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 SECURITIES
 AND EXCHANGE COMMISSION

 WASHINGTON,
 D.C. 20549

 FORM

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

 For the fiscal year ended June 30, 2025

 OR

 TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 For the transition period from _____________ to _____________

 Commission File No. 0-10248

 FONAR CORPORATION

 (Exact name of registrant as specified in its charter)

 delaware

 11-2464137

 (State of incorporation)

 (IRS Employer Identification Number)

 110 Marcus Drive, Melville, New York

 11747

 (Address of principal executive offices)

 (Zip Code)

 ( 631)
 694-2929

 (Registrant's
 Telephone Number, including area code)

 Securities
 Registered pursuant to Section 12(b) of the Act

 Title
 of Each Class

 Trading
 Symbol(s)

 Exchange
 Registered

 Common
 Stock, $.0001 par value

 FONR

 NASDAQ
 Capital Market

 Securities
 Registered pursuant to Section 12(g) of the Act

 None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
.

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
.

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 No.

by check mark whether the registrant (1) has submitted electronically and posted on its corporate website, 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). Yes No

 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 "large
accelerated filer", "accelerated filer and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):

 Large
 accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller
 reporting company

 Emerging
 Growth Company

 If
securities are registers pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. Yes No.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). Yes No.

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No.

 The aggregate market value of the shares of Common
Stock held by non-affiliates as of December 31, 2024 based on the closing price of $15.14 per share on such date as reported on the NASDAQ
System, was approximately $ 91.8 million. The other outstanding classes do not have a readily determinable market value.

 As of September 8, 2025, 6,203,465 shares of Common
Stock, 146 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.

 DOCUMENTS INCORPORATED BY REFERENCE

 NONE

 FORM 10-K ITEMS

 PAGE

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved[

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk.

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees and Services

 Item 15.

 Exhibits and Financial Statement Schedules

 ITEM 1. BUSINESS

 GENERAL

 FONAR Corporation, sometimes referred to as the "Company"
or "FONAR", 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 website 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.

 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 ("HMCA"). HMCA provides management services, administrative services,
billing and collection services, credentialing services, contract negotiations, compliance consulting, purchasing, IT services, hiring,
conducting interviews and managing personnel, storage of medical records, office space, equipment, repair, maintenance service, and clerical
and other non-medical personnel to medical providers engaged in diagnostic imaging. In addition to acting as a management company, HMCA
owns and operates six diagnostic imaging facilities in Florida. See Note 15 for a more detailed analysis.

 FONAR is engaged in the business of designing, manufacturing,
selling and servicing magnetic resonance imaging scanners, also referred to as "MRI" or "MR" scanners, which utilize
MRI technology for the detection and diagnosis of human disease, abnormalities, other medical conditions and injuries. FONAR's founders
built the first MRI 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 MRI technology.

 FONAR's iron frame technology made FONAR the
originator of "open" MRI scanners. We introduced the first "open" MRI in 1980. Since that time we have concentrated
on further application of our "open" MRI, introducing most recently the Upright Multi-Position " MRI scanner
(also referred to as the "Upright " or "Stand-Up " MRI scanner) and the FONAR 360 MRI scanner.
The FONAR 360 MRI is not presently being marketed.

 See Note 15 to the Consolidated Financial Statements
for separate financial information regarding our medical equipment and physician and diagnostic management services segments.

 On July 7, 2025, the board of directors received a
non-binding proposal from a group led by Timothy Damadian, the Company's Chief Executive Officer, and Luciano Bonanni, the Company's
Chief Operating Officer, pursuant to which proposal the group would acquire all of the outstanding common stock and other securities of
the Company not currently owned by the members of the group. Members of the group have voting control of the Company's equity
securities and the group advised the Company that it was unwilling to support any alternative transaction. As proposed, the transaction,
if completed, would result in the Company no longer being a publicly held company, and its Common Stock would be de-listed from the NASDAQ
Stock Market. The Board of Directors has established a Special Committee of independent and disinterested directors to consider
the proposal and negotiate on behalf of the Company and its stockholders. The Special Committee has retained its own independent
financial and legal advisors to assist it in this process. The group and the Special Committee are engaged in negotiations related to
the proposed going private transaction. No definitive agreements or terms have been executed by the parties and there is no assurance
that the transaction will be completed. Any definitive agreement and transaction will require approval by the Company's common
stock holders and will require the filing of definitive proxy materials in accordance with the SEC's proxy rules to obtain such
approval.

 CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS.

 We make certain statements in this Annual Report on
Form 10-K regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements, other
than statements of historical facts, included or incorporated by reference herein relating to management's current expectations
of future financial performance, continued growth and changes in economic conditions or capital markets are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.

 Forward-looking statements involve risks and uncertainties
which may cause actual results or outcomes to differ materially from those expressed herein. While we make such statements in good faith
and we believe such statements are based on reasonable assumptions, including without limitation, management's examination of historical
operating trends, data contained in records and other data available from third parties, we cannot assure you that our projections will
be achieved. These assumptions involve judgments with respect to 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. Factors that may cause
such differences include: economic conditions generally and in each of the markets in which we are located, the amount of sales contributed
by new and existing locations, labor costs for our personnel, and the level of competition from existing or new competitors.

 While we believe that our assumptions are reasonable,
it is very difficult to predict the impact of unknown factors, and it is impossible for us to anticipate all factors that could affect
our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should
evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially
from our expectations. These statements are not guarantees of future performance and undue reliance should not be placed on them.

 The forward-looking statements included in this report are made only as
of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information,
future events or otherwise, except as required by law.

 PHYSICIAN AND DIAGNOSTIC SERVICES MANAGEMENT SEGMENT

 Health Diagnostics Management, LLC (HDM) is owned
by Health Management Corporation of America (70.6%) and investors (29.4%). Health Management Corporation of America is owned 100% by FONAR
Corporation.

 HDM operates under the assumed name "Health
Management Company of America" ("HMCA").

 The combined business (HDM and Health Management Corporation
of America) will be referred to as "HMCA" for all periods before and after July 1, 2015, unless otherwise indicated.

 HMCA provides comprehensive non-medical management
services to diagnostic imaging facilities. These services include administrative services, billing and collection services, credentialing
services, contract negotiations, compliance consulting, purchasing IT services, hiring, conducting interviews, training, supervision and
management of non-medical personnel, storage of medical records, office space, equipment, repair & maintenance services, accounting,
assistance with legal and regulatory matters, and the development and implementation of practice growth and marketing strategies.

 As of June 30, 2025, HMCA managed a total of 44 MRI
scanners. Twenty-six (26) scanners are located in New York and eighteen (18) scanners are located in Florida. For the 2025 fiscal year,
the revenues HMCA recognized from the MRI facilities has increased to $95.4 million from $94.6 million in fiscal 2024. Six of the facilities
in Florida are owned and operated by HMCA subsidiaries.

 We believe the utilization of FONAR Upright MRI
scanning systems, which are produced under the protection of our patents, accounts for the historically robust patient volume at the scanning
facilities.

 During fiscal 2025, two additional high field magnets
were installed at our existing facilities in Naples, FL and Melville, NY, respectively. During fiscal year 2026, we expect to complete
installation of an additional high field magnet in Lynbrook, NY, to supplement the existing FONAR Upright MRI scanning systems at
that facility along with a new location in Nassau County, NY.

 HMCA GROWTH STRATEGY

 HMCA's growth strategy focuses on upgrading
and expanding the existing facilities it manages and expanding the number of facilities it either owns or manages for its clients, including
new sites. In connection with improving the performance of the facilities, we have added high field MRI scanners, extremity scanners and
x-ray machines to the Upright MRI scanners at certain of the sites where such additional diagnostic imaging modalities are expected
to produce the greatest return.

