca in the
original  principal  amount  of  $1,000,000,  payable  in  8  equal  consecutive
quarterly  installments  of principal and interest in the amount of  $133,584.00
each,  commencing  December 20, 2000, with interest at the rate of 6% per annum,
on which the sum of the remaining quarterly  installment  payments to be made is
$667,920.00 as of December 20, 2001 (the "2000 Muraca Note").

     WHEREAS,  the total amount of the remaining quarterly  installment payments
to be made to each of Muraca  and  Marciano  under  the  Notes is  $1,568,051.80
($3,136,103.60 in the aggregate);

     WHEREAS,  there is  additional  interest of  $2,959.33  on each of the 1998
Notes or $5,918.66 in the aggregate (the "Additional Interest");

     WHEREAS,  Muraca and  Marciano  have agreed to accept  shares of the Common
Stock of Fonar, the parent of HMCA, on the terms and conditions  hereinafter set
forth; and

     WHEREAS,  Fonar has determined that it is in the best interest of Fonar and
HMCA for shares of Fonar's  Common  Stock to be used to  satisfy  the  foregoing
obligations;

     NOW THEREFORE,  in consideration  of the premises and agreements  contained
herein, the parties hereto agree as follows:

1.   Definitions.  The terms  listed  below  shall have the  meanings  set forth
     herein:

     a)   1998  Notes:  1998  Marciano  Note  and  1998  Muraca  Note.

     b)   2000  Notes:  2000  Marciano  Note  and  2000  Muraca  Note.

     c)   Marciano  Notes:  1998 Marciano Note and 2000 Marciano Note.

     d)   Muraca  Notes:  1998  Muraca  Note  and  2000  Muraca  Note.

     e)   Notes:  1998 Marciano Note,  1998 Muraca Note,  2000 Marciano Note and
          2000 Muraca Note.

     f)   Outstanding  Installment Payments:  When used with respect to any Note
          or Notes,  the  remaining  quarterly  installment  payments to be made
          thereunder as of December 20, 2001.

     g)   Total  Obligation:  When used with  respect to any Note or Notes,  One
          Hundred  and  Fifteen  Percent  (115%)  of the sum of the  Outstanding
          Installment  Payments  of  said  Note or  Notes  plus  the  Additional
          Interest on the 1998 Notes.  The Total  Obligation as so determined is
          $3,613,325.50 .

2.   Payment in Shares of Common Stock. Muraca and Marcinao shall accept payment
     of the Notes in shares of the Common Stock of Fonar (the "Fonar Shares") in
     consideration   of  Fonar  paying  the  full  amount  of  the   Outstanding
     Installment Payments plus the Additional Interest plus a premium of fifteen
     percent of the Outstanding Installment Payments and the Additional Interest
     (the "Total  Obligation").  Subject to the  limitations  and conditions set
     forth in this  Agreement,  the  number of Fonar  Shares to be issued in the
     aggregate  under this Agreement  shall be such number as shall be necessary
     for Muraca and Marciano to realize "Net Proceeds" of the sale thereof equal
     to the Total  Obligation  under the Notes.  "Net  Proceeds" for the purpose
     hereof  shall  mean the  proceeds  from the sale of the  shares  after  the
     deduction of all commissions and other costs of the transaction.

3.   Issuance of Shares.  No later than January 14,  2002,  Fonar shall issue to
     each of Muraca and Marciano the lesser of 1,000,000 Fonar Shares (2,000,000
     Fonar  Shares in the  aggregate)  or the  number of Fonar  Shares  having a
     market value (as hereinafter  computed) as of the day prior to the issuance
     of the Fonar Shares equal to the Total  Obligation  on the Notes payable to
     him. If on July 1, 2002, and the first day of every quarter thereafter, the
     sum of the Net  Proceeds  from the Fonar  Shares  sold by each of Muraca or
     Marciano shall not have been equal to or greater that the Total  Obligation
     on the Notes  payable  to him,  then Fonar  shall  issue to him a number of
     Fonar Shares having a market value as of the day prior to issuance equal to
     the Total  Obligation on the Notes payable to him, less the Net Proceeds of
     the Fonar Shares previously sold by him, less the market value of the Fonar
     Shares  previously issued but unsold as of the day prior to the issuance of
     the  additional  Fonar  Shares.  Fonar  shall  have the  option of  issuing
     additional  shares at such time or any time  thereafter to cover  estimated
     commissions  and other  costs of sale or to take  account of any decline in
     the market price of Fonar's Common Stock. Fonar shall retain the option not
     to issue more than 2,500,000 Fonar Shares to each of Muraca and Marciano in
     the aggregate under this Agreement, but such limitation is extended only to
     allow Fonar to limit dilution of its  outstanding  stock and will not limit
     Fonar's  liability for any portion of the Total  Obligation of the Notes in
     the event the Net Proceeds from the sale of Fonar Shares is not  sufficient
     to satisfy the Total Obligations, as contemplated in Section 10 hereof.

4.   Market  Value.  The  market  value of Fonar  Shares as of any date shall be
     determined  by taking the average of the closing  prices  (bid  prices,  if
     prices are reported only as bid and ask prices) of Fonar's  Common Stock as
     reported  on  the  NASDAQ  System  for  the  30  trading  days  immediately
     proceeding the issue date of the shares.

5.   Registration of Fonar Shares. The initial Fonar Shares which will be issued
     to Muraca and Marciano will not be registered  under the  Securities Act of
     1933, as amended (the "Securities Act"), and as such will not be able to be
     resold until they are so registered or an exemption from such  registration
     is available.  By January 15, 2002, Fonar will file with the Securities and
     Exchange  Commission  a  registration   statement  or  an  amendment  to  a
     previously  filed  registration  statement  to cover the Fonar Shares which
     have been issued and which may be issued  hereafter to Muraca and Marciano.
     Fonar will use its best  efforts  to cause the  registration  statement  to
     become effective in as short a time period as possible.  Fonar Shares which
     may be issued  following  the  original  issuance  of Fonar  Shares will be
     registered or unregistered, depending on whether the registration statement
     covering said shares has become effective.

