<SEC-DOCUMENT>0000355019-12-000024.txt : 20120928
<SEC-HEADER>0000355019-12-000024.hdr.sgml : 20120928
<ACCEPTANCE-DATETIME>20120928165529
ACCESSION NUMBER:		0000355019-12-000024
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20120630
FILED AS OF DATE:		20120928
DATE AS OF CHANGE:		20120928

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FONAR CORP
		CENTRAL INDEX KEY:			0000355019
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				112464137
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-10248
		FILM NUMBER:		121117352

	BUSINESS ADDRESS:	
		STREET 1:		110 MARCUS DR
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
		BUSINESS PHONE:		6316942929

	MAIL ADDRESS:	
		STREET 1:		110 MARCUS DRIVE
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>fonar_10k-v3.htm
<DESCRIPTION>FONAR 10-K
<TEXT>
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<P STYLE="margin: 0; font: normal 10pt Courier New, Courier, Monospace"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">SECURITIES
AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">_____________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: 14pt Courier New, Courier, Monospace"><B>FORM
10-K</B></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">_____________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 4.5pt; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
the fiscal year ended June 30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">OR</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 31.5pt; text-indent: 4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 31.5pt; text-align: center; text-indent: -31.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">SECURITIES
AND EXCHANGE ACT OF 1934 [No Fee Required]</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
the transition period from _____________ to _____________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Commission
File No. 0-10248</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">___________________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: 20pt Courier New, Courier, Monospace"><B>FONAR
CORPORATION</B></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: 20pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(Exact
name of registrant as specified in its charter)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: normal 10pt Courier New, Courier, Monospace; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 56%; border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">DELAWARE</FONT></TD>
    <TD STYLE="width: 4%; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 40%; border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">11-2464137</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(State
    of incorporation)</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(IRS
                                                          Employer Identification</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Number)</FONT></P></TD></TR>
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">110
    Marcus Drive, Melville, New York</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">11747</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Address
    of principal &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;executive offices)</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(Zip
    Code)</FONT></TD></TR>
</TABLE>
<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: normal 10pt Courier New, Courier, Monospace; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 100%; border: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(631)
    694-2929</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; border-top-color: windowtext; border-top-width: 1pt; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(Registrant's
    telephone number, including area code)</FONT></TD></TR>
</TABLE>
<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">____________________________________________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Securities
registered pursuant to Section 12(b) of the Act:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Common
Stock, par value $.0001 per share</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Securities
registered pursuant to Section 12(g) of the Act:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">None</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">________________________________________________________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ___ No _X_</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ___ No
_X_</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark whether the registrant (1) has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Yes
__X___&#9; No ____</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark if disclosure of delinquent filers, pursuant to Item 405 of Regulation S-K, &sect;229.405 of this Chapter, is not
contained, and will not be contained, to the best of the registrant&rsquo;s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-K or any amendment to the Form 10-K. [X]</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of &ldquo;large accelerated filer&rdquo;, &ldquo;accelerated filer and &ldquo;smaller reporting
company&rdquo; in Rule 12b-2 of the Exchange Act. (Check one):</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Large
accelerated filer ___ Accelerated filer ____ Non-accelerated filer ____ Smaller reporting company _X_</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(Do
not check if a smaller reporting company)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Yes
___ No _X_</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate market value of the shares of Common Stock held by non-affiliates as of December 31, 2011 based on the closing price
of $1.70 per share on such date as reported on the NASDAQ System, was approximately $9.6 million. The other outstanding classes
do not have a readily determinable market value.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
of September 6, 2012, 5,901,262 shares of Common Stock, 158 shares of Class B Common Stock, 382,513 shares of Class C Common Stock
and 313,438 shares of Class A Non-voting Preferred Stock of the registrant were outstanding.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">DOCUMENTS
INCORPORATED BY REFERENCE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">None</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">DOCUMENTS
INCORPORATED BY REFERENCE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">None</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PART
I</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
1. BUSINESS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">GENERAL</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
Corporation, sometimes referred to as the &quot;Company&quot; or &quot;Fonar&quot;, is a Delaware corporation which was incorporated
on July 17, 1978. Our address is 110 Marcus Drive, Melville, New York 11747 and our telephone number is 631-694-2929. Fonar also
maintains a WEB site at www.fonar.com. Fonar provides copies of its filings with the Securities and Exchange Commission on Forms
10-K, 10-Q and 8-K and amendments to these reports to stockholders on request.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
conduct our business in two segments. Our medical equipment segment is conducted directly through Fonar. Our physician management
and diagnostic services segment is conducted through our subsidiary Health Management Corporation of America, which has assigned
its assets and liabilities for a controlling interest in a limited liability company, Imperial Management Services, LLC. This
new entity includes outside investors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MEDICAL
EQUIPMENT SEGMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
is engaged in the business of designing, manufacturing, selling and servicing magnetic resonance imaging, also referred to as
&quot;MRI&quot; or &quot;MR&quot; scanners, which utilize MRI technology for the detection and diagnosis of human disease, abnormalities,
other medical conditions and injuries. Fonar&rsquo;s founders built the first scanner in 1977 and Fonar introduced the first commercial
MRI scanner in 1980. Fonar is also the originator of the iron-core non-superconductive and permanent magnet technology.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
iron frame technology made Fonar the originator of &quot;open&quot; MRI scanners. We introduced the first &quot;open&quot; MRI
in 1980. Since that time we have concentrated on further application of our &ldquo;open&rdquo; MRI, introducing most recently
the Upright&reg; Multi-Position&trade;&rdquo; MRI scanner (also referred to as the &ldquo;Upright&reg;&rdquo; or &ldquo;Stand-Up&reg;&rdquo;
MRI scanner) and the Fonar 360&trade; MRI scanner.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
product we are now most vigorously promoting is our Upright&reg; MRI. Our patented Upright&reg; MRI is unique in the industry
in that it allows patients to be scanned in fully weight-bearing conditions, such as standing, sitting or bending in any position
that causes symptoms. This means that an abnormality or injury, such as a slipped disk can be visualized where it may not have
been with the patient lying down. We have introduced the name &ldquo;Upright&reg;&rdquo; as an alternative to &ldquo;Stand-UP&reg;&rdquo;
because of the multiplicity of positions in which the patient may be scanned where the patient is not standing.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PHYSICIAN
MANAGEMENT AND DIAGNOSTIC SERVICES SEGMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Health
Management Corporation of America, which we sometimes refer to as &quot;HMCA&quot;, was formed by Fonar in March 1997 as a wholly-owned
subsidiary in order to enable us to expand into the business of providing comprehensive management services to medical providers.
HMCA provides management services, administrative services, billing and collection services, office space, equipment, repair,
maintenance service and clerical and other non-medical personnel to medical providers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company completed a private placement of equity and succeeded in raising $6,000,000 by May 2, 2011. The offering consisted of
Preferred Class A membership interests in a newly formed limited liability company, Imperial Management Services, LLC (&ldquo;Imperial&rdquo;).
Class B membership interests, all of which were retained by the Company&rsquo;s subsidiary, HMCA, hold a 75% equity interest in
Imperial. The Class A membership interests are entitled to receive a dividend of 18% per annum of their capital contributions
to the limited liability company. HMCA contributed all of its assets, together with its liabilities, to Imperial as HMCA&rsquo;s
capital contribution. The Imperial operating agreement provides for the Class A members to receive priority distributions until
their original capital contributions are returned. As of June 30, 2012, Imperial manages 11 diagnostic imaging facilities located
in states of New York and Florida. One fifth of the Class A membership interests were redeemed during fiscal 2012 (equivalent
to 5% of the A and B membership interests in the aggregate).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
October 1, 2010, the Company purchased 100% of the stock of Fair Haven Services Inc., an entity wholly owned by Raymond Damadian.
The entity is in the business of leasing medical equipment to various unrelated PC&rsquo;s. The Company also holds a 50% controlling
interest in two entities from unrelated parties that provides management services to two diagnostic centers in the New York Metropolitan
area.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
Note 19 to the Consolidated Financial Statements for separate financial information regarding our medical equipment and physician
and diagnostic management services segments.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FORWARD
LOOKING STATEMENTS.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Certain
statements made in this Annual Report on Form 10-K are &quot;forward-looking statements&quot;, within the meaning of the Private
Securities Litigation Reform Act of 1995, regarding the plans and objectives of Management for future operations. Such statements
involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
These forward-looking statements are based on current expectations that involve numerous risks and uncertainties. Our plans and
objectives are based, in part, on assumptions involving the expansion of business. These assumptions involve judgments with respect
to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Annual Report will prove to be accurate. In light of the significant uncertainties
inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us
or any other person that our objectives and plans will be achieved.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">RECENT
DEVELOPMENTS AND OVERVIEW.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
products and works-in-progress are intended to significantly improve our competitive position. Our current products are the Upright&reg;
MRI and the Fonar 360&trade;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI permits, for the first time, MRI diagnoses to be made in the weight-bearing state. The Upright&reg; MRI is the
only MRI scanner that allows patients to be scanned while standing, sitting, bending or lying down. This means that an abnormality
or injury, such as a slipped disk, will be able to be scanned under full weight-bearing conditions, which is more often than not
the position in which the patient experiences pain. An adjustable bed allows patients to stand, sit or lie on their backs, sides
or stomachs. The Upright&reg; MRI may also be useful for MRI-guided interventional procedures.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">An
important application of the Fonar Upright&reg; technology is in the evaluation and diagnosis of patients with the Arnold-Chiari
syndrome believed to affect from 200,000 to 500,000 Americans. In this syndrome there is brain stem compression and entrapment
of the brain at the base of the skull in the foramen magnum, which is the circular bony opening at the base of the skull where
the spinal cord exits the skull. The brain structure &ldquo;entrapped&rdquo; in Chiari Syndrome are the lowest lying structures
of the brain, the tonsils of the cerebelium. The Chiari Syndrome is therefore alternately named Cerebellar Ectopia (CTE) indicating
the displacement (ectopia) of these Cerebellar tonsils in this syndrome. Classic symptoms of the Chiari Syndrome include the &ldquo;drop
attack,&rdquo; where the erect patient unexpectedly experiences an explosive rush or nervous discharge at the base of the brain
which rushes down the body to the extremities, causing the patient to collapse in a temporary neuromuscular paralysis which then
subsides while the patient is lying in a horizontal position.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fonar Upright&reg; MRI has demonstrated its key value on two current patients with Chiari Syndrome showing that the conventional
lie-down MRI scanners cannot make an adequate evaluation where the patient&rsquo;s pathology is most visible and where symptoms
are most acute when the patient is upright. A recent publication in the Journal &ldquo;Brain Injury&rdquo; (Brain Injury 2010,
24 (7-8) 988-994) of 1,200 neck pain patients reported that the fallen cerebellar tonsils of the brain (CTE) were missed 75% of
the time when the patient was scanned only in the recumbent position. It is critical to have an image of the patient in an upright
position so that the neurosurgeons can fully evaluate the extent of the brain stem compression which is occurring so they can
choose the most appropriate surgical approach for the operative repair.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; is emerging as the MRI of choice for diagnosing spinal pathology. In September, 2006, FONAR sold an Upright&reg;
MRI scanner to the largest orthopedic hospital in the Netherlands, the St. Maartenskliniek. St. Maartenskliniek has over 300 in-patient
beds and an extensive outpatient clinic program that diagnoses and treats 25,000 patients with orthopedic problems annually. In
placing the order, St. Maartenskliniek announced from the point of view of their internationally recognized &ldquo;Spine Center&rdquo;
that &ldquo;once Fonar made available upright weight-bearing MRI imaging technology, owning one for the St. Maartenskliniek &ldquo;Spine
Center&rdquo; was not optional but mandatory. For our hospital to continue to engage in spine surgery without it, once this new
technology became available, was unacceptable. Once the means were available to make certain we were getting the complete picture
of the patient&rsquo;s spine pathology before undertaking surgery, so that we could be certain we were not performing surgery
based on a wrongdiagnosis and running the risk of doing the wrong surgery, we did not regard the utilization of this new technology,
from our patients&rsquo; perspective, as optional. It was mandatory.&rdquo;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
February 2011, FONAR sold an UPRIGHT&reg; MRI to a neuroscience spine institute in the Northeast. The group that purchased the
MRI said they wanted the best diagnostic device available to allow them to be a &ldquo;center of excellence for the spine.&rdquo;
They had considered other state-of-the-art MRI scanners including those with field strengths of 1.5 and 3.0 Tesla, but those were
single-position (recumbent only) and not weight-bearing systems. The buyers firmly believed that in order for them to be a &ldquo;center
of excellence for the spine,&rdquo; it was crucial for them to have an MRI that could evaluate the spine in its full range of
dynamic weight-bearing positions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
June 2011, FONAR sold an Upright&reg; MRI to another medical practice dedicated to being a &ldquo;center of excellence for the
spine.&rdquo; Hoorman M. Melamed, MD, FAOOS, a board-certified orthopaedic spine surgeon, and a principal at the Bakersfield UPRIGHT
MRI Center, said, &ldquo;Selection of the FONAR UPRIGHT&reg; Multi-Position&trade; MRI for our group was a very careful and deliberate
decision. We recognize that the UPRIGHT&reg; MRI offers capabilities beyond that of a recumbent-only MRI. The UPRIGHT&reg; MRI
allows for scanning patients weight-bearing and the dynamic positions of flexion and extension. This allows us to see and evaluate
the spine under load of a patient&rsquo;s pathology thus enabling us to avoid underestimating a patient&rsquo;s pathology and
therefore obtaining a better diagnosis.&rdquo;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Another
milestone in the utilization of the FONAR Upright&reg; MRI was the publication in the medical journal &quot;Brain Injury&quot;
(July 2010) of a study of 1,200 neck pain patients. The study was published by 10 authors from distinguished universities in the
United States and around the world. The study reported that Cerebellar Tonsil Herniation (CTE) was missed 75% of the time when
the patient was scanned recumbent instead of upright. At the current rate of 1,000,000 automobile whiplash injuries in the U.S.
per year, 600,000 patients each year would have the pathology responsible for their symptoms go undetected if they were examined
solely in a conventional recumbent-only MRI.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
are vigorously promoting sales of the Upright&reg; MRI which we regard as our most promising product. Revenues recognized from
the sale of Upright&reg; MRI scanners increased in fiscal 2012 by 18.5% over fiscal 2011 from approximately $5.3 million in fiscal
2011 to approximately $6.3 million in fiscal 2012 under present market conditions. The following chart shows the revenues attributable
to our different model scanners for the fiscal years ended June 30, 2011 and June 30, 2012. Note that we recognize revenue on
a percentage of completion basis. Accordingly, revenue is recognized as each sub-assembly of a scanner is manufactured. Consequently
the revenues for a fiscal period do not necessarily relate to orders placed in that period or payments received.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: normal 10pt Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: top"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Model</FONT></TD><TD STYLE="padding-bottom: 1pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD COLSPAN="7" STYLE="text-align: center; border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenues
    Recognized</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD COLSPAN="3" STYLE="font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fiscal
    2011</FONT></TD><TD STYLE="padding-bottom: 1pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fiscal
    2012</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 26%; text-align: left; vertical-align: top; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Upright&reg;</FONT></TD><TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 8%; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="width: 26%; text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">5,345,932</FONT></TD><TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 8%; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="width: 26%; text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">6,335,198</FONT></TD><TD STYLE="width: 1%; text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: top; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
                                                                                                              360&trade;</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">0</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">0</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: top; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1,336,365</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$</FONT></TD><TD STYLE="text-align: right; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">587,267</FONT></TD><TD STYLE="text-align: left; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&ldquo;Other&rdquo;
revenue includes upgrades and deinstallations of scanners.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Although
the Fonar 360&trade; has not been sold in the past two fiscal years, it remains part of Fonar&rsquo;s product line. At the present
time the Upright&reg; MRI scanner is the main focus of Fonar&rsquo;s manufacturing activities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fonar 360&trade; includes the Open Sky&trade; MRI. We received our first order for a Fonar 360&trade; scanner in the first quarter
of fiscal 2005. The magnet frame is incorporated into the floor, ceiling and sidewalls of the scan room and is open. Consequently,
physicians and family members can walk inside the magnet to approach the patient. The Open Sky&trade; version of the Fonar 360&trade;
is decoratively designed so that it is incorporated into the panoramic landscape that decorates the walls of the scan room. The
ability of the Fonar 360&trade; to give physicians direct 360 degree access to patients and the availability of MRI compatible
interventional instruments such as needles, catheters, probes, scalpels and forceps, will also enable the Fonar 360&trade; to
be used for image guided interventions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
showcase installation of the first Fonar 360&trade; MRI scanner was completed at the Oxford Nuffield Orthopedic Center in Oxford,
United Kingdom. Oxford-Nuffield had two objectives in the choice of the Fonar 360&trade; MRI. The first was to have an open mid-field
MRI imaging scanner to meet their medical imaging needs. The second was to have an open scanner that would enable direct image
guided surgical intervention. The Oxford-Nuffield scanner is carrying a full diagnostic imaging load daily.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Additionally,
development of the works in progress Fonar 360&trade; MRI image guided interventional technology is actively progressing. Fonar
software engineers have completed and installed their 2nd generation tracking software at Oxford-Nuffield which is designed to
enable the surgeons to insert needles into the patient and accurately advance them under direct visual image guidance to the target
tissue, such as a tumor, so that therapeutic agents can be injected.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Health
Management Corporation of America (&ldquo;HMCA&rdquo;), a subsidiary of Fonar, currently is managing 11 diagnostic imaging centers
located in New York and Florida.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All
these centers, are equipped with Upright&reg; MRI scanners. HMCA has intensified its marketing efforts, including the hiring of
additional marketers and supervisory personnel. HMCA&rsquo;s objective is to increase HMCA&rsquo;s revenues not only for HMCA&rsquo;s
sake of promoting HMCA&rsquo;s profitability but to provide sufficient revenues to support both segments of our business during
times when MRI scanner sales are weak.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MEDICAL
EQUIPMENT SEGMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PRODUCTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
principal product is the Upright&reg; MRI.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI is a whole-body open MRI system that enables positional MRI (pMRI&reg;) applications, such as weight-bearing
MRI studies. Operating at a magnetic field strength of 0.6 Tesla, the scanner is a powerful, diagnostically versatile and cost-effective
open MRI that provides a broad range of clinical capabilities and a complete set of imaging protocols. Patients can be scanned
standing, bending, sitting, upright at an intermediate angle or in any of the conventional recumbent positions. This multi-positional
MRI system accommodates an unrestricted range of motion for flexion, extension, lateral bending, and rotation studies of the cervical
(upper)and lumbar (lower) spine. Previously difficult patient scanning positions can be achieved using the system&rsquo;s MRI-compatible,
three-dimensional, motorized patient handling system. Patients, lying horizontally, are placed into the magnet in the conventional
manner. The system&rsquo;s lift and tilt functions then deliver the targeted anatomical region to the center of the magnet. The
ceiling and floor are recessed to accommodate the full vertical travel of the table. True image orientation is assured, regardless
of the rotation angle, via computer read-back of the table&rsquo;s position. Spines and extremities can be scanned in weight-bearing
states; brains can be scanned with patients either standing or sitting.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">This
capability of the Fonar Upright&reg; technology has demonstrated its key value on patients with the Arnold-Chiari Syndrome (CTE),
which is believed to affect 200,000 to 500,000 Americans. In this syndrome, brain stem compression and subsequent severe neurological
symptoms occur in these patients, when because of weakness in the support tissues within the skull, the brain stem descends and
is compressed at the base of the skull in the foramen magnum, which is the circular bony opening at the base of the skull where
the spinal cord exits the skull. Conventional lie-down MRI scanners cannot make an adequate evaluation of the pathology since
the patient&rsquo;s pathology is most visible and the symptoms most acute when the patient is scanned in the upright weight-bearing
position.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI has also demonstrated its value for patients suffering from scoliosis. Scoliosis patients have been typically
subjected to routine x-ray exams for years and must be imaged upright for an adequate evaluation of their scoliosis. Because the
patient must be standing for the exam, an x-ray machine has been the only modality that could provide that service. The Upright&reg;
MRI, is the only MRI scanner which allows the patient to stand during the MRI exam. Fonar has developed a new RF receiver and
scanning protocol that for the first time allows scoliosis patients to obtain diagnostic pictures of their spines without the
risks of x-rays. A recent study by the National Cancer Institute (2000)of 5,466 women with scoliosis reported a 70% increase in
breast cancer resulting from 24.7 chest x-rays these patients received on the average in the course of their scoliosis treatment.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI is exceptionally open, making it the most non-claustrophobic whole-body MRI scanner. Patients can walk into the
magnet, stand or sit for their scans and then walk out. From the patient&rsquo;s point of view, the magnet&rsquo;s front-open
and top-open design provides an unprecedented degree of comfort because the scanner allows the patient an unobstructed view of
the scanner room from inside the magnet, and there is nothing in front of one&rsquo;s face or over one&rsquo;s head. The only
thing in front of the patient&rsquo;s face during the scan is a very large (42&rdquo;) panoramic TV (included with the scanner)
mounted on the wall. The bed is tilted back five degrees to stabilize a standing patient. Special coil fixtures, a patient seat,
Velcro straps, and transpolar stabilizing bars are available to keep the patient comfortable and motionless throughout the scanning
process.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Full-range-of-motion
studies of the joints in virtually any direction are possible, an especially promising feature for sports injuries. Full Range
of Motion cines, or movies, of the lumbar spine will be achieved under full body weight.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI will also be useful for MRI guided interventional procedures as the physician would have unhindered access to
the patient with no restrictions in the vertical direction.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">This
easy-entry, mid-field-strength scanner should be ideal for trauma centers where a quick MRI screening within the first critical
hour of treatment will greatly improve patients' chances for survival and optimize the extent of recovery.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fonar 360&trade; is an enlarged room sized magnet in which the floor, ceiling and walls of the scan room are part of the magnet
frame. This is made possible by Fonar&rsquo;s patented Iron-Frame&trade; technology which allows our engineers to control, contour
and direct the magnet&rsquo;s lines of flux in the patient gap where wanted and almost none outside of the steel of the magnet
where not wanted. Consequently, this scanner allows 360 degree access to the patient, and physicians and family members are able
to enter the scanner and approach the patient.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fonar 360&trade; is presently marketed as a diagnostic scanner and is sometimes referred to as the Open Sky&trade; MRI. In its
Open Sky&trade; capacity, the Fonar 360&trade; serves as an open patient-friendly scanner which allows 360 degree access to the
patient on the scanner bed.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">To
optimize the patient-friendly character of the Open Sky&trade; MRI, the walls, floor, ceiling and magnet poles are decorated with
landscape murals. The patient gap is twenty inches and the magnetic field strength is 0.6 Tesla.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
also expect to enable the Fonar 360&trade; to function as an MRI guided interventional scanner, for the purpose of performing
intra-operative, interventional and therapeutic procedures with MR compatible instrumentation. In this capacity, the enlarged
room sized magnet and 360 degree access to the patient afforded by the Fonar 360&trade; would permit full-fledged support teams
to walk into the magnet and perform MRI guided interventions on the patient inside the magnet. Most importantly, the exceptional
quality of the MRI image and its exceptional capacity to exhibit tissue detail on the image, by virtue of the nuclear resonance
signal&rsquo;s extraordinary capacity to create image contrast, can then be obtained very near real time to guide the physician
during the MRI guided intervention. Thus MRI compatible instruments, needles, catheters, endoscopes and the like can be introduced
directly into the human body and guided to the malignant lesion or other pathology by means of the MRI image. Surgically inoperable
lesions could be accessed through MRI guided catheters and needles making it possible to deliver the treatment agent directly
to the targeted tissue.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
first Fonar 360&trade; MRI scanner, installed at the Oxford-Nuffield Orthopedic Center in Oxford, United Kingdom, is now carrying
a full diagnostic imaging caseload. In addition, however, development of the works in progress Fonar 360&trade; MRI image guided
interventional technology is actively progressing. Fonar software engineers have completed and installed their 2nd generation
tracking software at Oxford-Nuffield which is designed to enable the surgeons to insert needles into the patient and accurately
advance them, under direct visual image guidance, to the target tissue, such as a tumor, so that therapeutic agents can be injected.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">With
current treatment methods, such as chemotherapy taken by mouth, the therapy must always be restricted in the doses that can be
applied to the malignant tissue because of the adverse effects on the healthy tissues. Thus chemotherapies must be limited at
the first sign of toxic side effects. The same is the case with radiation therapy. Fonar expects that with the Fonar 360&trade;
treatment agents may be administrated directly to the malignant tissue through small catheters or needles, thereby allowing much
larger doses of chemotherapy, x-rays, laser ablation, microwave and other anti-neoplastic agents to be applied directly and exclusively
to the malignant tissue with more effective results. Since the interventional procedure of introducing a treatment needle or catheter
under image guidance will be minimally invasive, the procedure can be readily repeated should metastases occur elsewhere, with
minimum impact on the patient beyond a straightforward needle injection. The presence of the MRI image during treatment would
enable the operator to make assessments during treatment whether the treatment is being effective.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition to the patient comfort and new applications, such as MRI directed interventions, made possible by our scanners&rsquo;
open design, the Upright&reg; and Fonar 360&trade; scanners are designed to maximize image quality through an optimal combination
of signal-to-noise (S/N) and contrast-to-noise (C/N) ratios. The technical improvements realized in these scanners&rsquo; design
over their predecessors also include increased image-processing speed and diagnostic flexibility.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MRI
directed interventions are made possible by the scanners&rsquo; ability to supply images to a monitor positioned next to the patient,
enabling the operator to view in process an interventional procedure from an unlimited number of angles. The openness of Fonar&rsquo;s
scanners would enable a physician to perform a wide range of interventional procedures inside the magnet.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
the case of breast imaging the access by a physician permits an image guided biopsy to be performed easily which is essential
once suspicious lesions are spotted by any diagnostic modality. In addition to being far superior to x-ray in detecting breast
lesions because of the MRI&rsquo;s ability to create the soft tissue contrast needed to see them, where x-ray is deficient in
its ability to generate the needed contrast between cancer and normal tissue, there is not the painful compression of the breast
characteristic of X-ray mammography.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI and Fonar 360&trade; scanners share much of the same fundamental technology and offer the same speed, precision
and image quality. Fonar&rsquo;s scanners initiated the new market segment of high-field open MRI. High-field open MRIs operate
at significantly higher magnetic field strengths and, therefore, produce more of the MRI image-producing signal needed to make
high-quality MRI images (measured by signal-to-noise ratios, S/N).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI and Fonar 360&trade; scanners utilize a 6000 gauss (0.6 Tesla field strength) iron core electromagnet. The greater
field strength of the 6000 gauss magnet, as compared to lower field open MRI scanners that operate at 3,000 gauss (0.3 Tesla)
when enhanced by the electronics already utilized by Fonar&rsquo;s scanners, produces images of higher quality and clarity. Fonar&rsquo;s
0.6 Tesla open scanner magnets are among the highest field &quot;open MRI&quot; magnets in the industry.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI and Fonar 360&trade; scanners are designed to maximize image quality through an optimal combination of signal-to-noise
(S/N) and contrast-to-noise (C/N) ratios. The technical improvements realized in the scanners&rsquo; design over their lower field
predecessors also include increased image-processing speed and diagnostic flexibility.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Several
technological advances have been engineered into the Upright&reg; MRI and Fonar 360&trade; scanners for extra improvements in
S/N, including: new high-S/N Organ Specific(TM) receiver coils; new advanced front-end electronics featuring high-speed, wide-dynamic-range
analog-to-digital conversion and a miniaturized ultra-low-noise pre-amplifier; high-speed automatic tuning, bandwidth-optimized
pulse sequences, multi-bandwidth sequences, and off-center FOV imaging capability.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition to the signal-to-noise ratio, however, the factor that must be considered when it comes to image quality is contrast,
the quality that enables reading physicians to clearly distinguish adjacent, and sometimes minute, anatomical structures from
their surroundings. This quality is measured by contrast-to-noise ratios (C/N). Unlike S/N, which increases with increasing field
strength, relaxometry studies have shown that C/N peaks in the mid-field range and actually falls off precipitously at higher
field strengths. The Upright&reg; MRI and Fonar 360&trade; scanners operate squarely in the optimum C/N range.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI and Fonar 360&trade; provide various features allowing for versatile diagnostic capability. For example, SMART&trade;
scanning allows for same-scan customization of up to 63 slices, each slice with its own thickness, resolution, angle and position.
This is an important feature for scanning parts of the body that include small-structure sub-regions requiring finer slice parameters.
There is also Multi-Angle Oblique&trade; (MAO) imaging, and oblique imaging.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
console for these scanners includes a mouse-driven, multi-window interface for easy operation and a 19-inch, 1280 x 1024-pixel,
20-up, high-resolution image monitor with features such as electronic magnifying glass and real-time, continuous zoom and pan.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
predecessors of the Upright&reg; MRI and Fonar 360&trade; were FONAR&rsquo;s QUAD&trade; scanner, Ultimate&trade; 7000 scanner
and Beta&trade; scanner. The Beta&trade; 3000 scanner utilized a permanent magnet. The Beta&trade; 3000M scanner utilized an iron
core electromagnet. All of our current and earlier model scanners create cross-sectional images of the human body.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
fiscal 2012, sales of our Upright&reg; MRI scanners accounted for approximately 16.1% of our total revenues and 33.9% of our medical
equipment revenues, as compared to 16.1% of total revenues and 30% of medical equipment revenues in fiscal 2011. These results
reflect the decrease in our sales of scanners.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
fiscal 2012 and fiscal 2011, we had no revenues attributable to sales of our Fonar 360&trade; scanner.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
principal selling, marketing and advertising efforts have been focused on the Upright&reg; MRI, which we believe is a particularly
unique product, being the only MRI scanner which is both open and allows for weight-bearing imaging. Since we perceive that the
Upright&reg; MRI is successfully penetrating the market and enabled us to achieve profitability in fiscal 2011 and 2012, we expect
to continue our focus on the Upright&reg; MRI in the immediate future. We are optimistic that in the long run the Fonar 360&trade;
and our other products and works in progress will also contribute to increased product sales.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
materials and components used in the manufacture of our products (circuit boards, computer hardware components, electrical components,
steel and plastic) are generally available at competitive prices. We have not had difficulty acquiring such materials.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">WORKS-IN-PROGRESS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All
of our products and works-in-progress seek to bring to the public MRI products that are expected to provide important advances
against serious disease.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MRI
takes advantage of the nuclear resonance signal elicited from the body's tissues and the exceptional sensitivity of this signal
for detecting disease. Much of the serious disease of the body occurs in the soft tissue of vital organs. The principal diagnostic
modality currently in use for detecting disease, as in the case of x-ray mammography, are diagnostic x-rays. X-rays discriminate
soft tissues, such as healthy breast tissue and cancerous tissue poorly, because the x-ray particle traverses the various soft
tissues almost equally thereby causing target films to be nearly equally exposed by x-rays passing through adjacent soft tissues
and creating healthy and cancerous shadows on the film that differ little in brightness. The image contrast in x-ray between cancerous
and healthy breast tissue is poor, making the detection of breast cancers by the x-ray mammogram less than optimal and forcing
the mammogram to rely on the presence or absence of microscopic stones called &ldquo;microcalcifications&rdquo; instead of being
able to &ldquo;see&rdquo; the breast cancer itself. If microcalcifications are not present to provide the missing contrast, then
the breast cancer goes undetected. They frequently are not present. The maximum contrast available by x-ray with which to discriminate
disease is 4%. Brain cancers differ from surrounding healthy brain by only 1.6% while the contrast in the brain by MRI is 25 times
greater at 40%. X-ray contrasts among the body&rsquo;s soft tissues are maximally 4%. Their contrast by MRI is 32.5 times greater
(130%).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
soft tissue contrasts with which to distinguish cancers on images by MRI are up to 180%. In the case of cancer these contrasts
can be even more marked making cancers readily visible and detectable anywhere in the body. This is because the nuclear resonance
signals from the body's tissues differ so dramatically. Liver cancer and healthy liver signals differ by 180% for example. Thus
there is some urgency to bring to market an MRI based breast scanner that can overcome the x-ray limitation and assure that mammograms
do not miss serious lesions. The added benefit of MRI mammography relative to x-ray mammography is the elimination of the need
for the patient to disrobe and the painful compression of the breast typical of the x-ray mammogram. The patient is scanned in
her street clothes in MRI mammography. Moreover MRI mammogram scans the entire chest wall including the axilla for the presence
of nodes which the x-ray mammogram cannot reach.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
view our Upright&reg; MRI as having the potential for being an ideal breast examination machine as it permits the patient to be
seated for the examination, which would allow easy access for an MRI guided breast biopsy when needed. The Fonar 360&trade; MRI
scanner would also be ideal for breast examinations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PRODUCT
MARKETING</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
principal markets for the Company's scanners are private diagnostic imaging centers and hospitals.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
internal sales force handles the domestic market. We continue to use independent manufacturer&rsquo;s representatives and distributors
for foreign markets. None of Fonar&rsquo;s competitors are entitled to make the Fonar Upright&reg; MRI scanner.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
Website includes interactive product information for reaching customers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
has targeted orthopedic surgeons and neurosurgeons, particularly spine surgeons, as important markets for the Upright&reg; MRI.
Accordingly, Fonar has exhibited at annual meetings of The American Academy of Orthopaedic Surgeons (AAOS); the North American
Spine Society (NASS); the American Association of Neurological Surgeons (AANS); and the Congress of Neurological Surgeons (CNS).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
success in targeting surgeons was most evident in the sale, in September 2006, of an Upright&reg; MRI scanner to the largest orthopedic
hospital in the Netherlands, the St. Maartenskliniek in Nijmegen. In addition to being a key sale to a prestigious hospital, the
medical conclusions reached and stated by the buyer and the buyer&rsquo;s intention to conduct research and publish articles concerning
the Upright&reg; technology, are a vital component to Fonar&rsquo;s objective to prove to the medical community at large, insurers,
governmental agencies and others the benefits, if not the necessity of Upright&reg; scanning. A Director of St. Maartenskliniek
and the Chairman of Spine Surgery stated that &ldquo;We at St. Maartenskliniek, the biggest orthopedic hospital in the Netherlands,
are very much looking forward to this new technology from Fonar which will enable us to evaluate the spine anatomy in the fully
weight-bearing state and in multiple positions. We expect these new multi-position capabilities to lead to more accurate diagnosis
and better surgery outcomes for patients. Once our active research program has discovered the benefits of this new Fonar technology
for patients, we intend to publish the results in a lot of peer reviewed scientific journals.&rdquo; The Chairman stated further
&ldquo;that once Fonar made available upright weight-bearing MRI imaging technology, owning one for the St. Maartenskliniek &ldquo;Spine
Center&rdquo; was not optional but mandatory. For our hospital to continue to engage in spine surgery without it, once this new
technology became available, was unacceptable&rdquo;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Recognition
of the importance of Fonar Upright&reg; MRI continues to grow. Medserena, of Germany, announced in August, 2010 the purchase of
its fourth Upright&reg; Multi-Position&trade; MRI. CEO Matthais Schulz said, &ldquo;The large number of requests coming from our
physicians in Germany are arising because of the special medical need for FONAR&rsquo;s unique technology. This is in spite of
an intensely active MRI market in Germany, where there are already many conventional lie-down MRIs installed.&rdquo;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Even
high-field 3.0 Tesla MRI scanners cannot overshadow the importance of Fonar&rsquo;s unique technology. In August, 2010, a distinguished
board-certified radiologist in Florida, the owner/operator of two multi-modality imaging centers equipped with MRIs, ordered a
Fonar Upright&reg; MRI. He initially considered purchasing a 3.0 Tesla lie-down MRI, but decided instead to buy the Fonar Upright&reg;
Multi-Position&trade; MRI when he became aware of its many unique imaging capabilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
advertising strategy has been designed to reach key purchasing decision makers with information concerning our flagship product,
the Upright&reg; MRI. This has led to many inquiries and to some sales of the Upright&reg; MRI scanner and is intended to increase
Fonar&rsquo;s presence in the medical market. Fonar&rsquo;s advertising has been directed at four target audiences: neurosurgeons,
orthopaedic surgeons, radiologists and physicians in general.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace"></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Courier New, Courier, Monospace; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">1)</TD><TD STYLE="text-align: justify">Neurosurgeons and Orthopaedic Surgeons: These are the surgeons who can most benefit from the superior diagnostic benefits of
the Fonar Upright&reg; MRI with its Multi-Position&reg; diagnostic ability. Advertisements to them have appeared in the journal
Spine, The Journal of Neurosurgery, and the Journal of the American Academy of Orthopedic Surgery.</TD></TR></TABLE>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Courier New, Courier, Monospace; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">2)</TD><TD STYLE="text-align: justify">Radiologists: This segment of the campaign is aimed at the physicians who now have a new modality to offer their referring
physicians. Our advertisements directed to them have appeared in Radiology and Diagnostic Imaging.</TD></TR></TABLE>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Courier New, Courier, Monospace; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">3)</TD><TD STYLE="text-align: justify">All Physicians: These advertising efforts have been directed to the total physician audience, so that the vast number of doctors
who send patients for MRI&rsquo;s are aware of the diagnostic advantages of the Fonar Upright&reg; Multi-Position&reg; MRI. Advertisements
directed to this audience have appeared in the Journal of the American Medical Association.</TD></TR></TABLE>