 PHYSICIAN AND DIAGNOSTIC MANAGEMENT SERVICES

 HMCA's services to the facilities it manages
encompass substantially all of their business operations. Each facility is controlled, however, not by HMCA, but by the physician owner,
or in the case of the six Florida sites owned by HMCA subsidiaries, by the medical director. All medical services are performed by physicians
and other medical personnel under the physician-owner's supervision. HMCA is the management company and performs services of a non-medical
nature. These services include:

 1. Offices and Equipment. HMCA identifies, negotiates
leases for and/or provides office space and equipment to its clients. This includes technologically sophisticated medical equipment. HMCA
also provides improvements to leaseholds, assistance in site selection and advice on improving, updating, expanding and adapting to new
technology.

 2. Personnel. HMCA 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
processes the necessary tax, insurance and other documentation relating to employees.

 3. Administrative. HMCA assists in scheduling patient
appointments, purchasing medical supplies and equipment, and handles the reporting, accounting, processing and filing systems. It prepares
and files the complex applications which enables our clients to participate in managed care programs and to qualify for insurance reimbursement.
HMCA 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.

 4. Billing and Collections. HMCA is responsible
for the billing and collection of revenues from third-party payors including those governed by No-Fault and Workers' Compensation
statutes.

 5. Cost Saving Programs. Based on available volume
discounts, HMCA seeks to assist in obtaining favorable pricing for office and medical supplies, equipment, contrast agents, and other
inventory for its clients.

 6. Diagnostic Imaging and Ancillary Services. HMCA
can offer access to diagnostic imaging equipment through diagnostic imaging facilities it manages. The Company is expanding the ancillary
services offered in its network to include x-rays, and other MRI equipment such as high-field (1.5 or 3.0 Tesla magnet strength) MRI scanners
and extremity MRI scanners.

 7. Marketing Strategies. HMCA is responsible for developing
and proposing marketing plans for its clients.

 8. Expansion Plans. HMCA assists the clients in developing
expansion plans including the opening of new or replacement facilities where appropriate.

 HMCA's objective is to free physicians from
as many non-medical duties as is practicable, allowing physicians to spend less time on business and administrative matters and more time
practicing medicine.

 The exceptions to this general model of operation
are six of the facilities located in Florida. These Florida facilities are owned by limited liability companies which, as our subsidiaries,
conduct their operations directly and bill and collect their fees from the patients and third-party payors.

 The facilities enter into contracts with third-party
payors, including managed care companies. None of HMCA's clients participate in any capitated plans or other risk-sharing arrangements.
Capitated plans are those Health Maintenance Organization programs where the provider is paid a flat monthly fee per patient.

 The management fees payable by the facilities to HMCA
are flat monthly fees. In fiscal 2025, the aggregate amount of active management fees was $5,160,735 per month. In fiscal 2024, the aggregate
amount of active management fees was $4,960,733 per month. Fees under the management agreements are subject to adjustment by mutual agreement
on an annual basis.

 Timothy Damadian currently owns three HMCA-managed
MRI facilities in Florida. The facilities were owned by the Company's founder and former CEO, Dr. Raymond Damadian until his passing
in August of 2022. The fees for these three sites are flat monthly fees which are subject to adjustment by mutual agreement on an annual
basis. In fiscal 2025 and fiscal 2024, the aggregate monthly amount of management fees payable to HMCA by these sites was $995,825.

 The six Florida facilities owned by HMCA subsidiaries
directly bill their patients or the patients' insurance carriers. Patient fees net of contractual allowances and discounts were
$33,179,446 in fiscal 2025 as compared to $33,815,796 in fiscal 2024.

 HMCA MARKETING

 HMCA's marketing strategy is to expand the business
and improve the facilities which it manages. HMCA is seeking to increase the number of locations of those facilities where market conditions
are promising and to promote growth of our clients' and Florida subsidiaries' patient volume and revenue.

 DIAGNOSTIC IMAGING FACILITIES

 Diagnostic imaging facilities managed by HMCA provide
diagnostic imaging services to patients referred by physicians. 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. Following diagnostic procedures, the images are reviewed by the interpreting
physicians who prepare reports of these tests and their findings. The vast majority of reports for the New York facilities are transcribed
by HMCA personnel and the remainder are outsourced to professional transcription services. Reports for the Florida facilities are outsourced
to professional transcription services.

 HMCA develops marketing programs and educational programs
in an effort to establish and maintain referring physician relationships for our clients and Florida subsidiaries.

 To further its position, HMCA is seeking to expand
the imaging modalities offered at its managed and owned diagnostic imaging facilities. Six facilities in New York and nine facilities
in Florida have two or more MRI scanners. One facility in New York and three in Florida also perform X-rays.

 REIMBURSEMENT

 HMCA's clients receive reimbursements for their
services through Medicare, Medicaid, managed care, private commercial insurance, third-party administrators, Workers' Compensation,
No-Fault and other insurance.

 Medicare

 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.

 Under Medicare'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'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.

 Services provided in non-hospital based freestanding
facilities are paid under the Medicare Physician Fee Schedule, or MPFS. All of HMCA's clients are presently in this category. The
MPFS is updated on an annual basis and sometimes modified more frequently.

 We have experienced reimbursement reductions for radiology
services provided to Medicare beneficiaries. In calendar year 2025, changes to the MPFS included a reduction in the conversion factor.
For our fiscal year ended June 30, 2025, Medicare revenues represented approximately 2.6% of the revenues for HMCA's clients and
subsidiaries as compared to 2.7% for the fiscal year ended June 30, 2024.

 Medicaid

 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 2025, approximately.05% of the revenues of HMCA's clients and subsidiaries were attributable
to Medicaid, as compared to 0.06% in fiscal 2024.

 Managed Care and Private Insurance

 Health Maintenance Organizations, or HMOs, 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 in many cases can be 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
previously proposed.

 HMCA COMPETITION

 The physician and diagnostic management services field
is highly competitive. A number of large health systems have acquired medical practices, and this trend is expected to continue. HMCA
anticipates that more competition will develop. Many competitors have greater financial and other resources than HMCA.

 With respect to the diagnostic imaging facilities
managed by HMCA, 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, as well as emphasizing
to potential referral sources the advantages of Upright MRI scanning. HMCA 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 believes that it will be
able to effectively meet the competition in the outpatient diagnostic imaging industry with the FONAR Upright MRI scanners and strategically
placed high field MRI scanners at its facilities.

 GOVERNMENT REGULATION APPLICABLE TO HMCA

 FEDERAL REGULATION

 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.

 Federal False Claims Act

 The federal False Claims Act and, in particular, the
False Claims Act's "qui tam" or "whistleblower" 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.

 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 for each
separate false claim and the government's attorneys' 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 "knowingly"
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 are set forth below:

 Failure to comply with the many technical
billing requirements applicable to our Medicare and Medicaid business;

 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;

 Failure to comply with the Medicare physician
supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision.

 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 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, "PPACA") expanded on changes made by the 2009 Fraud Enforcement and
Recovery Act with regard to such "reverse false claims." 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 and its clients have never been sued under the False Claims Act and believe we are in compliance with the
law.

 Stark Law

 Under the federal Self-Referral Law, also referred
to as the "Stark Law", 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 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 believes that it and its clients are in compliance with these laws.

 Anti-Kickback Regulation

 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 "qui tam" 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 nor its clients engage in this practice.

 Health Insurance Portability and Accountability Act

 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'
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-governmental healthcare benefit programs 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.

 Further, HIPAA requires healthcare providers and their
business associates to maintain the privacy and security of individually identifiable protected health information ("PHI").
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 ("HITECH"), signed into law
on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to "business associates,"
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, HHS 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 occurrence. In 2013 additional legal requirements were adopted
to provide further protection for PHI.

 In addition, many states have enacted comparable privacy
and security statues or regulations that, in some cases, are more stringent than HIPAA requirements. 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 sanctions.