6.   Escrow.  All Fonar  shares to be issued to Muraca and  Maricano  under this
     Agreement  will beheld in escrow by a brokerage firm selected by Muraca and
     Marciano  and  acceptable  to Fonar.  The  shares in escrow  may be sold in
     accordance  with the  instructions  of Muraca and Marciano,  subject to the
     volume  limitations  set forth in Section 7 hereof.  The  escrow  agreement
     shall be  substantially  in the form of Exhibit A hereto.  If the brokerage
     firm does not consent to act as escrow agent, the shares may be held by the
     brokerage firm as a depository  subject to the direction of an escrow agent
     mutually  agreeable to HMCA, Muraca and Marciano,  pursuant to a depository
     agreement  substantially  in the form of Exhibit B hereto.  The requirement
     that Fonar Shares be held in escrow shall not be effective until the shares
     are registered  under the Securities Act and the  restrictive  legends have
     been removed from the certificates representing the shares.

7.   Volume Limitations.  Until June 30, 2002, each of Muraca and Marciano shall
     sell not more than 66,666 shares of the Fonar Common Stock received by them
     hereunder per month,  if the average  closing bid price of the Common Stock
     of Fonar for the prior  calendar  month is at least  $1.50 per share and no
     more than 52,083 shares per month,  if the average closing bid price of the
     Common Stock of Fonar for the prior  calendar  month is less than $1.50 per
     share. In addition, at all times, both before and after June 30, 2002, each
     of Muraca and Marciano, shall sell no more than the lesser of 10,000 shares
     of Fonar Common  Stock,  or 10% of the  preceding  business  day's  trading
     volume for Fonar Common Stock, on any day. These volume  limitations may be
     increased from time to time on the mutual  agreement of the parties,  which
     need not be in writing.

8.   Suspension of Note Payments and Accrual of Interest. During the period this
     Agreement  is in  effect,  Fonar  shall not be  required  to pay any of the
     originally  scheduled  installments  of principal  and  interest  under the
     Notes.  In   consideration   of  Fonar's   agreement  to  pay  the  premium
     incorporated  into the calculation of the Total Obligation on the Notes, no
     interest  will accrue on the Notes during the term of this  Agreement,  and
     upon payment in full of the Total  Obligation  of a Note said Note shall be
     fully satisfied and paid.

9.   Obligation to Use Best Efforts to Sell.  Subject to the volume  limitations
     in Section 7 of this  Agreement,  each of Muraca and Marciano shall use his
     best efforts to sell all the Fonar Shares  issued to him. If either  Muraca
     or Marciano shall have failed to sell all of his Fonar Shares within thirty
     (30)  days of the  time he could  have,  taking  into  account  the  volume
     limitations  contained herein,  then for the purpose of determining whether
     the Total Obligation  payable on the Notes payable to him has been paid, he
     shall be deemed to have  received Net  Proceeds  equal to the higher of the
     market value of said unsold Fonar Shares as of the date they were issued to
     him or the date they first could have been sold, as determined  pursuant to
     Section 4 hereof.  The foregoing will not apply in any case where Fonar has
     consented to Muraca and  Marciano  delaying  the sale of Fonar  Shares,  or
     where Fonar has requested them to delay selling Fonar Shares.

10.  Final Payment on the Notes;  Application  of Net Proceeds;  Termination  of
     Stock Payments.  In determining  whether the Total  Obligation on the Notes
     has been  satisfied,  the Net  Proceeds  realized  by  Muraca  and shall be
     applied  pro rata to the  Muraca  Notes and the Net  Proceeds  realized  by
     Marciano shall be applied pro rata to the Marciano Notes.

If the Total Obligation with respect to a Note is not paid by the time the final
payment on said Note under the  original  payment  schedule  would have been due
(December  20, 2002 in the case of the 1998 Notes and  September 20, 2002 in the
case of the  2000  Notes),  then  interest  at the  rate of 6% per  annum  shall
commence to accrue on the unpaid  balance of the Total  Obligation  of said Note
and be included as part of the Total  Obligation.  In such case the payee on the
Note shall have the option of continuing to receive payments in Fonar Shares, in
accordance with Sections 2 and 3 of this Agreement,  until the Total  Obligation
of the Note is fully satisfied,  or to terminate the stock payments and elect to
receive the balance of the Total  Obligation  of the Note in cash or by check or
wire  transfer.  The payee may exercise this option by giving notice at any time
commencing  thirty (30) days prior to the date final payment is due by giving at
least thirty (30) days prior written notice.

10A. Other Events Giving Rise to Termination  Option.  Muraca and Marciano shall
     also have the option to terminate the payments in Fonar Shares and elect to
     receive  the  balance  of the Total  Obligation  of the Notes in cash or by
     check or wire transfer in the event any one or more of the following  shall
     occur:

     a)   Trading  of  shares of the  common  stock of Fonar  shall  cease or be
          suspended for at least five consecutive trading days; or

     b)   Fonar  shall  cease  doing  business  as  a  going  concern,  make  an
          assignment for the benefit of creditors,  file a petition commencing a
          voluntary case under any chapter of Title 11 of the United States Code
          (the "Bankruptcy Code"), be adjudicated an insolvent,  file a petition
          seeking  for  itself  any  reorganization,  arrangement,  composition,
          readjustment,  liquidation,  dissolution or similar  arrangement under
          any present or future  statute,  law,  rule or  regulation  or file an
          answer admitting the material  allegations of a petition filed against
          it in any such proceeding, consent to the filing of such a petition or
          acquiesce in the  appointment of a trustee,  receiver or liquidator of
          it or of all or any  part of its  assets  or  properties,  or take any
          action looking to its dissolution or liquidation; or