<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">This
advertising has featured a series of compelling messages. One advertisement pointed out that the AMA book, Guides to the Evaluation
of Permanent Impairment, indicates that diagnosis must be performed upright in flexion and extension. Another advertisement was
educational and headlined, &ldquo;Discover the power of Upright Imaging&rdquo;. Fonar realizes that peer-to-peer communications
is the most powerful way to speak to physicians. Consequently, testimonials from surgeons and radiologists have been used to promote
our Upright&reg; MRI scanner. The first such advertisement featured five surgeons and two radiologists, explaining the Multi-Position&reg;
diagnostic benefits of the Fonar Upright&reg; MRI scanner to them. Another advertisement featured a leading radiologist, telling
why he bought 12 Fonar Upright&reg; MRI scanners and planned to buy more.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Also,
our advertising for HMCA also serves as advertising for Fonar MRI scanners. We have increased internet awareness of our product
by driving patient traffic to the Upright&reg; scanning centers we manage by installing Websites for every location. These websites
and advertising give prospective customers of Upright&reg; MRI scanners a view of operating Upright&reg; MRI centers and the benefits
of using an Upright&reg; MRI scanner. The success of HMCA-managed sites not only increases management fees to HMCA but encourages
new sales for Fonar as well.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">To
meet the demand for high-field open MRI scanners, Fonar plans to devote its principal efforts to marketing the Upright&reg; MRI.
The Upright&reg; MRI is the only scanner in the industry that has the unique capability of scanning patients under weight-bearing
conditions and in various positions of pain or other symptoms. In addition we will continue to market our Fonar 360&trade; MRI
scanners. Utilizing a 6000 gauss (0.6 Tesla field strength) iron core electromagnet, the Upright&reg; MRI and Fonar 360&trade;
scanner magnets are among the highest field &quot;Open MRI&quot; scanners in the industry.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI is also suited to fill a demand for better diagnoses of scoliosis patients, who must be standing for the exam.
Scoliosis patients are typically subjected to routine x-ray exams for years. In the past, an x-ray machine was the only modality
that could provide that service. Typical MRI scanners cannot provide this service because the patient cannot stand up inside of
them. The Fonar Upright&trade; MRI scanner is the only MRI scanner which allows the patient to stand during the exam. The Fonar
Upright&reg; Scanner avoids radiation of the x-ray machines currently used for scoliosis, which have been reported by the National
Cancer Institute to cause a 70% increase in the risk of breast cancer. Other important new applications are Upright&reg; imaging
of the pelvic floor and abdomen to image prolapses and inguinal hernias. Fonar has also developed the first non-invasive method
to image the prostate: the patient simply sits on a flat, seat-like coil.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
also will seek to introduce new MRI applications for our scanners such as MRI-directed interventions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
areas of operations are principally in the United States. During the fiscal year ended June 30, 2012, 6.2% of the Company's revenues
were generated by foreign sales, as compared to 8.5% for fiscal 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
are seeking to promote foreign sales and have sold scanners in various foreign countries. Foreign sales, however, have not yet
proved to be a significant source of revenue.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">SERVICE
AND UPGRADES FOR MRI SCANNERS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
customer base of installed scanners has been and will continue to be an additional source of income, independent of direct sales.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Income
is generated from the installed base in two principal areas namely, service and upgrades. Service and maintenance revenues from
our external installed base were approximately $11.8 million in fiscal 2012 and $11.1 million in fiscal 2011. We expect service
revenues to increase as warranties expire on previously sold scanners, and the customers then enter into service contracts.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
also anticipate that our new scanners will result in upgrades income in future fiscal years. The potential for upgrades income,
particularly in the form of new patient supporting upright imaging fixtures and receiver coils, originates in the versatility
and productivity of the new Upright&reg; Imaging technology. New medical uses for MRI technology are constantly being discovered
and are anticipated for the Upright&reg; Imaging technology as well. New features can often be added to the scanner by the implementation
of little more than versatile new software packages. For example, software can be added to existing MRI angiography applications
to synchronize angiograms with the cardiac cycle. By doing so the dynamics of blood vessel filling and emptying can be visualized
with movies. Such enhancements are attractive to end users because they extend the useful life of the equipment and enable the
user to avoid obsolescence and the expense of having to purchase new equipment.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">RESEARCH
AND DEVELOPMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
the fiscal year ended June 30, 2012, we incurred expenditures of $1,242,656, none of which was capitalized, on research and development,
as compared to $1,507,290, $67,258 of which was capitalized, during the fiscal year ended June 30, 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Research
and development activities have focused principally, on the development and enhancement of the Upright&reg; and Fonar 360&trade;
MRI scanners. The Upright&reg; MRI and Fonar 360&trade; involve significant software and hardware development as the new products
represent entirely new hardware designs and architecture requiring a new operating software. Our research activity includes developing
a multitude of new features for upright scanning made possible by the new high speed data processing power of Fonar&rsquo;s newest
scanners. In addition, the Company&rsquo;s research and development efforts include the development of new software, such as its
Sympulse&trade; software and hardware upgrade and the designing and continuing introduction of new receiver surface coils for
the Upright&reg; MRI.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Research
and development activities have focused principally on software improvements to the user interface of the MRI scanner. The Windows-based
Sympulse&trade; platform controls all of the functions of the UPRIGHT&reg; scanner except those of the versatile, multi-position
patient table. Separate, dedicated, motion-control software is used to maneuver the UPRIGHT&reg; bed, and development of this
software is ongoing as well. The same Sympulse&trade; platform running identical software underpins the operation of other FONAR
MRI scanners, including the FONAR 360&trade; and older units such as the Quad 12000&trade;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
December 2010 FONAR completed and shipped Release 8.0. The signature feature of Release 8.0 is the Centering Cursor, which enables
the technologist to position the target anatomy precisely at the center of the magnet by means of a cursor that can be translated
on scout or localizer images. The location of the Centering Cursor is communicated directly to the patient table with a click
of the mouse. Because the UPRIGHT&reg; bed enjoys three degrees of freedom in its motion, unlike conventional recumbent MRI scanners
that have but one (in and out), the anatomy of interest can be scanned at magnet isocenter, where the magnetic field is most uniform.
This is critical for the successful implementation of chemical-shift sensitive fat suppression techniques, such as direct fat
saturation and the Dixon method.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">While
software improvements to the user interface are important in their own right, significant value is added to the MRI scanner by
the modification of existing protocols for examining various parts of the body, and the development of new protocols that utilize
new underlying capabilities of the pulse sequence software.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
example, in Release 8.0, the Dixon method of fat suppression was extended from gradient echo sequences to fast spin echo and spin
echo sequences. This is particularly important for musculoskeletal imaging because it enables technologists to meet the demand
of radiologists for true proton density-, T1-, and T2-weighted imaging with fat suppression. Protocols employing this new technique
were released together with the user interface software in a bundled package. Over time, FONAR users have become accustomed to
the steady improvement in clinical protocols that accompany new software releases. More significantly, in recent years we have
seen increasing adoption of FONAR-standard clinical protocols over those developed on site. This is a testament to the superior
image quality they produce in attractively short scan times.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
development of clinically practical scan protocols and software depends on close contact between research and development scientists
and engineers and end users. That close contact is facilitated in part by the subsidiary relationship with HMCA-IMPERIAL and the
scanning centers it manages. In addition to that collaboration, R&amp;D staff have pursued a variety of novel and UPRIGHT&reg;
MRI-specific research projects that, it is anticipated, will ultimately lead to new applications that are made available to existing
customers as upgrade add-ons to their machines.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
example, a multi-year collaboration with faculty and graduate students at the University of Delaware has led to the development
of an open-geometry low-impedance quadrature knee coil that is ideally suited to the weight-bearing examination of the knee, and
the study of a variety of pathologies such as patellofemoral pain syndrome and osteoarthritis. This work is described in doctoral
dissertations and papers that have been presented at conferences and submitted for publication.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Two
independent collaborations with plastic surgeons specializing in breast implantation have yielded insights into the way in which
various types of implants coexist with surrounding tissues in the cosmetically significant upright seated or standing posture.
One or more publications authored by these outside users are in progress.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
receiver coil and scanning protocols designed for rapid, x-ray free MRI evaluation of patients with scoliosis has already been
made available to FONAR customers. FONAR image display software that enables the technologist to reformat the axial 3D data set
into a coronal plane that follows the lordotic curve of the spine is enabled upon purchase of the coil. Papers describing this
work have already been published.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Another
important development is &ldquo;Correlated Slice Profile&rdquo; (CSP&trade;) Imaging which can be done for most spine patients.
The patient having the spine scan is scanned in the four positions of Upright&reg;-neutral, Upright&reg;-flexion, Upright&reg;-extension,
and traditional recumbent. At the conclusion of the scan, the MRI technologist selects a center-slice sagittal view from each
of the four positions. The four image positions are then displayed side by side. In this way, one can quickly comprehend how a
patient&rsquo;s pathology changes from position to position within the same anatomic slice. This multi-position weight-bearing
imaging of the spine enables the patient&rsquo;s physician to see all of the patient&rsquo;s symptom-generating pathology so they
can be correctly addressed therapeutically or surgically (if necessary).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">BACKLOG</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
backlog of unfilled orders at September 14, 2012 was approximately $7.4 million, as compared to $9.4 million at September 20,
2011. It is expected that a substantial portion of the existing backlog of orders will be filled within the 2013 fiscal year.
Our contracts generally provide that if a customer cancels an order, the customer's initial down payment for the MRI scanner is
nonrefundable.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PATENTS
AND LICENSES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
currently have numerous patents in effect which relate to the technology and components of the MRI scanners. We believe that
these patents, and the know-how we have developed, are material to our business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">One
of our patents, issued in the name of Dr. Damadian and licensed to Fonar, was United States patent No. 3,789,832, Apparatus and
Method for Detecting Cancer in Tissue, also referred to as the &quot;1974 Patent&quot;. The development of our MRI scanners have
been based upon the 1974 Patent, and we believe that the 1974 Patent was the first of its kind to utilize MR to scan the human
body and to detect cancer. The 1974 Patent was extended beyond its original 17-year term and expired in February, 1992.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
have significantly enhanced our patent position within the industry and now possesses a substantial patent portfolio which provides
us, under the aegis of United States patent law, &quot;the exclusive right to make, use and sell&quot; many of the scanner features
which Fonar pioneered and which are now incorporated in most MRI scanners sold by the industry. As of June 30, 2012, 182 patents
had been issued to Fonar, and approximately 19 patents were pending. A number of Fonar&rsquo;s existing patents specifically relate
to protecting Fonar&rsquo;s position in the high-field iron frame open MRI market. The patents further enhance Dr. Damadian's
pioneer patent, the 1974 Patent, that initiated the MRI industry and provided the original invention of MRI scanning. The terms
of the patents in Fonar&rsquo;s portfolio extend to various times.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
also have patent cross-licensing agreements with other MRI manufacturers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PRODUCT
COMPETITION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MRI
SCANNERS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
majority of the MRI scanners in use in hospitals and outpatient facilities and at mobile sites in the United States are based
on high field air core magnet technology while the balance are based on open iron frame magnet technology. Fonar&rsquo;s open
iron frame MRI scanners are competing principally with high-field air core scanners. Fonar&rsquo;s open MRI scanners, however,
utilizing a 6,000 gauss or 0.6 Tesla field strength, iron core electromagnet, were the first &quot;open&quot; MR scanners at high
field strength.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
believes that its MRI scanners have significant advantages as compared to the high-field air core scanners of its competitors.
These advantages include:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.
There is no expansive fringe magnetic field. High field air core scanners require a more expensive shielded room than is required
for the iron frame scanners. The shielded room required for the iron frame scanners is intended to prevent interference from external
radio frequencies.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.
They are more open and quiet.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.
They can scan the trauma victim, the cardiac arrest patient, the respirator-supported patient, and premature and newborn babies.
This is not possible with high- field air core scanners because their magnetic field interferes with conventional life-support
equipment.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
principal competitive disadvantage of our products is that they are not &ldquo;high field strength&rdquo;, 1.0 Tesla +, magnets.
As a general principle, the higher field strength can produce a faster scan. In some parts of the body a faster scan can be traded
for a clearer picture. Although we believe that the benefits of &ldquo;openness&rdquo; provided by our scanners compensate for
the lower field strength, certain customers will still prefer the higher field strength.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
faces competition within the MRI industry from such firms as General Electric Company, Philips N.V., Toshiba Corporation, Hitachi
Corporation and Siemens A.G. Most competitors have marketing and financial resources more substantial than those available to
us. They have in the past, and may in the future, heavily discount the sales price of their scanners. Such competitors sell both
high field air core superconducting MRI scanners and iron frame products. Fonar&rsquo;s original iron frame design, ultimately
imitated by Fonar&rsquo;s competitors to duplicate Fonar&rsquo;s origination of &ldquo;Open&rdquo; MRI magnets, gave rise to current
patient protected Upright&reg; MRI technology with the result that Fonar today is the unique and only supplier of the highest
field MRI magnets (.6 Tesla) that are not superconducting, do not use liquid helium and are not therefore susceptible to explosion.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
iron frame, because it could control the magnetic lines of force and place them where wanted and remove them from where not wanted,
such as in the Fonar 360&trade; where physicians and staff are standing, provide a much more versatile magnet design than is possible
with air core magnets. Air core magnets contain no iron but consist entirely of turns of current carrying wire.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
an 11 year period from 1983-1994, Fonar's large competitors, with one exception, generally rejected Fonar's &quot;open&quot; design
but by now all have added the iron frame &quot;open&quot; magnet to their MRI product lines. One reason for this market shift,
in addition to patient claustrophobia, is the awareness that the open magnet designs permit access to the patient to perform MRI
guided procedures, a field which is now growing rapidly and is called &quot;interventional MRI.&quot;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fonar 360&trade; scanner explicitly addresses this growing market reception of MRI guided interventions, and the first of these
scanners was sold to a hospital in England. Fonar's Upright&reg; magnet also addresses the growing market reception of MRI guided
interventions. Although not enabling a full interventional theater as the Fonar 360&trade; does, the iron frame Upright&reg; MRI
design permits ready access to the patient and enables a wide range of interventional procedures such as biopsies and needle or
catheter delivered therapies to be performed under MRI image guidance. The &quot;tunnel&quot; air core superconductive scanners
do not permit access to the patient while the patient is inside the scanner.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
expects to be the leader Upright&reg; Multi-Position MRI for providing dynamic visualization of body parts such as the spine and
other joints as well as dynamic visualization of the heart in its upright position when it is sustaining its full normal physiological
load. No companies possess the patented Upright&reg; MRI technology or the Fonar 360&trade;&rsquo;s 360&deg; full access interventional
technology.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">OTHER
IMAGING MODALITIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
MRI scanners also compete with other diagnostic imaging systems, all of which are based upon the ability of energy waves to penetrate
human tissue and to be detected by either photographic film or electronic devices for presentation of an image on a television
monitor. Three different kinds of energy waves - X-ray, gamma and sound - are used in medical imaging techniques which compete
with MRI medical scanning, the first two of which involve exposing the patient to potentially harmful radiation. These other imaging
modalities compete with MRI products on the basis of specific applications.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">X-rays
are the most common energy source used in imaging the body and are employed in three imaging modalities:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.
Conventional X-ray systems, the oldest method of imaging, are typically used to image bones and teeth. The image resolution of
adjacent structures that have high contrast, such as bone adjacent to soft tissue, is excellent, while the discrimination between
soft tissue organs is poor because of the nearly equivalent penetration of x-rays.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.
Computerized Tomography, also referred to as &quot;CT&quot;, systems couple computers to x-ray instruments to produce cross-sectional
images of particular large organs or areas of the body. The CT scanner addresses the need for images, not available by conventional
radiography, that display anatomic relationships spatially. However, CT images are generally limited to the transverse plane and
cannot readily be obtained in the two other planes, sagittal and coronal. Improved picture resolution is available at the expense
of increased exposure to x-rays from multiple projections. Furthermore, the pictures obtained by this method are computer reconstructions
of a series of projections and, once diseased tissue has been detected, CT scanning cannot be focused for more detailed pictorial
analysis or obtain a chemical analysis.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.
Digital radiography systems add computer image processing capability to conventional x-ray systems. Digital radiography can be
used in a number of diagnostic procedures which provide continuous imaging of a particular area with enhanced image quality and
reduced patient exposure to radiation.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Nuclear
medicine systems, which are based upon the detection of gamma radiation generated by radioactive pharmaceuticals introduced into
the body, are used to provide information concerning soft tissue and internal body organs and particularly to examine organ function
over time.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Ultrasound
systems emit, detect and process high frequency sound waves reflected from organ boundaries and tissue interfaces to generate
images of soft tissue and internal body organs. Although the images are substantially less detailed than those obtainable with
x-ray methods, ultrasound is generally considered harmless and therefore has found particular use in imaging the pregnant uterus.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">X-ray
machines, ultrasound machines, digital radiography systems and nuclear medicine compete with the MRI scanners by offering significantly
lower price and space requirements. However, Fonar believes that the quality of the images produced by its MRI scanners is generally
superior to the quality of the images produced by those other methodologies.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">GOVERNMENT
REGULATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FDA
Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Food and Drug Administration in accordance with Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing
of Fonar&rsquo;s MRI scanners. The regulations can be classified as either pre-market or post-market. The pre-market requirements
include obtaining marketing clearance, proper device labeling, establishment registration and device listing. Once the products
are on the market, Fonar must comply with post-market surveillance controls. These requirements include the Quality Systems Regulation,
or &ldquo;QSR&rdquo;, also known as Current Good Manufacturing Practices or CGMPs, and Medical Device Reporting, also referred
to as MDR regulations. The QSR is a quality assurance requirement that covers the design, packaging, labeling and manufacturing
of a medical device. The MDR regulation is an adverse event-reporting program.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Classes
of Products</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Under
the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act, all medical devices are classified by the FDA
into one of three classes. A Class I device is subject only to general controls, such as labeling requirements and manufacturing
practices; a Class II device must comply with certain performance standards established by the FDA; and a Class III device must
obtain pre-market approval from the FDA prior to commercial marketing.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
products are Class II devices. Class I devices are subject to the least regulatory control. They present minimal potential for
harm to the user and are often simpler in design than Class II or Class III devices. Class I devices are subject to &quot;General
Controls&quot; as are Class II and Class III devices. General Controls include:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 27pt; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.
Establishment registration of companies which are required to register under 21 CFR Part 807.20, such as manufacturers, distributors,
re-packagers and re-labelers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 27pt; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.
Medical device listing with FDA of devices to be marketed.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 27pt; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.
Manufacturing devices in accordance with the Current Good Manufacturing Practices Quality System Regulation in 21 CFR Part 820.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 27pt; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.
Labeling devices in accordance with labeling regulations in 21 CFR Part 801 or 809.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 27pt; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">5.
Submission of a Premarket Notification, pursuant to 510(k), before marketing a device.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class
II devices are those for which general controls alone</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">are
insufficient to assure safety and effectiveness, and existing methods are available to provide such assurances. In addition to
complying with general controls, Class II devices are also subject to special controls. Special controls may include special labeling
requirements, guidance documents, mandatory performance standards and post-market surveillance.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
received approval to market our Beta&trade; 3000 and Beta&trade; 3000M scanners as Class III devices on September 26, 1984 and
November 12, 1985. On July 28, 1988, the Magnetic Resonance Diagnostic Device which includes MR Imaging and MR Spectroscopy was
reclassified by the FDA to Class II status. Consequently, Fonar&rsquo;s products are now classified as Class II products. On July
26, 1991, Fonar received FDA clearance to market the Ultimate&trade; Magnetic Resonance Imaging Scanner as a Class II device.
Fonar received FDA clearance to market the QUAD&trade; 7000 in April 1995 and the QUAD&trade; 12000 in November 1995. On March
16, 2000, Fonar received FDA clearance to market the Fonar 360&trade; for diagnostic imaging, the Open Sky&trade; version, and
on October 3, 2000 received FDA clearance for the Upright&reg; MRI.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Premarketing
Submission</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Each
person who wants to market Class I, II and some III devices intended for human use in the U.S. must submit a 510(k) to FDA at
least 90 days before marketing unless the device is exempt from 510(k) requirements. A 510(k) is a pre-marketing submission made
to FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, SE, to a legally
marketed device that is not subject to pre-market approval, PMA. Applicants must compare their 510(k) device to one or more similar
devices currently on the U.S. market and make and support their substantial equivalency claims.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
FDA is committed to a 90-day clearance after submission of a 510(k), provided the 510(k) is complete and there is no need to submit
additional information or data.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
510(k) is essentially a brief statement and description of the product. As Fonar&rsquo;s scanner products are Class II products,
there are no pre-market data requirements and the process is neither lengthy nor expensive.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">An
investigational device exemption, also referred to as IDE, allows the investigational device to be used in a clinical study pending
FDA clearance in order to collect safety and effectiveness data required to support the Premarket Approval, also referred to as
PMA, application or a Premarket Notification pursuant to 510(k), submission to the FDA. Clinical studies are most often conducted
to support a PMA.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
the most part, however, we have not found it necessary to utilize IDE&rsquo;s. The standard 90 day clearance for our new MRI scanner
products classified as Class II products makes the IDE unnecessary, particularly in view of the time and effort involved in compiling
the information necessary to support an IDE.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Quality
System Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Quality Management System is applicable to the design, manufacture, administration of installation and servicing of magnetic resonance
imaging scanner systems. The FDA has authority to conduct detailed inspections of manufacturing plants, to establish Good Manufacturing
Practices which must be followed in the manufacture of medical devices, to require periodic reporting of product defects and to
prohibit the exportation of medical devices that do not comply with the law.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Medical
Device Reporting Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Manufacturers
must report all MDR reportable events to the FDA. Each manufacturer must review and evaluate all complaints to determine whether
the complaint represents an event which is required to be reported to FDA. Section 820.3(b) of the Quality Systems regulation
defines a complaint as, &quot;any written, electronic or oral communication that alleges deficiencies related to the identity,
quality, durability, reliability, safety, effectiveness, or performance of a device after it is released for distribution.&quot;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
report is required when a manufacturer becomes aware of information that reasonably suggests that one of their marketed devices
has or may have caused or contributed to a death, serious injury, or has malfunctioned and that the device or a similar device
marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Malfunctions
are not reportable if they are not likely to result in a death, serious injury or other significant adverse event experience.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
malfunction which is or can be corrected during routine service or device maintenance still must be reported if the recurrence
of the malfunction is likely to cause or contribute to a death or serious injury if it were to recur.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
have established and maintained written procedures for implementation of the MDR regulation. These procedures include internal
systems that:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
provide for timely and effective identification, communication and evaluation of adverse events;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
provide a standardized review process and procedures for determining whether or not an event is reportable; and</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">* <FONT STYLE="font: x-small Courier New, Courier, Monospace">provide
procedures to insure the timely transmission of complete reports.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">These
procedures also include documentation and record keeping requirements for:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
information that was evaluated to determine if an event was reportable;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
all medical device reports and information submitted to the FDA;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
any information that was evaluated during preparation of annual certification reports; and</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
systems that ensure access to information that facilitates timely follow up and inspection by FDA.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FDA
Enforcement</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FDA
may take the following actions to enforce the MDR regulation:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FDA-Initiated
or Voluntary Recalls</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Recalls
are regulatory actions that remove a hazardous, potentially hazardous, or a misbranded product from the marketplace. Recalls are
also used to convey additional information to the user concerning the safe use of the product. Either FDA or the manufacturer
can initiate recalls.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">There
are three classifications, i.e., I, II, or III, assigned by the Food and Drug Administration to a particular product recall to
indicate the relative degree of health hazard presented by the product being recalled.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class
I</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Is
a situation in which there is a reasonable probability that the use of, or exposure to, a violative product will cause serious
adverse health consequences or death.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class
II</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Is
a situation in which use of, or exposure to, a violative product may cause temporary or medically reversible adverse health consequences
or where the probability of serious adverse health consequences is remote.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class
III</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Is
a situation in which use of, or exposure to, a violative product is not likely to cause adverse health consequences.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
has initiated five voluntary recalls. Four of the recalls were Class II and one was Class III. The recalls involved making minor
corrections to the product in the field. Frequently, corrections which are made at the site of the device are called field corrections
as opposed to recalls.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Civil
Money Penalties</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
FDA, after an appropriate hearing, may impose civil money penalties for violations of the FD&amp;C Act that relate to medical
devices. In determining the amount of a civil penalty, FDA will take into account the nature, circumstances, extent, and gravity
of the violations, the violator's ability to pay, the effect on the violator's ability to continue to do business, and any history
of prior violations. The civil money penalty may not exceed $15,000 for each violation and may not exceed $1,000,000 for all violations
adjudicated in a single proceeding, per person.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Warning
Letters</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FDA
issues written communications to a firm, indicating that the firm may incur more severe sanctions if the violations described
in the letter are not corrected. Warning letters are issued to cause prompt correction of violations that pose a hazard to health
or that involve economic deception. The FDA generally issues the letters before pursuing more severe sanctions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Seizure</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
seizure is a civil court action against a specific quantity of goods which enables the FDA to remove these goods from commercial
channels. After seizure, no one may tamper with the goods except by permission of the court. The court usually gives the owner
or claimant of the seized merchandise approximately 30 days to decide a course of action. If they take no action, the court will
recommend disposal of the goods. If the owner decides to contest the government's charges, the court will schedule the case for
trial. A third option allows the owner of the goods to request permission of the court to bring the goods into compliance with
the law. The owner of the goods is required to provide a bond or, security deposit, to assure that they will perform the orders
of the court, and the owner must pay for FDA supervision of any activities by the company to bring the goods into compliance.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Citation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
citation is a formal warning to a firm of intent to prosecute the firm if violations of the FD&amp;C Act are not corrected. It
provides the firm an opportunity to convince FDA not to prosecute.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Injunction</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">An
injunction is a civil action filed by FDA against an individual or company. Usually, FDA files an injunction to stop a company
from continuing to manufacture, package or distribute products that are in violation of the law.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Prosecution</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Prosecution
is a criminal action filed by FDA against a company or individual charging violation of the law for past practices.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Foreign
and Export Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
obtain approvals as necessary in connection with the sales of our products in foreign countries. In some cases, FDA approval has
been sufficient for foreign sales as well. Our standard practice has been to require either the distributor or the customer to
obtain any such foreign approvals or licenses which may be required.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Legally
marketed devices that comply with the requirements of the Food Drug &amp; Cosmetic Act require a Certificate to Foreign Government
issued by the FDA for export. Other devices that do not meet the requirements of the FD&amp;C Act but comply with the laws of
a foreign government require a Certificate of Exportability issued by the FDA. All products which we sell have FDA clearance and
would fall into the first category.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Foreign
governments have differing requirements concerning the import of medical devices into their respective jurisdictions. The European
Union, also referred to as EU, made up of 27 individual countries, has some essential requirements described in the EU&rsquo;s
Medical Device Directive, also referred to as MDD. In order to export to one of these countries, we must meet the essential requirements
of the MDD and any additional requirements of the importing country. The essential requirements are similar to some of the requirements
mandated by the FDA. In addition the MDD requires that we enlist a Notified Body to examine and assess our documentation, a Technical
Construction File, and verify that the product has been manufactured in conformity with the documentation. The notified body must
carry out or arrange for the inspections and tests necessary to verify that the product complies with the essential requirements
of the MDD, including safety performance and Electromagnetic Compatibility, also referred to as EMC. Also required is a Quality
System, ISO-9001, assessment by the Notified Body. We were approved for ISO 9001 certification for its Quality Management System
in April, 1999.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
received clearances to sell the Fonar 360&trade; and Upright&reg; MRI scanners in the EU in May, 2002.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other
countries require that their own testing laboratories perform an evaluation of our devices. This requires that we must bring the
foreign agency&rsquo;s personnel to the USA to perform the evaluation at our expense before exporting.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Some
countries, including many in Latin America and Africa, have very few regulatory requirements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">To
date, Fonar has been able to comply with all foreign regulatory requirements applicable to its export sales.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HEALTH
MANAGEMENT CORPORATION OF AMERICA</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">IMPERIAL
MANAGEMENT SERVICES, LLC</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PHYSICIAN
AND DIAGNOSTIC SERVICES MANAGEMENT BUSINESS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Health
Management Corporation of America, formed under the name U.S. Health Management Corporation and referred to as &quot;HMCA&quot;,
was organized by FONAR in March 1997. HMCA was formed as a wholly-owned subsidiary which engages in the business of providing
comprehensive management services to diagnostic imaging facilities. The services we provide include development, administration,
leasing of office space, facilities and equipment, provision of supplies, staffing, training and supervision of non-medical personnel,
legal services, accounting, billing and collection and the development and implementation of practice growth and marketing strategies.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Subsequently,
in May 2011, HMCA contributed all of its assets, liabilities and business to Imperial which is controlled but not wholly-owned
by HMCA. Imperial is continuing the business of HMCA utilizing the same facilities, equipment and personnel as HMCA. This transaction
did not result in a change of control or policy, but was solely a means to raise capital. To avoid confusion in making comparisons
and to show the continuity of the business, our physician management and diagnostic services segment is sometimes referred to
as &ldquo;HMCA-IMPERIAL&rdquo; for both periods before and after May 2, 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
currently manages 11 MRI facilities. In April 2003, HMCA-IMPERIAL sold the portion of its business which managed primary care
medical practices, and in July 2005, HMCA-IMPERIAL sold the portion of its business engaged in the management of physical therapy
and rehabilitation practices. This was the result of HMCA-IMPERIAL&rsquo;s decision to focus on management of MRI facilities,
the business in which HMCA-IMPERIAL is most experienced. For the 2011 fiscal year, the revenues HMCA-IMPERIAL recognized from
the MRI facilities increased to $15.3 million, and in fiscal 2012 the revenues recognized from the MRI facilities further increased
to $20.7 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
GROWTH STRATEGY</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL&rsquo;s
growth strategy focuses on upgrading and expanding the existing facilities it manages and expanding the number of facilities it
manages for its clients. Our most important effort in this regard has been to promote and facilitate the replacement of existing
MRI scanners with new Fonar Upright&reg; MRI scanners. Presently, we have Upright&reg; MRI scanners at all of the MRI facilities
we manage.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
May 1, 2010, HMCA-IMPERIAL purchased a 15.2% interest from an unrelated party of an entity that provides management services to
a diagnostic center in the New York Metropolitan area. On January 1, 2011, the Company purchased an additional 34.8% interest
by the issuance of a promissory note of $400,000.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
recently added an eleventh Upright&reg; MRI facility that it manages in Westchester County, New York.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
connection with its focus on managing only MRI facilities, HMCA-IMPERIAL sold its business of managing physical therapy and rehabilitation
practices on July 28, 2005 to Health Plus Management Services, L.L.C.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PHYSICIAN
AND DIAGNOSTIC MANAGEMENT SERVICES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL's
services to the facilities it manages encompass substantially all of their business operations. Each facility is controlled, however,
by the physician owner, not HMCA-IMPERIAL, and all medical services are performed by the physicians and other medical personnel
under the physician-owner&rsquo;s supervision. HMCA-IMPERIAL is the management company and performs services of a non-professional
nature. These services include:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.
Offices and Equipment. HMCA-IMPERIAL identifies, negotiates leases for and/or provides office space and equipment to its clients.
This includes technologically sophisticated medical equipment. HMCA-IMPERIAL also provides improvements to leaseholds, assistance