 We believe that we are in compliance with the current
HIPAA requirements, as amended by HITECH, together with other legislation and regulations, 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 our own interpretation, 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.

 Civil Money Penalty Law and Other Federal Statutes

 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.

 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.

 Certificates of Need

 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 currently operating in any such states.

 State Regulation

 In addition to the federal self-referral law and federal
Anti-kickback statute, many States, including those in which HMCA 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 believes that
it and its clients are in compliance with these laws.

 Various States prohibit business corporations from
practicing medicine. Various States, including New York, also prohibit the sharing of professional fees or fee splitting. Consequently,
in New York HMCA leases space and equipment to clients and provides clients with a range of non-medical administrative and managerial
services for agreed upon fees. Under Florida law a business entity can bill patients and third-party payors directly if that entity is
properly licensed through AHCA. All of the nine facilities in Florida are licensed healthcare clinics through AHCA.

 HMCA's clients and subsidiaries generate revenue
from patients covered by no-fault insurance and workers' compensation programs. For the fiscal year ended June 30, 2025 approximately
58.0% of our clients' receipts were from patients covered by no-fault insurance and approximately 9.1% of our client's receipts
were from patients covered by workers' compensation programs. For the fiscal year ended June 30, 2024, approximately 58.0% of HMCA's
clients' receipts were from patients covered by no-fault insurance and approximately 8.8% of HMCA's clients' receipts
were from patients covered by workers' compensation programs. The foregoing numbers do not include payments from third-party administrators.
In the event that changes in these laws alter the fee structures or methods of providing service, or impose additional or different requirements,
HMCA could be required to modify its business practices and services in ways that could be more costly to HMCA or in ways that decrease
the revenues which HMCA receives from its clients.

 Compliance Program

 We maintain a program to monitor compliance with federal
and state laws and regulations applicable to the healthcare entities. The compliance program 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. 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.

 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 assist our
clients with educational programs designed to familiarize them with the regulatory requirements and specific elements of our compliance
program.

 HMCA believes that it and its clients are in compliance
with applicable Federal, State and local laws. HMCA does not believe that such laws will have any adverse material effect on its business.

 MEDICAL EQUIPMENT SEGMENT

 PRODUCTS

 The Upright MRI scanner is our primary product.

 The Upright MRI is a "whole-body"
MRI, meaning that it can be used to scan virtually any part of the body. The Upright MRI differs from conventional MRI scanners in
that it is not limited to scanning patients in the recumbent posture. For example, patients can be scanned while sitting, standing, bending,
or lying down.

 The fact that the patient space is unobstructed permits
scanning in a variety of postures that cannot be duplicated in conventional MRI scanners. Most conventional MRI scanners in use today
employ solenoidal super-conducting magnets whose magnetic field orientation is along the axis of the patient's body, which must
be placed into the bore of the scanner in either a supine or prone posture. Our experience is that when presented with a choice between
being scanned lying down in a tunnel-like enclosure or seated in an open MRI, most patients will choose the latter.

 The Upright MRI is also, by design, a non-claustrophobic
MRI scanner. The Upright MRI employs a dipole magnet whose magnetic field orientation is transverse to the axis of the patient's
body. The gap between the poles of the magnet is the space into which the patient is placed. Because the magnetic field direction is horizontal
and transverse to the body, a patient who is scanned seated or standing has an unobstructed view out of the gap of the magnet. In typical
installations, patients watch television while being scanned, without the aid of special glasses with mirrors.

 The Upright MRI facilitates patient scanning
in a variety of postures thanks to a unique, three-axis patient handling system. The motorized patient table, or bed, can be rotated to
any angle between 0 (horizontal) and 84 degrees (nearly vertical). Unlike a conventional recumbent MRI patient table, which can only move
into or out of the scanner's bore, the Upright MRI bed can be translated with two degrees of freedom, in/out and up/down. User-friendly
software allows the scanner operator to move the anatomical region of interest precisely to the center of the magnet using a cursor placed
on a localizer image. Anatomically true image orientation is assured, regardless of the rotation angle of the bed, via computer read-back
of the table's position. A seat can be hooked onto the bed in a variety of locations, or removed, as needed. Transpolar VersaRests
and other devices can be used to keep the patient comfortable and motionless throughout the scanning process.

 IMAGE QUALITY AND FIELD STRENGTH

 Most commercially available MRI scanners range in
magnetic field strength from about 0.2 T (Tesla) to 7.0 T, and open MRI scanners range from about 0.2 T to 1.2 T.

 Field strength is an important characteristic of MRI
scanners, but not the only one. Higher field strengths generally provide higher signal-to-noise ratios (SNR) on account of the Boltzmann
distribution, but SNR is not the only determinant of image quality. For example, the spin-lattice relaxation time T 1 that characterizes
the nuclear magnetic resonance (NMR) signal increases with field strength, decreasing the difference in T 1 values between tissues
that is an essential contributor to contrast in images. For example, grey/white matter contrast in the brain falls off rapidly above about
1.0 T, and some studies have shown that optimal tissue contrast occurs in the mid-field region, down to 0.2 T. Imaging bandwidth, receiver
coil design, pulse sequence design, and scan parameters significantly affect image quality. Indeed, researchers and MRI vendors are pushing
the boundaries of MRI technology in both directions, that is, to very low (1 – 199 mT) and very high (7.0 T and above) field strengths
for a variety of technical and diagnostic reasons. For instance, one advantage of lower field strengths is that image artifacts arising
from metallic implants such as surgical screws diminish as field strength decreases. This is particularly important for surgeons referring
their postoperative patients for diagnostic imaging studies.

 The Upright MRI operates at a mid-field strength
of 0.6 T and enjoys wide acceptance in the radiological community. The scanner is diagnostically versatile and equipped with a broad range
of clinically proven imaging protocols that produce images of exceptional quality, and a fully-featured, robust, and user-friendly software
interface.

 DIAGNOSTIC ADVANTAGES OF POSITIONAL MRI

 Apart from its attractiveness as an open, non-claustrophobic,
general-purpose MRI, the Upright MRI can deliver diagnostically relevant information that correlates with patient posture.

 For example, a variety of injuries to and pathologies
of the spine, such as spondylolisthesis ("slipped disc"), may go undetected in the recumbent posture, but manifest themselves
when the patient is scanned in a normal, weight-bearing ("physiological") position, such as seated, or seated in forward flexion,
extension, or standing.

 The Upright MRI has demonstrated its value for
patients suffering from scoliosis, who typically undergo regular x-ray exams over a course of years. A 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 received on average over
the course of their treatment. Prior to the advent of the Upright MRI, the x-ray machine was the only imaging modality that could
evaluate the condition because the patient must be imaged standing. FONAR has developed an RF receiver coil and a 3D scanning protocol
that for the first time allows scoliosis patients to obtain diagnostic, multi-slice images of their spines while standing, without the
risks associated with radiation, and with the soft-tissue-contrast benefits of MRI over x-ray.

 The utility of upright, weight-bearing MRI is not
limited to the spine. For example, approximately one in a thousand people (some 200,000 to 500,000 in the US) have a congenital condition
known as Chiari malformation, an abnormality of the brain at the junction with the spine at the base of the skull. In people with Chiari
malformation, the lowest lying structures of the brain, the tonsils of the cerebellum, descend into and become entrapped by the foramen
magnum, the circular bony opening at the base of the skull

 where the spinal cord exits. While most of these individuals are asymptomatic,
many suffer from more severe forms of the syndrome (e.g., type II or Arnold-Chiari syndrome), in which brain stem compression results
in severe neurological symptoms. The Chiari syndrome is also called Cerebellar Tonsillar Ectopia (CTE) because of the displacement (ectopia)
of the cerebellar tonsils. Classic symptoms of Chiari syndrome include the "drop attack," in which the afflicted individual
unexpectedly experiences an explosive rush at the base of the brain that runs down the body to the extremities, causing the patient to
collapse in a temporary neuromuscular paralysis. These symptoms subside when the patient is lying down. Conventional lie-down MRI scanners
cannot make an adequate evaluation of the pathology since this pathology is most visible and the symptoms are most acute when the patient
is scanned in the upright, weight-bearing position (Brain Injury 2010, 24 (7-8) 988-994).