     c)   An order for relief  against  Fonar shall have been entered  under any
          chapter of the Bankruptcy  Code or a decree or order by a court having
          jurisdiction  in the  premises  shall have been  entered  approving as
          properly  filed  a  petition  seeking   reorganization,   arrangement,
          readjustment, liquidation, dissolution or similar relief against Fonar
          under any present or future statute,  law, rule or regulation,  or any
          trustee,  receiver or liquidator of Fonar or of all or any part of its
          assets and  properties  shall be  appointed;  or if there is commenced
          against  Fonar  any   proceeding   seeking  any  such  relief  or  the
          appointment of any such trustee,  receiver or liquidator which remains
          undismissed for a period of sixty (60) days.

11.  Effect of  Termination of Stock  Payments.  In the event that either Muraca
     (or his assignees) or Marciano (or his  assignees)  elects to terminate the
     payments in Fonar  Shares prior to December 20, 2002 and receive the unpaid
     portion  of the  Total  Obligation  of a Note in cash or by  check  or wire
     transfer,  then the  provisions of the  Amendment to Employment  Agreements
     executed by Muraca, Marciano, Damadian MRI in Forest Hills, P.C. and others
     concurrently  herewith  shall  terminate.  HMCA  shall have sixty (60) days
     thereafter to make full payment.

12.  Reservation of Rights Under Notes and Other  Agreements.  In the event of a
     default  under  this  Agreement  in the  payment  of any part of the  Total
     Obligation  of any Note,  then Muraca or Marciano,  as the case may be, may
     elect to  exercise  his  rights  under the Note with  respect to any amount
     which  remains  unpaid  thereunder  in  addition  to  exercising  any other
     remedies he may have under this  Agreement  or at law.  Muraca and Marciano
     shall have  preserved all of their  existing  rights and remedies under the
     Notes  and the  other  agreements  entered  into  in  connection  with  the
     acquisition  of A & A,  including  but not  limited  to the Stock  Purchase
     Agreement dated March 20, 1998.

13.  Salary of Wayne  Muraca.  Section 7(b) of the Stock  Purchase  Agreement is
     modified  to  provide  that  the  compensation  of  Wayne  Muraca  shall be
     increased to $75,000 per annum, together with the car allowance as provided
     therein,  effective  as of  November  9,  2001 and to  $85,000  per  annum,
     together with the car allowance  provide therein effective as of January 1,
     2002,  with annual cost of living  increases  based on the  consumer  price
     index, or if such index is not available, a similar index.

14.  Payment of Muraca and  Marciano's  Attorneys.  HMCA will pay Felice Muraca,
     Esq., the attorney for Muraca and Marciano,  the sum of $5,000 for services
     rendered  in  connection   with  the   transactions   contemplated   herein
     immediately upon the execution of this Agreement.

15.  Miscellaneous.  This  Agreement  shall be construed in accordance  with the
     laws of the State of New York.  This  Agreement  may not be assigned by any
     party without the prior written consent of the other parties  hereto;  this
     Agreement  shall be binding  upon and inure to the  benefit of the  parties
     hereto  and  their  respective  successors,  heirs and  permitted  assigns.
     Captions and headings are for  convenience  of reference only and shall not
     affect the interpretation of this Agreement. This Agreement may be executed
     in counterparts.

     IN WITNESS WHEREOF,  the parties have executed this Agreement in the manner
legally binding upon them as of the day and year first above written.


                                      HEALTH MANAGEMENT CORPORATION OF AMERICA

                                      By: /s/Raymond V. Damadian, President
                                          Raymond V. Damadian, Presiden

                                      /s/Glenn Muraca
                                      GLENN MURACA

                                      /s/Giovanni Marciano
                                      GIOVANNI MARCIANO


                                      FONAR CORPORATION

                                      By: /s/Raymond V. Damadian, President
                                          Raymond V. Damadian, Presiden


<PAGE>
                                    EXHIBIT A

                                ESCROW AGREEMENT


     THIS ESCROW  AGREEMENT  ("Agreement")  is made and  entered  into as of the
_____ day of _______,  200_ by and among  Fonar  Corporation  ("Fonar"),  Health
Management  Corporation of America  ("HMCA"),  Glenn Muraca,  D.O.,  ("Muraca"),
Giovanni  Marciano,  D.O.  ("Marciano")  and [Name of Escrow Agent] (the "Escrow
Agent").


                                    RECITALS

     A. Fonar,  HMCA,  Muraca and Marciano  have  entered  into a Stock  Payment
Agreement dated December 20, 2001,  pursuant to which Muraca and Marciano agreed
to accept shares of Fonar Common Stock (the "Fonar Common  Stock") in payment of
certain promissory notes, as provided therein (the "Stock Payment Agreement").

     B. The Stock  Payment  Agreement  provided  that the shares of Fonar Common
Stock to be delivered  to Muraca and  Marciano  would be held in escrow and that
the sale of said shares would be subject to certain volume  limitations,  as set
forth in the Stock Payment Agreement.

     C. The  Escrow  Agent has  agreed to act as escrow  agent as  requested  by
Fonar,  HMCA,  Muraca and Marciano,  in accordance with the terms and conditions
herein.