in site selection and advice on improving, updating, expanding and adapting to new technology.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.
Personnel. HMCA-IMPERIAL staffs all the non-medical positions of its clients with its own employees, eliminating the client's
need to interview, train and manage non-medical employees. HMCA-IMPERIAL processes the necessary tax, insurance and other documentation
relating to employees.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.
Administrative. HMCA-IMPERIAL assists in the scheduling of patient appointments, purchasing of office and medical supplies and
equipment and handling of reporting, accounting, processing and filing systems. It prepares and files the physician portions of
complex forms to enable its clients to participate in managed care programs and to qualify for insurance reimbursement. HMCA-IMPERIAL
assists the clients to implement programs and procedures to ensure full and timely regulatory compliance and appropriate cost
reimbursement under no-fault insurance and Workers' Compensation guidelines, as well as compliance with other applicable governmental
requirements and regulations, including HIPAA and other privacy requirements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.
Billing and Collections. HMCA-IMPERIAL is responsible for the billing and collection of revenues from third-party payors including
those governed by No-Fault and Workers' Compensation statutes. HMCA-IMPERIAL is presently using a third party to perform its billing
and collection services for its clients&rsquo; No-Fault and Workers&rsquo; Compensation scanning business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">5.
Cost Saving Programs. Based on available volume discounts, HMCA-IMPERIAL seeks to assist in obtaining favorable pricing for office
and medical supplies, equipment, contrast agents, such as gadolinuim, and other inventory for its clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">6.
Diagnostic Imaging and Ancillary Services. HMCA-IMPERIAL can offer access to diagnostic imaging equipment through diagnostic imaging
facilities it manages. The Company may expand the ancillary services offered in its network to include CT-scans and x-rays, if
it is determined that such additions may be useful to clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">7.
Marketing Strategies. HMCA-IMPERIAL is responsible for developing and proposing marketing plans for its clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">8.
Expansion Plans. HMCA-IMPERIAL assists the clients in developing expansion plans including the opening of new or replacement facilities
where appropriate.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
advises clients on all aspects of their businesses, including expansion where it is a reasonable objective, on a continuous basis.
HMCA-IMPERIAL&rsquo;s objective is to free physicians from as many non-medical duties as is practicable. Practices can treat patients
more efficiently if the physicians can spend less time on business and administrative matters and more time practicing medicine.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
provides its services pursuant to negotiated contracts with its clients. While HMCA-IMPERIAL believes it can provide the greatest
value to its clients by furnishing the full range of services appropriate to that client, HMCA-IMPERIAL would also be willing
to enter into contracts providing for a more limited spectrum of management services.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
facilities enter into contracts with third party payors, including managed care companies. Neither HMCA-IMPERIAL&rsquo;s clients
nor HMCA-IMPERIAL participate in any capitated plans or other risk sharing arrangements. Capitated plans are those HMO programs
where the provider is paid a flat monthly fee per patient.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
of June 22, 2007, Dr. Robert Diamond purchased the stock of the professional corporations owning eight New York sites managed
by HMCA-IMPERIAL, previously owned by Dr. Raymond V. Damadian, the President, Chairman of the Board and principal stockholder
of Fonar. Dr. Diamond has been reading scans for HMCA-IMPERIAL managed facilities for more than seven years. In connection with
the sale, new management agreements were substituted for the existing management agreements, providing, for the same management
services. The fees in fiscal 2009, however, were flat monthly fees in the aggregate amount of $578,500 per month. The fees in
fiscal 2010 were flat monthly fees in the aggregate amount of $696,000 per month and in fiscal 2011 increased to $892,930 per
month in the aggregate. Fees under the management agreements are subject to adjustment by mutual agreement on an annual basis.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
fiscal 2012, the aggregate amount of management fees increased to $1,708,739 per month in the aggregate.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Dr.
Damadian still owns the three MRI facilities in Florida managed by HMCA-IMPERIAL. The fees for the three sites in Florida owned
by Dr. Damadian are flat monthly fees ranging from $194,051 to $241,266 per month. No MRI facilities or other medical facilities
are owned by HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
contracts with Tritech Healthcare Management (Plainview, New York) to perform billing and collection for its clients&rsquo; No-Fault
and Workers&rsquo; Compensation business for a fee of 5% of all adjusted No-Fault and Workers&rsquo; Compensation claims with
a $30,000 monthly cap. As of June 30, 2012, the fee was $360,000. HMCA-IMPERIAL handles all of its clients&rsquo; other billings
and collections.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
June 2011, Health Diagnostics, LLC, outsourced its billing, collections and credentialing operations for the sites that it manages
to HMCA-IMPERIAL. The fee is 5% of all adjusted deposits. The revenue received by HMCA-IMPERIAL in fiscal 2011 from this arrangement
was $76,148 and in fiscal 2012 was $1,824,802. This agreement is for a term of five years.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Since
the types of medical practices that Health Diagnostics manages are very similar to those that HMCA-IMPERIAL manages, it is a natural
expansion of HMCA-IMPERIAL services. With HMCA-IMPERIAL&rsquo;s 14 years of experience in billing, collecting and credentialing,
this agreement is expected to benefit the customer and enhance the profitability of HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
MARKETING</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL's
marketing strategy is to expand the business and improve the facilities which it manages. HMCA-IMPERIAL will seek to increase
the number of locations of those facilities where market conditions are promising and to promote growth of its clients' patient
volume and revenue.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">DIAGNOSTIC
IMAGING FACILITIES AND OTHER ANCILLIARY SERVICES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Diagnostic
imaging facilities managed by HMCA-IMPERIAL provide diagnostic imaging services to patients referred by physicians who are either
in private practice or affiliated with managed care providers or other payor groups. The facilities are operated in a manner which
eliminates the admission and other administrative inconveniences of in-hospital diagnostic imaging services. Imaging services
are performed in an outpatient setting by trained medical technologists under the direction of physicians employed by the diagnostic
imaging facilities. Following diagnostic procedures, the images are reviewed by the interpreting physicians who prepare a report
of these tests and their findings. These reports are transcribed by HMCA-IMPERIAL personnel and then delivered to the referring
physician.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
develops marketing programs in an effort to establish and maintain profitable referring physician relationships and to maximize
reimbursement yields. These marketing approaches identify and target selected market segments consisting of area physicians with
certain desirable medical specialties and reimbursement yields. Corporate and facility managers determine these market segments
based upon an analysis of competition, imaging demand, medical specialty and payor mix of each referral from the local market.
HMCA-IMPERIAL also directs marketing efforts at managed care providers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Managed
care providers have become an important factor in the diagnostic imaging industry. To further its position, HMCA-IMPERIAL is seeking
to expand the imaging modalities offered at its managed diagnostic imaging facilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">REIMBURSEMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL&rsquo;s
clients receive reimbursements for their MRI scans through Medicare, Medicaid, managed care and private insurance.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Medicare</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Medicare program provides reimbursement for hospitalization, physician, diagnostic and certain other services to eligible persons
65 years of age and over and certain other individuals. Providers are paid by the federal government in accordance with regulations
promulgated by the Department of Health and Human Services, HSS, and generally accept the payment with nominal deductible and
co-insurance amounts required to be paid by the service recipient, as payment in full. Hospital inpatient services are reimbursed
under a prospective payment system. Hospitals receive a specific prospective payment for inpatient treatment services based upon
the diagnosis of the patient.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Under
Medicare&rsquo;s prospective payment system for hospital outpatient services, or OPPS, a hospital is paid for outpatient services
on a rate per service basis that varies according to the ambulatory payment classification group, or APC, to which the service
is assigned rather than on a hospital&rsquo;s costs. Each year the Centers for Medicare and Medicaid Services, or CMS, publishes
new APC rates that are determined in accordance with the promulgated methodology.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Services
provided in non-hospital based freestanding facilities, such as independent diagnostic treatment facilities, are paid under the
Medicare Physician Fee Schedule, or MPFS. All of HMCA-IMPERIAL&rsquo;s clients are presently in this category of independent diagnostic
treatment facilities. The MPFS is updated on an annual basis.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Healthcare
Reform Legislation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Healthcare
reform legislation enacted in the first quarter of 2010 by the Patient Protection and Affordable Care Act or PPACA, specifically
requires the U.S. Department of Health and Human Services, in computing physician practice expense relative value units, to increase
the equipment utilization factor for advanced diagnostic imaging services (such as MRI, CT and PET) from a presumed utilization
rate of 50% to 65% for 2010 through 2012, 70% in 2013, and 75% thereafter. Excluded from the adjustment are low-technology imaging
modalities such as ultrasound, X-ray and fluoroscopy. The Health Care and Education Reconciliation Act of 2010 (H.R. 4872) or
Reconciliation Act, which was passed by the Senate and approved by the President on March 30, 2010, amends the provision for higher
presumed utilization of advanced diagnostic imaging services to a presumed rate of 75%. These changes may result in decreased
revenue for the scans we perform for Medicare beneficiaries. Other changes in reimbursement for services rendered by Medicare
Advantage plans may also reduce the revenues we receive for services rendered to Medicare Advantage enrollees.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
have experienced reimbursement reductions for radiology services provided to Medicare beneficiaries, including reductions pursuant
to the Deficit Reduction Act, or DRA.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
DRA, which became effective in 2007, set reimbursement for the technical component for imaging services (excluding diagnostic
and screening mammography) in non-hospital based freestanding facilities at the lesser of OPPS or the MPFS.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition to the foregoing changes to the usage assumptions, CMS&rsquo; 2010 regulatory changes to the MPFS also included a downward
adjustment to services primarily involving the technical component rather than the physician work component, by adjusting downward
malpractice payments for these services. The reductions will affect the services we provide, primarily impacting radiology and
other diagnostic tests. As noted above, the changes to the MPFS will be transitioned over a four-year period such that beginning
in 2013, CMS will fully implement the revised payment rates. This change to the MPFS, could have an adverse effect on our financial
condition and results of operations. For our fiscal year ended June 30, 2012, Medicare revenues represented approximately 8.3%
of the revenues for HMCA-IMPERIAL&rsquo;s clients. The impact of the new MPFS will increase over the four-year transition period
unless mitigated by future legislation (either currently proposed or pledged by Congress and the federal government administration).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Many
of PPACA&rsquo;s provisions will not take effect for months or several years, while others are effective immediately. Many provisions
also will require the federal government and individual state governments to interpret and implement the new requirements. In
addition, PPACA remains the subject of significant debate, and proposals to repeal, block or amend the law have been introduced
in Congress and many state legislatures. Finally, a number of state attorneys general have filed legal challenges to PPACA seeking
to block its implementation on constitutional grounds. Because of the many variables involved, we are unable to predict how many
of the legislative mandates contained in PPACA will be implemented or in what form, whether any additional or similar changes
to statutes or regulations (including interpretations), will occur in the future, or what effect any future legislation or regulation
would have on our business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Medicaid</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons. In addition to federally-mandated
basic services, the services offered and reimbursement methods vary from state to state. In many states, Medicaid reimbursement
is patterned after the Medicare program; however, an increasing number of states have established or are establishing payment
methodologies intended to provide healthcare services to Medicaid patients through managed care arrangements. In fiscal 2012,
approximately 1.1% of the revenues of HMCA-IMPERIAL&rsquo;s clients were attributable to Medicaid.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Managed
Care and Private Insurance.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Health
Maintenance Organizations, or HMO&rsquo;s, Preferred Provider Organizations, or PPOs, and other managed care organizations attempt
to control the cost of healthcare services by a variety of measures, including imposing lower payment rates, preauthorization
requirements, limiting services and mandating less costly treatment alternatives. Managed care contracting is competitive and
reimbursement schedules are at or below Medicare reimbursement levels. Some managed care organizations have reduced or otherwise
limited, and other managed care organizations may reduce or otherwise limit, reimbursement in response to reductions in government
reimbursement. These reductions could have an adverse impact on our financial condition and results of operations. These reductions
have been, and any future reductions may be, similar to the reimbursement reductions proposed by CMS, Congress and the current
federal government administration. The development and expansion of HMOs, PPOs and other managed care organizations within our
core markets could have a negative impact on utilization of our services in certain markets and/or affect the revenues per procedure
we can collect, since such organizations will exert greater control over patients&rsquo; access to diagnostic imaging services,
the selection of the provider of such services and the reimbursement thereof.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
COMPETITION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
physician and diagnostic management services field is highly competitive. A number of large hospitals have acquired medical practices
and this trend may continue. HMCA-IMPERIAL expects that more competition will develop. Many competitors have greater financial
and other resources than HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">With
respect to the diagnostic imaging facilities managed by HMCA-IMPERIAL, the outpatient diagnostic imaging industry is highly competitive.
Competition focuses primarily on attracting physician referrals at the local market level and increasing referrals through relationships
with managed care organizations. HMCA-IMPERIAL believes that principal competitors for the diagnostic imaging centers are hospitals
and independent or management company-owned imaging centers. Competitive factors include quality and timeliness of test results,
ability to develop and maintain relationships with managed care organizations and referring physicians, type and quality of equipment,
facility location, convenience of scheduling and availability of patient appointment times. HMCA-IMPERIAL believes that it will
be able to effectively meet the competition in the outpatient diagnostic imaging industry with the new Fonar Upright&reg; MRI
scanners at its facilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">GOVERNMENT
REGULATION APPLICABLE TO HMCA-IMPERIAL</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FEDERAL
REGULATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
healthcare industry is highly regulated and changes in laws and regulations can be significant. Changes in the law or new interpretation
of existing laws can have a material effect on our permissible activities, the relative costs associated with doing business and
the amount of reimbursement by government and other third-party payors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Federal
False Claims Act</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
federal False Claims Act and, in particular, the False Claims Act&rsquo;s &ldquo;qui tam&rdquo; or &ldquo;whistleblower&rdquo;
provisions allow a private individual to bring actions in the name of the government alleging that a defendant has made false
claims for payment from federal funds. After the individual has initiated the lawsuit, the government must decide whether to intervene
in the lawsuit and to become the primary prosecutor. If the government declines to join the lawsuit, the individual may choose
to pursue the case alone, although the government must be kept apprised of the progress of the lawsuit, and may intervene later.
Whether or not the federal government intervenes in the case, it will receive the majority of any recovery. If the litigation
is successful, the individual is entitled to no less than 15%, but no more than 30%, of whatever amount the government recovers
that is related to the whistleblower&rsquo;s allegations. When an entity is determined to have violated the federal False Claims
Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500
to $11,000 for each separate false claim, as well as the government&rsquo;s attorneys&rsquo; fees. Liability arises when an entity
knowingly submits, or causes someone else to submit, a false claim for reimbursement to the federal government. The False Claims
Act defines the term &ldquo;knowingly&rdquo; broadly, though simple negligence will not give rise to liability under the False
Claims Act. Examples of the other actions which may lead to liability under the False Claims Act:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Failure
to comply with the many technical billing requirements applicable to our Medicare and Medicaid business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Failure
to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal
healthcare program, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare
program.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Failure
to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements
concerning physician supervision.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Fraud Enforcement and Recovery Act of 2009 expanded the scope of the False Claims Act by, among other things, broadening protections
for whistleblowers and creating liability for knowingly retaining a government overpayment, acting in deliberate ignorance of
a government overpayment or acting in reckless disregard of a government overpayment. The recently enacted healthcare reform bills
in the form of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
of 2010 (collectively, &ldquo;PPACA&rdquo;) expanded on changes made by the 2009 Fraud Enforcement and Recovery Act with regard
to such &ldquo;reverse false claims.&rdquo; Under PPACA, the knowing failure to report and return an overpayment within 60 days
of identifying the overpayment or by the date a corresponding cost report is due, whichever is later, constitutes a violation
of the False Claims Act. HMCA-IMPERIAL and its clients have never been sued under the False Claims Act and believe they are in
compliance with the law.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stark
Law</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Under
the federal Self-Referral Law, also referred to as the &quot;Stark Law&quot;, which is applicable to Medicare and Medicaid patients,
and the self-referral laws of various States, certain health practitioners, including physicians, chiropractors and podiatrists,
are prohibited from referring their patients for the provision of designated health services, including diagnostic imaging and
physical therapy services, to any entity with which they or their immediate family members have a financial relationship, unless
the referral fits within one of the specific exceptions in the statutes or regulations. The federal government has taken the position
that a violation of the federal Stark Law is also a violation of the Federal False Claims Act. Statutory exceptions under the
Stark Law include, among others, direct physician services, in-office ancillary services rendered within a group practice, space
and equipment rental and services rendered to enrollees of certain prepaid health plans. Some of these exceptions are also available
under the State self-referral laws. HMCA-IMPERIAL believes that it and its clients are in compliance with these laws.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Anti-kickback
Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
are subject to federal and state laws which govern financial and other arrangements between healthcare providers. These include
the federal anti-kickback statute which, among other things, prohibits the knowing and willful solicitation, offer, payment or
receipt of any remuneration, direct or indirect, in cash or in kind, in return for or to induce the referral of patients for items
or services covered by Medicare, Medicaid and certain other governmental health programs. Under PPACA, knowledge of the anti-kickback
statute or the specific intent to violate the law is not required. Violation of the anti-kickback statute may result in civil
or criminal penalties and exclusion from the Medicare, Medicaid and other federal healthcare programs, and according to PPACA,
now provides a basis for liability under the False Claims Act. In addition, it is possible that private parties may file &ldquo;qui
tam&rdquo; actions based on claims resulting from relationships that violate the anti-kickback statute, seeking significant financial
rewards. Many states have enacted similar statutes, which are not limited to items and services paid for under Medicare or a federally
funded healthcare program. Neither HMCA-IMPERIAL nor its clients engage in this practice.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
fiscal 2012, approximately 8.3% of the revenues of HMCA-IMPERIAL&rsquo;s clients were attributable to Medicare and 1.1% were attributable
to Medicaid. In fiscal 2011, approximately 17.4% of the revenues of HMCA-IMPERIAL&rsquo;s clients were attributable to Medicare
and 2.7% were attributable to Medicaid.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Deficit
Reduction Act (DRA)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
February 8, 2006, the President signed into law the DRA. Effective January 1, 2007, the DRA provides that Medicare reimbursement
for the technical component for imaging services (excluding diagnostic and screening mammography) performed in freestanding facilities
will be capped. Payment will be the lesser of the Medicare Physician Fee Schedule or the Hospital Outpatient Prospective Payment
System (HOPS) rates. Implementation of these reimbursement reductions contained in the DRA has had an adverse effect on our business.
In fiscal 2012, however, we were able to counter this effect by increasing our clients&rsquo; scan volumes through our vigorous
marketing efforts.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
DRA also codified the reduction in reimbursement for multiple images on contiguous body parts previously announced by CMS, the
agency responsible for administering the Medicare program. In November 2005, CMS announced that it would pay 100% of the technical
component of the higher priced imaging procedure and 50% of the technical component of each additional imaging procedure for imaging
procedures involving contiguous body parts within a family of codes when performed in the same session. CMS had indicated that
it would phase in this 50% rate reduction over two years, so that the reduction was 25% for each additional imaging procedure
in 2006 and another 25% reduction scheduled for 2007. However, for services furnished on or after July 1, 2010, the PPACA which,
as stated above, was signed into law on March 23, 2010, requires the full 50% reduction to be implemented. We have determined
that the impact of this final 25% reduction is, and will likely be in the future, immaterial to our operating results.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Health
Insurance Portability and Accountability Act</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Congress
enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in part, to combat healthcare fraud and to
protect the privacy and security of patients&rsquo; individually identifiable healthcare information. HIPAA, among other things,
amends existing crimes and criminal penalties for Medicare fraud and enacts new federal healthcare fraud crimes, including actions
affecting non-government healthcare benefit program by means of false or fraudulent representations in connection with the delivery
of healthcare services is subject to a fine or imprisonment, or potentially both. In addition, HIPAA authorizes the imposition
of civil money penalties against entities that employ or enter into contracts with excluded Medicare or Medicaid program participants
if such entities provide services to federal health program beneficiaries. A finding of liability under HIPAA could have a material
adverse effect on our business, financial condition and results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Further,
HIPAA requires healthcare providers and their business associates to maintain the privacy and security of individually identifiable
protected health information (&ldquo;PHI&rdquo;). HIPAA imposes federal standards for electronic transactions, for the security
of electronic health information and for protecting the privacy of PHI. The Health Information Technology for Economic and Clinical
Health Act of 2009 (&ldquo;HITECH&rdquo;), signed into law on February 17, 2009, dramatically expanded, among other things, (1)
the scope of HIPAA to now apply directly to &ldquo;business associates,&rdquo; or independent contractors who receive or obtain
PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new
federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches
of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from
receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations,
increasing the annual cap in penalties from $25,000 to $1.5 million per year.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition, many states have enacted comparable privacy and security statues or regulations that, in some cases, are most stringent
than HIPAA requirements. In those cases it may be necessary to modify our operations and procedures to comply with the more stringent
state laws, which may entail significant and costly changes for us. We believe that we are in compliance with such state laws
and regulations. However, if we fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
believe that we are in compliance with the current HIPAA requirements, as amended by HITECH, and comparable state laws, but we
anticipate that we may encounter certain costs associated with future compliance. Moreover, we cannot guarantee that enforcement
agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with ours, or the interpretations
of our contracted radiology practices or their affiliated physicians. A finding of liability under the HIPAA standards may result
in significant criminal and civil penalties. Noncompliance also may result in exclusion from participation in government programs,
including Medicare and Medicaid. These actions could have a material adverse effect on our business, financial condition, and
results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Civil
Money Penalty Law and Other Federal Statutes</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Civil Money Penalty, or CMP, law covers a variety of practices. It provides a means of administrative enforcement of the anti-kickback
statute, and prohibits false claims, claims for medically unnecessary services, violations of Medicare participating provider
or assignment agreements and other practices. The statute gives the Office of Inspector General of the HHS the power to seek substantial
civil fines, exclusion and other sanctions against providers or others who violate the CMP prohibitions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition, in 1996, Congress created a new federal crime: healthcare fraud and false statements relating to healthcare matters.
The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including
private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored
programs such as the Medicare and Medicaid programs.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Certificates
of Need</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Some
states require hospitals and certain other healthcare facilities and providers to obtain a certificate of need, or CON, or similar
regulatory approval prior to establishing certain healthcare operations or services, incurring certain capital projects and/or
the acquisition of major medical equipment including MRI and PET/CT systems. We are not operating in any such states.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Patient
Protection and Affordable Care Act</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
March 23, 2010, President Obama signed into law healthcare reform legislation in the form of PPACA. The implementation of this
law will likely have a profound impact on the healthcare industry. Most of the provisions of PPACA will be phased in over the
next four years and can be conceptualized as a broad framework not only to provide health insurance coverage to millions of Americans,
but to fundamentally change the delivery of care by bringing together elements of health information technology, evidence-based
medicine, chronic disease management, medical &ldquo;homes,&rdquo; care collaboration and shared financial risk in a way that
will accelerate industry adoption and change. There are also many provisions addressing cost containment, reductions of Medicare
and other payments and heightened compliance requirements and additional penalties, which will create further challenges for providers.
We are unable to predict the full impact of PPACA at this time due to the law&rsquo;s complexity and current lack of implementing
regulations or interpretive guidance. Moving forward, we believe that the federal government will likely have greater involvement
in the healthcare industry than in prior years.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">State
Regulation</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition to the federal self-referral law and federal Anti-kickback statute, many States, including those in which HMCA-IMPERIAL
and its clients operate, have their own versions of self-referral and anti-kickback laws. These laws are not limited in their
applicability, as are the federal laws, to specific programs. HMCA-IMPERIAL believes that it and its clients are in compliance
with these laws.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Various
States prohibit business corporations from practicing medicine. Various States also prohibit the sharing of professional fees
or fee splitting. Consequently, HMCA-IMPERIAL leases space and equipment to clients and provides clients with a range of non-medical
administrative and managerial services for agreed upon fees. HMCA-IMPERIAL does not engage in the practice of medicine or establish
standards of medical practice or policies for its clients in any State even where permitted.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL's
clients generate revenue from patients covered by no-fault insurance and workers' compensation programs. For the fiscal year ended
June 30, 2012 approximately 33.8% of our clients&rsquo; receipts were from patients covered by no-fault insurance and approximately
3.7% of our client&rsquo;s receipts were from patients covered by workers&rsquo; compensation programs. For the fiscal year ended
June 30, 2011, approximately 30.7% of HMCA-IMPERIAL&rsquo;s clients&rsquo; receipts were from patients covered by no-fault insurance
and approximately 3.5% of HMCA-IMPERIAL&rsquo;s clients&rsquo; receipts were from patients covered by workers&rsquo; compensation
programs. In the event that changes in these laws alter the fee structures or methods of providing service, or impose additional
or different requirements, HMCA-IMPERIAL could be required to modify its business practices and services in ways that could be
more costly to HMCA-IMPERIAL or in ways that decrease the revenues which HMCA-IMPERIAL receives from its clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Compliance
Program</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
maintain a program to monitor compliance with federal and state laws and regulations applicable to the healthcare entities. We
have a compliance officer who is charged with implementing and supervising our compliance program, which includes the adoption
of (i) Standards of Conduct for our employees and affiliates and (ii) a process that specifies how employees, affiliates and others
may report regulatory or ethical concerns to our compliance officer. We believe that our compliance program meets the relevant
standards provided by the Office of Inspector General of the Department of Health and Human Services.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">An
important part of our compliance program consists of conducting periodic audits of various aspects of our operations and that
of the contracted radiology practices. We also conduct mandatory educational programs designed to familiarize our employees with
the regulatory requirements and specific elements of our compliance program.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
believes that it and its clients are in compliance with applicable Federal, State and local laws. HMCA-IMPERIAL does not believe
that such laws will have any material effect on its business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">EMPLOYEES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
of July 1, 2012, we employed 244 persons on a full-time and part-time basis. Of such employees, 4 were engaged in marketing and
sales, 9 in research and development, 17 in production, 33 in customer support services, 21 in administration, 102 on site at
facilities and offices, 35 performing billing and collection functions managed by HMCA-IMPERIAL and 23 performing transcription
services for those facilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
2.&#9;PROPERTIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
leases approximately 117,000 square feet of office and plant space at its principal offices in Melville, New York and at one other
location in Melville, New York at a current aggregate annual rental rate of $1,336,043, excluding utilities, taxes and other related
expenses. The term of one of the leases includes options to renew up through 2016 and the terms of the other leases extend to
2013. Management believes that the premises will be adequate for its current needs. HMCA-IMPERIAL already has consolidated its
headquarters with those of Fonar as part of Fonar&rsquo;s cost cutting program. HMCA-IMPERIAL maintains leased office premises
for its clients at the clients&rsquo; sites having an aggregate annual rental rate of approximately $849,000 under leases having
various terms.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
3. LEGAL PROCEEDINGS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
or about June 30, 2010, one of Fonar&rsquo;s customers, Golden Triangle Company, commenced an action against Fonar and certain
individual defendants employed or formerly employed by Fonar, in the United States District Court for the Eastern District of
New York based on the alleged wrongful failure of Fonar to deliver a scanner in Kuwait. The claim alleges various causes of action
including breach of contract, fraud, conspiracy to defraud and conversion. Golden Triangle Company v. Fonar Corporation et al,
CV10-2933. Plaintiff contracted with Fonar to purchase a scanner, and paid $1,455,500 in advance. The scanner was never delivered,
but Plaintiff never designed a site for delivery either. Alleging other damages, fraud and deceptive trade practices, Plaintiff
seeks as much as $5,000,000. Fonar made a motion to dismiss the complaint, the outcome of which left plaintiff with only a cause
of action for breach of contract. The claims against the individual officers and employees of Fonar were dismissed. Fonar now
has filed its answer, together with a counterclaim alleging that the plaintiff, by attempting to overcharge the end-customer,
has damaged Fonar&rsquo;s reputation and ability to sell in Kuwait. Golden Triangle has replied to Fonar&rsquo;s counterclaim
and the case is now in discovery. The deadline for completing discovery is December 31, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition, we are or were party to additional less significant actions in which the customers are seeking to obtain a return of
their deposits for MRI scanners on the grounds that various contingencies failed to materialize. Upright MRI of Chicago, LLC v.
Fonar, Circuit Court of Cook County, Illinois ($310,000), Matt Malek Madison v. Fonar, U.S. District Court, Northern District
of California ($300,000), and Jack Shapiro v. Fonar Corporation, Supreme Court, Nassau County, New York ($500,000 although the
actual deposit was $323,000). In the Upright MRI of Chicago case, the case was settled by an arrangement whereby a third party
took over the sales agreement and agreed to pay the original purchaser the down payment it made. In the Madison case, the Court
granted summary judgment to Madison for the deposit and prejudgment interest. We appealed the judgment but lost. Inexplicitly,
however, the plaintiff has not taken any action to enforce the judgment. As of June 30, 2012, the Company recorded a liability
of $372,000 in connection with this judgment. In the Shapiro case, Shapiro, who was also a sales representative for Fonar, and
Fonar were attempting to negotiate a settlement, but the plaintiff has served Fonar with discovery demands.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
December 2, 2011, Bonutti Research filed an action filed in U.S. District Court for the Eastern District Court of New York. The
complaint alleges that Fonar&rsquo;s Upright&reg; MRI scanners infringe plaintiff&rsquo;s patent. Fonar believes plaintiff&rsquo;s
claims are without merit. Fonar believes the claims of the Bonutti patent are invalidated by bibliography of published prior art.
In addition the Bonutti invention was never built and does not work for multiple technologic reasons. The plaintiff served the
complaint on the last possible day permitted after filing. The defendants obtained an extension of time to answer to May 18, 2012.
Subsequently, on or about July 3, 2012, Bonutti hired new substitute counsel and requested a 60 day extension to answer Fonar&rsquo;s
counterclaims and to postpone the initial conference. Bonutti has answered our counterclaims and an initial conference with the
magistrate judge has been scheduled. The conference with the court is now scheduled for September 28, 2012. At this point we are
unable to assess the amount in controversy as no damages were specified. The patent in question has now expired.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: left"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Part
II</FONT>&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
Common Stock is traded in the Nasdaq SmallCap market under the National Association of Securities Dealers Automated Quotation
System, also referred to as &quot;NASDAQ&quot;, symbol FONR. The following table sets forth the high and low trades reported in
NASDAQ System for the periods shown.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: normal 10pt Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fiscal Quarter</FONT></TD><TD STYLE="padding-bottom: 1pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">High</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: center; vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Low</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 66%; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">January&nbsp; - March&nbsp;&nbsp;
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2010</FONT></TD><TD STYLE="width: 3%; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 0%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 13%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.81</FONT></TD><TD STYLE="width: 0%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 3%; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 0%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="width: 13%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.19</FONT></TD><TD STYLE="width: 0%; text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">April&nbsp;&nbsp;&nbsp; - June&nbsp;&nbsp;&nbsp;
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2010</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.24</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.40</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; padding-left: 5.4pt; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">July&nbsp;&nbsp;&nbsp;
    &nbsp;- September&nbsp;&nbsp;&nbsp; &nbsp;2010</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.94</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.31</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">October&nbsp; - December&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2010</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.29</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.00</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">January&nbsp; - March&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    &nbsp;2011</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.57</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.25</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">April&nbsp;&nbsp;&nbsp; - June
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2011</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.20</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.65</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">July&nbsp;&nbsp;&nbsp;&nbsp; -
    September &nbsp;&nbsp;&nbsp;&nbsp;2011</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.70</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.63</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">October&nbsp; - December&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2011</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.16</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.36</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">January&nbsp; - March&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2012</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.89</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.68</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">April&nbsp;&nbsp;&nbsp; - June&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2012</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">6.80</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2.68</FONT></TD><TD STYLE="text-align: center; font: normal 10pt Courier New, Courier, Monospace; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255); font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">July&nbsp;&nbsp;&nbsp;&nbsp; -
    September 14, 2012</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.12</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.02</FONT></TD><TD STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: bottom"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
</TABLE>