 In the body, the Upright MRI is being utilized
in a variety of ways, for example to image pelvic organ prolapse in the standing posture, inguinal hernias, defecation in the sitting
posture (utilizing cine MRI), and the prostate in the sitting posture (utilizing a flat, multi-channel receiver coil on top of which the
patient simply sits).

 PRODUCT MARKETING

 FONAR's principal marketing efforts in the medical
equipment segment have been focused on the Upright MRI, which we believe is a unique product. We expect to focus on the Upright
MRI going forward.

 The principal markets for the Company's scanners
are private diagnostic imaging centers and hospital outpatient imaging facilities.

 FONAR's marketing strategy has been designed
to reach key purchasing decision makers with information concerning the Upright MRI. This has led to many inquiries and some sales
of the Upright MRI scanner and is intended to increase FONAR's presence in the medical equipment market. FONAR focuses primarily
on four target audiences: neurosurgeons, orthopedic surgeons, radiologists, and general physicians.

 Our advertising for FONAR and HMCA reinforces the
unique value provided by the FONAR Upright MRI scanner. We have increased internet awareness of our product by driving patient traffic
to the HMCA scanning centers we manage via the FONAR website as well as through websites for each HMCA location. These websites give prospective
customers of Upright MRI scanners a view of operating Upright MRI centers and highlight the benefits of using the Upright
MRI scanner.

 SERVICE AND UPGRADES FOR MRI SCANNERS

 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 $8.4
million in fiscal 2025 and $7.6 million in fiscal 2024.

 We hope to maintain service revenues at present levels,
based on the demonstrated longevity of the Upright MRI scanner and continued customer satisfaction with the product. Critical to
this longevity and customer satisfaction is the stream of software improvements and hardware upgrades that FONAR has delivered over the
years to keep the scanners competitive with the latest technology in the marketplace. We also anticipate that our installed base of scanners
will generate income from upgrades in future fiscal years.

 We have engaged with AIRS Medical USA, Inc., to distribute
their SwiftMR TM product to our installed base of customers. We believe that the SwiftMR TM product significantly
improves the image quality and efficiency of both the Upright MRI and the outside manufacturer equipment that is operated by our
installed base. Revenues from the sale of SwiftMR TM are included in the service and maintenance revenues described above.

 In 2024, we formed a new subsidiary, Opus Diagnostic
Management, LLC, which is focused on providing service for MRI scanners sold by other manufacturers. We hope to control the cost of maintaining
and repairing the outside manufacturer equipment operated by HMCA, and to expand into providing maintenance and repair services to other
third party operators of outside manufacturer equipment. Revenues from Opus are included in the service and maintenance revenues described
above.

 RESEARCH AND DEVELOPMENT

 During the fiscal year ended June 30, 2025, we incurred
expenditures of $1,576,086, none of which were capitalized, on research and development, as compared to $1,735,949, none of which were
capitalized, during the fiscal year ended June 30, 2024.

 Research and development activities have focused principally
on software improvements to the user interface of the MRI scanner. The Windows-based Sympulse platform controls all of the functions
of the Upright scanner except those of the versatile, multi-position patient table. Separate, dedicated, motion-control software
is used to maneuver the Upright bed, and development of this software is ongoing as well.

 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.
Over time, FONAR users have become accustomed to the steady improvement in the recommended clinical protocols that accompany new software
releases. More significantly, in recent years we have seen increasing adoption of FONAR-recommended clinical protocols over those developed
on site. This is a testament to the superior image quality they produce in attractively short scan times.

 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 relationship with HMCA and the scanning centers. In addition to that collaboration, R&D staff have pursued
a variety of novel and Upright MRI-specific research projects. It is anticipated that these will ultimately lead to new applications
that are made available to existing customers as upgrade add-ons to their machines. For example, phase-contrast imaging techniques originally
developed for angiography have recently been applied to cerebrospinal fluid (CSF) flow. Analysis of CSF flow in upright and recumbent
postures may prove to be of significant value in the evaluation of a variety of disorders and lead to a better understanding of human
physiology.

 PATENTS AND LICENSES

 We currently have numerous patents in effect which
relate to the technology and components of our MRI scanners. We believe that these patents, and the know-how we have developed, are material
to our business.

 Our seminal patent, 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 in
this report as the "1974 Patent". The 1974 Patent was the first MRI patent issued by the United States Patent Office. The
development of our MRI scanners has 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. A number of FONAR's existing patents specifically relate to protecting FONAR's position in the Upright MRI market. The
patents further enhance Dr. Damadian's pioneer patent that initiated the MRI industry and provided the original invention of MRI
scanning.

 We maintain a robust patent portfolio that provides
us, under the aegis of United States patent law, "the exclusive right to make, use and sell" 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, 2025, a total of 245 patents
have been issued to FONAR. In fiscal year 2025, we obtained four new patents. Most significantly, we obtained approval for a patent related
to the development of our next generation patient positioning system. Other patents issued in fiscal 2025 include a system for monitoring
the effectiveness of a treatment regimen, and a method for assessing risk of cerebral palsy based on cerebrospinal fluid flow.

 PRODUCT COMPETITION

 MRI SCANNERS

 FONAR faces competition for MRI product sales from
companies such as Siemens, General Electric, Philips, Fujifilm, Canon, and United Imaging. Each of these is primarily focused on the high-field
(1.0 T and above) marketplace, though some have produced open MRI scanners for imaging in the recumbent posture. None of these firms has
so far introduced an open, upright MRI.

 In recent years, other companies have introduced MRI
scanners aimed at the upright, weight-bearing MRI market. Their success in the US has so far been limited. We believe that the higher
field strength and larger dimensions of the FONAR Upright MRI magnet, together with the greater variety of patient positioning possibilities
afforded by the FONAR Upright MRI bed, give us a competitive advantage over the products introduced by these companies.

 Most of our 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.

 OTHER IMAGING MODALITIES

 FONAR's MRI scanners also compete with other
diagnostic imaging systems, all of which are based upon the ability of some form of energetic wave to penetrate human tissue and be detected
by either photographic film or electronic devices for presentation on a display monitor. Three different kinds of energy waves –
x-ray, gamma, and sound – are used in medical imaging techniques that compete with MRI, 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 cost, space requirements,
and specific clinical applications.

 X-rays are the most common energy source used in imaging
the body and are employed in three imaging modalities: conventional x-ray systems, computerized tomography (CT), and digital radiography.
None of these enjoy the exquisite soft-tissue contrast of MRI, but they do offer high resolution imaging in certain applications and high
speed of image acquisition.

 Nuclear medicine systems, which are based upon the
detection of photons (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.

 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-rays or MRI, ultrasound is generally considered harmless
and therefore has found applications in imaging the pregnant uterus and the breast, to name two.

 X-ray (including CT), nuclear medicine, and ultrasound
compete with the MRI scanners by offering significantly lower price and space requirements. However, history has shown that the superior
tissue contrast characteristics of MRI have secured its place as the diagnostic imaging modality of choice for a wide variety of pathologies.

 GOVERNMENT REGULATION

 FDA Regulation

 The Food and Drug Administration in accordance with
Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing of FONAR'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 "QSR", 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.

 Classes of Products

 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. FONAR's
products are Class II devices. Class II devices are subject to "General Controls"; General Controls include:

 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.