     NOW,  THEREFORE,  in consideration of the foregoing recitals and the mutual
covenants  and promises  contained  herein,  the parties,  each  intending to be
legally bound hereby, agree as follows:

1.   Creation  and  Establishment  of Escrow;  Delivery of Fonar  Common  Stock;
     Cooperation  and  Assistance  of  Muraca  and  Marciano.  The  certificates
     representing  the Fonar Common Stock shall be delivered to the Escrow Agent
     at such times as the shares of the Fonar Common Stock are registered  under
     the Securities Act of 1933, as amended and the restrictive  legends thereon
     are removed. Concurrently with the delivery of the certificates, Muraca and
     Marciano  shall  deliver to the Escrow Agent stock  powers  covering all of
     said  shares  then  delivered  duly  executed  in blank and  undated,  with
     signature  guarantees.  Upon  delivery to the Escrow  Agent,  the foregoing
     shall be held in escrow by the Escrow  Agent in  accordance  with the terms
     and  conditions  of  this  Agreement.  From  and  after  the  date  of this
     Agreement,  the parties  shall provide  reasonable  cooperation  with,  and
     assistance  to,  the Escrow  Agent to permit  the Escrow  Agent to make any
     necessary exchanges of certificates representing the Fonar Common Stock and
     to  otherwise  facilitate  the  disposition  of the Fonar  Common  Stock in
     accordance  with the terms of this  Agreement  (the shares of Fonar  Common
     Stock  held  by the  Escrow  Agent  in  escrow  under  this  Agreement  are
     hereinafter sometimes referred to as the "Escrowed Shares").

2.   Sale of Fonar  Common  Stock.  Subject to the volume  limitation  and other
     terms,  conditions and  restrictions  hereinafter  set forth,  the Escrowed
     Shares  may be sold at the  request  of  Muraca  and  Marciano  at any time
     following their delivery to the Escrow Agent.  Any sales of Escrowed Shares
     which may be permitted hereunder shall be made on the basis of instructions
     provided  by Muraca and  Marciano  in such  manner  and by such  designated
     person or persons as may be arranged by Muraca and  Marciano and the Escrow
     Agent. The disposition of the net proceeds (after deductions of commissions
     and  fees)  of any such  sales  shall be in  accordance  with  instructions
     provided by Muraca and Marciano.

3.   Volume  Limitations.  Notwithstanding the provisions of Paragraph 2 hereof,
     the maximum number of Escrowed Shares which may be sold in the aggregate on
     any day shall be  limited  to the  lesser  of  20,000  shares or 10% of the
     trading volume for the Common Stock of Fonar (NASDAQ: FONR), as reported on
     the NASDAQ System, on the previous trading day. In addition, until June 30,
     2002,  the  maximum  numbers of  Escrowed  Shares  which can be sold in any
     calendar month will be 133,333  Escrowed  Shares if the average closing bid
     price of the Common Stock of Fonar for the prior calendar month is at least
     $1.50 per share and  104,167  Escrowed  Shares if the  average  closing bid
     price of the  Common  Stock of Fonar for the prior  calendar  month is less
     than $1.50 per shares.

4.   Provisions  Concerning  Escrowed  Shares.  During the  period the  Escrowed
     Shares are held in escrow hereunder:

     (a)  Voting  Powers.  Muraca and Marciano  shall have the right to exercise
          any and all voting powers with respect thereto.

     (b)  Stock Splits and Stock Dividends.  Any dividends  consisting of shares
          of the Common  Stock of Fonar  payable  with  respect to the  Escrowed
          Shares or any additional  shares of the Common Stock of Fonar to which
          the holders of the  Escrowed  Shares may become  entitled by reason of
          any stock split,  or any  securities  into which the  Escrowed  Shares
          might be changed  pursuant to a merger,  consolidation or amendment to
          the  Certificate  of  Incorporation  of  Fonar  Corporation,  shall be
          delivered  to the Escrow  Agent and held in escrow by the Escrow Agent
          as shares of Escrowed Shares,  pursuant to the terms and conditions of
          this Agreement.

     (c)  Other  Dividends and  Distributions.  All cash dividends  which may be
          declared and paid on the Escrowed  Shares and,  except as set forth in
          Section 4(b) above, all dividends and  distributions of other property
          payable  with respect to the  Escrowed  Shares,  shall be delivered to
          Muraca and Marciano.

     (d)  Encumbrances.  Muraca and Marciano  may pledge or  otherwise  encumber
          their respective  interests in the Escrowed Shares, but any pledgee or
          other secured  party shall be subject to the terms of this  Agreement,
          and no shares of the Escrowed  Shares shall be released from escrow or
          sold otherwise than in accordance with the terms of this Agreement.

5.   Compensation of Escrow Agent.  No  compensation  shall be payable by either
     Fonar and HMCA or Muraca and  Marciano  to the  Escrow  Agent for acting as
     escrow  agent  hereunder,  but  the  Escrow  Agent  shall  be  entitled  to
     commissions  and fees,  payable by Muraca and Marciano,  in connection with
     the sales of any Fonar Common Stock made through it as a broker/dealer.  In
     addition,  to the extent the Escrow  Agent  shall  incur any  out-of-pocket
     costs and  expenses in  connection  with the  performance  of its duties as
     expressly provided hereunder,  or at the request of Fonar, HMCA, Muraca and
     Marciano,  including the reasonable  fees of legal counsel,  if any, Fonar,
     HMCA, Muraca and Marciano shall reimburse the Escrow Agent in equal shares.

6.   Term of  Agreement.  Unless  earlier  terminated  by the  agreement  of the
     parties or as otherwise  provided  herein,  this  Agreement  and the escrow
     created  hereby shall  continue  until such time as all the shares of Fonar
     Common Stock to be issued and sold under the Stock Payment  Agreement  have
     been issued and sold, returned to Fonar or HMCA or otherwise distributed in
     accordance  with the terms hereof or the express  written  instructions  of
     Fonar, HMCA and Muraca and Marciano.

