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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jun. 30, 2022
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of FONAR Corporation, its majority and wholly-owned subsidiaries and partnerships. The operating activities of subsidiaries are included in the accompanying consolidated statements from the date of acquisition. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates 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 receivable allowances, intangible assets, income taxes and related tax asset valuation allowances, useful lives of property and equipment, contingencies, revenue recognition and the assessment of 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. Inventories 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. Property and Equipment 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. 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. Expenses for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. Maintenance and repair expenses totaled approximately $2,783,000 and $2,051,000 for the years ended June 30, 2022 and 2021 respectively. The estimated useful lives in years are generally as follows:
Estimated Useful Life in Years for Property and Equipment
Diagnostic equipment |  |  | 5–13 |
Research, development and demonstration equipment |  |  | 3-7 |
Machinery and equipment |  |  | 2-7 |
Furniture and fixtures |  |  | 3-9 |
Leasehold improvements |  |  | 3–10 |
Building |  |  | 28 |
Long-Lived Assets The Company periodically assesses the recoverability of long-lived assets, including property and equipment and intangibles, other than goodwill, 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. Other Intangible Assets 1) Patents and Copyrights Amortization is calculated on the straight-line basis over 15 years. 2) Non-Competition Agreements The non-competition agreements are being amortized on the straight-line basis over the length of the agreement (7 years). 3) Customer Relationships Amortization is calculated on the straight line basis over 20 years. Goodwill Generally accepted accounting principles in the United States require the Company to perform a goodwill impairment test annually at the end of each fiscal year and more frequently when negative conditions or a triggering event arises. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered potentially impaired and a second step is performed to measure the amount of impairment loss, if any. Acquired assets and assumed liabilities Pursuant to ASC No. 805, if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, but during the allowed measurement period not to exceed one year from the acquisition date, the Company adjusts the provisional amounts recognized at the acquisition date by means of adjusting the amount recognized for goodwill. Revenue Recognition Revenue on sales contracts for scanners, included in “product sales” in the accompanying consolidated statements of operations, is recognized under the percentage-of-completion method in accordance with FASB ASC 606, “Revenue Recognition – Construction-Type and Production-Type Contracts”. The Company manufactures its scanners under specific contracts that provide for progress payments. Production and installation take approximately three to six months. Revenue on scanner service contracts is recognized on the straight-line method over the related contract period, usually one year. Revenue from product sales (upgrades and supplies) is recognized upon shipment. 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 “PCs”). As of June 30, 2022, the Company has 22 management agreements of which 3 were with PC’s owned by Raymond V. Damadian, M.D., Chairman of the Board of FONAR until his unexpected death in August 2022 (“the Related medical practices”) and 19 are with PC’s, which are all located in the state of New York (“the New York PC’s”), owned by two unrelated radiologists. The contractual fees for services rendered to the PCs consists of fixed monthly fees per diagnostic imaging facility ranging from approximately $77,000 to $447,000. All fees are re-negotiable at the anniversary of the agreements and each year thereafter. The Company records a provision for bad debts for estimated uncollectible fees, which is reflected in other operating expenses on the Statement of Operations. The Company currently recognizes revenue in accordance with the recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue. Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. The Company’s patient fee revenues, net of contractual allowances and discounts less the provision for bad debts for the years ended June 30, 2022 and 2021 are summarized in the following table.
Patient Fee Revenue - Net |  |  |  |
|  | For the Years Ended June 30
|  | 2022 |  | 2021
Commercial Insurance/ Managed Care |  | $ | 4,248,708 |  |  | $ | 4,100,440 |
Medicare/Medicaid |  |  | 1,060,920 |  |  |  | 968,055 |
Workers’ Compensation/Personal Injury |  |  | 17,907,335 |  |  |  | 15,011,111 |
Other |  |  | 6,365,275 |  |  |  | 3,227,783 |
Net Patient Fee Revenue |  | $ | 29,582,238 |  |  | $ | 23,307,389 |
Research and Development Costs Research and development costs are charged to expense as incurred. The costs of 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. Advertising Costs Advertising costs are expensed as incurred. Advertising expense approximated $634,000 and $633,000 and for the years ended June 30, 2022 and 2021, respectively. Shipping Costs The Company’s shipping and handling costs are included in revenue from product sales and the related expense included in costs related to product sales is $7,391 and $8,215 for the years ended June 30, 2022 and 2021 respectively. Income Taxes 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. Customer Advances Cash advances and progress payments received on sales orders are reflected as customer advances until such time as revenue recognition occurs. Earnings Per Share Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. In accordance with ASC topic 260-10, “Participating Securities and the Two-Class Method”, 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, 2022 and 2021. 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 the years ended June 30, 2022 and 2021, diluted EPS for common shareholders includes 127,504 shares upon conversion of Class C Common.