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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
September 6, 2012, we had approximately 2,652 stockholders of record of our Common Stock, 12 stockholders of record of our Class
B Common Stock, 3 stockholders of record of our Class C Common Stock and 2,456 stockholders of record of our Class A Non-voting
Preferred Stock.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
the present time, the only class of our securities for which there is a market is the Common Stock.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
paid cash dividends in fiscal 1998 and the first three quarters of fiscal 1999 on monies we received from the enforcement of our
patents. Except for these dividends, we have not paid any cash dividends. Except for these dividends, we expect that we will retain
earnings to finance the development and expansion of our business for the foreseeable future.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">INTRODUCTION.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
was formed in 1978 to engage in the business of designing, manufacturing and selling MRI scanners. In 1997, we formed a wholly-owned
subsidiary, Health Management Corporation of America, also referred to as &quot;HMCA-IMPERIAL&quot;, formerly known as U.S. Health
Management Corporation, in order to expand into the physician and diagnostic management services business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar's
principal MRI products are its Stand-Up&reg;/Upright&reg; MRI and Fonar 360&trade; MRI scanners. The Stand-Up&reg; MRI allows
patients to be scanned for the first time under weight-bearing conditions. The Stand-Up&reg; MRI is the only MRI capable of producing
images in the weight-bearing state.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
0.6 Tesla field strength, the Upright&reg; MRI and Fonar 360&trade; magnets are among the highest field open MRI scanners in the
industry, offering non-claustrophobic MRI together with high-field image quality. Fonar&rsquo;s open MRI scanners were the first
high field strength open MRI scanners in the industry.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">HMCA-IMPERIAL
commenced operations in July, 1997 and generates revenues from providing comprehensive management services, including development,
administration, accounting, billing and collection services, together with office space, medical equipment, supplies and non-medical
personnel to its clients. Revenues are in the form of fees which are earned under contracts with HMCA-IMPERIAL&rsquo;s clients.
Since July 2005, HMCA-IMPERIAL has engaged only in the management of MRI facilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
the fiscal years ended June 30, 2012 and June 30, 2011, 32.2% and 33.6%, respectively, of HMCA-IMPERIAL&rsquo;s revenues were
derived from contracts with facilities owned by Dr. Raymond V. Damadian, the President of Fonar and HMCA-IMPERIAL and principal
stockholder of Fonar. The agreements with these MRI facilities are for one-year terms which renew automatically on an annual basis,
unless terminated. The fees for the sites owned by Dr. Damadian in Florida are flat monthly fees ranging from $194,051 to $241,266.
The balance of HMCA-IMPERIAL&rsquo;s revenues are derived from contracts with MRI facilities purchased by Dr. Robert Diamond from
Dr. Damadian. The MRI facilities owned by Dr. Diamond are charged a flat fee, pursuant to contracts executed in connection with
the sale of the MRI facilities at the end of fiscal 2007. The fees are reviewed and if appropriate, adjusted on an annual basis
by mutual agreement. During fiscal 2012, these fees ranged from $100,000 per month to $241,000 per month.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Industry
Updates</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
services for which we bill Medicare directly, we are paid under the Medicare Physician Fee Schedule, which is updated on an annual
basis. Under the Medicare statutory formula, payments under the Physician Fee Schedule would have decreased for the past several
years if Congress failed to intervene.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
2010, the Centers for Medicare and Medicaid Services (&ldquo;CMS&rdquo;) projected a rate reduction of 21.2% in the absence of
Congressional intervention. However, over the course of the first six months of 2010, various temporary solutions were enacted
by Congress which resulted in delaying any such change to the physician fee schedule. Ultimately, a 2.2% increase in the conversion
factor was passed by Congress effective June 1, 2010, further delaying the pending 21.2% conversion factor reduction to November
30, 2010. On November 2, 2010, CMS released the calendar year 2011 Medicare Physician Fee Schedule. Again, the rule would have
significantly reduced physician fee schedule payments in 2011 had Congress not acted by passing the Physician Payment and Therapy
Relief Act of 2010 and the Medicare and Medicaid Extenders Act of 2010, which together continued the 2.2% update from June 2010
through December 31, 2011. Similarly, the calendar year 2012 Medicare Physician Fee Schedule provided for a 27.4% decrease to
the physician fee schedule which was averted by Congress passing the Middle Class Tax Relief and Job Creation Act of 2012. While
Congress has historically provided temporary relief from the formula-driven reductions in the conversion factor, it cannot be
guaranteed that Congress will act to provide relief in the future. The failure of Congress to act could adversely impact our revenues
and results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">MIPPA
also modified the methodology by which the budget neutrality formula was applied to the 2009 physician fee schedule payment rates,
resulting in an overall reduction in payment rates for services performed by many specialties, including an estimated 1% reduction
for nuclear medicine. The impact of the payment rates on specific companies depends on their service mix. Also with respect to
MIPPA, the legislation requires all suppliers that provide the technical component of diagnostic MRI, PET/CT, CT, and nuclear
medicine to be accredited by an accreditation organization designated by CMS (which currently include the ACR, the IAC and The
Joint Commission) by January 1, 2012. Our facilities are currently accredited by the ACR.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
number of other legislative changes impact our physician management and diagnostic services business. For example, beginning on
January 1, 2007, the DRA imposed caps on Medicare payment rates for certain imaging services furnished in physician&rsquo;s offices
and other non-hospital based settings. Under the cap, payments for specified imaging services cannot exceed the hospital outpatient
payment rates for those services. The limitation is applicable only to the technical components of the diagnostic imaging services.
CMS issues on an annual basis the hospital outpatient prospective payment rates, which are used to develop the caps. If the technical
component of the service established under the Physician Fee Schedule (without including geographic adjustments) exceeds the hospital
outpatient payment amount for the service (also without including geographic adjustments), then the payment is to be reduced.
In other words, in those instances where the technical component for the particular service is greater for the non-hospital site,
the DRA directs that the hospital outpatient payment rate be substituted for the otherwise applicable Physician Fee Schedule payment
rate.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
DRA also codified the reduction in reimbursement for multiple images on contiguous body parts, which was previously announced
by CMS. The DRA mandated payment at 100% of the technical component of the higher priced imaging procedure and 50% for the technical
component of each additional imaging procedure for multiple images of contiguous body parts within a family of codes performed
in the same session. Initially, CMS announced that it would phase in this reimbursement reduction over a two-year period, to include
a 25% reduction for each additional imaging procedure on contiguous body parts in 2006 and an additional 25% reduction in 2007.
CMS did not implement the additional 25% reduction scheduled for 2007, but for services furnished on or after July 1, 2010, PPACA
requires the full 50% reduction to be implemented.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Regulatory
updates to payment rates for which we bill the Medicare program directly are published annually by CMS. For payments under the
Physician Fee Schedule for calendar year 2010, CMS changed the way it calculates components of the Medicare Physician Fee Schedule.
First, CMS reduced payment rates for certain diagnostic services using equipment costing more than $1 million through revisions
to usage assumptions from the current 50% usage rate to a 90% usage rate. This change applied to MRI and CT scans. However, for
certain diagnostic services performed on or after January 1, 2011, the Reconciliation Act reduces the assumed usage rate for such
equipment from CMS&rsquo;s current rate of 90% to a rate of 75%, resulting in an increase in payment rates for such services.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Recent
global market and economic conditions have been unprecedented. Concerns about the potential long-term and widespread recession,
weak recovery, inflation, energy costs, geopolitical issues, the availability and cost of credit, the United States mortgage market
and a declining real estate market in the United States have contributed to increased market volatility and diminished expectations
for the United States economy. These conditions, combined with declining business and consumer confidence and increased unemployment,
have contributed to unusual volatility. At this time, it is unclear what impact this might have on our future revenues or business.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by
illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties
specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers.
If market conditions continue, they may limit our ability to timely access the capital markets to meet liquidity needs, resulting
in adverse effects on our financial condition and results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Critical
Accounting Policies</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate
our estimates, including those related to investments, intangible assets, income taxes, contingencies and litigation. We base
our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation
of our consolidated financial statements. We recognize revenue and related costs of revenue from sales contracts for our MRI scanners,
under the percentage-of-completion method. Under this method, we recognize revenue and related costs of revenue, as each sub-assembly
is completed. Amounts received in advance of our commencement of production are recorded as customer advances.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. As of
June 30, 2012, we recorded a valuation allowance which reduced our deferred tax assets to equal our deferred tax liability.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
amortize our intangible assets, including patents, purchased management agreements and capitalized software development costs,
over the shorter of the contractual/legal life or the estimated economic life. Our amortization life for patents and capitalized
software development costs is 15 to 17 years and 5 years, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
periodically assess the recoverability of long-lived assets, including property and equipment, intangibles and management agreements,
when there are indications of potential impairment, based on estimates of undiscounted future cash flows. The amount of impairment
is calculated by comparing anticipated discounted future cash flows with the carrying value of the related asset. In performing
this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic
factors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">RESULTS
OF OPERATIONS. FISCAL 2012 COMPARED TO FISCAL 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
fiscal 2012, we experienced a net income of $6.9 million on revenues of $39.4 million, as compared to net income of $3.3 million
on revenues of $33.1 million for fiscal 2011. This represents an increase in revenues of 19.0%. Increased management fees of 35.3%
was the principal factor accounting for the increased revenues of the Company. Related party management fees increased by 29.5%.
In addition, total costs and expenses increased by 9.9%. Our consolidated operating results improved by $3.4 million to an operating
income of $7.2 million for fiscal 2012 as compared to an operating income of $3.8 million for fiscal 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Discussion
of Operating Results of Medical Equipment Segment</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Fiscal
2012 Compared to Fiscal 2011</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenues
attributable to our medical equipment segment increased by 5% to $18.7 million in fiscal 2012 from $17.8 million in fiscal 2011,
with product sales revenues increasing 3.6% from $6.7 million in fiscal 2011 to $6.9 million in fiscal 2012. Service revenue increased
from $11.1 million in fiscal 2011 to $11.8 million in fiscal 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Upright&reg; MRI is unique in that it permits MRI scans to be performed on patients upright in the weight-bearing state and in
multiple positions that correlate with symptoms. An important event in our ongoing effort to educate both the medical community
and payors about the benefits, if not necessity, of utilizing Upright&reg; MRI scanning, occurred in fiscal 2007 when we sold
an Upright&reg; MRI scanner to the largest orthopedic hospital in the Netherlands, St. Maartenskliniek. Upon placing the order,
the Chairman of Spine Surgery at St. Maartenskliniek expressed the view that for their hospital to continue to engage in spine
surgery without Fonar&rsquo;s Upright&reg; MRI technology, now that it was available was &ldquo;unacceptable&rdquo; and that owning
the scanner &ldquo;was not optional, but mandatory&rdquo;. He further stated that &ldquo;once our active research program has
discovered the benefits of this new Fonar technology for patients, we intend to publish the results in a lot of peer reviewed
scientific journals&rdquo;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Product
sales to unrelated parties increased by 3.6% in fiscal 2012 from $6.7 million in fiscal 2011 to $6.9 million in fiscal 2012. There
were no product sales to related parties in fiscal 2012 or 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
believe that one of our principal challenges in achieving greater market penetration is attributable to the better name recognition
and larger sales forces of our larger competitors such as General Electric, Siemens, Hitachi, Philips and Toshiba and the ability
of some of our competitors to offer attractive financing terms through affiliates, such as G.E. Capital. Nevertheless, no other
competitor offers a whole body weight-bearing multi-position MRI scanner as the FONAR Upright&reg; MRI.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
operating results for the medical equipment segment increased by $1.3 million from income of $1.4 million in 2011 to income of
$2.7 million in fiscal 2012. This increase is attributable most significantly to a decrease in our operating expenses.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
recognized revenues of $6.3 million from the sale of our Upright&reg; MRI scanners in fiscal 2012, while in fiscal 2011, we recognized
revenues of $5.3 million from the sale of Upright&reg; MRI scanners.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">None
of our revenues for fiscal 2012 or fiscal 2011 were attributable to sales to related parties.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Research
and development expenses, net of capitalized costs, decreased by 13.7% to $1.2 million in fiscal 2012 as compared to $1.4 million
in fiscal 2011. Our expenses for fiscal 2012 represented continued research and development of Fonar&rsquo;s scanners, Fonar&rsquo;s
new hardware and software product, Sympulse&trade; and new surface coils to be used with the Upright&reg; MRI scanner.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Discussion
of Operating Results of Physician and Diagnostic Services Management Segment.</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Fiscal
2012 Compared to Fiscal 2011</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenues
attributable to the Company's physician and diagnostic services management segment, HMCA-IMPERIAL, increased by 35% to $20.7 million
in fiscal 2012 from $15.3 million in fiscal 2011. The increase in revenues was primarily due to the renegotiation of some of the
contracts between HMCA-IMPERIAL and its clients and the recognition of $1.8 million in revenues from Health Diagnostics, LLC.
All of the MRI facilities managed by HMCA-IMPERIAL have Upright&reg; MRI scanners.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cost
of revenues as a percentage of the related revenues for our physician and diagnostic services management segment increased from
$9.7 million or 63.4% of related revenues for the year ended June 30, 2011 to $12.3 million, or 59.4% of related revenue for the
year ended June 30, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Operating
results of this segment increased from operating income of $2.4 million in fiscal 2011 to operating income of $4.5 million in
fiscal 2012. We believe that our efforts to expand and improve the operation of our physician and diagnostic services management
segment are directly responsible for the profitability of this segment and our company as a whole.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Discussion
of Certain Consolidated Results of Operations</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Fiscal
2012 Compared to Fiscal 2011</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Interest
and investment income increased in 2012 compared to 2011. We recognized interest income of $243,254 in 2012 as compared to $228,174
in fiscal 2011, representing a increase of 6.6%.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Interest
expense of $478,663 was recognized in fiscal 2012, as compared to $518,532 in fiscal 2011, representing a decrease of 7.7%.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">While
revenue increased by 19.0%, selling, general and administrative expenses, increased by only 3.4% to $8.7 million in fiscal 2012
from $8.4 million in fiscal 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Compensatory
element of stock issuances decreased from approximately $204,000 in fiscal 2011 to $180,000 in fiscal 2012, reflecting a decrease
in Fonar&rsquo;s use of its stock bonus plans to pay employees and others.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
higher provision for bad debts of $1.1 million in fiscal 2012 as compared to $963,000 in fiscal 2011, reflected an increase in
reserves for certain indebtedness in fiscal 2012 by our physician and diagnostic services management segment. In fiscal 2012,
the three Florida sites managed by HMCA-IMPERIAL jointly and severally guaranteed the payment of their management fees to HMCA-IMPERIAL,
further securing HMCA-IMPERIAL&rsquo;s management fee receivables.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenue
from service and repair fees increased from $11.1 million in fiscal 2011 to $11.8 million in fiscal 2012 as scanners previously
under warranty entered into service agreements with FONAR.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Continuing
our tradition as the originator of MRI, we remain committed to maintaining our position as the leading innovator of the industry
through investing in research and development. In fiscal 2012 we continued our investment in the development of our new MRI scanners,
together with software and upgrades, with an investment of $1,242,656 in research and development, none of which was capitalized,
as compared to $1,507,290, $67,258 of which was capitalized, in fiscal 2011. The research and development expenditures were approximately
6.6% of revenues attributable to our medical equipment segment and 3.2% of total revenues in 2012, and 8.1% of medical equipment
segment revenues and 4.3% of total revenues in fiscal 2011. This represented a 13.7% decrease in research and development expenditures
in fiscal 2012 as compared to fiscal 2011. Notwithstanding the decrease in research and development expenditures in connection
with our overall cost cutting programs, we remain fully committed to developing new features, software and upgrades to improve
its products.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
physician and diagnostic services management segment, HMCA-IMPERIAL, revenues increased, from $15.3 in fiscal 2011 to $20.7 million
in fiscal 2012. This is primarily attributable to increased revenue received by HMCA-IMPERIAL from its contracts with its clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
have been taking steps to improve HMCA-IMPERIAL revenues by our marketing efforts, which focus on the unique capability of our
Upright&reg; MRI scanners to scan patients in different positions. We have also been increasing the number of health insurance
plans in which our clients participate.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Marketing
expenditures may increase, as the Company continues its efforts to promote sales.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
management fees are dependent on collection by our clients of fees from reimbursements from Medicare, Medicaid, private insurance,
no fault and workers&rsquo; compensation carriers, self&ndash;pay and other third-party payors. The health care industry is experiencing
the effects of the federal and state governments&rsquo; trend toward cost containment, as governments and other third-party payors
seek to impose lower reimbursement and utilization rates and negotiate reduced payment schedules with providers. The cost-containment
measures, consolidated with the increasing influence of managed-care payors and competition for patients, have resulted in reduced
rates of reimbursement for services provided by our clients from time to time. Our future revenues and results of operations may
be adversely impacted by future reductions in reimbursement rates.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Certain
third-party payors have proposed and implemented changes in the methods and rates of reimbursement that have had the effect of
substantially decreasing reimbursement for diagnostic imaging services that HMCA-IMPERIAL&rsquo;s clients provide. To the extent
reimbursement from third-party payors is reduced, it will likely have an adverse impact on the rates they pay us, as they would
need to reduce the management fees they pay HMCA-IMPERIAL to offset such decreased reimbursement rates. Furthermore, many commercial
health care insurance arrangements are changing, so that individuals bear greater financial responsibility through high deductible
plans, co-insurance and higher co-payments, which may result in patients delaying or foregoing medical procedures. We expect that
any further changes to the rates or methods of reimbursement for services, which reduce the reimbursement per scan of our clients
may partially offset the increases in scan volume we are working to achieve for our clients, and indirectly will result in a decline
in our revenues.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
2009, the Obama administration announced its intentions for healthcare reform in the United States. Legislation adopting healthcare
reform was passed in 2010. On March 23, 2010, President Obama signed into law healthcare reform legislation in the form of the
Patient Protection and Affordable Care Act, or PPACA. The implementation of this law will likely have a profound impact on the
healthcare industry, most of which will be experienced in 2013 and thereafter. Healthcare cost containment, reductions of Medicare
and other payments, and increased regulation will present additional challenges for healthcare providers. We are unable to predict
the full impact of PPACA at this time, but anticipate the possibility that it may reduce the profitability of both our medical
equipment segment and physician and diagnostic services management segment. In addition there are also political uncertainties
which may result in the repeal or modification of PPACA or the adoption of alternative medical cost containment and insurance
requirements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition, the use of radiology benefit managers, or RBM&rsquo;s has increased in recent years. It is common practice for health
insurance carriers to contract with RBMs to manage utilization of diagnostic imaging procedures for their insureds. In many cases,
this leads to lower utilization of imaging procedures based on a determination of medical necessity. The efficacy of RBMs is still
a high controversial topic. We cannot predict whether the healthcare legislation or the use of RBMs will negatively impact our
business, but it is possible that our financial position and results of operations could be negatively affected.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
the present time healthcare reform has not directly affected our business, but we believe uncertainty as to the ultimate impact
of healthcare reform, taxes, and the state of the economy have hurt our scanner sales.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
a result of our loss for fiscal 2010, Fonar did not meet NASDAQ&rsquo;s criteria for continued listing. During fiscal 2011 Fonar
was able to avoid delisting and to come into compliance with NASDAQ&rsquo;s requirements and has remained in compliance during
fiscal 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">LIQUIDITY
AND CAPITAL RESOURCES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash,
cash equivalents and marketable securities increased by 30.0% from $9.3 million at June 30, 2011 to $12.0 million at June 30,
2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Marketable
securities approximated $32,000 as of June 30, 2012, as compared to $33,000 as of June 30, 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
provided by operating activities for fiscal 2012 approximated $7.4 million. Cash provided by operating activities was attributable
to the net income of $6.9 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
used in investing activities for fiscal 2012 approximated $1.2 million. The principal uses of cash from investing activities were
purchases of property and equipment of $1.1 million, and costs of patents of $146,000.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
used in financing activities for fiscal 2012 approximated $3.4 million. The principal uses of cash in financing activities was
the repayment of loans and capital lease obligations of $1.4 million, distributions to non-controlling interests of $1.1 million
and a redemption to non-controlling interests of $1.2 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Total
liabilities decreased by 12.4% during fiscal 2012, from approximately $25.7 million at June 30, 2011 to approximately $22.5 million
at June 30, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
at June 30, 2012, our obligations included approximately $2.8 million in various state sales taxes.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
June 30, 2012, we had working capital of approximately $4.8 million as compared to working capital of $576,000 at June 30, 2011,
and stockholders&rsquo; equity of $11.1 million at June 30, 2012 as compared to stockholders&rsquo; equity of $5.9 million at
June 30, 2011. For the year ended June 30, 2012, we realized a net income of $6.9 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
principal sources of liquidity has been derived from investments and revenues.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
business plan includes an program for manufacturing and selling our Upright&reg; MRI scanners. In addition, we are enhancing our
revenue by participating in the physician and diagnostic services management business through our subsidiary, HMCA-IMPERIAL and
have upgraded the facilities which it manages, most significantly by the replacement of the original MRI scanners with new Upright&reg;
MRI scanners. Presently, all of the 11 MRI facilities managed by HMCA-IMPERIAL are equipped with Upright&reg; MRI scanners. We
have also intensified our marketing activities through the hiring of additional marketers for HMCA-IMPERIAL&rsquo;s clients.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
business plan also calls for a continuing emphasis on providing our customers with enhanced equipment service and maintenance
capabilities and delivering state-of-the-art, innovative and high quality equipment upgrades at competitive prices. Fees for on-going
service and maintenance from our installed base of scanners were $11.1 million for the year ended June 30, 2011 and $11.8 million
for the year ended June 30, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
order to reduce our net losses and demands on our cash and other liquid reserves, we instituted an aggressive program of cost
cutting during and following the end of fiscal 2008. These measures included consolidating HMCA-IMPERIAL&rsquo;s office space
with Fonar&rsquo;s office space, reductions in the size of our workforce, compensation and benefits, as well as across the board
reduction of expenses. The cost reductions were intended to enable us to withstand periods of low volumes of MRI scanner sales,
by keeping expenditures at levels which, if necessary, can be supported by service revenues and HMCA-IMPERIAL revenues. We are
also seeking equity and debt financing and have been engaged in discussions with several possible sources.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
order to promote sales, we are continuing to focus on marketing campaigns to strengthen the demand for our products and services.
Management anticipates that Fonar&rsquo;s capital resources will continue to improve if Fonar&rsquo;s MRI scanner products gain
wider market recognition and acceptance resulting in both increased product sales and scan volumes. If we are not successful with
our marketing efforts to increase sales, we will experience a shortfall in cash, and it will be necessary to reduce operating
expenses or obtain funds through equity or debt financing in sufficient amounts to avoid the need to curtail our operations subsequent
to June 30, 2013. Current economic credit conditions have contributed to a slowing business environment. Given such liquidity
and credit constraints in the markets, the business may suffer, should the credit markets not improve in the near future. The
direct impact of these conditions is not fully known. However, there can be no assurance that we would be able to secure additional
funds if needed and that if such funds were available, whether the terms or conditions would be acceptable to us. In such case,
the reduction in operating expenses might need to be substantial in order for us to generate positive cash flow to sustain our
operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">If
we are unable to meet expenditures with revenues or financing then it will be necessary to reduce expenses further, or seek other
sources of funds through the issuance of debt or equity financing in order to conduct operations as now conducted subsequent to
fiscal 2013.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Capital
expenditures for fiscal 2012 approximated $1.2 million. Capitalized patent costs were approximately $146,000. Purchases of property
and equipment were approximately $1.1 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
has not committed to making capital expenditures in the 2013 fiscal year.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company believes that its business plan has been responsible for the past two consecutive fiscal years of profitability (fiscal
2012 and fiscal 2011) and that its capital resources will be adequate to support operations at current levels through June 30,
2013. In fiscal 2010 and prior years, however, the Company also experienced losses and periods of working capital deficits. The
future effects on our business of healthcare reform legislation, the Deficit Reduction Act, the tax on sales of medical equipment
and the general economic and business climate are not known at the present time. Nevertheless, there is a possibility of adverse
consequences to our business operations from these causes. Consequently, we have not recorded a deferred tax asset as a result
of our carry-forward tax losses since we presently believe that it is more likely than not that we will not be able to utilize
all of these losses in the short term.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
investments in fixed rate instruments. None of the fixed rate instruments in which we invest extend beyond June 30, 2013.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All
of our revenue, expense and capital purchasing activities are transacted in United States dollars.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
Note 11 to the consolidated Financial Statements for information on long-term debt.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Item
8.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FINANCIAL
STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: normal 10pt Courier New, Courier, Monospace; width: 100%; border-collapse: collapse">
<TR STYLE="font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 84%; padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD>
    <TD STYLE="width: 16%; vertical-align: bottom; border-bottom: windowtext 1pt solid; font: normal 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Page
    No.</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-indent: 8.85pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 17.85pt; text-indent: -9pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
                                                          BALANCE SHEETS</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
        June 30, 2012 and 2011</FONT></P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
                                                          STATEMENTS OF INCOME</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
        the Years Ended June 30, 2012 and 2011</FONT></P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
                                                          STATEMENTS OF STOCKHOLDERS' EQUITY</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">AND
        COMPREHENSIVE INCOME</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
        the Years Ended June 30, 2012 and 2011</FONT></P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
                                                          STATEMENTS OF CASH FLOWS</FONT></P>
        <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: 8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">For
        the Years Ended June 30, 2012 and 2011</FONT></P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="padding-right: 5.4pt; padding-left: 22.35pt; layout-grid-mode: line; text-indent: -13.5pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">
    &nbsp;NOTES     TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-align: center; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: 10pt Courier New, Courier, Monospace"><U>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">To
the Audit Committee of the</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">Board
of Directors and Shareholders</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">of
Fonar Corporation and Subsidiaries</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: justify; margin-right: 0; margin-left: 0"><FONT STYLE="font: 10pt Courier New, Courier, Monospace; color: black">We
have audited the accompanying consolidated balance sheets of </FONT>Fonar Corporation and Subsidiaries<FONT STYLE="color: black">
(the &ldquo;Company&rdquo;) as of June 30, 2012 and 2011, and the related consolidated statements of income, stockholders&rsquo;
equity and comprehensive income and cash flows for the years then ended. These consolidated financial statements are the responsibility
of the Company&rsquo;s management. Our responsibility is to express an opinion on these consolidated financial statements based
on our audits.</FONT> </P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. <FONT STYLE="font-style: normal">The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company&rsquo;s internal control over financial reporting. Accordingly, we express no such
opinion.</FONT></FONT><FONT STYLE="font: 10pt Courier New, Courier, Monospace"><FONT>&nbsp; An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation.&nbsp; We
believe that our audits provide a reasonable basis for our opinion.</FONT></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font-family: Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; text-align: justify; margin-right: 0; margin-left: 0"><FONT STYLE="font: 10pt Courier New, Courier, Monospace; color: black">In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of </FONT>Fonar Corporation and Subsidiaries<FONT STYLE="color: black">, as of June 30, 2012 and 2011, and
the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America</FONT>.<FONT STYLE="color: black"> </FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin-right: 0; margin-left: 0"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">/s/
Marcum, LLP</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">New
York, New York</FONT></P>