 2.
 Medical device listing with FDA of devices to be marketed.

 3.
 Manufacturing devices in accordance with the Current Good Manufacturing Practices Quality System Regulation
in 21 CFR Part 820.

 4.
 Labeling devices in accordance with labeling regulations in 21 CFR Part 801 or 809.

 5.
 Submission of a Premarket Notification, pursuant to 510(k), before marketing a device.

 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.

 On October 3, 2000 FONAR received FDA clearance for
the Upright MRI under the name "Indomitable".

 Premarketing Submission

 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.

 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.

 The 510(k) is essentially a brief statement and description
of the product. As FONAR's scanner products are Class II products, there are no pre-market data requirements.

 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.

 For the most part, however, we have not found it necessary
to utilize IDE'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.

 Quality System Regulation

 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.

 Medical Device Reporting Regulation

 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, "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."

 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.

 Malfunctions are not reportable if they are not likely
to result in a death, serious injury or other significant adverse event experience.

 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.

 We have established and maintained written procedures
for implementation of the MDR regulation. These procedures include internal systems that:

 -

 provide for timely
and effective identification, communication and evaluation of adverseevents;

 -

 provide a standardized review process and procedures for determining whether
or not an event is reportable; and

 -
 provide procedures to insure the timely transmission of complete reports.

 These procedures also include documentation and record
keeping requirements for information that was evaluated to determine if an event was reportable; all medical device reports and information
submitted to the FDA; any information that was evaluated during preparation of annual certification reports; and systems that ensure access
to information that facilitates timely follow up and inspection by the FDA.

 FDA Enforcement

 FDA may take the following actions to enforce the
MDR regulation:

 FDA-Initiated or Voluntary Recalls

 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.

 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.

 Class I

 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.

 Class II

 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.

 Class III

 Is a situation in which use of, or exposure to, a
violative product is not likely to cause adverse health consequences.

 FONAR has initiated six voluntary recalls which occurred
between 1987 and 2016. Five 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.

 Civil Money Penalties

 The FDA, after an appropriate hearing, may impose
civil money penalties for violations of the Food Drug & Cosmetic 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.

 Warning Letters

 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.

 Seizure

 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.

 Citation

 A citation is a formal warning to a firm of intent
to prosecute the firm if violations of the FD&C Act are not corrected. It provides the firm an opportunity to convince FDA not to
prosecute.

 Injunction

 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.

 Prosecution

 Prosecution is a criminal action filed by FDA against
a company or individual charging violation of the law for past practices.

 Foreign and Export Regulation

 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.

 Legally marketed devices that comply with the requirements
of the FD&C Act require a Certificate to Foreign Government issued by the FDA for export. Other devices that do not meet the requirements
of the FD&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.

 Foreign governments have differing requirements concerning
the import of medical devices into their respective jurisdictions. The European Union's new medical device regulation, EU 2017/745
went into effect on May 25, 2021, and contains significant changes from the prior European regulatory scheme. We have applied to the Notified
Body, TUV-SUD, to perform a Conformity Assessment of our technical documentation and our Quality Management System.

 Other countries require that their own testing laboratories
perform an evaluation of our devices. This requires that we must bring the foreign agency's personnel to the USA to perform the
evaluation at our expense before exporting.

 Some countries, including many in Latin America and
Africa, have very few regulatory requirements, beyond FDA clearance.

 To date, FONAR has been able to comply with all foreign
regulatory requirements applicable to its export sales.

 EMPLOYEES

 FONAR and HMCA had approximately 535 employees as
of August 7, 2025. This total number included employees engaged in production, customer support, research and development, information
technology, employees engaged in marketing and sales, billing and collection, legal and compliance matters, as well as transcriptionists,
Florida technologists, field service technicians and individuals in various administrative positions. A significant number of employees
were employed at the MRI facilities managed or owned by HMCA, primarily in administrative positions.

 ITEM 1A. RISK FACTORS

 1. Reduced Reimbursement Rates. Most of our revenues
are derived from our scanning center business conducted by HMCA. Our scanning center clients and the Florida facilities owned by HMCA
are experiencing lower reimbursement rates from Medicare, other government programs and private insurance companies. To the extent possible,
we counter these reductions by increasing scanning volume and controlling operating expenses. Inflation in the cost of both materials
and labor have limited our ability to control our costs, negatively impacting our ability to maintain profitability in this business segment.

 2. Inflation. Inflation has drastically increased
our costs for both materials and labor. Diagnostic imaging facilities require significant amounts of capital to operate, particularly
in the context of opening new diagnostic imaging centers. These increased costs make it more difficult to achieve organic growth and extend
the time that a new center takes to achieve profitability. Continued cost increases, coupled with reduced reimbursement rates may threaten
the profitability of our current operations and cause the cost of expansion to become prohibitively high.

 3. Cybersecurity threats. Diagnostic imaging
centers have increasingly become a target for threat actors. Our organization relies on information technology systems and computer
networks to operate. Our partners, vendors, and business associates are equally reliant on their own computer systems to provide the
services that we depend on to perform core functions. Data incidents in the form of breaches, ransomware attacks, denial-of-service
attacks, and a variety of other hazards could materially disrupt our operations, or the operations of our partners. In addition, the
costs to respond to such incidents related to rebuilding internal systems, restoring data, responding to regulatory investigations
and/or litigation could be significant. Our cybersecurity liability insurance may be inadequate to cover these losses. Management
has identified a material weakness in our internal controls over our information technology systems during the fiscal year ending
June 30, 2025. While management has enacted a plan for remediation by improving these internal controls and implementing additional
controls, there is no guarantee these remediation efforts will be adequate. Further, there is no guarantee that other, unidentified
risks could negatively impact our operations in the future. The cost of maintaining and improving our security technologies to
protect ourselves from these threats, and to comply with associated regulatory requirements related to cybersecurity, has increased
substantially in the most recent fiscal year and will continue to increase in the future. Previous cybersecurity incidents have not
materially affected our results of operations or financial condition. However, cybersecurity threats have the potential to
significantly impair our operations and the operations of the various third parties upon whom we rely. Risks outside of our control,
such as cybersecurity attacks to our partners, vendors and business associates could threaten our ability to operate and reduce
operating margins.

 4. Dependence on Referrals. HMCA derives substantially
all of its revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at the facilities. We depend
on referrals of patients from unaffiliated physicians and other third parties to the facilities we manage or own for the services we perform.
If these physicians and other third parties were to reduce the number of patients they refer or discontinue referring patients, scan volumes
could decrease, which would reduce our net revenue and operating margins.

 5. Current and future changes in Florida Insurance
Law. On March 24, 2023, Florida enacted House Bill 837. Dubbed the Tort Reform Act, the bill made sweeping changes to Florida's
negligence laws that negatively impact our Florida diagnostic imaging facilities (both those we own and those we manage) with more unpaid
bills, higher administrative costs, and lower reimbursement rates. Florida legislators continue to propose significant changes to the
current structure of Florida's insurance industry, including an annual proposal to repeal of Florida's no-fault insurance
law and replace it with a fault-based system. This proposal was vetoed by Governor Ron DeSantis after passing both houses in 2021, but
similar legislation was proposed in 2022, 2023, and again in 2025. The 2025 proposal died unheard in the Florida Senate's Banking
and Insurance committee. A repeal of the no-fault law will result in significant delays in payment for the services we render and will
have a negative effect on our operations. The full impact of these proposed changes, including their impact on scan volume, are impossible
to estimate at this time. We will continue to monitor this bill as it continues through the legislative process.

 6. Scanning Facility Competition. The market for diagnostic
imaging services is highly competitive. The facilities we manage or own compete for patients on the basis of reputation, location and
the quality of diagnostic imaging services. Groups of radiologists, established hospitals, clinics and other independent organizations
that own and operate imaging equipment are the principal competitors. The Florida market in particular is experiencing a high level of
competition, which, coupled with recent Tort Reform, has created a challenging landscape for the centers we own and manage in that state,
and may deter future expansion.