7.   Limitation of Escrow Agent's  Duties.  (a) All parties  hereto  acknowledge
     that the duties of the Escrow Agent  hereunder  are solely  ministerial  in
     nature and have been  requested  for their  convenience.  The Escrow  Agent
     shall not be deemed to be the agent of either party hereto,  or to have any
     legal or  beneficial  interest in any of the escrowed  assets.  The parties
     agree that the  Escrow  Agent  shall not be liable for any act or  omission
     taken or suffered in good faith with respect to this Agreement, unless such
     act or omission is the result of the gross negligence or willful misconduct
     of the Escrow Agent.

     (b)  The Escrow  Agent may  consult  with legal  counsel and shall be fully
          protected  and incur no  liability  relative to any action or inaction
          taken in good faith in accordance with the advice of such counsel. The
          Escrow  Agent  shall  have  no  responsibility   for  determining  the
          genuineness or validity of any certificate,  document, notice or other
          instrument  or item  presented to or  deposited  with it, and shall be
          fully protected in acting in accordance  with any written  instruction
          given to it by the parties hereto in accordance  with the terms hereof
          and reasonably believed by the Escrow Agent to have been signed by the
          proper representatives of such parties.

     (c)  The Escrow Agent shall not be required to institute legal  proceedings
          of any kind.  The Escrow  Agent  shall not be  required  to defend any
          legal proceedings  which may be instituted  against it with respect to
          this  Agreement  unless  requested  to do so in  writing by any of the
          parties  hereto,  and  unless  and  until  it is  indemnified  by  the
          requesting  party to the satisfaction of the Escrow Agent, in its sole
          discretion,  against the cost and expense of such  defense,  including
          without  limitation  the  reasonable  fees and  expenses  of its legal
          counsel.  If any  conflicting  demand  shall be made  upon the  Escrow
          Agent,  it shall not be  required  to  determine  the same or take any
          action  thereon  and  may  await  settlement  of  the  controversy  by
          appropriate and nonappealable legal proceedings. Upon the commencement
          of any action  against or  otherwise  involving  the Escrow Agent with
          respect to this Agreement,  or upon advice of counsel under subsection
          (b)  hereunder,  the Escrow Agent shall be entitled to interplead  the
          matter of this escrow into a court of  competent  jurisdiction  in the
          State of New York  and,  in such  event,  the  Escrow  Agent  shall be
          relieved  of  and  discharged   from  any  and  all   obligations  and
          liabilities under this Agreement. In any such action, the Escrow Agent
          shall be entitled to the indemnities provided in Section 8 below.

8.   Indemnification  of Escrow Agent.  Fonar, HMCA, Muraca and Marciano jointly
     and severally  shall hold  harmless and  indemnify  the Escrow  Agent,  its
     partners,   employees   and  agents  from  and  against  all   obligations,
     liabilities,  claims, suits, judgments,  losses, damages, costs or expenses
     of any kind or nature,  including without limitation  reasonable attorneys'
     fees,  which may be imposed on, incurred by, or asserted against the Escrow
     Agent,  under or by reason of this Agreement,  except when due to the gross
     negligence  or  willful  misconduct  of the  Escrow  Agent.  The  foregoing
     indemnities  shall  survive  the  resignation  of the  Escrow  Agent or the
     termination of this Agreement.

9.   Resignation  of Escrow Agent.  The Escrow Agent in its sole  discretion may
     resign at any time and be  discharged  of its  duties  hereunder  by giving
     ninety (90) days prior written notice to the parties  hereto,  which notice
     shall specify the date of such  resignation.  In the event the parties fail
     to appoint a successor  escrow agent and notify the Escrow Agent in writing
     of such  appointment  within such ninety (90) day period,  the Escrow Agent
     shall be deemed to be solely a custodian of the escrowed  property  without
     further  duties  hereunder,  and shall be  entitled  to petition a court of
     competent  jurisdiction  to  appoint a  successor  escrow  agent.  Upon the
     appointment of a successor escrow agent by the parties hereunder or by such
     court, the Escrow Agent's duties and liabilities under this Agreement shall
     terminate.

10.  Assignment.  Except to the extent  provided  herein,  no  assignment by any
     party hereunder of its rights  hereunder  shall be effective  without prior
     written  consent of the other  parties  hereto,  except  that HMCA shall be
     entitled to assign its rights to its parent,  Fonar  Corporation  or to any
     successor to HMCA or Fonar  Corporation  which  agrees to be bound  hereby.
     Notice  of any  permitted  assignment  shall  be given  in  writing  by the
     assigning party to the other parties hereto.  On any permitted  assignment,
     the assignee or assignees shall be vested with all the rights,  powers, and
     remedies of the  assigning  party  hereunder.  From and after the effective
     date of any such assignment,  the Escrow Agent shall be entitled to rely on
     any  written  instructions  received  from any such  assignee,  to the same
     extent as it  previously  was entitled to rely on any written  instructions
     received from the assignor.

11.  Applicable Law. This Agreement has been executed and delivered in the State
     of New York and shall be governed by and construed in  accordance  with the
     law of the State of New York.  Whenever  possible,  each  provision of this
     Agreement  shall be  interpreted  in such a manner as to be  effective  and
     valid under  applicable  law, but, if any provision of this Agreement shall
     be held to be prohibited or invalid under  applicable  law, such provisions
     shall be ineffective  only to the extent of such prohibition or invalidity,
     without  invalidating  the  remainder of such  provisions  or the remaining
     provisions of this Agreement.

12.  Further  Assurances.  The parties agree that they will  cooperate with each
     other and the Escrow  Agent and will  execute and  deliver,  or cause to be
     executed and delivered, all such stock powers, proxies, powers of attorney,
     dividend orders, and other instruments and documents and will take all such
     other action, as the other party or the Escrow Agent may reasonably request
     from time to time in order to carry out the provisions and purposes hereof.