<P STYLE="font: normal 10pt/11.25pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">September
28, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: 10pt Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
BALANCE SHEETS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>ASSETS</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Current Assets:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-left: 0.1in">Cash and cash equivalents</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">12,032,015</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">9,251,244</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Accounts receivable &ndash; net of allowances for doubtful accounts of $1,852,987 and $1,777,794 at June 30, 2012 and 2011, respectively</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,094,687</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,263,903</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Management and other fees receivable &ndash; net of allowances for doubtful accounts of $7,458,345 and $6,508,345 at June 30, 2012 and 2011, respectively</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,781,635</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,308,456</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Management and other fees receivable &ndash; related medical practices &ndash; net of allowances for doubtful accounts of $403,047 at June 30, 2012 and 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,311,195</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,668,880</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Costs and estimated earnings in excess of billings on uncompleted contracts</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,128,596</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">169,443</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 0.1in">Inventories</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,194,949</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,400,240</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Current portion of note receivable &ndash; net of allowances for doubtful accounts of $65,000 at June 30, 2012 and  2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">116,016</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">114,058</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.1in">Prepaid expenses and other current assets</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">206,328</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">384,437</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.1in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.1in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Total Current Assets</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">25,865,421</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">22,560,661</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Property and Equipment &ndash; Net</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,173,447</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,769,424</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Notes Receivable</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">275,966</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">358,769</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other Intangible Assets &ndash; Net</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,835,179</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,318,311</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other Assets</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">465,455</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">573,509</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 31.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 31.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Total Assets</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">33,615,468</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">31,580,674</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
BALANCE SHEETS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>LIABILITIES</U></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Current Liabilities:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Current portion of long-term debt and capital&nbsp; leases</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,853,623</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">2,025,836</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Accounts payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,076,846</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,187,115</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Other current liabilities</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,693,241</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">8,236,105</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Unearned revenue on service contracts</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,474,614</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,762,394</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Customer advances</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,881,284</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,845,794</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Billings in excess of costs and estimated earnings on uncompleted contracts</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,045</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">Income tax payable</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">100,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">21,079,608</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">23,136,289</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Long-Term Liabilities:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Accounts payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">47,600</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">102,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Due to related medical practices</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">228,741</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">228,267</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Long-term debt and capital leases, less current portion</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">777,274</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,746,286</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">Other liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">400,714</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">502,018</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">Total Long-Term Liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,454,329</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2,578,571</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Total Liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">22,533,937</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">25,714,860</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Commitments,
Contingencies and Other Matters</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
BALANCE SHEETS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>STOCKHOLDERS'
EQUITY</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Stockholders' Equity:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Class A non-voting preferred stock $.0001 par value; 453,000 shares authorized at June 30, 2012 and June 30, 2011, 313,438 issued and outstanding at June 30, 2012 and 2011</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">31</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">31</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Preferred stock $.001 par value; 567,000 shares authorized at June 30, 2012 and 2011, issued and outstanding &ndash; none</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Common stock $.0001 par value; 8,500,000 shares authorized at June 30, 2012 and June 30, 2011, 5,912,905 and 5,636,571 issued at June 30, 2012 and 2011, respectively; 5,901,262 and 5,624,928 outstanding at June 30, 2012 and 2011, respectively</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">590</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">562</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Class B common stock (10 votes per share) $.0001 par value; 227,000 shares authorized&nbsp; at June 30, 2012 and June 30, 2011, 158 issued and outstanding at June 30, 2012 and 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Class C common stock (25 votes per share) $.0001 par value; 567,000 shares authorized at June 30, 2012 and June 30, 2011, 382,513 issued and outstanding at June 30, 2012 and 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">38</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">38</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-indent: -0.1in; padding-left: 0.2in">Paid-in capital in excess of par value</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">174,084,007</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">173,476,059</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Accumulated other comprehensive loss</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(19,534</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(16,179</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Accumulated deficit</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(168,333,958</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(174,110,439</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(70,813</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(115,305</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.1in; padding-left: 0.2in">Treasury stock, at cost &ndash; 11,643 shares of common stock at June 30, 2012 and 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(675,390</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(675,390</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">Non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">6,096,560</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">7,306,437</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.2in">Total Stockholders' Equity</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">11,081,531</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">5,865,814</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.2in">Total Liabilities and Stockholders' Equity</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">33,615,468</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">31,580,674</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENTS OF INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Revenues</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Product sales &ndash; net</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">6,922,465</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">6,682,297</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Service and repair fees &ndash; net</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">11,674,541</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,936,839</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.4in">Service and repair fees &ndash; related parties &ndash; net</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">110,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">192,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Management and other fees - net</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">14,060,275</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,170,086</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -0.2in; padding-left: 0.4in">Management and other fees &ndash; related medical practices &ndash; net</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">6,677,138</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">5,154,673</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.2in">Total Revenues &ndash; Net</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">39,444,419</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">33,136,395</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Costs and Expenses</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Costs related to product sales</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,387,923</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,768,601</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Costs related to service and repair fees</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,453,116</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,936,435</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.4in">Costs related to service and repair fees&nbsp;&nbsp; &ndash; related parties</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">32,536</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">51,684</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.4in">Costs related to management and other fees</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">8,733,823</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,781,638</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.4in">Costs related to management and other fees &ndash; related medical practices</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,588,282</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,941,192</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Research and development</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,242,656</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,440,032</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.4in">Selling, general and administrative, inclusive of compensatory element of stock issuances of $180,418 and $204,486 for the years ended June 30, 2012 and 2011, respectively</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">8,749,090</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">8,462,335</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.2in">Provision for bad debts</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,050,442</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">963,009</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.5in">Total Costs and Expenses</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">32,237,868</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">29,344,926</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.4in">Income from Operations</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,206,551</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,791,469</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.2in">Other Income and (Expenses):</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Interest expense</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(478,663</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(514,703</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Interest expense &ndash; related parties</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(3,829</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Investment income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">243,254</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">226,610</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0.2in">Interest income &ndash; related parties</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,564</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.2in">Other income (expense) &ndash; net</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">45,056</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(116,617</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -0.2in; padding-left: 0.3in">Income Before Provision For Income Taxes and Non Controlling Interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,016,198</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,384,494</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0.1in">Provision for Income Taxes</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">141,125</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">75,475</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Net Income</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">6,875,073</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">3,309,019</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Net Income &ndash; Non Controlling Interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,098,592</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(148,109</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Net Income &ndash; Controlling Interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,776,481</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,160,910</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENTS OF INCOME</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.2in; padding-left: 0.3in">Net Income Available to Common Stockholders</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,392,212</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2,941,026</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.2in; padding-left: 0.3in">Net Income Available to Class A Non-Voting Preferred Stockholders</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">286,406</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">163,886</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.2in; padding-left: 0.3in">Net Income Available to Class C Common Stockholders</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">97,863</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">55,998</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.2in; padding-left: 0.3in">Basic Net Income Per Common Share Available to Common Stockholders</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.93</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.56</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 22.35pt">Diluted Net Income Per Common Share Available to Common Stockholders</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.91</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.55</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -0.2in; padding-left: 0.3in">Basic and Diluted Income Per Share &ndash; Common C</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.26</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0.15</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; text-indent: -12.75pt; padding-left: 0.3in">Weighted Average Basic Shares Outstanding &ndash; Common Stockholder</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,778,695</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,264,795</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; text-indent: -12.75pt; padding-left: 22.35pt">Weighted Average Diluted Shares Outstanding &ndash; Common Stockholder</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,906,199</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,392,299</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 22.35pt">Weighted Average Basic Shares&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Outstanding &ndash; Class C Common</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -13.5pt; padding-left: 22.35pt">Weighted Average Diluted Shares&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Outstanding &ndash; Class C Common</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FOR
THE YEARS ENDED JUNE 30, 2012 AND 2011</FONT></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class A</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Non-Voting</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Preferred</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; vertical-align: bottom">Common Stock</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Stock</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Amount</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%; font-weight: normal; font-style: normal; padding-left: 0pt">Balance - June 30, 2010</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">31</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">4,974,207</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">497</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax:Unrealized gains on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">128,803</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">13</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">521,918</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">52</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital contribution in Fair Haven acquisition</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Effect of change from equity method to consolidation of investment (Note 10)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;
                                                                                                                     &nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;
                                                                                                                     &nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;
                                                                                                                     &nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Balance - June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">31</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,624,928</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">562</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized losses on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">58,334</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">218,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">22</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;
                                                                                                                     &nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;
                                                                                                                     &nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;
                                                                                                                     &nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 0pt">Balance - June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">31</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">5,901,262</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">590</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FOR
THE YEARS ENDED JUNE 30, 2012 AND 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class B</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Common</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stock</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class C</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Common</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stock</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Paid-in</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Capital in</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Excess of</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Par Value</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 53%; font-weight: normal; font-style: normal; padding-left: 0pt; padding-right: 0pt">Balance - June 30, 2010</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">158</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">38</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">172,379,863</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt; padding-right: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized gains on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">204,473</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">862,759</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital contribution in Fair Haven acquisition</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">28,964</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Effect of change from equity method to consolidation of investment (Note 10)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Balance - June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">158</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">38</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">173,476,059</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized losses on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">180,412</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">427,536</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 0pt">Balance - June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">158</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">38</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">174,084,007</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FOR
THE YEARS ENDED JUNE 30, 2012 AND 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Treasury</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stock</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Notes</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Receivable</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">From</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Employee</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stockholders</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Accumulated</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Comprehensive</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Loss</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 53%; font-weight: normal; font-style: normal; text-indent: -8.85pt; padding-left: 8.85pt">Balance - June 30, 2010</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(675,390</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(191,167</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(18,489</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized gains on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,310</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital contribution in Fair Haven acquisition</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">75,862</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Effect of change from equity method to consolidation of investment (Note 10)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Balance - June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(675,390</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(115,305</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(16,179</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized losses on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(3,355</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">44,492</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">Balance &ndash; June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(675,390</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(70,813</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(19,534</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FOR
THE YEARS ENDED JUNE 30, 2012 AND 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Accumulated Deficit</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Non Controlling Interests</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 63%; font-weight: normal; font-style: normal; padding-left: 0pt">Balance - June 30, 2010</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 14%; font-weight: normal; font-style: normal; text-align: right">(177,271,349</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 14%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,160,910</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">148,109</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized gains on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plan</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital contribution in Fair Haven acquisition</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,700,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(22,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(10,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Effect of change from equity method to consolidation of investment (Note 10)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">491,328</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 0pt">Balance - June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(174,110,439</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,306,437</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,776,481</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,098,592</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized losses on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,200,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,135,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">16,031</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 0pt">Balance &ndash; June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(168,333,958</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">6,096,560</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FOR
THE YEARS ENDED JUNE 30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Comprehensive Income</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 66%; font-weight: normal; font-style: normal; padding-left: 0pt">Balance - June 30, 2010</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(5,775,966</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,309,019</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,309,019</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized gains on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,310</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,310</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">204,486</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">862,811</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital contribution in Fair Haven acquisition</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">28,964</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">75,862</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,700,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(22,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(10,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Effect of change from equity method to consolidation of investment (Note 10)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">491,328</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 0pt">Balance - June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,865,814</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,311,329</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Net income</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,875,073</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,875,073</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Other comprehensive loss, net of tax: Unrealized losses on securities arising during the year, net of tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(3,355</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(3,355</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Stock issued to employees under stock bonus plans</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">180,418</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Issuance of stock for goods and services</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">427,558</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Payments on notes receivable from employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">44,492</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,200,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Distributions to non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,135,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">16,031</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 0pt">Balance &ndash; June, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">11,081,531</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">6,871,781</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENTS OF CASH FLOWS</FONT></P>