Schedule of earnings per share |  |  |  |  |  |  |  |  |  |  |  |
|  | June 30, 2022
Basic |  | Total |  | Common Stock |  | Class C Common Stock
Numerator: |  |  |  |  |  |
Net income available to common stockholders |  | $ | 12,440,906 |  |  | $ | 11,690,796 |  |  | $ | 191,038 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  | 6,554,209 |  |  |  | 6,554,209 |  |  |  | 382,513 |
Basic income per common share |  | $ | 1.90 |  |  | $ | 1.78 |  |  | $ | 0.50 |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  |  |  |  |  | 6,554,209 |  |  |  | 382,513 |
Class C Common Stock |  |  |  |  |  |  | 127,504 |  |  |  | — |
Total Denominator for diluted earnings per share |  |  |  |  |  |  | 6,681,713 |  |  |  | 382,513 |
Diluted income per common share |  |  |  |  |  | $ | 1.75 |  |  | $ | 0.50 |
|  | June 30, 2021
Basic |  | Total |  | Common Stock |  | Class C Common Stock
Numerator: |  |  |  |  |  |
Net income available to common stockholders |  | $ | 10,207,588 |  |  | $ | 9,592,134 |  |  | $ | 156,744 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  | 6,505,283 |  |  |  | 6,505,283 |  |  |  | 382,513 |
Basic income per common share |  | $ | 1.57 |  |  | $ | 1.47 |  |  | $ | 0.41 |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  |  |  |  |  | 6,505,283 |  |  |  | 382,513 |
Class C Common Stock |  |  |  |  |  |  | 127,504 |  |  |  | — |
Total Denominator for diluted earnings per share |  |  |  |  |  |  | 6,632,787 |  |  |  | 382,513 |
Diluted income per common share |  |  |  |  |  | $ | 1.45 |  |  | $ | 0.41 |
Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market funds. Short Term Investments Short term investments include certificates of deposit with original maturities of greater than 90 days. Concentration of Credit Risk Cash: The Company maintains its cash and cash equivalents with various financial institutions, which exceed federally insured limits throughout the year. At June 30, 2022, the Company had cash on deposit of approximately $46,834,000 in excess of federally insured limits of $250,000. Related Parties: Net revenues from related parties accounted for approximately 12% of the consolidated net revenues for the years ended June 30, 2022 and 2021. Net management fee receivables from the related party medical practices accounted for approximately 13% of the consolidated accounts receivable for the years ended June 30, 2022 and 2021. See Note 3 regarding the Company’s concentrations in the healthcare industry. Fair Value of Financial Instruments The financial statements include various estimated fair value information at June 30, 2022 and 2021, as required by ASC topic 820, “Disclosures about Fair Value of Financial Instruments”. 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. The standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing fair value. These tiers include, Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. 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: Cash and cash equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments. Short term investments: The carrying amount approximates fair value because of the short-term maturity of those instruments. Such amounts include Certificates of Deposits with original maturities greater than 90 days. These securities are classified as Level 1. Receivable and accounts payable: The carrying amounts approximate fair value because of the short maturity of those instruments. 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. Long-term debt and notes 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. All of the Company’s financial instruments are held for purposes other than trading. Recent Accounting Standards FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of June 30, 2022 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 2022 or 2021, and it does not believe that any of those standards will have a significant impact on our consolidated financial statements at the time they become effective.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI https://asc.fasb.org/topic&trid=2122369 + Details
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