13.  Notices.  Any  notices or other  communications  required  or desired to be
     served,  given or  delivered  hereunder  shall be in writing,  and shall be
     deemed to have been validly  served,  given or delivered on the same day if
     delivered  personally or by facsimile  transmission with voice confirmation
     of receipt,  or shall be deemed  given on the date  receipt is confirmed if
     mailed by registered or certified  mail or receipted  commercial  overnight
     carrier (e.g., Federal Express,  DHL, etc.), return receipt or confirmation
     of delivery requested, to the parties at the following addresses:



     (a)  If to Fonar, to:

          Fonar Corporation
          110 Marcus Drive
          Melville, New York  11747
          Facsimile No.: (631) 753-5150
          Attn: Raymond V. Damadian
             Henry T. Meyer, Esq.


     (b)  If HMCA, to:

           Health Management Corporation of America
           6 Corporate Center Drive
           Melville, New York 11747
                    Facsimile No.:  (631) 630-1070
           Attn:  Timothy Damadian

           With a copy to:

           Henry T. Meyer, Esq.
           110 Marcus Drive
           Melville, New York  11747
           Facsimile No.: (631) 753-5150

     (c)  If to Glenn Muraca, D.O., to:

          _____________________________
          _____________________________

          Facsimile No.: __________________

     (d)  If to Giovanni Marciano, D.O., to:

          _____________________________
          _____________________________

          Facsimile No.:  _________________


     (e)  If to the Escrow Agent:

          _____________________________
          _____________________________
          _____________________________

          Facsimile No.:  _________________
          Attn:  _________________________

     or to such other person or address as a party may  hereafter  designate for
     notice or other communications to such party by written notice to the other
     party and the Escrow Agent in the manner herein described.  Any notice sent
     by Fonar,  HMCA,  Muraca or Marciano to the Escrow Agent shall be furnished
     to the other  parties in the same  manner such notice is sent to the Escrow
     Agent.

14.  Consent to Jurisdiction and Service. Any legal action or proceeding arising
     out of this  Agreement may be brought in any state or federal court sitting
     in the State of New York and the  parties  hereby  irrevocably  consent and
     submit to the exclusive  jurisdiction of said courts and irrevocably  agree
     that all claims in any such action or proceeding shall be heard, determined
     in and enforced by any such court.

15.  Successors and Assigns.  This Agreement  shall be binding upon and inure to
     the benefit of Fonar,  HMCA, Muraca,  Marciano,  the Escrow Agent and their
     respective successors and permitted assigns.

16.  General  Provisions.  This  Agreement  may  be  executed  in  one  or  more
     counterparts,  each of which shall be deemed an original,  and all of which
     shall constitute one and the same  instrument.  This Agreement shall not be
     modified or amended except by a written instrument  executed by all parties
     hereto.

     IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
officers of the parties as of the date first above written.


                                   FONAR CORPORATION

                                   By: ______________________________________


                                   HEALTH MANAGEMENT CORPORATION OF AMERICA

                                   By:  ______________________________________



                                   --------------------------------------
                                   GLENN MURACA, D.O.



                                   --------------------------------------
                                   GIOVANNI MARCIANO, D.O.


                                   as Escrow Agent only

                                   By: _______________________________________


<PAGE>

                                    EXHIBIT B

                              DEPOSITORY AGREEMENT


     THIS DEPOSITORY AGREEMENT  ("Agreement") is made and entered into as of the
____ day of  _____,  200_,  by and among  Fonar  Corporation  ("Fonar"),  Health
Management  Corporation  of America  (`HMCA"),  Glenn Muraca,  D.O.  ("Muraca"),
Giovanni  Marciano,  D.O.  ("Marciano"),  [Name of Escrow  Agent]  (the  "Escrow
Agent") and [Name of Brokerage Firm] (the "Depository").

                                    RECITALS

     A. Fonar,  HMCA,  Muraca and Marciano  have  entered  into a Stock  Payment
Agreement dated December 20, 2001,  pursuant to which Muraca and Marciano agreed
to accept shares of Fonar Common Stock (the "Fonar Common  Stock") in payment of
certain promissory notes, as provided therein (the "Stock Payment Agreement").

     B. The Stock  Payment  Agreement  provided  that the shares of Fonar Common
Stock to be delivered  to Muraca and  Marciano  would be held in escrow and that
the sale of said shares would be subject to certain volume  limitations,  as set
forth in the Stock Payment Agreement.

     C. Fonar, HMCA, Muraca,  Marciano and the Escrow Agent gave agreed that the
shares of Fonar  Common  Stock to be held in  escrow be held by the  Depository,
subject to the direction of the Escrow Agent as provided herein.

     D. The  Depository has agreed to act as the depository for the Fonar Common
Stock in accordance  with the terms hereof and,  except as hereinafter  provided
the Escrow Agent shall be the only party  authorized to instruct the  Depository
as to the disposition of the Fonar Common Stock.

     NOW,  THEREFORE,  in consideration of the foregoing recitals and the mutual
covenants  and promises  contained  herein,  the parties,  each  intending to be
legally bound hereby, agree as follows:

     1. Creation and  Establishment  of Escrow;  Delivery of Fonar Common Stock;
Cooperation  and  Assistance  of Muraca  and  Marciano.  Fonar,  HMCA,  Muraca ,
Marciano or the Escrow Agent shall deliver  certificates  representing the Fonar
Common Stock to the Depository.  Concurrently therewith,  Muraca and Marciano or
the Escrow Agent shall deliver to the  Depository  stock powers  covering all of
said shares, duly executed in blank and undated, with signature guarantees. Upon
delivery to the  Depository,  the foregoing shall be held in accordance with the
terms  and  conditions  of this  Agreement.  From  and  after  the  date of this
Agreement, Fonar, HMCA, Muraca and Marciano shall provide reasonable cooperation
with,  and  assistance  to, the Escrow Agent and Depository to permit the Escrow
Agent  and   Depository  to  make  any  necessary   exchanges  of   certificates
representing the Fonar Common Stock and to otherwise  facilitate the disposition
of the Fonar Common Stock in accordance with the terms of this Agreement.