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<TR STYLE="vertical-align: top; font: normal 10pt Courier New, Courier, Monospace">
    <TD STYLE="width: 100%; padding-right: 5.4pt; padding-left: 5.4pt; font: normal 10pt Courier New, Courier, Monospace"><FONT STYLE="font: x-small Courier New, Courier, Monospace"></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center; border-bottom: Black 1pt solid">For the Years &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">CASH FLOWS FROM OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 67%; text-align: left; text-indent: 9pt; padding-left: 8.85pt">Net income</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">6,875,073</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">3,309,019</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 17.85pt">Adjustments to reconcile net income to net cash provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,230,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,073,006</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Abandoned patents written off</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76,231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">79,958</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Provision for bad debts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,050,442</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">963,009</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Compensatory element of stock issuances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">180,418</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">204,486</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Stock issued for costs and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">427,558</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">862,811</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 17.85pt">(Increase) decrease in operating assets, net:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Accounts and management fee receivables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(996,720</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,550,287</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Notes receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">80,845</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(336,717</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Costs and estimated earnings in excess of billings on uncompleted contracts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(959,153</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -9pt; padding-left: 35.85pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">205,291</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425,971</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">177,593</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">200,894</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">108,054</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(57,724</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Advances and notes to related parties medical practices</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,423</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 17.85pt">Increase (decrease) in operating liabilities, net:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(164,669</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,012,493</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(830,644</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">699,929</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Customer advances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(964,510</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,467</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Billings in excess of costs and estimated earnings on uncompleted contracts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,045</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,739,353</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Other liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(101,304</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,255</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 35.85pt">Due to related medical practices</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">474</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(299,624</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 35.85pt">Income tax payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 44.85pt">NET CASH PROVIDED BY OPERATING ACTIVITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,416,184</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,148,971</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;<FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CONSOLIDATED
STATEMENTS OF CASH FLOWS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.1pt; padding-left: 8.1pt">CASH FLOWS FROM INVESTING ACTIVITIES</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 65%; font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Sales of marketable securities</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 13%; font-weight: normal; font-style: normal; text-align: right">(2,839</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 13%; font-weight: normal; font-style: normal; text-align: right">(2,608</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Purchases of property and equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,081,209</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(532,562</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Costs of capitalized software development</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(67,258</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Cash acquired from business combination</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">290,102</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-indent: -9pt; padding-left: 17.1pt">Cost of patents</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right; border-bottom: Black 1pt solid">(146,163</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right; border-bottom: Black 1pt solid">(135,210</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 44.1pt">NET CASH USED IN&nbsp; INVESTING ACTIVITIES</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(1,230,211</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(447,536</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.1pt; padding-left: 8.1pt">CASH FLOWS FROM FINANCING ACTIVITIES</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Proceeds from non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,700,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Proceeds from debt</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">246,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Repayment of borrowings and capital lease obligations</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,387,225</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,492,546</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Repayment of notes receivable from&nbsp; employee stockholders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">44,492</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">75,862</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Distributions to non controlling&nbsp; interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,135,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(22,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Redemption of non controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,200,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Purchase of non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(10,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 17.1pt">Proceeds from non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">16,031</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 17.1pt">Sale to non controlling interest</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">10,500</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 44.1pt">NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(3,405,202</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">5,250,316</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.1pt; padding-left: 8.1pt">NET INCREASE IN CASH AND CASH EQUIVALENTS</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,780,771</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,951,751</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.1pt; padding-left: 8.1pt">CASH AND CASH EQUIVALENTS &ndash; BEGINNING OF YEAR</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">9,251,244</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,299,493</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; text-indent: -8.1pt; padding-left: 8.1pt">CASH AND CASH EQUIVALENTS &ndash; END OF YEAR</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">12,032,015</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">9,251,244</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
accompanying notes to consolidated financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
1 - DESCRIPTION OF BUSINESS AND LIQUIDITY AND CAPITAL RESOURCES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Description
of Business</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
Corporation (the &ldquo;Company&rdquo; or &ldquo;FONAR&rdquo;) is a Delaware corporation, which was incorporated on July 17, 1978.
FONAR is engaged in the research, development, production and marketing of medical scanning equipment, which uses principles of
Magnetic Resonance Imaging (&quot;MRI&quot;) for the detection and diagnosis of human diseases. In addition to deriving revenues
from the direct sale of MRI equipment, revenue is also generated from our installed-base of customers through our service and
upgrade programs.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR,
through its wholly-owned subsidiary Health Management Corporation of America (&quot;HMCA&quot;) provides comprehensive management
services to diagnostic imaging facilities. The services provided by the Company include development, administration, leasing of
office space, facilities and medical equipment, provision of supplies, staffing and supervision of non-medical personnel, legal
services, accounting, billing and collection and the development and implementation of practice growth and marketing strategies.
As of June 30, 2012, Imperial manages 11 diagnostic imaging facilities located in states of New York and Florida.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
May 2011, HMCA contributed all of its assets together with its liabilities to a newly formed limited liability company, Imperial
Management Services, LLC (&ldquo;Imperial&rdquo;).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
October 1, 2010, the Company purchased 100% of the stock of Fair Haven Services Inc., an entity wholly owned by Raymond Damadian.
The entity is in the business of leasing medical equipment to various unrelated PC&rsquo;s.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 21.1pt 0 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Liquidity
</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
June 30, 2012, the Company had working capital of approximately $4.8 million as compared to working capital of $576,000 at June
30, 2011, and stockholders&rsquo; equity of $11.1 million at June 30, 2012 as compared to stockholders&rsquo; equity of $5.9 million
at June 30, 2011. For the year ended June 30, 2012, we realized a net income of $6.9 million.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company believes that its business plan has been responsible for the past two consecutive fiscal years of profitability (fiscal
2012 and fiscal 2011) and that its capital resources will be adequate to support operations at current levels through June 30,
2013. In fiscal 2010 and prior years, however, the Company also experienced losses and periods of working capital deficits. The
future effects on our business of healthcare reform legislation, the Deficit Reduction Act, the tax on sales of medical equipment
and the general economic and business climate are not known at the present time. Nevertheless, there is a possibility of adverse
consequences to our business operations from these causes.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
order to promote sales, the Company is continuing to focus on marketing campaigns to strengthen the demand for our products and
services. Management anticipates that the Company&rsquo;s capital resources will continue to improve if the Company&rsquo;s MRI
scanner products gain wider market recognition and acceptance resulting in both increased product sales and scan volumes. If the
Company is not successful with our marketing efforts to increase sales, the Company will experience a shortfall in cash, and it
will be necessary to reduce operating expenses or obtain funds through equity or debt financing.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
1 - DESCRIPTION OF BUSINESS AND LIQUIDITY AND CAPITAL RESOURCES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Liquidity</U>
(Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">If
the Company is unable to meet expenditures with revenues or financing then it will be necessary to reduce expenses further, or
seek other sources of funds through the issuance of debt or equity financing in order to conduct operations as now conducted subsequent
to fiscal 2013.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Principles
of Consolidation</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships.
All significant intercompany accounts and transactions have been eliminated in consolidation.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Use
of Estimates</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The most significant estimates
relate to accounts receivable allowances, intangible assets, income taxes, useful lives of property and equipment, contingencies,
revenue recognition and litigation. In addition, healthcare industry reforms and reimbursement practices will continue to impact
the Company's operations and the determination of contractual and other allowance estimates. Actual results could differ from
those estimates.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Inventories</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Inventories
consist of purchased parts, components and supplies, as well as work-in-process, and are stated at the lower of cost, determined
on the first-in, first-out method, or market.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Property
and Equipment</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Property
and equipment procured in the normal course of business is stated at cost. Property and equipment purchased in connection with
an acquisition is stated at its estimated fair value, generally based on an appraisal. Property and equipment is being depreciated
for financial accounting purposes using the straight-line method over their estimated useful lives, generally five to seven years.
Leasehold improvements are being amortized over the shorter of the useful life or the remaining lease term. Upon retirement or
other disposition of these assets, the cost and related accumulated depreciation of these assets are removed from the accounts
and the resulting gains or losses are reflected in the results of operations. Expenditures for maintenance and repairs are charged
to operations. Renewals and betterments are capitalized. Maintenance and repair expenses totaled approximately $371,000 and $334,000
for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Other
Intangible Assets</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1)
Capitalized Software Development Costs</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Capitalization
of software development costs begins upon the establishment of technological feasibility. Technological feasibility for the Company&rsquo;s
computer software is generally based upon achievement of a detail program design free of high risk development issues and the
completion of research and development on the product hardware in which it is to be used. The establishment of technological feasibility
and the ongoing assessment of recoverability of capitalized computer software development costs require considerable judgment
by management with respect to certain external factors, including, but not limited to, technological feasibility, anticipated
future gross revenue, estimated economic life and changes in software and hardware technology. Prior to reaching technological
feasibility those costs are expensed as incurred and included in research and development.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Amortization
of capitalized software development costs commences when the related products become available for general release to customers.
Amortization is provided on a product by product basis. The annual amortization is the greater of the amount computed using (a)
the ratio that current gross revenue for a product bears to the total of current and anticipated future gross revenue for that
product, or (b) the straight-line method over the remaining estimated economic life of the product.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company periodically performs reviews of the recoverability of such capitalized software development costs. At the time a determination
is made that capitalized amounts are not recoverable, based on the estimated cash flows to be generated from the applicable software,
any remaining capitalized amounts are written off.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2)
Patents and Copyrights</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Amortization
is calculated on the straight-line basis over a period ranging from 15 to 17 years.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3)
Management Agreement</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
management agreement is being amortized on the straight line basis over the length of the agreement (15 years).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Long-Lived
Assets</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company periodically assesses the recoverability of long-lived assets, including property and equipment and intangibles, when
there are indications of potential impairment, based on estimates of undiscounted future cash flows. The amount of impairment
is calculated by comparing anticipated discounted future cash flows with the carrying value of the related asset. In performing
this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic
factors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Revenue
Recognition</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenue
on sales contracts for scanners, included in &ldquo;product sales&rdquo; in the accompanying consolidated statements of operations,
is recognized under the percentage-of-completion method in accordance with FASB ASC 605-35, &ldquo;Revenue Recognition &ndash;
Construction-Type and Production-Type Contracts&rdquo;. The Company manufactures its scanners under specific contracts that provide
for progress payments. Production and installation take approximately three to six months. The percentage of completion is determined
by the ratio of costs incurred to date on completed sub-assemblies to the total estimated cost for each scanner. Contract costs
include purchased parts and components, direct labor and overhead. Revisions in cost estimates and provisions for estimated losses
on uncompleted contracts, if any, are made in the period in which such losses are determined. The asset, &quot;Costs and Estimated
Earnings in Excess of Billings on Uncompleted Contracts&quot;, represents revenues recognized in excess of amounts billed. The
liability, &quot;Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts&quot;, represents amounts billed
in excess of revenues recognized.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenue
on scanner service contracts is recognized on the straight-line method over the related contract period, usually one year.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenue
from sales of other items is recognized upon shipment.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Revenue
under management contracts is recognized based upon contractual agreements for management services rendered by the Company primarily
under various long-term agreements with various medical providers (the &quot;PCs&quot;). As of June 30, 2012, the Company has
eleven management agreements of which three are with PC&rsquo;s owned by Raymond V. Damadian, M.D., President and Chairman of
the Board of FONAR (&ldquo;the Related medical practices&rdquo;) and eight are with PC&rsquo;s, which are all located in the state
of New York (&ldquo;the New York PC&rsquo;s&rdquo;), owned by one unrelated radiologist. The contractual fees for services rendered
to the PCs consists of fixed monthly fees per diagnostic imaging facility ranging from approximately $100,000 to $241,000. All
fees are re-negotiable at the anniversary of the agreements and each year thereafter. Revenue under lease contracts is recognized
based upon contractual agreements for the leasing of medical equipment primarily under long term contracts to various unrelated
PC&rsquo;s. The lease fees for the medical equipment consist of fixed monthly fees ranging from $2,000 to $21,000. All fees are
re-negotiable at the anniversary of the agreements and each year thereafter.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Research
and Development Costs</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Research
and development costs are charged to expense as incurred. The costs of materials and equipment that are acquired or constructed
for research and development activities, and have alternative future uses (either in research and development, marketing or production),
are classified as property and equipment and depreciated over their estimated useful lives.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Advertising
Costs</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Advertising
costs are expensed as incurred. Advertising expense approximated $715,000 and $466,000 for the years ended June 30, 2012 and 2011,
respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Shipping
Costs</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company&rsquo;s shipping and handling costs are included in revenue from product sales and the related expense included in costs
related to product sales is $26,425 and $49,712 for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Income
Taxes</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Deferred
tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis
of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Customer
Advances</U></FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
advances and progress payments received on sales orders are reflected as customer advances until such time as revenue recognition
begins.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Earnings
Per Share</U></FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Basic
earnings per share (&ldquo;EPS&rdquo;) is computed based on weighted average shares outstanding and excludes any potential dilution.
In accordance with ASC topic 260-10, &ldquo;Participating Securities and the Two-Class Method&rdquo;, the Company used the Two-Class
method for calculating basic earnings per share and applied the if converted method in calculating diluted earnings per share
for the years ended June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Diluted
EPS reflects the potential dilution from the exercise or conversion of all dilutive securities into common stock based on the
average market price of common shares outstanding during the period. For both the year ended June 30, 2012 and June 30, 2011,
diluted EPS for common shareholders includes 127,504 shares upon conversion of Class C Common. For the year ended June 30, 2012
and June 30, 2011, the number of common shares potentially issuable upon the exercise of certain options of 14,022 and 22,537;
respectively, have not been included in the computation of diluted EPS since the effect would be antidilutive.</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt/92% Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Earnings
Per Share</U> (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>