 7. Pressure to Control Healthcare Costs. One of the
principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services.
Healthcare providers participating in managed care plans may be required to refer diagnostic imaging tests to certain providers depending
on the plan in which a covered patient is enrolled. In addition, managed care contracting has become very competitive. The expansion of
health maintenance organizations, preferred provider organizations and other managed care organizations in New York or Florida could have
a negative impact on the utilization and pricing of services performed at the facilities HMCA manages or owns to the extent these organizations
exert control over patients' access to diagnostic imaging services, selections of the provider of such services and reimbursement
rates for those services.

 8. Eligibility Changes to Insurance Programs. Due
to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in
governmental programs may increase. Healthcare reform legislation will continue to increase the participation of individuals in the Medicaid
program in states that elect to participate in the expanded Medicaid coverage. A shift in payor mix from managed care and other private
payors to government payors or an increase in the number of uninsured patients may result in a reduction in the rates of reimbursement
or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in net revenue. Policies now being offered
under various insurance plans are expected to reduce demand for MRI scans as they become less affordable. Changes in the eligibility requirements
for governmental programs such as the Medicaid program and state decisions on whether to participate in the expansion of such programs
also could increase the number of patients who participate in such programs and the number of uninsured patients. Even for those patients
who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater
risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition,
and results of operations.

 9. Federal and state privacy and information security
laws. We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security
and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act. If we
fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, or protect
our proprietary rights to our systems, our business, reputation, results of operations, financial position and cash flows could be materially
and adversely affected.

 10. Demand for MRI Scanners. The reduced reimbursement
rates have a negative effect on our sales of MRI scanners. With lower revenue projections, prospective customers would demand lower prices
for scanners. Although the reduced reimbursements may not affect foreign demand, a lower number of sales in the aggregate could reduce
economies of scale and consequently, profit margins.

 11. Manufacturing Competition. Many if not most of
our competing scanner manufacturers have significantly greater financial resources, production capacity, and other resources than we do.
Such competitors would include General Electric, Siemens, Hitachi and Phillips. Although FONAR is the only company which can manufacture
and sell the unique Stand-Up (Upright) MRI scanner, potential customers must be convinced that the purchase of a FONAR scanner
is their best choice. We believe that with time, that objective will be reached, particularly with customers scanning patients having
neck, back, knee and various orthopedic issues who would benefit from being scanned in weight-bearing positions.

 12. Other changes in Domestic and Worldwide Economic
Conditions. We are subject to risk arising from adverse changes in general domestic and global economic and other conditions, including
tariffs, recessions or economic slowdowns, disruptions of credit markets and military conflicts. Turbulence and uncertainty in the United
States and international markets and economies may adversely affect our workforce, liquidity, financial condition, revenues, profitability
and business operations generally.

 ITEM 1B. UNRESOLVED STAFF COMMENTS

 None.

 ITEM 1C. CYBERSECURITY

 Risk Management and Strategy

 Our Cybersecurity Risk Management Strategy includes
a myriad of tools and resources that are designed to ensure the integrity of our information systems. We place particular emphasis on
protecting the privacy of our patient data pursuant to the HIPAA Security Rule. Our cybersecurity risk management process is integrated
with our larger risk management system and is considered a core function of our overall risk management strategy.

 Our strategy is based around identification,
mitigation, avoidance and response to material cybersecurity risks. We employ physical and electronic safeguards to control access
to our systems. We employ additional electronic safeguards to control/limit access to the data contained in those systems. We review
and re-assess these processes on a rolling basis with the assistance of both internal staff and outside vendors, including
assessors, consultants, auditors, and other third parties. Some steps we take include the use of standard security protocols such as
password maintenance, multi-factor identification, and penetration testing. We take other steps as may be situationally appropriate
for the specific risk presented.

 For the fiscal year ended June 30, 2025, management has identified
a material weakness in our internal controls over our information technology systems, as described in greater detail in Item 9A. In response,
we have taken several steps to enhance our cybersecurity efforts. Those steps include increasing the scope of our Multi-Factor Authentication
requirement to include additional tertiary information systems, improving password security, upgrading our anti-virus software, upgrading
our threat detection tools, implementing additional threat detection tools, and replacing and/or decommissioning hardware that has known
vulnerabilities.

 We require all of our employees to receive cybersecurity
training as part of their initial onboarding process, and employees are required to complete additional training throughout the year.

 We evaluate all of our vendors and third-party partners
for material cybersecurity risks and take steps to mitigate risk through insurance and contractual risk transfer provisions when appropriate.
Our Information Technology department works collaboratively with our third-party vendors to coordinate a mutually beneficial approach
to cybersecurity in the specific context in which risk is presented. These collaborations sometimes take place on a rolling basis, and
sometimes take place on a semi-annual or annual basis.

 Cybersecurity threats, including previous cybersecurity incidents, have
not materially affected our results of operations or financial condition. However, cybersecurity threats have the potential to significantly
impair our operations and the operations of the various third parties upon whom we rely.

 Governance

 The audit committee of our Board of Directors provides
oversight of cybersecurity risks. It receives regular reports from management, including our General Counsel, on various cybersecurity
matters during each board meeting. Such reports include information on current cybersecurity risks facing the organization, cybersecurity
incidents involving our partners and/or other participants in our industry, and routine updates on the status of our internal cybersecurity
risk management plan.

 Our General Counsel oversees and manages our cybersecurity
program. Our General Counsel acts as the coordinator of our cybersecurity team, which includes representatives from our Information Technology
department and Compliance department. In addition, he regularly interacts with various department heads from both our New York and Florida
regions regarding the prevention, detection, mitigation and remediation of cybersecurity risks. Our General Counsel has an educational
background in computer science and has relevant work experience in cybersecurity insurance and risk management.

 ITEM 2. PROPERTIES

 FONAR and HMCA currently lease approximately 78,000
square feet of office and plant space at its principal offices in Melville, New York. The term of the lease runs through November, 2033.
Management believes that the premises will be adequate for its current needs. HMCA also maintains office space for the Facilities owned
by its subsidiaries in Florida and for its clients at the clients' sites in New York and Florida under leases having various terms.
HMCA owns the building for the client's premises in Tallahassee, Florida.

 ITEM 3. LEGAL PROCEEDINGS.

 From time to time we are involved in various litigation matters arising
in the ordinary course of our business. We do not believe the disposition of any current matter will have a material adverse effect on
our consolidated financial position or results of operations. There are no material legal proceedings threatened or pending against the
Company.

 ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable

 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

 Our Common Stock is traded on NASDAQ Capital Markets
under the symbol FONR.

 On September 8, 2025 we had approximately 922 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 992 stockholders of record of our Class A Non-voting Preferred Stock.

 The only class of our securities for which there is
a market is the Common Stock.

 We currently have a policy of retaining earnings to
finance the development and expansion of our business. We expect to continue this policy for the foreseeable future.

 Performance Graph

 The following graph compares
the Company's cumulative total stockholder return on its Common Stock against industry and broad-market indexes which have been
compiled by the Nasdaq Global Index Group. The periods commence on June 30, 2021 for five years and end on June 30, 2025. The graph assumes
$100 is invested in FONAR Common Stock (NASDAQ: FONR), the Nasdaq Composite Total Return (Nasdaq Composite), Nasdaq Health Care Management
Services (Nasdaq Health), and Nasdaq Medical Equipment (Nasdaq Equipment). The comparisons in the graph below are based on historical
data and are not intended to forecast the possible future performance of the common stock.