     2. Escrow. The terms of the escrow are set forth in a separate agreement of
even date  herewith.  A copy of such escrow  agreement  shall be provided to the
Depository at its request, but the Depository shall in no respect be responsible
for  monitoring  compliance by the Escrow Agent with the terms thereof and shall
be fully  protected  in relying  upon the  instructions  of the Escrow  Agent or
Fonar, HMCA, Muraca and Marciano,  acting jointly, as hereinafter provided.  The
proceeds  of any sale of Fonar  Common  Stock  shall be  released  to Muraca and
Marciano.

     3.  Authority of Escrow Agent;  Duties and  Agreements of  Depository.  The
Depository  shall hold the Fonar  Common  Stock in an account or accounts in the
names of Muraca  and  Marciano.  Notwithstanding  that the  Escrow  Agent has no
beneficial  interest in the Fonar  Common  Stock,  the Escrow Agent shall be the
only party from whom the Depository shall accept any  instructions  with respect
to the sale, assignment,  transfer, release or other disposition or treatment of
the Fonar Common  Stock and any  dividends  or  distributions  which may be paid
thereon.  The initial employees of the Escrow Agent who shall issue instructions
hereunder  on its behalf shall be  __________________________.  The Escrow Agent
may change these employees at any time by written notice to the  Depository.  In
addition to placing sell orders,  the Escrow Agent may direct the  Depository to
release shares to Muraca and Marciano or return them to HMCA and Fonar.

     4.  Temporary  Authorization.  Upon written  authorization  from the Escrow
Agent  by one  of its  designated  employees,  Muraca  and  Marciano  may  issue
instructions  to the Depository to sell up to such number of shares of the Fonar
Common Stock per day,  week or month for such period of time as may be specified
in the authorization.  Such authorization  shall be subject to and in accordance
with the provisions of the Escrow  Agreement  relating to the maximum numbers of
shares which can be sold during  specified  time  periods.  The Escrow Agent may
issue such authorizations from time to time.

     5. Change of  Depository.  A new Depository may be appointed and recognized
hereunder only if such new  appointment or change is made in a writing signed by
Fonar, HMCA, Muraca and Marciano.

     6.  Instructions  from Fonar,  HMCA,  Muraca and Marciano.  Notwithstanding
anything  contained herein to the contrary,  if Fonar, HMCA, Muraca and Marciano
jointly issue  instructions  to the  Depository in writing,  then the Depository
shall rely on those instructions notwithstanding the absence of any instructions
from the Escrow Agent or any instructions from the Escrow Agent to the contrary.

     7. Limitation of Depository's Duties.

     (a) All  parties  hereto  acknowledge  that the  duties  of the  Depository
hereunder  are solely  ministerial  in nature and have been  requested for their
convenience.  The  Depository  shall  not be deemed to be the agent of any party
hereto,  or to have any  legal or  beneficial  interest  in any of the  escrowed
assets. The parties agree that the Depository shall not be liable for any act or
omission taken or suffered in good faith with respect to this Agreement,  unless
such act or omission is the result of the gross negligence or willful misconduct
of the Depository.

     (b) The  Depository  may  consult  with  legal  counsel  and shall be fully
protected  and incur no  liability  relative to any action or inaction  taken in
good faith in accordance with the advice of such counsel.  The Depository  shall
have no  responsibility  for  determining  the  genuineness  or  validity of any
certificate,  document,  notice  or other  instrument  or item  presented  to or
deposited with it, and shall be fully protected in acting in accordance with any
written  instruction  given to it by the parties  hereto in accordance  with the
terms hereof and  reasonably  believed by the  Depository to have been signed by
the proper representatives of such parties.

     (c) The Depository shall not be required to institute legal  proceedings of
any kind. The Depository  shall not be required to defend any legal  proceedings
which  may be  instituted  against  it with  respect  to this  Agreement  unless
requested to do so in writing by any of the parties hereto, and unless and until
it is indemnified by the requesting party to the satisfaction of the Depository,
in its sole discretion,  against the cost and expense of such defense, including
without limitation the reasonable fees and expenses of its legal counsel. If any
conflicting  demand shall be made upon the Depository,  it shall not be required
to determine the same or take any action thereon and may await settlement of the
controversy  by  appropriate  and  nonappealable  legal  proceedings.  Upon  the
commencement  of any action against or otherwise  involving the Depository  with
respect to this  Agreement,  or upon  advice of  counsel  under  subsection  (b)
hereunder,  the  Depository  shall be entitled to interplead  the matter of this
escrow into a court of competent  jurisdiction  in the State of New York and, in
such event,  the Depository shall be relieved of and discharged from any and all
obligations  and  liabilities  under this  Agreement.  In any such  action,  the
Depository shall be entitled to the indemnities provided in Section 8 below.

     8. Indemnification of Depository.  Fonar, HMCA, Muraca and Marciano jointly
and severally  shall hold harmless and indemnify the  Depository,  its partners,
employees  and agents  from and against all  obligations,  liabilities,  claims,
suits,  judgments,  losses,  damages,  costs or  expenses of any kind or nature,
including without  limitation  reasonable  attorneys' fees, which may be imposed
on, incurred by, or asserted against the Depository,  under or by reason of this
Agreement,  except when due to the gross negligence or willful misconduct of the
Depository.  The  foregoing  indemnities  shall survive the  resignation  of the
Depository or the termination of this Agreement.