<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD COLSPAN="9" STYLE="font: 10pt Courier New, Courier, Monospace; text-align: center; border-bottom: Black 1pt solid">June 30, 2012</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="9" STYLE="font: 10pt Courier New, Courier, Monospace; text-align: center; border-bottom: Black 1pt solid">June 30, 2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD COLSPAN="19" STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: center; vertical-align: middle">&nbsp;(000's omitted, except per share data)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-bottom: 1pt; padding-left: 5.4pt"><U>Basic</U></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Total</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Common Stock</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Class C Common Stock</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Total</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Common Stock</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">Class C Common Stock</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 19%; font: 10pt Courier New, Courier, Monospace; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Numerator: <BR>Net income <BR>Available <BR>to common <BR>stockholders</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,776,481</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,392,212</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">97,863</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">3,160,910</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">2,941,026</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">55,998</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-bottom: 2.5pt; padding-left: 5.4pt">Denominator: <BR>Weighted <BR>Average <BR>Shares <BR>outstanding</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,778,695</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,778,695</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,264,795</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,264,795</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-bottom: 2.5pt; padding-left: 5.4pt">Basic <BR>income <BR>per <BR>common <BR>share</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">1.00</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.93</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.26</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.60</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.56</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.15</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-left: 5.4pt"><U>Diluted</U> <BR>Denominator: <BR>Weighted <BR>Average
    <BR>Shares <BR>outstanding</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: right">5,778,695</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: right">5,264,795</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Class C <BR>Common <BR>Stock</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">127,504</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">127,504</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Courier New, Courier, Monospace; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total <BR>Denominator <BR>for <BR>diluted <BR>earnings <BR>per share</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,906,199</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">5,392,299</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">382,513</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-bottom: 2.5pt; padding-left: 5.4pt">Diluted <BR>income per <BR>common <BR>share</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.91</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.26</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.55</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Courier New, Courier, Monospace; text-align: right">0.15</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Courier New, Courier, Monospace; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>



<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Cash
and Cash Equivalents</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company considers all short-term highly liquid investments with a maturity of three months or less when purchased to be cash or
cash equivalents.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Concentration
of Credit Risk</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash:
The Company maintains its cash and cash equivalents with various financial institutions, which exceed federally insured limits
throughout the year. At June 30, 2012, the Company had cash on deposit of approximately $10,771,000 in excess of federally insured
limits of $250,000.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Related
Parties: Net revenues from related parties accounted for approximately 17% and 16% of the consolidated net revenues for the years
ended June 30, 2012 and 2011, respectively. Net management fee receivables from the related medical practices accounted for approximately
13% and 16% of the consolidated accounts receivable for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
Note 3 regarding the Company&rsquo;s concentrations in the healthcare industry.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Fair
Value of Financial Instruments</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
financial statements include various estimated fair value information at June 30, 2012 and 2011, as required by ASC topic 820,
&quot;Disclosures about Fair Value of Financial Instruments&quot;. Such information, which pertains to the Company's financial
instruments, is based on the requirements set forth in that Statement and does not purport to represent the aggregate net fair
value to the Company.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is
practicable to estimate that value:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
and cash equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Accounts
receivable and accounts payable: The carrying amounts approximate fair value because of the short maturity of those instruments.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Notes
receivable: The carrying amount approximates fair value because the discounted present value of the cash flow generated by the
parties approximates the carrying value of the amounts due to the Company.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Long-term
debt, notes payable and accounts payable: The carrying amounts of debt and notes payable approximate fair value due to the length
of the maturities, the interest rates being tied to market indices and/or due to the interest rates not being significantly different
from the current market rates available to the Company.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All
of the Company's financial instruments are held for purposes other than trading.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Accumulated
Other Comprehensive Loss</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Accumulated
other comprehensive loss generally includes all changes in equity during a period, except those resulting from investments by
stockholders and distributions to stockholders.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Recent
Accounting Pronouncements </U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
December 2011, the Financial Accounting Standards Board (&ldquo;FASB&rdquo;) issued Accounting Standards Update (&ldquo;ASU&rdquo;)
No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in ASU 2011-05. ASU 2011-12 defers the requirement that companies present reclassification adjustments
for each component of Accumulated Other Comprehensive Income in both net income and Other Comprehensive Income on the face of
the financial statements. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement
to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial
statements. The guidance provided by this update becomes effective for fiscal years, and interim periods within those years, beginning
after December 15, 2011. The adoption of this standard is not expected to have a material impact on the Company&rsquo;s consolidated
position and results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets
for Impairment. This ASU simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency
in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative
factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than
its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than
its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in
previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning
after September 15, 2012, early adoption is permitted. The adoption of this standard is not expected to have a material impact
on the Company&rsquo;s consolidated financial position and results of operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FASB,
the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of June
30, 2012 that will become effective in subsequent periods; however, management does not believe that any of those updates would
have significantly affected our financial accounting measures or disclosures had they been in effect during 2012 or 2011, and
it does not believe that any of those pronouncements will have a significant impact on our consolidated financial statements at
the time they become effective.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Reclassifications</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Certain
prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not have any
effect on reported net income for any periods presented.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
3 - MANAGEMENT FEE RECEIVABLE AND ACCOUNTS RECEIVABLE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company&rsquo;s customers are concentrated in the healthcare industry.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Management
Fee Receivable</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company&rsquo;s receivables from the related and non-related professional corporations (&ldquo;PCs&rdquo;) substantially consist
of fees outstanding under management agreements. Payment of the outstanding fees is dependent on collection by the PCs of fees
from third party medical reimbursement organizations, principally insurance companies and health management organizations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Payment
of the management fee receivables from the PC&rsquo;s may be impaired by the inability of the PC&rsquo;s to collect in a timely
manner their medical fees from the third party payors, particularly insurance carriers covering automobile no-fault and workers
compensation claims due to longer payment cycles and rigorous informational requirements and certain other disallowed claims.
Approximately 38% and 34%, respectively, of the PCs&rsquo; 2012 and 2011 net revenues were derived from no-fault and personal
injury protection claims. The Company considers the aging of its accounts receivable in determining the amount of allowance for
doubtful accounts. The Company generally takes all legally available steps to collect its receivables. Credit losses associated
with the receivables are provided for in the consolidated financial statements and have historically been within management's
expectations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Net
revenues from management and other fees charged to the related medical practices accounted for approximately 17% and 16%, of the
consolidated net revenues for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Tallahassee
Magnetic Resonance Imaging, PA, Stand Up MRI of Boca Raton, PA and Stand Up MRI &amp; Diagnostic Center, PA (all related medical
practices) entered into a guaranty agreement, pursuant to which they cross guaranteed all management fees which are payable to
the Company, which have arisen under each individual management agreement.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Accounts
Receivable</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Credit
risk with respect to the Company&rsquo;s accounts receivable related to product sales and service and repair fees is limited due
to the customer advances received prior to the commencement of work performed and the billing of amounts to customers as sub-assemblies
are completed. Service and repair fees are billed on a monthly or quarterly basis and the Company does not continue providing
these services if accounts receivable become past due. The Company controls credit risk with respect to accounts receivable from
service and repair fees through its credit evaluation process, credit limits, monitoring procedures and reasonably short collection
terms. The Company performs ongoing credit authorizations before a product sales contract is entered into or service and repair
fees are provided.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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    <!-- Field: /Page -->

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
4 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS AND CUSTOMER ADVANCES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1)
Information relating to uncompleted contracts as of June 30, 2012 and 2011 is as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 69%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Costs incurred on uncompleted Contracts</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">3,745,307</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,868,568</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Estimated earnings</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2,670,289</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,077,387</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,415,596</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,945,955</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Less: Billings to date</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">5,287,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2,780,557</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">1,128,596</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">165,398</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Included
in the accompanying consolidated balance sheets under the following captions:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: center">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Costs and estimated earnings in excess of billings on&nbsp; uncompleted contracts</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,128,596</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">169,443</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Less:&nbsp; Billings in excess of costs and estimated earnings on uncompleted contracts</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;
                                                                                                                     &nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">4,045</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">1,128,596</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">165,398</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">2)
Customer advances consist of the following:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: center">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 68%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt; text-indent: 0pt">Total advances</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">9,168,284</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">7,626,351</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: 11pt; padding-left: 8.85pt">Less: Advances on contracts under construction</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">5,287,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2,780,557</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,881,284</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">4,845,794</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
5 &ndash; INVENTORIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Inventories
included in the accompanying consolidated balance sheets consist of:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; text-indent: -9pt; padding-left: 22pt; padding-right: 22pt">Purchased parts, components and supplies</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,672,494</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,818,542</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-bottom: 1pt; padding-left: 11pt; padding-right: 11pt">Work-in-process</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">522,455</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">581,698</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2,194,949</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2,400,240</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
6 - PROPERTY AND EQUIPMENT</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Property
and equipment, at cost, less accumulated depreciation and amortization, at June 30, 2012 and 2011, is comprised of:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 64%; font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Diagnostic equipment under capital&nbsp; leases</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 2%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1,417,300</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 2%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">2,270,719</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Diagnostic equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,138,898</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,518,035</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Research, development and demonstration equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">9,861,199</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">9,605,961</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Machinery and equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,985,215</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,982,085</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Furniture and fixtures</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,212,149</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,127,809</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Leasehold improvements</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,545,974</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,663,666</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 0pt">Building</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">939,614</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">939,614</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">28,100,349</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">27,107,889</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Less: Accumulated depreciation and amortization</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">24,926,902</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">23,338,465</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,173,447</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,769,424</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Depreciation
and amortization of property and equipment for the years ended June 30, 2012 and 2011 was $1,677,186 and $1,464,055, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Depreciation
and amortization of diagnostic equipment under capital leases for the years ended June 30, 2012 and 2011 was $646,620 and $433,859,
respectively. Accumulated depreciation and amortization of diagnostic equipment under capital leases for the years ended June
30, 2012 and 2011 was $1,074,152 and $1,067,534, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
7 - OTHER INTANGIBLE ASSETS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other
intangible assets, net of accumulated amortization, at June 30, 2012 and 2011 are comprised of:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Capitalized software development costs</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">6,368,960</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">6,368,960</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Patents and copyrights</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,100,511</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,030,579</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Management agreement</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">513,333</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">513,333</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,982,804</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">10,912,872</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Less: Accumulated amortization</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">7,147,625</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">6,594,561</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,835,179</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">4,318,311</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Information
related to the above intangible assets for the years ended June 30, 2012 and 2011 is as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt">Balance &ndash; Beginning of Year</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">4,318,311</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">4,291,419</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt">Amounts capitalized</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">146,163</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">715,801</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt">Abandon patents written off</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(76,231</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(79,958</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-bottom: 1pt; padding-left: 5.4pt">Amortization</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(553,064</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(608,951</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-bottom: 2.5pt; padding-left: 5.4pt">Balance &ndash; End of Year</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,835,179</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">4,318,311</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Amortization
of patents and copyrights for the years ended June 30, 2012 and 2011 amounted to $156,310 and $142,049, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Amortization
of capitalized software development costs for the years ended June 30, 2012 and 2011 was $360,087 and $448,569, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Amortization
of management agreement for the years ended June 30, 2012 and 2011 amounted to $36,667 and $18,333, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
7 - OTHER INTANGIBLE ASSETS (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
estimated amortization of patents and copyrights and capitalized software development costs for the five years ending June 30,
2017 and thereafter is as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ending June 30,</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Patents and</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Copyrights</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Capitalized Software Development Costs</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Management Agreement</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; font-weight: normal; font-style: normal; text-align: right">2013</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 16%; font-weight: normal; font-style: normal; text-align: right">496,776</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 16%; font-weight: normal; font-style: normal; text-align: right">174,025</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 15%; font-weight: normal; font-style: normal; text-align: right">286,084</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 15%; font-weight: normal; font-style: normal; text-align: right">36,667</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2014</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">449,502</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">190,159</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">222,676</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">36,667</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2015</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">420,802</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">206,293</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">177,842</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">36,667</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2016</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">439,926</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">221,848</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">181,411</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">36,667</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2017</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">453,001</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">229,334</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">187,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">36,667</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Thereafter</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,575,172</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,197,062</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">103,112</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">274,998</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">3,835,179</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2,218,721</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">1,158,125</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">458,333</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
weighted average amortization period for other intangible assets is 9.6 years and they have no expected residual value.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
8 &ndash; NOTES RECEIVABLE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Notes
receivable as of June 30, 2012 and 2011 consist of the following:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">As of June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Note Receivable &ndash; (a)</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">65,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">65,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Note Receivable &ndash; (b)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">233,182</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">264,985</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Note Receivable &ndash; (c)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">158,800</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">207,842</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Total Notes Receivable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">456,982</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">537,827</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 5.4pt">Allowance</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(65,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(65,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Net Notes Receivable</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">391,982</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">472,827</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Current Portion</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">116,016</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">114,058</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Long-Term Portion</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">275,966</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">358,769</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">a)
This note receivable represents a note due from a customer for the purchase of a system. The note is past due. The Company has
an allowance for doubtful accounts of $65,000 as of June 30, 2012 and 2011 on this note.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">b)
This note receivable represents a note due from a customer for the purchase of an Upright MRI system. The note is payable in 60
consecutive equal monthly payments of principal and interest of $5,798 commencing November 2010.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">c)
This represents notes from a customer for past due service provided to two Upright MRI systems. The notes are payable in monthly
payments of principal and interest of $5,444.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
9 - CAPITAL STOCK</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Common
Stock</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Cash
dividends payable on the common stock shall, in all cases, be on a per share basis, one hundred twenty percent (120%) of the cash
dividend payable on shares of Class B common stock and three hundred sixty percent (360%) of the cash dividend payable on a share
of Class C common stock.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Class
B Common Stock</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Class
B common stock is convertible into shares of common stock on a one-for-one basis. Class B common stock has 10 votes per share.
There were 158 of such shares outstanding at June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Class
C Common Stock</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
April 3, 1995, the stockholders ratified a proposal creating a new Class C common stock and authorized the exchange offering of
three shares of Class C common stock for each share of the Company's outstanding Class B common stock. The Class C common stock
has 25 votes per share, as compared to 10 votes per share for the Class B common stock and one vote per share for the common stock.
The Class C common stock was offered on a three-for-one basis to the holders of the Class B common stock. Although having greater
voting power, each share of Class C common stock has only one-third of the rights of a share of Class B common stock to dividends
and distributions. Class C common stock is convertible into shares of common stock on a three-for-one basis.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Class
A Non-Voting Preferred Stock</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
April 3, 1995, the stockholders ratified a proposal consisting of the creation of a new class of Class A non-voting preferred
stock with special dividend rights and the declaration of a stock dividend on the Company's common stock consisting of one share
of Class A non-voting preferred stock for every five shares of common stock. The stock dividend was payable to holders of common
stock on October 20, 1995. Class A non-voting preferred stock issued pursuant to such stock dividend approximates 313,000 shares.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Class A non-voting preferred stock is entitled to a special dividend equal to 3-1/4% of first $10 million, 4-1/2% of next $20
million and 5-1/2% on amounts in excess of $30 million of the amount of any cash awards or</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">settlements
received by the Company in connection with the enforcement of five of the Company's patents in its patent lawsuits, less the revised
special dividend payable on the common stock with respect to one of the Company's patents.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Class A non-voting preferred stock participates on an equal per share basis with the common stock in any dividends declared and
ranks equally with the common stock on distribution rights, liquidation rights and other rights and preferences (other than the
voting rights).</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Stock
Bonus Plans</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
April 23, 2010, the Board approved the 2010 Stock Bonus Plan. The plan entitles the Company to reserve 2,000,000 shares of common
stock. On August 10, 2010, the Company filed Form S-8 to register the 2,000,000 shares. As of June 30, 2012, 1,072,945 shares
of common stock of FONAR were available for future grant under this plan. 276,334 shares were issued during the year ended June
30, 2012.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
9 - CAPITAL STOCK (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Options</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company has stock option plans, which provide for the awarding of incentive and non-qualified stock options to employees, directors
and consultants who may contribute to the success of the Company. The options granted vest either immediately or ratably over
a period of time from the date of grant, typically three or four years, at a price determined by the Board of Directors or a committee
of the Board of Directors, generally the fair value of the Company's common stock at the date of grant. The options must be exercised
within ten years from the date of grant.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR&rsquo;s
1997 Nonstatutory Stock Option Plan, adopted on May 9, 1997, permits the issuance of stock options covering an aggregate of 200,000
shares of common stock of FONAR. The options may be issued at such prices and upon such terms and conditions as are determined
by FONAR. The 1997 Plan terminated on May 8, 2007. During the year ended June 30, 2012, 8,272 options expired, therefore of the
options granted under this plan zero shares remain outstanding.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR&rsquo;s
2002 Incentive Stock Option Plan (the &ldquo;FONAR 2002 Plan&rdquo;), adopted on July 1, 2002, is intended to qualify as an incentive
stock option plan under Section 422A of the Internal Revenue Code of 1954, as amended. The FONAR 2002 Plan permits the issuance
of stock options covering an aggregate of 100,000 shares of common stock of FONAR. The options have an exercise price equal to
the fair market value of the underlying stock on the date the option is granted, are nontransferable, are exercisable for a period
not exceeding ten years and expire upon the voluntary termination of employment. The FONAR 2002 Plan terminated on June 30, 2012.
During the year ended June 30, 2012, 243 options were forfeited, therefore 14,022 options remain outstanding.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR&rsquo;s
2005 Incentive Stock Option Plan (the &ldquo;FONAR 2005 Plan&rdquo;), adopted on February 16, 2005, is intended to qualify as
an incentive stock option plan under Section 422A of the Internal Revenue Code of 1954, as amended. The FONAR 2005 Plan permits
the issuance of stock options covering an aggregate of 80,000 shares of common stock of FONAR. The options have an exercise price
equal to the fair market value of the underlying stock on the date the option is granted, are non-transferable, are exercisable
for a period not exceeding ten years, and expire upon the voluntary termination of employment. The FONAR 2005 Plan will terminate
on February 14, 2015. As of June 30, 2012, 80,000 shares of common stock of FONAR were available for future grant under this Plan.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
9 - CAPITAL STOCK (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Options
</U>(Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Stock
option activity and weighted average exercise prices under these plans and grants for the years ended June 30, 2012 and 2011 were
as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Number of Options</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Weighted Average Exercise Price</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Aggregate Intrinsic Value</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%; font-weight: normal; font-style: normal; padding-left: 5.4pt">Outstanding, June 30, 2010</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">68,234</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">29.63</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Granted</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Exercised</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Forfeited / Expired</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(45,697</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">29.31</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Outstanding, June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">22,537</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">30.27</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Granted</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Exercised</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Forfeited / Expired</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(8,515</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">34.41</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">Outstanding, June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">14,022</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">27.76</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Exercisable at:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;June 30, 2011</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">22,537</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">30.27</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;June 30, 2012</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">14,022</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">27.76</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
range of exercise prices for options outstanding as of June 30, 2012 was as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Range of Exercise Price</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Number of Options Outstanding</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Weighted Average Remaining Contractual Life in Years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 30%; font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$25.00 - $28.13</FONT></TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 26%; font-weight: normal; font-style: normal; text-align: right">5,932</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 26%; font-weight: normal; font-style: normal; text-align: right">0.28</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">$29.00 - $34.38</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">8,090</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.26</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">14,022</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
10 &ndash; CONTROLLING INTERESTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
May 2, 2011, the Company completed a private placement of equity and succeeded in raising $6,000,000. The offering consisted of
Preferred Class A membership interests in a newly formed limited liability company, Imperial Management Services, LLC (&ldquo;Imperial&rdquo;).
The Class B membership interests in Imperial, all of which were retained by the Company&rsquo;s subsidiary, HMCA, hold a 75% equity
interest in Imperial. The Class A membership interests are entitled to receive a dividend of 18% per annum of their cash capital
contribution of $6,000,000. HMCA contributed all of its assets, together with its liabilities, to Imperial as HMCA&rsquo;s capital
contribution. The Imperial operating agreement provides for the Class A members to receive priority distributions until their
original capital contributions are returned. Dividends are payable quarterly beginning August 1, 2011. On May 1, 2012, the Company
returned a portion of the Class A Members capital contribution in the amount of $1,200,000. The Company&rsquo;s subsidiary, HMCA,
now owns an 80% interest in Imperial Management Services.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
May 1, 2010, the Company purchased a 15.2% interest from an unrelated party of an entity that provides management services to
a diagnostic center in the New York Metropolitan area. On January 1, 2011, the Company purchased an additional 34.8% interest
by the issuance of a promissory note of $400,000. Commencing January 1, 2011, the Company consolidates the activity of this entity.
The fair values assigned to the assets acquired and liabilities assumed were as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 70%; font-weight: normal; font-style: normal; padding-left: 5.4pt">Cash</TD><TD STYLE="width: 10%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 18%; font-weight: normal; font-style: normal; text-align: right">289,185</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Property and equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">303,659</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Management contracts</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">513,333</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Security deposits</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">45,784</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Accounts payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(47,026</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Notes payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(130,650</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Non-controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(491,328</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Less prior investment</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(82,957</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Subtotal</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">400,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 5.4pt">Purchase price</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(400,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Cash used in purchase</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company also has a 50% controlling interest in an entity which the Company consolidates, that provides management services to
a diagnostic center in the New York Metropolitan area. The center began operations during January 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
11 - LONG-TERM DEBT, NOTES PAYABLE AND CAPITAL LEASES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Long-term
debt, notes payable and capital leases consist of the following:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 64%; font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt">Capital lease requiring monthly payments of $13,623, including interest at a rate of 10.51% per annum through July 2010. The lease was restructured in July 2008, requiring twelve monthly payments of $6,923 followed by 31 monthly payments of $9,585 through January 2012, including interest at a rate of 11.82%. The lease is collateralized by the related equipment.</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">73,390</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Notes payable of $580,000 requiring aggregate monthly payments of $20,106, including interest at a rate of 15% per annum through June 2013. Amount due to a related party as of June 30, 2012 is $30,725.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">214,355</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">399,024</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable requiring monthly payments of interest at a rate of 7% until May 2009 followed by 240 monthly payments of $4,472 through October 2026. The loan is collateralized by a building with a net book value of $720,841 as of June 30, 2012.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">481,615</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">500,411</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable requiring monthly payments of $12,150, including interest at a rate of 5% per annum through January 2014, seven monthly payments of $31,000 commencing February 2014 and a final payment of $5,091 in September 2014.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">423,280</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">544,555</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable requiring monthly payments of $8,325, including interest at a rate of 10% per annum through April 2012.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">72,341</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable from the Fair Haven acquisition requires three monthly payments of $15,000, twelve monthly payments of $20,000 and six monthly payments of $25,000, including interest at a rate of 8.58% per annum through November 2011 then 6 payments of $25,000. The loan is collateralized by equipment which, as of June 30, 2012, has been fully depreciated.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">42,500</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">257,246</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
11 - LONG-TERM DEBT, NOTES PAYABLE AND CAPITAL LEASES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 64%; font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt">Note payable from the Fair Haven acquisition requires monthly payments of $21,000, including interest at a rate of 4.5% per annum through February 2011 and a final payment of $533,783 in March 2011. The loan is collateralized by equipment which, as of June 30, 2012, has been fully depreciated.&nbsp; The Company expects to have this loan paid in full by December 2012.</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">187,707</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">510,771</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable from the Fair Haven acquisition requires monthly payments of $18,850, including interest at a rate of 11.2% per annum through January 2014. The loan is collateralized by equipment with a net book value of $343,148 as of June 30, 2012.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">326,890</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">533,502</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable of $400,000 entered into for the purchase of 34.2% interest in a management company requiring payments of $100,000 on January 2, 2012 and $300,000 on January 2, 2013 including interest at a rate of 10% per annum through January 2013. The lender has a security interest in Imperial&rsquo;s members interest until the note has been paid in full.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">300,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">400,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify; padding-left: 5.4pt"><BR>
Note payable requiring monthly principal installments of $4,100 and interest computed on the unpaid principal amount at a rate of 5% per annum through April 2017. The note is secured by certain assets of the Company.</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">237,800</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt"><BR>
Other (including capital leases for property and equipment).</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">416,750</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">480,882</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,630,897</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,772,122</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Less: Current portion</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,853,623</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2,025,836</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">777,274</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">1,746,286</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
maturities of long-term debt over the next five years and thereafter are as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Years Ending June 30,</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 55%; font-weight: normal; font-style: normal; text-align: right">2013</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 31%; font-weight: normal; font-style: normal; text-align: right">1,853,623</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2014</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">197,962</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2015</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">72,372</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2016</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">73,991</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2017</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">67,688</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Thereafter</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">365,261</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2,630,897</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
12 - INCOME TAXES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Effective
January 1, 2007, the Company adopted the provisions of ASC topic 740 (formerly FASB Interpretation No. 48/FASB Statement No. 109,
&ldquo;Accounting for Uncertainty in Income Taxes&rdquo;). ASC topic 740 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate
tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized
and measured pursuant to the interpretation are referred to as &ldquo;unrecognized benefits&rdquo;. A liability is recognized
(or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because
it represents an enterprise&rsquo;s potential future obligation to the taxing authority for a tax position that was not recognized
as a result of applying the provisions of ASC topic 740.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
accordance with ASC topic 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable)
and would be classified as &ldquo;Interest expense, net&rdquo;. Penalties if incurred would be recognized as a component of &ldquo;Selling,
general and administrative&rdquo; expenses.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most
instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior
to 2008.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
of June 30, 2012, no liability for unrecognized tax benefits was required to be recorded. The Company does not expect its unrecognized
tax benefit position to change during the next 12 months.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which
those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies
in making this assessment. At present, the Company does not have a sufficient history of income or knowledge of future effects
on our business of healthcare reform legislation, the Deficit Reduction Act, the tax on sales of medical equipment and the general
economic and business climate to conclude that it is more-likely-than-not that the Company will be able to realize any of its
tax benefits in the near future and therefore a valuation allowance was established for the full value of the deferred tax asset.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all
of the valuation. Should the Company become profitable in future periods with supportable trends, the valuation allowance will
be reversed accordingly.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Components
of the current provision for income taxes are as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 50%; font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt">Current:&nbsp;&nbsp;&nbsp; Federal</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 16%; font-weight: normal; font-style: normal; text-align: right">112,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 16%; font-weight: normal; font-style: normal; text-align: right">75,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;State</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">29,125</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">475</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">141,125</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">75,475</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
12 - INCOME TAXES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
reconciliation of the federal statutory income tax rate to the Company's effective tax rate as reported is as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 66%; font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Taxes at federal statutory rate</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(34.0</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)%</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">(34.0</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">State and local income benefit, net of federal benefit</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(6.0</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(6.0</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 0pt">Permanent differences</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.2</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.9</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -8.85pt; padding-left: 8.85pt">Decrease in the valuation allowance and true ups</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">40.8</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">40.3</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 0pt">Effective income tax rate</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right; text-indent: 11pt; padding-left: 11pt">2.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">2.2</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">As
of June 30, 2012, the Company has net operating loss (&ldquo;NOL&rsquo;s&rdquo;) carryforwards of approximately $154,431,000 that
will be available to offset future taxable income. The NOLs are due to expire during the years ending from June 30, 2019 to June
30, 2031. The utilization of certain of the NOLs is limited by separate return limitation year rules pursuant to Section 1502
of the Internal Revenue Code.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company has, for federal income tax purposes, research and development tax credit carryforwards aggregating $4,323,000, which
are accounted for under the flow-through method. In addition, for New York State income tax purposes, the Company has tax credit
carryforwards, aggregating approximately $1,103,000, which are accounted for under the flow-through method. The tax credit carryforwards
expire during the years ending June 30, 2013 to June 30, 2031. The Company also has $210,000 in alternative minimum tax credits.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Significant
components of the Company's deferred tax assets and liabilities at June 30, 2012 and 2011 are as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Deferred tax assets:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;Allowance for doubtful accounts</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">4,656,468</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">4,256,391</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: 8.85pt; padding-left: 5.4pt">Accrued liabilities</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">221,897</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">273,497</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: 8.85pt; padding-left: 5.4pt">Net operating carryforwards</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">61,772,391</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">65,464,211</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: 8.85pt; padding-left: 5.4pt">Tax credit carryforward</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,769,943</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,559,462</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: 8.85pt; padding-left: 5.4pt">Property and equipment</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,990,284</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1,742,367</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">74,410,983</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">77,295,928</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Valuation allowance</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(73,754,414</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(76,468,787</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Net deferred tax assets</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">656,569</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">827,141</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Deferred
    tax liabilities:&nbsp;<BR>
 &nbsp;Inventory</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(51,109</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(42,793</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; text-indent: -4.5pt; padding-left: 13.35pt">&nbsp;Capitalized software development costs</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(605,460</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(784,348</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Gross deferred tax liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(656,569</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(827,141</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Net deferred tax liabilities</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
12 - INCOME TAXES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
net change in the valuation allowance for deferred tax assets decreased by approximately $2,433,000 and $632,000 during the years
ended June 30, 2012 and 2011, respectively, which primarily represents the tax benefit from the utilization of the net operating
loss carryforward.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
13 - OTHER CURRENT LIABILITIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Included
in other current liabilities are the following:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: justify">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 67%; font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Accrued salaries, commissions and payroll taxes</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">569,966</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">839,531</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Accrued interest</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">190,712</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">156,571</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Litigation accruals</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">493,349</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">193,349</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Sales tax payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,764,297</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,731,751</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Legal and other professional fees</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">577,435</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">693,590</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Accounting fees</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">345,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">435,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Insurance premiums</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">12,634</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">21,633</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Interest and penalty &ndash; sales tax</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,115,539</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,922,804</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Penalty &ndash; 401k plan</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">250,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">250,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Purchase scanners</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right; vertical-align: middle">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">105,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 11pt">Rent</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">207,823</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">461,413</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 11pt">Other</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">166,486</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">425,463</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">7,693,241</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">8,236,105</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
14 &ndash; ACQUISITION OF FAIR HAVEN SERVICES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
October 1, 2010, the Company purchased 100% of the stock of Fair Haven Services, an entity wholly owned by Raymond V. Damadian
for $10. The entity is in the business of leasing medical equipment to various unrelated PCs. The transaction was accounted for
as a merger of commonly-controlled entities. The carrying value of the assets and liabilities at the acquisition date approximated
the fair value. The carrying value of the assets acquired and liabilities assumed consisted of the following:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 78%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Accounts Receivable</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 18%; font-weight: normal; font-style: normal; text-align: right">182,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,288,703</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Short term portion of debt</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1,733,955</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Other accrued expenses</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(13,955</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Long term debt less current portion</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(693,829</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Net Capital Contributed</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">28,964</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
15 - COMMITMENTS AND CONTINGENCIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Leases</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company rents its operating facilities and certain equipment, pursuant to operating lease agreements expiring at various dates
through May 2018. The leases for certain facilities contain escalation clauses relating to increases in real property taxes as
well as certain maintenance costs.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Future
minimum operating lease commitments consisted of the following at June 30, 2012:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Year Ending June 30,</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Facilities And Equipment (Operating Lease)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 43%; font-weight: normal; font-style: normal; text-align: right">2013</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 43%; font-weight: normal; font-style: normal; text-align: right">2,200,953</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2014</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,689,231</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2015</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,611,230</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2016</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,144,736</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2017</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">136,766</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Thereafter</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">129,745</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Total minimum obligations</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">6,912,661</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Rent
expense for operating leases approximated $2,253,000 and $2,436,000 for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Employee
Benefit Plans</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company has a non-contributory 401(k) Plan (the &ldquo;401(k) Plan&rdquo;). The 401(k) Plan covers all non-union employees who
are at least 21 years of age with no minimum service requirements. There were no employer contributions to the Plan for the years
ended June 30, 2012 and 2011. (see Other Matters below)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
stockholders of the Company approved the 2000 Employee Stock Purchase Plan (&ldquo;ESPP&rdquo;) at the Company&rsquo;s annual
stockholders&rsquo; meeting in April 2000. The ESPP provides for eligible employees to acquire common stock of the Company at
a discount, not to exceed 15%. This plan has not been put into effect as of June 30, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Litigation</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury,
customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions,
will not have a material adverse effect on the consolidated financial position or results of operations of the Company.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
15 - COMMITMENTS AND CONTINGENCIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Litigation
</U>(Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
or about June 30, 2010, one of Fonar&rsquo;s customers, Golden Triangle Company, commenced an action against Fonar and certain
individual defendants employed or formerly employed by Fonar, in the United States District Court for the Eastern District of
New York based on the alleged wrongful failure of Fonar to deliver a scanner in Kuwait. The claim alleges various causes of action
including breach of contract, fraud, conspiracy to defraud and conversion. <U>Golden Triangle Company v. Fonar Corporation et
al</U>, CV10-2933. The Plaintiff contracted with Fonar to purchase a scanner, and paid $1,455,500 in advance. The scanner was
never delivered, but Plaintiff never designed a site for delivery either. Alleging other damages, fraud and deceptive trade practices,
Plaintiff seeks as much as $5,000,000. Fonar made a motion to dismiss the complaint, the outcome of which left Plaintiff with
only a cause of action for breach of contract. The claims against the individual officers and employees of Fonar were dismissed.
Fonar now has filed its answer, together with a counterclaim alleging that the Plaintiff, by attempting to overcharge the end-customer,
has damaged Fonar&rsquo;s reputation and ability to sell in Kuwait. Golden Triangle has replied to Fonar&rsquo;s counterclaim
and the case is now in discovery. The deadline for completing discovery is December 31, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
addition, we are or were party to additional less significant actions in which the customers are seeking to obtain a return
of their deposits for MRI scanners on the grounds that various contingencies failed to materialize. <U>Upright MRI of
Chicago, LLC v. Fonar</U>, Circuit Court of Cook County, Illinois ($310,000), <U>Matt Malek Madison v. Fonar,</U> U.S.
District Court, Northern District of California ($300,000), and <U>Jack Shapiro v. Fonar Corporation</U>, Supreme Court,
Nassau County, New York ($500,000 although the actual deposit was $323,000). In the <U>Upright MRI of Chicago</U> case, the
case was settled by an arrangement whereby a third party took over the sales agreement and agreed to pay the original
purchaser the down payment it made. In the <U>Madison </U>case, the Court granted summary judgment to Madison for the deposit
and prejudgment interest. We appealed the judgment but lost. The Plaintiff has not taken any action to enforce the judgment.
As of June 30, 2012, the Company recorded a liability of $372,000 in connection with this judgement. In the <U>Shapiro</U>
case, Shapiro, who was also a sales representative for Fonar, and Fonar were attempting to negotiate a settlement, but
the Plaintiff has served Fonar with discovery demands.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
December 2, 2011, Bonutti Research filed an action filed in U.S. District Court for the Eastern District Court of New York. The
complaint alleges that Fonar&rsquo;s Upright&reg; MRI scanners infringe plaintiff&rsquo;s patent. Fonar believes plaintiff&rsquo;s
claims are without merit. The plaintiff served the complaint on the last possible day permitted after filing. The defendants obtained
an extension of time to answer to May 18, 2012. Subsequently, on or about July 3, 2012, Bonutti hired new substitute counsel and
requested a 60 day extension to answer Fonar&rsquo;s counterclaims and to postpone the initial conference. Bonutti has answered
our counterclaims and an initial conference with the magistrate judge has been scheduled. The conference with the court is now
scheduled for September 28, 2012. At this point we are unable to assess the amount in controversy as no damages were specified.
We cannot at this time determine the impact of an adverse determination of this case.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
15 - COMMITMENTS AND CONTINGENCIES (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Stipulation
Agreements</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company has entered into stipulation agreements with a number of its creditors that in the aggregate totals $253,167 as of June
30, 2012. The monthly payments total $26,452.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
amounts to be paid over the next two years are as follows:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: x-small Courier New, Courier, Monospace; border-top: Black 1pt double; border-bottom: Black 1pt double">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Year Ending</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">June 30,</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="text-align: center; background-color: rgb(204,238,255); vertical-align: bottom">
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="width: 50%; font-weight: normal; font-style: normal">2013</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="width: 10%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal">$</TD><TD STYLE="width: 37%; font-weight: normal; font-style: normal">205,567</TD><TD STYLE="width: 0%; font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="text-align: center; background-color: White; vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal">47,600</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="text-align: center; background-color: rgb(204,238,255); vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal">253,167</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Other
Matters</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. The
Company has recorded tax obligations of $2,442,000 plus interest and penalties of approximately $2,116,000. The Company is in
the process of determining its regulatory requirements in order to become compliant.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company has determined they may not be in compliance with the Department of Labor and Internal Revenue Service regulations concerning
the requirements to file Form 5500 to report activity of its 401K Employee Benefit Plan. The filings do not require the Company
to pay tax, however they may be subject to penalty for non-compliance. The Company has recorded provisions for any potential penalties
totaling $250,000. The amount was the Company&rsquo;s best estimate of potential penalties. Management is unable to determine
the outcome of this uncertainty. The Company has engaged outside counsel to handle such matters to determine the necessary requirements
to ensure compliance. On August 31, 2011, the Company submitted with the Internal Revenue Service a request for a compliance statement
and a determination letter for our 401K plan. On December 9, 2011, the Internal Revenue Service issued a favorable determination
letter on our 401K plan. The Company is still working with outside counsel to complete and file forms with the US Department of
Labor.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
16 - OTHER INCOME (EXPENSE)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Other
income (expense) consists of:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 57%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">(Loss) income from investment</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: right; vertical-align: middle">$</TD><TD STYLE="width: 15%; font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 15%; font-weight: normal; font-style: normal; text-align: right">(61,466</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Litigation settlement</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">56,194</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Loss on abandonment of property</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; vertical-align: middle">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(64,565</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Other (expense) income</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">(11,138</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">9,414</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">45,056</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(116,617</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
</TABLE>