 Relative Dollar Values

 June 30, 2021

 June 30, 2022

 June 30, 2023

 FONR Common Stock

 $

 $

 $

 $

 $

 NASDAQ Composite

 $

 $

 $

 $

 $

 Health Care Management Services

 $

 $

 $

 $

 $

 Medical Equipment

 $

 $

 $

 $

 $

 Share Repurchase Program

 In
September 2022, our Board of Directors authorized a program to repurchase up to $9 million of our common stock. Under this program, we
may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including
pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including
price, capital availability, regulatory requirements, and other market conditions. We are not obligated to repurchase a specific number
of shares under this program and it may be modified, suspended or discontinued at any time.

 The following table summarizes
the number of shares repurchased during the three months ended June 30, 2025:

 Fiscal Month

 Total Number of Shares Purchased

 Average Price Paid per Share

 Total Number of Shares Purchased as Part of Publicly Announced Programs

 Maximum Dollar Value that May Still Be Purchased Under the Program (In Thousands)

 April 1, 2025 – April 30, 2025

 $

 —

 2,928

 May 1, 2025 – May 31, 2025

 $

 —

 2,928

 June 1, 2025 – June 30, 2025

 $

 —

 2,928

 Total

 $

 —

 ITEM 6. [Reserved]

 Not applicable.

 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

 INTRODUCTION.

 FONAR was formed in 1978 to engage in the business
of designing, manufacturing and selling MRI scanners. HMCA, a subsidiary of FONAR, provides management services to diagnostic imaging
facilities.

 FONAR's principal MRI product is its Upright
MRI (also called Stand-Up MRI) scanner. The Upright MRI allows patients to be scanned for the first time under weight-bearing
conditions. The Stand-Up MRI is the only MRI capable of producing images in the weight-bearing state.

 At 0.6 Tesla field strength, the Upright MRI
is among the highest field open MRI scanners in the industry, offering non-claustrophobic MRI together with high-field image quality.
FONAR's open MRI scanners were the first high field strength open MRI scanners in the industry.

 FONAR's
wholly owned subsidiary, Health Management Corporation of America ("HMCA"), has the controlling interest in Health Diagnostics
Management, LLC ("HDM"). HMCA presently has a direct ownership interest of 70.6% in HDM, and the investors in HDM have a
29.4% ownership interest. During the fiscal year ended June 30, 2025, the Company sold non-controlling interests to a minority shareholder
for $132,000. The management of the diagnostic imaging centers business segment is being conducted by HDM, operating under the name "Health
Management Company of America". For the sake of simplicity, HMCA, and HDM are referred to as "HMCA", unless otherwise
indicated.HMCA 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's clients, except for its six Florida subsidiaries which bill
and collect fees from patients, insurers and other third-party payors directly.

 In February 2024, FONAR formed a wholly-owned subsidiary,
Opus Diagnostic Management, LLC, to provide repair and maintenance of third party manufactured MRI equipment that HMCA operates.

 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 Our discussion and analysis of financial condition
and results of operations are based on our consolidated financial statements that were prepared in accordance with U.S. generally accepted
accounting principles, or GAAP. Management makes estimates and assumptions when preparing financial statements. These estimates and assumptions
affect various matters, including:

 Our reported amounts of assets and liabilities in
our consolidated balance sheets at the dates of the financial statements;

 Our disclosure of contingent assets and liabilities
at the dates of the financial statements; and

 Our reported amounts of net revenue and expenses in
our consolidated statements of operations during the reporting periods

 These estimates involve judgments with respect to
numerous factors that are difficult to predict and are beyond management's control. As a result, actual amounts could differ materially
from these estimates.

 We believe our critical accounting estimates in the
following areas affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

 Revenue Recognition and Receivable Allowances

 The Company's receivables from the related and
non-related professional corporations, as well as those receivables due under fee-for-service contracts at the Florida subsidiaries, are
largely dependent on collection of fees from various third-party payers. As described in greater detail in Note 2 to the Consolidated
Financial Statements, we recognize revenue in accordance with Accounting Standards Codification 606, as the services are provided.

 Medical receivables are due under fee-for-service
contracts with third-party payors, such as hospitals, government sponsored healthcare programs, patients' legal counsel and directly
from patients. The carrying amount of the medical receivable is reduced by contractual allowances and discounts based on the historical
experience with each payor class on a per location basis.

 Management fee receivable is related to the management
fees outstanding from the related and non-related professional corporations ("PCs") under management agreements. The Company
establishes a current expected credit loss ("CECL") to address the risk that a portion of the contractually obligated management
fees receivable from the PCs may not be paid. The PCs may be limited in their ability to pay the full management fees receivable if they
do not collect sufficient expected fees from third-party payers and patients. The Company's management fees are collateralized,
individually and collectively, by the assets of the PCs. The CECL is determined based upon the difference between the management fee receivable
and the current amount of outstanding fees estimated to be collected by the PCs. The Company's considerations into the estimate
of the PCs fee collection included historical loss rates to pools of receivables with similar risks and characteristics, current and forward
looking economic conditions, and the financial condition of each PC.

 We recognize revenue and related costs of revenue
from sales contracts for our MRI scanners and major upgrades, 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.

 RESULTS OF OPERATIONS. FISCAL 2025 COMPARED TO
FISCAL 2024

 In fiscal 2025, we recognized net income of $10.7
million on revenues of $104.4 million, as compared to net income of $14.1 million on revenues of $102.9 million for fiscal 2024. This
represents an increase in revenues of 1.4%. Total costs and expenses increased by 7.4%. Our consolidated operating results decreased by
29.7% to an operating income of $11.6 million for fiscal 2025 as compared to operating income of $16.5 million for fiscal 2024.

 Discussion of Consolidated Results of Operations

 Fiscal 2025 Compared to Fiscal 2024

 While revenue increased by 1.4% selling, general and
administrative expenses increased by 10.7% to $29.7 million in fiscal 2025 from $26.9 million in fiscal 2024. This difference in selling,
general and administrative expenses was largely due to a $2,300,000 increase on reserves for credit loses for a single payer – American
Transit Insurance Company. American Transit Insurance Company (ATIC) is a New York based motor vehicle insurer primarily focused on for-hire
automobile insurance. During Fiscal 2025, ATIC posted over $750 million in net losses and has indicated that they are approaching insolvency.
ATIC continues to operate and is working with the New York Department of Financial Services to resolve its issues. We are monitoring the
situation for new developments. If ATIC enters receivership or suffers additional adverse consequences, we may need to take additional
reserves in the future.

 Interest and investment income remained constant in
2025 compared to 2024. We recognized investment income of $2.1 million in fiscal 2025 and 2024. This is due to the Company placing cash
in interest bearing accounts and purchasing short term treasury bills.

 Interest expense of $25,611 was recognized in fiscal
2025, as compared to interest expense of $76,997 in fiscal 2024. The Company repaid the outstanding debt for a building located in Florida
during fiscal 2025.

 The 29.4% non-controlling interest allocations of
$2,339,000 and $3,530,000 for fiscal 2025 and fiscal 2024, respectively, have been calculated by Income from operations, and adding depreciation
and amortization net of miscellaneous losses and other income from the Physician and Diagnostic Service Management segment (See Note 15).

 We incurred some unusual one-time expenses during
Fiscal Year 2025. We settled an outstanding tax debt related to New York City Commercial Rent Tax in the amount of $172,000. We also incurred
a significant expense from Consolidated Edison Company in the amount of $206,000 for unreported electricity bills at our Midtown Manhattan
location, due to faulty meter reading over a period of years. These one-time expenses have been resolved.

 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 2025 we continued our investment in the development of various upgrades for the UPRIGHT MRI, with an investment of $1,576,086
in research and development, none of which was capitalized, as compared to $1,735,949, none of which was capitalized, in fiscal 2024.
The research and development expenditures were approximately 17.6% of revenues attributable to our medical equipment segment and 1.5%
of total revenues in 2025, and 20.8% of medical equipment segment revenues and 1.7% of total revenues in fiscal 2024. This represented
a 9.2% decrease in research and development expenditures in fiscal 2025 as compared to fiscal 2024.