     9.  Resignation  of Depository.  The Depository in its sole  discretion may
resign at any time and be  discharged  of its duties  hereunder by giving ninety
(90) days prior written notice to the parties hereto, which notice shall specify
the date of such  resignation.  In the  event  the  parties  fail to  appoint  a
successor  depository and notify the  Depository in writing of such  appointment
within such ninety (90) day period,  the Depository shall be deemed to be solely
a custodian without further duties hereunder,  and shall be entitled to petition
a court of competent  jurisdiction to appoint a successor  depository.  Upon the
appointment of a successor depository by the parties hereunder or by such court,
the Depository's duties and liabilities under this Agreement shall terminate.

     10. Assignment.  Except to the extent provided herein, no assignment by any
party hereunder of its rights hereunder shall be effective without prior written
consent of the other  parties  hereto,  except  that HMCA shall be  entitled  to
assign its rights to its parent,  Fonar  Corporation or to any successor to HMCA
or Fonar  Corporation  which  agrees  to be  bound  hereby.  Notice  of any such
permitted  assignment  shall be given in writing by the  assigning  party to the
other parties  hereto.  On any permitted  assignment,  the assignee or assignees
shall be vested with all the rights, powers, and remedies of the assigning party
hereunder.  From  and  after  the  effective  date of any such  assignment,  the
Depository shall be entitled to rely on any written  instructions  received from
any such  assignee,  to the same extent as it previously was entitled to rely on
any written instructions received from the assignor.

     11.  Applicable  Law. This Agreement has been executed and delivered in the
State of New York and shall be governed by and construed in accordance  with the
law of the  State  of New  York.  Whenever  possible,  each  provision  of  this
Agreement  shall be  interpreted  in such a manner as to be effective  and valid
under  applicable  law, but, if any provision of this Agreement shall be held to
be  prohibited  or  invalid  under  applicable  law,  such  provisions  shall be
ineffective  only to the  extent  of such  prohibition  or  invalidity,  without
invalidating  the remainder of such  provisions  or the remaining  provisions of
this Agreement.

     12. Notices. Any notices or other communications  required or desired to be
served, given or delivered hereunder shall be in writing, and shall be deemed to
have  been  validly  served,  given or  delivered  on the same day if  delivered
personally or by facsimile  transmission with voice confirmation of receipt,  or
shall be deemed given on the date  receipt is confirmed if mailed by  registered
or certified  mail or receipted  commercial  overnight  carrier  (e.g.,  Federal
Express,  DHL, etc.), return receipt or confirmation of delivery  requested,  to
the parties at the following addresses:


(a)      If Fonar, to:

         Fonar Corporation
         110 Marcus Drive
         Melville, New York  11747
         Facsimile: (631) 753-5150
         Attn: Raymond V. Damadian
                   Henry T. Meyer, Esq.


(b)      If HMCA, to:

         Health Management Corporation of America
         6 Corporate Center Drive
         Melville, New York  11747
         Facsimile No.:  (631) 630-1070
         Attn:  Timothy Damadian


         With a copy to

         Henry T. Meyer, Esq.
         110 Marcus Drive
         Melville, New York  11747
         Facsimile No. (631) 753-5150

(c)      If to Muraca, to:

         Glenn Muraca, D.O.
         _____________________________
         _____________________________

         Facsimile No.:  ________________________


(d)      If to Marciano, to:

         Giovanni Marciano, D.O.
         _____________________________
         _____________________________

         Facsimile No.: ________________________

(e)      If to the Escrow Agent:

         _____________________________
         _____________________________
         _____________________________

         Facsimile No.:_____________________
         Attn: ____________________________

(e)      If to the Depository:

         _____________________________
         _____________________________
         _____________________________

         Facsimile No.: _______________________
         Attn:  ______________________________

or to such other person or address as a party may hereafter designate for notice
or other  communications  to such party by written notice to the other party and
the Depository in the manner herein described.

     13.  Consent to  Jurisdiction  and Service.  Any legal action or proceeding
arising  out of this  Agreement  may be brought  in any state or  federal  court
sitting in the State of New York and the parties hereby irrevocably  consent and
submit to the exclusive  jurisdiction of said courts and irrevocably  agree that
all claims in any such action or  proceeding  shall be heard,  determined in and
enforced by any such court.

     14. Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the  parties and their  respective  successors  and  permitted
assigns.

     15.  General  Provisions.  This  Agreement  may be  executed in one or more
counterparts,  each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.  This Agreement shall not be modified or
amended except by a written instrument executed by all parties hereto.

     IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
officers of the parties as of the date first above written.


                                   FONAR CORPORATION

                                   By: __________________________________

                                   HEALTH MANAGEMENT CORPORATION OF AMERICA

                                   By:  ______________________________________


                                   By: ______________________________________
                                          GLENN MURACA, D.O.


                                   By: ______________________________________
                                          GIOVANNI MARCIANO, D.O.


                                   ------------------------------------------
                                   as Escrow Agent only


                                   By: ______________________________________


                                   _______________________, as Depository only

                                   By: ______________________________________



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>5
<FILENAME>x231.txt
<TEXT>
EXHIBIT 23.1

               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in this  Registration  Statement on
Form S-3 of our report dated September 28, 2001, except for Note 13, as to which
the date is October 25, 2001, which appears in the Annual Report on Form 10-K/A,
of Fonar  Corporation and  Subsidiaries  for the year ended June 30, 2001 and to
the  reference  to our firm  under the  caption  "Experts"  in the  Registration
Statement.

/s/Grassi & Co., CPA's, P.C.
Grassi & Co., CPA's, P.C.

New York, New York
January 11, 2002

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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