<!-- Field: Page; Sequence: 44 -->
    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt">&nbsp;</DIV>
    <!-- Field: /Page -->

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
17 - SUPPLEMENTAL CASH FLOW INFORMATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
the years ended June 30, 2012 and 2011, the Company paid $168,062 and $309,003 for interest, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
the years ended June 30, 2012 and 2011, the Company paid $116,125 and $0 for income taxes, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Non-cash
investing and financing activities related to business combinations:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">October 1, 2010 Acquisition</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">January 1, 2011 Acquisition</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Total</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%; font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Accounts receivable</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">182,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">182,000</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Property &amp; equipment</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,288,703</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">303,659</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,592,362</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Management agreement</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">513,333</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">513,333</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Other assets</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">45,784</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">45,784</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: 0pt; padding-left: 11pt">Other current liabilities</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(13,955</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(13,955</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Accounts payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(47,026</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(47,026</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Notes payable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(2,427,784</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(530,650</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(2,958,434</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt">Paid in capital</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(28,964</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(28,964</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 11pt; text-align: left; vertical-align: middle">Non-controlling interests</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(491,328</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(491,328</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 11pt; vertical-align: middle">Reclassification of investment &nbsp;&nbsp;from other assets</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(82,957</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(82,957</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
18 &ndash; DUE TO RELATED MEDICAL PRACTICES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
June 2009, an entity owned by the Company&rsquo;s Chairman of the Board, Tallahassee Scanning Services PA, sold its Upright MRI
scanning system to the Company for $550,000 in exchange for 35 monthly payments of $18,769 to be made over a three year period,
commencing October 18, 2009 including interest at a rate of 10.41% per annum. The Company used this scanning system to fulfill
a sales order with an unrelated customer. The unpaid balance of as of June 30, 2012 and 2011 was $134,880.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
19 - SEGMENT AND RELATED INFORMATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company provides segment data in accordance with the provisions of ASC topic 280, &ldquo;Disclosures about Segments of an Enterprise
and Related Information&rdquo;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company operates in two industry segments - manufacturing and the servicing of medical equipment and management of diagnostic
imaging centers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
accounting policies of the segments are the same as those described in the summary of significant accounting policies. All intersegment
sales are market-based. The Company evaluates performance based on income or loss from operations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
19 - SEGMENT AND RELATED INFORMATION (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Summarized
financial information concerning the Company&rsquo;s reportable segments is shown in the following table:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Manufacturing and Servicing of Medical Equipment</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Management of Diagnostic Imaging Centers</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Totals</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-decoration: underline; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Fiscal
    2012: </TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 46%; font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Net revenues from external customers</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">18,707,006</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">20,737,413</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 11%; font-weight: normal; font-style: normal; text-align: right">39,444,419</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Intersegment net revenues</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">810,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">810,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Income from operations</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,666,574</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">4,539,977</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,206,551</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Depreciation and amortization</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">697,100</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,533,150</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,230,250</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Compensatory element of stock issuances</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">155,068</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">25,350</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">180,418</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Total identifiable assets</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">15,144,291</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">18,471,177</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">33,615,468</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital expenditures</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">404,530</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">822,842</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,227,372</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="text-align: left; background-color: rgb(204,238,255); vertical-align: middle; height: 4">
    <TD STYLE="font-weight: normal; font-style: normal; text-decoration: underline; text-indent: -8.85pt; padding-left: 8.85pt">Fiscal 2011:</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Net revenues from external customers</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">17,811,636</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">15,324,759</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">33,136,395</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Intersegment net revenues</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">924,166</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">924,166</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Income from operations</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,433,331</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,358,138</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,791,469</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Depreciation and amortization</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">806,117</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,266,889</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2,073,006</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Compensatory element of stock issuances</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">139,308</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">65,178</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">204,486</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Total identifiable assets</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">13,439,701</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">18,140,973</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">31,580,674</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Capital expenditures</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">202,468</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">532,562</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">735,030</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
19 - SEGMENT AND RELATED INFORMATION (Continued)</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Export
Product Sales</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company&rsquo;s areas of operations are principally in the United States. The Company had export sales of medical equipment amounting
to 17.0% and 28.0% of product sales revenues to third parties for the years ended June 30, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
foreign product sales, as a percentage of product sales to unrelated parties, were made to customers in the following countries:</FONT></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 35%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; padding-left: 5.4pt; text-align: right; vertical-align: bottom">Holland</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">0.1</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">- %</FONT></TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt; text-align: right; vertical-align: bottom">England</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">16.9</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt; text-align: right; vertical-align: bottom">Germany</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">19.5</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt; text-align: right; vertical-align: bottom">Greece</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5.8</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt; text-align: right; vertical-align: bottom">Australia</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.7</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Puerto Rico</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.9</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">Libya</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">1.1</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">17.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">28.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace"><U>Foreign
Service and Repair Fees</U></FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company&rsquo;s areas of service and repair are principally in the United States. The Company had foreign revenues of service
and repair of medical equipment amounting to 9.9% and 7.8% of consolidated net service and repair fees for the years ended June
30, 2012 and 2011, respectively. The foreign service and repair fees, as a percentage of total service and repair fees, were provided
principally to the following countries:</FONT></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 38%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">For the Years Ended June 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Spain</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">0.8</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">1.1</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Puerto Rico</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.9</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.0</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Switzerland</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.0</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.5</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Germany</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.3</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.3</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">England</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.8</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.7</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Holland</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2.6</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1.3</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Scotland</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.7</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.9</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Canada</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.8</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.3</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Australia</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.4</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.4</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-left: 5.4pt; vertical-align: bottom">Libya</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.2</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0.3</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: right; padding-bottom: 1pt; padding-left: 5.4pt; vertical-align: bottom">Greece</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">0.4</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">9.9</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">7.8</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company does not have any material assets outside of the United States.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
20 &ndash; ALLOWANCE FOR DOUBTFUL ACCOUNTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
following represents a summary of allowance for doubtful accounts for the years ended June 30, 2012 and 2011, respectively:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid">Description</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Balance</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">June 30, 2011</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Additions</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Deductions</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Balance</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">June 30, 2012</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%; font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Receivables from equipment sales and service contracts</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">1,777,794</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">(1</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">100,442</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">25,249</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">1,852,987</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Management fee receivable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,508,345</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">950,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">7,458,345</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Management fee receivable from related medical practices</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">403,047</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">403,047</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Medical receivables</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,622,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash; &nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,622,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Advance and notes to related parties</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">264,791</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">-&nbsp;&nbsp;&nbsp; </TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">25,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">239,791</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Notes receivable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">65,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">-&nbsp;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">65,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid">Description</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Balance June 30, 2010</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Additions</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Deductions</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid">Balance June 30, 2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%; font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Receivables from equipment sales and service contracts</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">2,289,049</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">(1</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">127,323</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">638,578</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">1,777,794</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Management fee receivable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">5,808,345</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">700,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6,508,345</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Management fee receivable from related medical practices</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,129,818</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">726,771</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">403,047</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Medical receivables</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,622,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left"></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">1,622,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Advance and notes to related parties</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">264,791</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp; &nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">264,791</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -4.5pt; padding-left: 8.85pt">Notes receivable</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">115,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">(1</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">)</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">135,686</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">185,686</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">65,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(1)
Included in provision for bad debts.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">JUNE
30, 2012 and 2011</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">NOTE
21 &ndash; SUBSEQUENT EVENTS</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Company evaluates events that have occurred after the balance sheet date, but before the consolidated financial statements are
issued.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: -4.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">There
have been no disagreements with our independent registered public accounting firm or other matters requiring disclosure under
Regulation S-K, Item 304(b).</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
9A(T). CONTROLS AND PROCEDURES</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Disclosure
Controls and Procedures</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Disclosure
controls and procedures (as defined in Rule 13(a) &ndash; 15(e)) are controls and other procedures that are designed to ensure
that information required to be disclosed by a public company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC&rsquo;s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by a public company in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the company&rsquo;s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure. Disclosure controls and procedures include
many aspects of internal control over financial reporting.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Based
on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective at June 30, 2012.</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision
of, our Chief Executive Officer and Chief Financial Officer and effected by our Board, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, including those policies and procedures that:</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 13.5pt; text-align: justify; text-indent: -13.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 13.5pt; text-align: justify; text-indent: -13.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 13.5pt; text-align: justify; text-indent: -13.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 13.5pt; text-align: justify; text-indent: -13.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 13.5pt; text-align: justify; text-indent: -13.5pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on our consolidated financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">It
should be noted, however, that because of its inherent limitations, internal control over financial reporting cannot provide absolute
assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Management&rsquo;s
Report on Internal Control over Financial Reporting</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined
in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal
controls over financial reporting as of June 30, 2012. In making its assessment of the effectiveness of our internal controls
over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (&ldquo;COSO&rdquo;) in Internal Control-Integrated Framework. Based on these criteria, our management has concluded
that, as of June 30, 2012, our internal control over financial reporting is effective. This annual report does not include an
attestation report of our independent registered public accounting firm regarding internal control over financial reporting.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">There
was no changes in our internal controls or in other factors that could significantly affect these controls, during our fourth
quarter ended June 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PART
III</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Directors
serve from the date of their election until the next annual meeting of stockholders and until their successors are elected and
qualify. With the exception of Dr. Raymond V. Damadian, who does not receive any fees for serving as a director, each director
receives $20,000 per annum for his or her service as a director. Officers serve at the discretion of the Board of Directors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">A
majority of our board of directors is composed of independent directors: Robert J. Janoff, Charles N. O&rsquo;Data and Ronald
G. Lehman. The outside directors also serve as the members of the audit committee, which is a standing committee of board of directors
having a charter describing its responsibilities. Mr. O&rsquo;Data has been designated as the audit committee financial expert.
His relevant experience is described in his biographical information.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">We
have adopted a code of ethics applicable to, among other personnel, our principal executive officer, principal financial officer,
controllers and persons performing similar functions. The code is designed to deter wrongdoing and to promote: 1. honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2. full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities
and Exchange Commission and in other public communications we make; 3. compliance with applicable governmental laws, rules and
regulations; 4. the prompt internal reporting of violations of the code to an appropriate person or persons identified in the
code and 5. accountability for adherence to the code. We will provide a copy of the code to any person who requests a copy. A
person may request a copy by writing to Fonar Corporation, 110 Marcus Drive, Melville, New York 11747, to the attention of the
Legal Department or Investor Relations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
officers and directors of the Company are set forth below:</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Raymond
V. Damadian, M.D. 76 President, Treasurer,</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Chairman
of the Board</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">and
a Director</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Claudette
J.V. Chan 74 Director and Secretary</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Robert
J. Janoff 85 Director</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Charles
N. O'Data 76 Director</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Ronald
G. Lehman 36 Director</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Raymond
V. Damadian, M.D. has been the Chairman of the Board and President of Fonar since its inception in 1978 and Treasurer since February,
2001. Dr. Damadian was employed by the State University of New York, Downstate Medical Center, New York, as an Associate Professor
of Biophysics and Associate Professor of Internal Medicine from 1967 until September 1979. Dr. Damadian received an M.D. degree
in 1960 from Albert Einstein College of Medicine, New York, and a B.S. degree in mathematics from the University of Wisconsin
in 1956. In addition, Dr. Damadian conducted post-graduate work at Harvard University, where he studied extensively in the fields
of physics, mathematics and electronics. Dr. Damadian is the author of numerous articles and books on the nuclear magnetic resonance
effect in human tissue, which is the theoretical basis for the Fonar MRI scanners. Dr. Damadian is a 1988 recipient of the National
Medal of Technology and in 1989 was inducted into the National Inventors Hall of Fame, for his contributions in conceiving and
developing the application of magnetic resonance technology to medical applications including whole body scanning and diagnostic
imaging. Dr. Damadian is the President, Treasurer and director of HMCA and a Manager of IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Claudette
J.V. Chan has been a Director of Fonar since October 1987 and Secretary of Fonar since January 2008. Mrs. Chan was employed from
1992 through 1997 by Raymond V. Damadian, M.D. MR Scanning Centers Management Company and since 1997 by HMCA-IMPERIAL, as &quot;site
inspector,&quot; in which capacity she is responsible for supervising and implementing standard procedures and policies for MRI
scanning centers. From 1989 to 1994 Mrs. Chan was employed by St. Matthew's and St. Timothy's Neighborhood Center, Inc., as the
director of volunteers in the &quot;Meals on Wheels&quot; program, a program which cares for the elderly. In approximately 1983,
Mrs. Chan formed the Claudette Penot Collection, a retail mail-order business specializing in women's apparel and gifts, of which
she was the President until she stopped operating the business in approximately 1989. Mrs. Chan practiced and taught in the field
of nursing until 1973, when her son was born. She received a bachelor of science degree in nursing from Cornell University in
1960. Mrs. Chan is the sister of Raymond V. Damadian.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Robert
J. Janoff has been a Director of Fonar since February 1989. Mr. Janoff has been a self-employed New York State licensed private
investigator for more than thirty-five years and was a Senior Adjustor in Empire Insurance Group for more than 15 years until
retiring from that position on July 1, 1997. Mr. Janoff also served, from June 1985 to June 1991, as President of Action Data
Management Strategies, Ltd., a supplier of computer programs for use by insurance companies. Mr. Janoff was a member of the Board
of Directors of Harmony Heights of Oyster Bay, New York for over 25 years, which is a nonprofit residential school for girls with
learning disabilities.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Charles
N. O'Data has been a Director of Fonar since February 1998. From 1968 to 1997, Mr. O'Data was the Vice President for Development
for Geneva College, a liberal arts college located in western Pennsylvania. In that capacity, he acted as the College's chief
investment officer. His responsibilities included management of the College's endowment fund and fund raising. In July 1997, Mr.
O'Data retired from Geneva College after 36 years of service to assume a position of National Sales Executive for SC Johnson Company's
Professional Markets Group, a unit of SC Johnson Wax, and specialized in healthcare and education sales, a position he held until
the spring of 1999. In his capacity with SC Johnson he was responsible for sales to the nation&rsquo;s three largest Group Purchasing
Organizations which included some 4,000 hospitals. Mr. O'Data presently acts as an independent financial consultant to various
entities. Mr. O'Data served on the board of The Medical Center, Beaver, Pennsylvania, now a part of Heritage Valley Health System,
a 500 bed acute care facility, for 26 years, three as its Chair. Mr. O&rsquo;Data also served on the board of the Hospital Council
of Western Pennsylvania, a shared-services and group purchasing organization covering seven states. He founded The Beaver County
Foundation, a Community Foundation, in 1992, and serves as its President. He also serves as Director of Philanthropic Advisors
for McKinley Carter Wealth Management, a regional wealth management firm in Pennsylvania, Ohio and West Virginia. Mr. O'Data is
listed as a finance associate in the Middle States Association, Commission on Higher Education. The commission is the formal accrediting
body for higher education in the eastern region of the country. In this capacity he evaluates the financial aspects of educational
organizations. Mr. O&rsquo;Data is a graduate of Geneva College, where he received a B.S. degree in Economics in 1958.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Ronald
G. Lehman, has been a Director of Fonar since April, 2012, when he was unanimously appointed by the remaining four Directors to
fill the vacancy resulting from the death of former Director Robert Djerejian. From October, 2009 to the present, Mr. Lehman has
served as Managing Director of Investment Banking with Bruderman Brothers, Inc., a private New York-based broker-dealer registered
with the Securities and Exchange Commission and which is a member of the Financial Industry Regulatory authority (FINRA) and the
Securities Investor Protection Corporation (SIPC). Mr. Lehman directly manages all facets of the firm&rsquo;s transaction processes,
from deal origination, to sourcing capital, to negotiating deal structures, through documentation and closing. The firm provides
buy and sell-side advisory, capital raising, and consulting services to lower middle-market companies. Mr. Lehman specializes
in advising healthcare services companies and has recently completed several recapitalizations in the industry. He also participates
in the firm&rsquo;s merchant banking investments and oversees many of these assignments. From May, 2008 to October, 2009, Mr.
Lehman served as Senior Vice President of Acquisitions at Health Diagnostics, LLC, where he managed the company&rsquo;s acquisition
and corporate finance activities. From March, 2000 to May, 2008, Mr. Lehman worked for various Bruderman entities as a buy and
sell-side advisor and as a principal in several private equity transactions. From September, 1998 to March, 2000, Mr. Lehman worked
at Deutsche Bank Securities, Inc. and last held the position of Associate in their Global Custody Group. Mr. Lehman graduated
from Columbia University with a B.A. in 1998.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Robert
Djerejian served as a Director for Fonar from June 2002 until his death on August 21, 2011. Since 1996 he served as a senior consultant
for Haines, Lundberg &amp; Waehler International (HLW International), an architectural, engineering, planning interior design
firm, which among other hi-tech specialties designs hospitals and laboratories. Prior to that time he was the Senior Managing
Partner of HLW International for a period of 22 years where he received numerous design awards including the National Honor Award
from the Endowment for the Arts and The Design Excellence Award from the NY Society of the American Institute of Architects. During
his management of the firm he brought the firm to international prominence with offices in London, Shanghai and Saudi Arabia.
He also consulted for private clientele in design management in planning, design and construction services. Mr. Djerejian was
an Emeritus member of the Board of Trustees of Pratt Institute since 1992, where he chaired the Nominations Committee and was
the Vice Chairman of the Executive Committee. He served as a Board Member coordinating the joint venture of Corcoran College of
Art &amp; Design in Washington DC with Pratt Institute as one of the founding directors forming the Delaware College of Art and
Design. He is a member of the American institute of Architects and the NY Society of Architects. Mr. Djerejian was a graduate
of Pratt Institute School of Architecture, where he received his B.A. in Architecture in 1955.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
11. EXECUTIVE COMPENSATION.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">With
the exception of the Chief Executive Officer, the compensation of the Company's executive officers is based on a combination of
salary and bonuses based on performance. The Chief Executive Officer's compensation consists of a salary.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Chief Executive Officer&rsquo;s salary varies only slightly and is by his own decision relatively low. It is not expected to increase
materially in the near future. At such time as we become consistently and sufficiently profitable or there is a reconsideration
of our compensation policy, the compensation payable to the Chief Executive Officer may be reconsidered. As presently existing,
the Chief Executive Officer&rsquo;s compensation package includes no understandings with respect to bonuses, options or other
incentives; as such, it is not subject to our general policy later discussed.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Board of Directors does not have a compensation Committee. Dr. Raymond V. Damadian, President, Chief Executive Officer and Chairman
of the Board, controls over 50% of the voting power of our capital stock. Dr. Damadian is the only executive officer who is a
member of the Board of Directors. Dr. Damadian participates in the determination of executive compensation for our officers.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
Board of Directors has established an audit committee. The members of the committee are Robert J. Janoff, Charles N. O'Data and
Ronald G. Lehman.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
compensation policy includes a combination of salary, commissions, bonuses, stock bonuses and stock options, designed to incentivize
our employees. There is no universal plan applicable to all of our employees. The fixed and variable components of our employees&rsquo;
compensation tend to be individualized, based on a combination of the employees&rsquo; performance, responsibilities and position,
our assessment of how best to motivate a person in such a position and the needs and preferences of the particular employees,
as negotiated between employees and their supervisors or management.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">There
is set forth in the following Summary Compensation Table the compensation provided by us during fiscal 2012 to our Principal Executive
Officer, who also serves as our acting Principal Financial Officer. There is set forth in the following Outstanding Equity Awards
Table and Director Compensation Table the required information.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">I.
SUMMARY COMPENSATION TABLE</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">Name and All Other Principal Position (a)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-top: Black 1pt solid; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">Year&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;(b)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-top: Black 1pt solid; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">Salary ($) (c)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-top: Black 1pt solid; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">Bonus ($) (d)</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-top: Black 1pt solid; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">All Other Compensation</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-top: Black 1pt solid; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid; border-top: Black 1pt solid">Total Compensation</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Raymond V,</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">2012</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">35,934.76</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 9%; font-weight: normal; font-style: normal; text-align: right">35,934.76</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 5.4pt">Damadian</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2011</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">35,934.29</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">35,934.29</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; padding-left: 5.4pt; border-bottom: Black 1pt solid">PEO/PFO</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">57,358.12</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: normal; font-style: normal; text-align: right">57,358.12</TD><TD STYLE="padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">II.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace; border-bottom: Black 1pt solid">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid">Name</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid">Number of Securities Underlying Unexercised Options (#) Exercisable (a)</TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Option Exercise Price ($)</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(b)</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Option Expiration Date</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">(c)</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 22%; font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Raymond V. Damadian, PEO/PFO</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 19%; font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 19%; font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 21%; font-weight: normal; font-style: normal; text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">N/A</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">III.
DIRECTOR COMPENSATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid">Name</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fees</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Earned
</FONT>or</P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Paid
              in </FONT>Cash</P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">($)</FONT></P></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Total</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">($)</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Raymond V.Damadian</TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 20%; font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 20%; font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Claudette J.V.Chan</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">19,999.98</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">19,999.98</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Robert J.Janoff</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">20,769.48</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">20,769.48</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Charles N. O&rsquo;Data</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">20,769.48</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">20,769.48</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Ronald G. Lehman</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,076.92</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,076.92</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Robert Djerejian</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,846.15</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,846.15</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">EMPLOYEE
COMPENSATION PLANS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Equity
Compensation Plan Information as of June 30, 201</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; vertical-align: top">(a)</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: center; vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; vertical-align: top">(b)</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: center; vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; text-align: center; vertical-align: top">(c)</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: left; vertical-align: top"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Plan category</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: left; vertical-align: top">Number of securities to be issued upon exercise of outstanding options, warrants and rights</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: left; vertical-align: top">Weighted-average exercise price of outstanding options, warrants and rights</TD><TD STYLE="font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: normal; font-style: normal; border-bottom: Black 1pt solid; text-align: left; vertical-align: top">Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 50%; font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Equity compensation plans approved by security holders</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">14,022</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 4%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">27.76</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">130,943</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; text-indent: -8.85pt; padding-left: 8.85pt">Equity compensation plans not approved by security holders</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;&nbsp;&nbsp;N/A</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; padding-left: 0pt">Total</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">14,022</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">27.76</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">130,943</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
2002 Incentive Stock Option Plan, adopted on July 1, 2002, was intended to qualify as an incentive stock option plan under Section
422A of the Internal Revenue Code of 1954, as amended. The 2002 Incentive Stock Option Plan permitted the issuance of stock options
covering an aggregate of 100,000 shares of Common Stock of Fonar. The options have an exercise price equal to the fair market
value of the underlying stock on the date the option was granted, are nontransferable, are exercisable for a period not exceeding
ten years and expire upon the voluntary termination of employment. The 2002 Stock Option Plan terminated on June 30, 2012. Of
the options granted under this plan, 14,022 remain outstanding.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar&rsquo;s
2005 Incentive Stock Option Plan, adopted on February 15, 2005, is intended to qualify as an incentive stock option plan under
Section 422A of the Internal Revenue code of 1954, as amended. The Plan permits the issuance of stock options covering an aggregate
of 80,000 shares of common stock of Fonar. The options have an exercise price equal to the fair market value of the underlying
stock on the date the option is granted, are non-transferable, are exercisable for a period not exceeding ten years, and expire
upon the voluntary termination of employment. The Plan will terminate on February 14, 2015. As of June 30, 2012, 80,000 shares
of common stock of Fonar were available for future grant under this plan.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Fonar
adopted its 2010 Stock Bonus Plan, on June 28, 2010. This Plan permits Fonar to issue an aggregate of 2,000,000 shares of common
stock of Fonar as bonus or compensation. As of June 30, 2012, 1,072,945 shares were available for issuance.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
following table sets forth the number and percentage of shares of Fonar&rsquo;s securities held by each director, by each person
known by us to own in excess of five percent of Fonar&rsquo;s voting securities and by all officers and directors as a group as
of September 6, 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: x-small Courier New, Courier, Monospace">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Name and Address of</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Beneficial Owner (1)</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Shares</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Beneficially Owned</FONT></P></TD><TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Percent</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">of Class</FONT></P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Raymond V. Damadian, M.D.</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 8.85pt; text-indent: -8.85pt"><FONT STYLE="font: x-small Courier New, Courier, Monospace">c/o Fonar Corporation</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Melville, New York</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director, President, Treasurer</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">CEO, 5% + Stockholder</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">120,302</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: normal; font-style: normal; text-align: right">2.04</TD><TD STYLE="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class C Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">382,447</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">99.98</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class A Preferred</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">19,093</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6.09</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Claudette Chan</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director and Secretary</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">106</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class A Preferred</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">32</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Robert J. Janoff</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">3,000</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class A Preferred</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">79</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Charles N. O'Data</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">528</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Ronald G. Lehman</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Robert Djerejian</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Director until August 21, 2011</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">0</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*</FONT></TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt"><P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All Officers and Directors</FONT></P> <P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0"><FONT STYLE="font: x-small Courier New, Courier, Monospace">as a Group (5 persons)</FONT></P></TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Common Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">123,936</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">2.10</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class C Stock</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">382,447</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">99.98</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left; padding-left: 5.4pt">Class A Preferred</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">19,204</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal">&nbsp;</TD>
    <TD STYLE="font-weight: normal; font-style: normal; text-align: left">&nbsp;</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: right">6.13</TD><TD STYLE="font-weight: normal; font-style: normal; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">___________________________</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">*
Less than one percent</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">1.
Address provided for each beneficial owner owning more than five percent of the voting securities of Fonar.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Background.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Between
1990 and 1996, Raymond V. Damadian, M.D. MRI Scanning Centers Management Company, also referred to as &ldquo;RVDC&rdquo;, a Delaware
corporation of which Dr. Damadian was the sole stockholder, director and President, purchased and leased scanners from Fonar to
establish a network of professional corporations operating MRI scanning centers, also referred to as the &quot;Centers&quot;,
in New York, Florida, Georgia and other locations. Dr. Raymond V. Damadian is the Chairman, President and principal stockholder
of Fonar and was also the owner, director and President of each of these professional corporations. RVDC provided the necessary
management and the scanners to the Centers, although in certain situations, a Center would acquire the scanner directly from Fonar.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ACQUISITION
OF RVDC.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Effective
June 30, 1997, Fonar&rsquo;s wholly-owned subsidiary, Health Management Corporation of America, also referred to as &quot;HMCA&quot;,
formerly known as U.S. Health Management Corporation, acquired RVDC by purchasing all of the issued and outstanding shares of
RVDC from Dr. Damadian for 400 shares of the Common Stock of Fonar. The transactions can be rescinded by Dr. Damadian, however,
in the event of a change of control in Fonar or the bankruptcy of Fonar. There is no time limit on the right to rescind. In connection
with the transaction, Fonar granted RVDC a nonexclusive royalty free license to Fonar&rsquo;s patents and software. These licenses
may be terminated by Fonar in the event of the bankruptcy of RVDC or a change in control of RVDC.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">AGREEMENTS
WITH HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Effective
July 1, 1997, new management agreements were entered into by the Centers and HMCA-IMPERIAL. Since that time certain of the original
Centers have been closed and new Centers opened. Each new Center also entered into a management agreement with HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Pursuant
to the management agreements, HMCA-IMPERIAL is providing comprehensive management and administrative services and office facilities,
including billing and collection of accounts, payroll and accounts payable processing, supplies and utilities to the Centers.
Under the management agreements, HMCA-IMPERIAL provides service through Fonar for the scanners at the Centers. In total, 11 MRI
Centers have management agreements with HMCA-IMPERIAL.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">At
the end of fiscal 2007, Dr. Damadian sold all of his stock in the MRI Centers located in New York State. The new owner is one
of the radiologists who has been reading and interpreting scans performed at those facilities, Dr. Robert A. Diamond. In connection
with the sale, HMCA-IMPERIAL entered into new management agreements with the MRI Centers under which HMCA-IMPERIAL performs essentially
the same services for the MRI Centers as prior to the sale. The fees charged, however, are flat fees charged on a monthly basis
ranging from $100,000 to $212,311 in fiscal 2012.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Dr.
Damadian remains the owner of three MRI Centers in Florida. The MRI Centers owned by Dr. Damadian in Florida pay flat rate monthly
fees ranging from $194,050 to $241,266 to HMCA-IMPERIAL per month. These fees are renegotiable on an annual basis.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
the fiscal years ended June 30, 2012 and June 30, 2011 the net revenues received by HMCA-IMPERIAL from the MRI Centers owned by
Dr. Damadian were approximately $6.7 million and $5.2 million respectively.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">During
April 2009, Fair Haven Services, Inc. lent HMCA-IMPERIAL $258,000. The loan bears interest at a rate of 10% per annum and was
payable in 36 installments. This loan has been paid in full. Dr Damadian is the President of Fair Haven Services, Inc.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">In
June 2009, Tallahassee Scanning Services, P.A. an entity owned by Dr Damadian, sold its Upright MRI scanning system to HMCA-IMPERIAL
for $550,000 payable in 35 monthly installments beginning on October 18, 2009 with interest at the rate of 10.41% per annum.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
October 1, 2010, HMCA-IMPERIAL purchased 100% of the stock of Fair Haven Services, Inc., an entity wholly owned by Dr. Damadian
for $10. Fair Haven is in the business of leasing medical equipment to various unrelated PCs.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">On
May 2, 2011, Dr. Damadian participated in the private placement of equity in Imperial by investing $100,000 in Imperial&rsquo;s
Class A membership interests.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Audit
Fees</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate fees billed by Marcum LLP for the audit of our annual consolidated financial statements for the fiscal year ended June
30, 2012 and the reviews of the financial statements included in our Forms 10-Q for the fiscal year ended June 30, 2012 were $446,417.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate fees billed by Marcum LLP for the audit of our annual financial statements for the fiscal year ended June 30, 2011 and
the reviews of the financial statements included in our Forms 10-Q for the fiscal year ended June 30, 2011 were $448,482.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Audit
Related Fees</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">No
fees were billed by Marcum LLP for the fiscal years ended June 30, 2012 or June 30, 2011 for services related to the Audit or
review of our financial statements that are not included under the caption &ldquo;Audit Fees&rdquo;.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">No
fees were billed by Marcum LLP for the fiscal years ended June 30, 2012 or June 30, 2011 for designing, operating, supervising
or implementing any of our financial information systems or any hardware or software systems for our financial information.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Tax
Fees</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate fees billed by Marcum LLP for tax compliance, tax advice and tax planning in the fiscal year ended June 30, 2012 were
$90,317.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate fees billed by Marcum LLP for tax compliance, tax advice and tax planning in the fiscal year ended June 30, 2011 were
$106,107.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">All
Other Fees</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
aggregate fees billed by Marcum LLP for all other services rendered by them during the fiscal years ended June 30, 2012 and June
30, 2011 were $7,597 and $63,138, respectively, which included services in connection with the registration of securities, employee
benefit plan audits and reviews and procedures that we requested Marcum LLP to undertake to provide assurances on matters not
required by laws or regulations.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Since
January 1, 2003, the audit committee has adopted policies and procedures for pre-approving all non-audit work performed by the
auditors. Specifically, the committee must pre-approve the use of the auditors for all such services. The audit committee has
pre-approved all non-audit work since that time and in making its determination has considered whether the provision of such services
was compatible with the independence of the auditors.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Our
audit committee believes that the provision by Marcum LLP of services in addition to audit services in fiscal 2012 and 2011 were
compatible with maintaining their independence.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">PART
IV</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">a)
FINANCIAL STATEMENTS AND SCHEDULES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">The
following consolidated financial statements are included in Part II, Item 8.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Report
of Independent Registered Public Accounting Firm</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Consolidated
Balance Sheets as at June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Consolidated
Statements of Operations/Income for the Years Ended June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Consolidated
Statements of Stockholders' Equity(Deficiency)and Comprehensive Income(Loss)for the Years Ended June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Consolidated
Statements of Cash Flows for the Years Ended June 30, 2012 and 2011.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Notes
to Consolidated Financial Statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Information
required by schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements
or notes to the financial statements.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">b)
REPORTS ON FORM 8-K</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Registrant&rsquo;s
Report on Form 8-K containing the Company&rsquo;s Earnings Report for the first nine months of Fiscal 2012. May 10, 2012, Commission
File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">c)
EXHIBITS</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.1
Certificate of Incorporation, as amended, of the Registrant incorporated by reference to Exhibit 3.1 to the Registrant's registration
statement on Form S-1,Commission File No. 33-13365.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.2
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.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.3
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&rsquo;s registration statement on Form S-3, Commission File No. 333-63782.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.4
Section A of Article Fourth of the Certificate of Incorporation, as amended, of the Registrant incorporated by reference to Exhibit
3.3 of the Registrant&rsquo;s Annual Report on Form 10-K for the fiscal year ended June 30, 2003, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">3.5
By-Laws, as amended, of the Registrant incorporated by reference to Exhibit 3.2 to the Registrant's registration statement on
Form S-1, Commission File No. 33-13365.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.1
Specimen Common Stock Certificate incorporated</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">by
reference to Exhibit 4.1 to the Registrant's registration statement on Form S-1, Commission File No. 33-13365.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.2
Specimen Class B Common Stock Certificate incorporated by reference to Exhibit 4.2 to the Registrant's registration statement
on Form S-1, Commission File No. 33-13365.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.3
Form of 4% Convertible Debentures due June 30, 2002 incorporated by reference to Exhibit 4.1 of the Registrant&rsquo;s current
report on Form 8-K filed on June 11, 2001. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.4
Form of Purchase Warrants incorporated by reference to Exhibit 4.2 of the Registrant&rsquo;s current report on Form 8-K filed
on June 11, 2001. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.5
Form of Callable Warrants incorporated by reference to Exhibit 4.3 of the Registrant&rsquo;s current report on Form 8-K filed
on June 11, 2001. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.6
Form of Replacement Callable Warrants incorporated by reference to Exhibit 4.7 of the Registrant&rsquo;s registration statement
on Form S-3, Commission File No. 333-10677.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.7
Form of Amended and Restated Purchase Warrant for The Tail Wind Fund, Ltd. incorporated by reference to Exhibit 4.7 of the Registrants
registration statement on Form S-3, Commission File No. 333-116908.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">4.8
Form of Amended and Restated Purchase Warrant for Placement Agent and Designees incorporated by reference to Exhibit 4.8 of the
Registrant&rsquo;s registration statement on Form S-3, Commission File No. 333-116908.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.1
License Agreement between the Registrant and Raymond V. Damadian incorporated by reference to Exhibit 10 (e) to Form 10-K for
the fiscal year ended June 30, 1983, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.2
1983 Nonstatutory Stock Option Plan incorporated by reference to Exhibit 10 (a) to Form 10-K for the fiscal year ended June 30,
1983, Commission File No. 0-10248, and amendments thereto dated as of March 7, 1984 and dated August 22, 1984, incorporated by
referenced to Exhibit 28 (a) to Form 10-K for the year ended June 30, 1984, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.3
1984 Incentive Stock Option Plan incorporated by reference to Exhibit 28 (c) to Form 10-K for the year ended June 30, 1984, Commission
File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.4
1986 Nonstatutory Stock Option Plan incorporated by reference to Exhibit 10.7 to Form 10-K for the fiscal year ended June 30,
1986, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.5
1986 Stock Bonus Plan incorporated by reference to Exhibit 10.8 to Form 10-K for the fiscal year ended June 30, 1986, Commission
File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.6
1986 Incentive Stock Option Plan incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended June 30, 1986,
Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.7
Lease Agreement, dated as of August 18, 1987, between the Registrant and Reckson Associates incorporated by reference to Exhibit
10.26 to Form 10-K for the fiscal year ended June 30, 1987, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.8
1993 Incentive Stock Option Plan incorporated by reference to Exhibit 28.1 to the Registrant's registration statement on Form
S-8, Commission File No. 33-60154.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.9
1993 Non-Statutory Stock Option Plan incorporated by reference to Exhibit 28.2 to the Registrant's registration statement on Form
S-8, Commission File No. 33-60154.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.10
1993 Stock Bonus Plan incorporated by reference to Exhibit 28.3 to the Registrant's registration statement on Form S-8, Commission
File No. 33-60154.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.11
1994 Non-Statutory Stock Option Plan incorporated by reference to Exhibit 28.1 to the Registrant's registration statement on Form
S-8, Commission File No. 33-81638.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.12
1994 Stock Bonus Plan incorporated by reference to Exhibit 28.2 to the Registrant's registration statement on Form S-8, Commission
File No. 33-81638.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.13
1995 Non-Statutory Stock Option Plan incorporated by reference to Exhibit 28.1 to the Registrant's registration statement on Form
S-8, Commission File No. 33-62099.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.14
1995 Stock Bonus Plan incorporated by reference to Exhibit 28.2 to the Registrant's registration statement on Form S-8, Commission
File No. 33-62099.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.15
1997 Non-Statutory Stock Option Plan incorporated by reference to Exhibit 28.1 to the Registrant's registration statement on Form
S-8, Commission File No.: 333-27411.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.16
1997 Stock Bonus Plan incorporated by reference to Exhibit 28.2 to the Registrant's registration statement on Form S-8, Commission
File No: 333-27411.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.17
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 by reference to Exhibit 2.1 to the Registrant's Form
8-K, July 31, 1997, commission File No: 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.18
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 by reference to Exhibit 2.1 to the Registrant's
8-K, June 30, 1997, Commission File No: 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt">&nbsp;</DIV>
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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.19
Stock Purchase Agreement dated March 20, 1998 by and among Health Management Corporation of America, Fonar Corporation, Giovanni
Marciano, Glenn Muraca et al., incorporated by reference to Exhibit 2.1 to the Registrant's 8-K, March 20, 1998, Commission File
No: 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.20
Stock Purchase Agreement dated August 20, 1998 by and among Health Management Corporation of America, Fonar Corporation, Stuart
Blumberg and Steven Jonas, incorporated by reference to Exhibit 2 to the Registrant's 8-K, September 3, 1998, Commission File
No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.21
2000 Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration Statement on Form S-8,
Commission File No.: 333-66760.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.22
2002 Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on Form S-8,
Commission File No.: 333-89578.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.23
2002 Incentive Stock Option Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on
Form S-8, Commission File No.: 333-96557.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.24
2003 Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on Form S-8,
Commission File No: 333-106626.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.25
2003 Supplemental Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement
on Form S-8, Commission File No: 333-106626.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.26
2004 Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on Form S-8,
Commission File No. 333-112577.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.27
2005 Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on Form S-8,
Commission File No. 333-122859.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.28
2005 Supplemental Stock Bonus Plan incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement
on Form S-8, Commission File No. 333-126658.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.29
Purchase Agreement dated May 24, 2001 by and between the Registrant and The Tail Wind Fund Ltd. incorporated by reference to Exhibit
10.1 to the Registrant&rsquo;s current report on Form 8-K filed June 11, 2001. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.30
Registration Rights Agreement dated May 24, 2001 by and among the Registrant, The Tail Wind Fund Ltd. and Roan Meyers, Inc. incorporated
herein by reference to Exhibit 10.2 to the Registrant&rsquo;s current report on Form 8-K filed June 11, 2001. Commission File
No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.31
Amendment to Callable Warrant dated April 28, 2004 by and between The Tail Wind Fund, Ltd. and the Registrant incorporated by
reference to Exhibit 10.17 to the Registrant&rsquo;s registration statement on Form S-3, Commission File No. 333-116908.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<!-- Field: Page; Sequence: 62 -->
    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt">&nbsp;</DIV>
    <!-- Field: /Page -->

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.32
First Amendment to Purchase Warrant dated April 28, 2004 by and between The Tail Wind Fund, Ltd. and the Registrant incorporated
by reference to Exhibit 10.18 to the Registrant&rsquo;s registration statement on Form S-3, Commission File No. 333-116908</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.33
Form of First Amendment to Purchase Warrant dated June 1, 2004 by and between each of Roan/Meyers Associates, L.P. and its designees
and the Registrant, incorporated by reference to Exhibit 10.19 to the Registrant&rsquo;s registration statement on Form S-3, Commission
File No. 333-116908.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.34
Asset Purchase Agreement dated July 28, 2005 among Health Plus Management Services, L.L.C., Health Management Corporation of America,
Dynamic Healthcare Management, Inc. and Fonar Corporation, incorporated by reference to Exhibit 2 to the Registrant&rsquo;s Form
8-K, August 2, 2005, Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.35
Partnership Interest Purchase Agreement dated September 29, 2008 by and between Diagnostic Management, LLC and Raymond V. Damadian,
M.D. MR Scanning Centers Management Company, incorporated by reference to Exhibit 10.35 to Form 10-K for the fiscal year ended
June 30, 2008. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.36
2010 Stock Bonus Plan, incorporated by reference to Exhibit 99.1 to the Registrant&rsquo;s registration statement on Form S-8,
Commission File No. 333-168771.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">10.37
Operating Agreement for Imperial Management Services, LLC, incorporated by reference to Exhibit 10.37 to Form 10-K for the fiscal
year ended June 30, 2011. Commission File No. 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">14.1
Code of Ethics, incorporated by reference to Exhibit 14.1 of registrant&rsquo;s Form 10-K for the fiscal year ended June 30, 2004,
Commission File No.: 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">21.1
Subsidiaries of the Registrant. See Exhibits.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">23.1
Independent Registered Public Accounting Firm&rsquo;s Report</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">See
Exhibits.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">31.1
Section 302 Certification. See Exhibits.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">32.1
Section 906 Certification. See Exhibits.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">99.1
Press Release on Sale to Largest Orthopedic Hospital in the Netherlands, incorporated by reference to Exhibit 99.1 of registrant&rsquo;s
Form 10-K for the fiscal year ended June 30, 2006, Commission File No.: 0-10248.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">99.2
XBLR Detail tagging extension.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

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<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION AND SUBSIDIARIES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">SIGNATURES</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin-top: 0; margin-bottom: 0; text-align: center"><FONT STYLE="font: x-small Courier New, Courier, Monospace">FONAR
CORPORATION</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Dated:
September 28, 2012</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 198pt; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">By:/s/Raymond
V. Damadian</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0 0 0 220pt; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Raymond
V. Damadian, President</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">Pursuant
to the requirements of the Securities Exchange Act of 1934, this  report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"><FONT STYLE="font: x-small Courier New, Courier, Monospace">&nbsp;</FONT></P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 39%; font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 0.25in; layout-grid-mode: line; text-decoration: underline; text-align: center; text-indent: -0.25in">Signature</TD>
    <TD STYLE="width: 31%; font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line; text-decoration: underline; text-align: center">Title</TD>
    <TD STYLE="width: 30%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: center"><U>Date</U></P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">/s/Raymond V. Damadian</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">Raymond V. Damadian</P></TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">Chairman of the Board of Directors, President, Director, Principal Executive, Officer and Acting, Principal Financial Officer</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">September 28, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">/s/ Claudette J.V. Chan</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">Claudette J.V. Chan</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">Secretary</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">Director</P></TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">September 28, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">/s/ Robert J. Janoff</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">Robert J. Janoff</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">&nbsp;</P></TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">Director</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">September 28, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">/s/ Charles N. O'Data</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">Charles N. O'Data</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">&nbsp;</P></TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">Director</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">September 28, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">/s/ Ronald G. Lehman</P>
        <P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 0 0 0.25in; text-indent: -0.25in">Ronald G. Lehman</P></TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">Director</TD>
    <TD STYLE="font: 10pt Courier New, Courier, Monospace; padding-right: 5.4pt; padding-left: 5.4pt; layout-grid-mode: line">September 28, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

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<TYPE>EX-21
<SEQUENCE>2
<FILENAME>fonar_exhibit-21.htm
<DESCRIPTION>FONAR EXHIBIT 21.1
<TEXT>
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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Exhibit 21.1 Subsidiaries of the Registrant</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Imperial Management Services,
LLC</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Health Management Corporation
of America (Delaware)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Fair Haven Services, Inc.</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">HMCM, Inc. (New York)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Raymond V. Damadian, M.D.
MR Scanning Center Management Company (Delaware)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Dynamic Services, Inc. (New
York)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 1.5in 0 0.5in; text-indent: -0.25in">Central Health Care Management
Company, Inc. (Delaware)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>



<P STYLE="margin: 0"></P>

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<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>fonar_exhibit-23.htm
<DESCRIPTION>FONAR EXHIBIT 23.1
<TEXT>
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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Exhibit 23.1 Independent Registered Public Accounting
Firm&rsquo;s Consent</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">We consent to the incorporation
by reference in the Registration Statement of Fonar Corporation and Subsidiaries on Form S-8 (File No. 333-122859) and Form S-8
(File No. 333-168771) of our report dated September 28, 2012, with respect to our audits of the consolidated financial statements
of Fonar Corporation and Subsidiaries as of June 30, 2012 and 2011 and for the years then ended, which report is included in this
Annual Report on Form 10-K of Fonar Corporation and Subsidiaries for the year ended June 30, 2012.</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">/s/ Marcum LLP</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">______________</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Marcum LLP</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">New York, New York</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">September 28, 2012</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>



<P STYLE="margin: 0"></P>

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<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>fonar_exhibit-31.htm
<DESCRIPTION>FONAR EXHIBIT 31.1
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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Exhibit 31.1</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">CERTIFICATION</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">I, Raymond V. Damadian, certify that:</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">1.
I have reviewed this annual report on Form 10-K of Fonar Corporation;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements made, not misleading with
respect to the period covered by this annual report; and</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">3.
Based on my knowledge, the financial statements, and other financial information, included in this annual report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report.</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(f) for the registrant
and I have:</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by
others within those entities, particularly during the period in which this report is being prepared;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of financial statements for external purposes in accordance
with generally accepted accounting principles;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">c) Evaluated
the effectiveness of the registrant&rsquo;s disclosure controls and procedures and presented in this report my conclusions about
the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
and</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">d) Disclosed
in this report any change in the registrant&rsquo;s internal control over financial reporting that occurred during the registrant&rsquo;s
most recent fiscal quarter (the registrant&rsquo;s fourth quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant&rsquo;s internal control over financial reporting; and</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant&rsquo;s auditors
and the audit committee of registrant&rsquo;s board of directors (or persons performing the equivalent functions):</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">a) all
significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant&rsquo;s ability to record, process, summarize and report financial data; and</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 1in; text-align: justify; text-indent: -0.25in">b) any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&rsquo;s
internal control over financial reporting.</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-indent: 0.25in">Date: September 28, 2012</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">/s/Raymond
V. Damadian</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">______________________</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.75in; text-align: justify; text-indent: -0.25in">(Signature)</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 265.5pt 0 0.75in; text-indent: -0.25in">President, Principal Executive
Officer and Acting Principal Financial Officer</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 265.5pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>



<P STYLE="margin: 0"></P>

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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>fonar_exhibit-32.htm
<DESCRIPTION>FONAR EXHIBIT 32.1
<TEXT>
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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Exhibit 32.1</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">CERTIFICATION PURSUANT TO</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">18 U.S.C. SECTION 1350,</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">AS ADOPTED PURSUANT TO</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">In connection with the Annual
Report of Fonar Corporation and Subsidiaries (the &ldquo;Company&rdquo;) on Form 10K for the fiscal year ended June 30, 2012, as
filed with the Securities and Exchange Commission on the date hereof (the &ldquo;Report&rdquo;), I, Dr. Raymond V. Damadian, President,
Chief Executive Officer, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002, that:</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">The Report fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">The information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">/s/Dr. Raymond V. Damadian</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">__________________________</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">Dr. Raymond V. Damadian</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">President, Chief Executive Officer</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-indent: 0.5in">and Chief Financial Officer</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in">September 28, 2012</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0 11.7pt 0 0.25in; text-align: justify">A signed original of this
written statement required by Section 906 has been provided to Fonar Corporation and will be retained by Fonar Corporation and
furnished to the Securities and Exchange Commission or its staff upon request.</P>

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<TYPE>EX-99
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<FILENAME>fonar_exhibit-992.htm
<DESCRIPTION>FONAR EXHIBIT 99.2
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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">Exhibit 99.2</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0"><U>XBLR Detail tagging extension</U></P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">FONAR will take advantage of the 30 day extension allowed for
first time detail tagging filers. An amended 10-KA will be filed within 30 days of September 28, 2012 that will include detail
tagging.</P>

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<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

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