 For the fiscal year 2025 the Company recorded an income
tax expense of $3.1 million compared with an income tax expense of $5.2 million for 2024. The Company has recorded a deferred tax asset
of $6.3 million as of June 30, 2025, primarily relating to the tax benefits from the net allowance for credit losses and tax credits available
to offset future taxable income. The income tax benefits are attributable to the expected tax benefits associated with the projected realization
and utilization of our net state operating losses in future periods. The utilization of these tax benefits is dependent on the Company
generating future taxable income and other factors. A partial valuation allowance will be maintained until evidence exists to support
that it is no longer needed, (principally related to unrealizable state operating losses). Although the Company is expecting to generate
taxable income in future periods, we cannot accurately measure the full impact of the adoption of healthcare regulations, including the
impact of continuing changes in MRI scanning reimbursement rates, which could materially impact operations. A partial valuation allowance
will be maintained until evidence exists to support that it is no longer needed. As of June 30, 2025, the valuation allowance was $252,000.

 We have been taking steps to improve HMCA revenues
by our marketing efforts, which focus on the unique capability of our Upright MRI scanners to scan patients in different positions.
We have also been increasing the number of health insurance plans in which our clients participate. Operationally, we have invested in
technology that we believe will reduce scan times and improve operational efficiency in the centers that we manage.

 Our management fees are dependent on collection by
our clients of fees from reimbursements from Medicare, Medicaid, private insurance, no fault and workers' compensation carriers,
self–pay and other third-party payers. The health care industry is experiencing the effects of the federal and state governments'
trend toward cost containment, as governments and other third-party payers 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
payers 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.

 Certain third-party payers 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's clients provide. To the extent reimbursement from third-party payers 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 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.
More frequently, however, patients are scanned and we experience difficulty in collecting deductibles and co-payments. We expect recent
changes to the Florida insurance laws to result in less patients being reimbursed through no-fault auto insurance, resulting in both lower
reimbursement rates and a higher rate of uncollectible billings. Further, we believe that the passage of New York Public Health Law Article
49A will have a significant negative impact on our collection rates. 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.

 In addition, the use of radiology benefit managers,
or RBM'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 highly controversial topic. We cannot predict whether 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.

 Discussion of Operating Results of Management of Diagnostic Imaging
Centers

 Fiscal 2025 Compared to Fiscal 2024

 Revenues attributable to the Company's physician
and diagnostic services management segment, HMCA, increased to $95.4 million in fiscal 2025 as compared to $94.6 million in fiscal 2024.
The increase in revenues was due to an increase of $1.5 million of management and other fees which was offset from a decrease of patient
fees (net of contractual allowances and discounts) from patient and third-party payers recognized by six of the facilities in Florida
of approximately $636,000. The decrease in patient fees at our Florida locations is a consequence of Florida's 2023 Tort Reform
Act. We have seen a decrease in both volume and average reimbursement rate since the act took effect, and we expect that trend to continue
for the immediate future.

 Cost of revenues as a percentage of the related revenues
for our physician and diagnostic services management segment increased from $53.0 million or 56.0% of related revenues for the year ended
June 30, 2024 to $55.6 million, or 58.3% of related revenues for the year ended June 30, 2025.

 Operating results of this segment decreased from operating
income of $23.5 million in fiscal 2024 to operating income of $19.2 million in fiscal 2025. The decrease is due mainly to taking a large
reserve for the American Transit Insurance Company business along with increased expenses in the form of staffing costs, equipment repair
costs and helium replacement costs. 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.

 For the fiscal year ended June 30, 2025, 11.5% of
total revenues were derived from contracts with facilities that are currently owned by Timothy Damadian, the Chief Executive Officer of
FONAR as compared to 11.6% of total revenues were derived from these contracts for the 2024 fiscal year. The agreements with these MRI
facilities are for one-year terms which renew automatically on an annual basis, unless terminated. The fees for these sites, which are
located in Florida, are flat monthly fees.

 Discussion of Operating Results of Medical Equipment
- Manufacturing and Service of MRI Equipment

 Fiscal 2025 Compared to Fiscal 2024

 Revenues attributable to our medical equipment segment
increased to $9.0 million in fiscal 2025 as compared to $8.4 million in fiscal 2024, with product sales revenues decreasing by 23.6% from
$738,000 in fiscal 2024 to $563,000 in fiscal 2025. Service revenue increased by 10.8% from $7.6 million in fiscal 2024 to $8.4 million
in fiscal 2025.

 Lower reimbursement rates have reduced the demand
for our MRI products, resulting in lower sales volumes. As a result of fewer sales, service revenues have decreased since as older scanners
are taken out of service, there are fewer new scanners available to sign service contracts.

 The operating loss for the medical equipment segment
increased from an operating loss of $7.0 million in fiscal 2024 to an operating loss of $7.6 million in fiscal 2025. The losses are attributable
most significantly to the fact that costs increased by a greater amount than revenues.

 The increase in costs was the result of several factors.
We made a significant investment into developing the capacity to service MRI equipment manufactured by third manufacturers through our
Opus Diagnostic Services, LLC subsidiary. We made additional investments into sales and marketing of image enhancement software SwiftMR TM
pursuant to our distribution agreement with AIRS Medical USA, Inc. We hope these ventures will develop into a viable source of new revenue
in the future.

 Research and development expenses decreased to $1.6
million in fiscal 2025 from $1.7 million in fiscal 2024. Our expenses for fiscal 2025 represented continued research and development of
various upgrades for the Upright MRI scanner.

 LIQUIDITY AND CAPITAL RESOURCES

 Cash, and cash equivalents remained constant at $56.3
million at June 30, 2025 and June 30, 2024.

 Cash provided by operating activities for fiscal 2025
was approximately $11.3 million. Cash provided by operating activities was attributable to the consolidated net income of $10.7 million,
adjusted primarily for depreciation and amortization of $4.7 million, provision for credit losses of $3.2 million, and an increase in
other current liabilities of $2.7 million which was offset by the increase in accounts, and medical and management fee receivables of
$9.0 million and an increase in prepaid expenses and other current assets of $1.2 million.

 Cash used in investing activities for fiscal 2025
was approximately $3.8 million. The cash used in investing activities was attributable to purchases of property and equipment of $3.8
million, costs of patents of $25,325, offset by proceeds from short term investments of $15,608. The majority of the purchases of property
and equipment was due to the addition of an additional high field scanners at two existing centers.

 Cash used in financing activities for fiscal 2025
approximated $7.5 million. The principal uses of cash used in financing activities included the repayment of borrowings and capital lease
obligations of $113,940, purchase of treasury stock of $1.8 million and distributions to non-controlling interests of $5.7 million which
was offset by the sale of noncontrolling interests of $132,000.

 Total liabilities decreased by 1.2% during fiscal
2025 from approximately $57.5 million at June 30, 2024 to approximately $56.8 million at June 30, 2025.

 At June 30, 2025, we had working capital of approximately
$127.5 million as compared to working capital of $122.5 million at June 30, 2024, and equity of $160.1 million at June 30, 2025 as compared
to equity of $156.8 million at June 30, 2024. This resulted from an increase in current assets ($140.3 million at June 30, 2024 as compared
to $144.7 million at June 30, 2025), and a decrease in current liabilities from $17.9 million at June 30, 2024 to $17.1 million at June
30, 2025.

 Our principal sources of liquidity are derived from
revenues.

 Our business plan includes a program for manufacturing,
selling, maintaining and repairing our Upright MRI scanners. In addition, we generate the majority of our revenue by participating
in the physician and diagnostic services management business through our subsidiary, HMCA. As of June 30, 2025, HMCA manages a total of
44 MRI scanners of which 26 MRI scanners are located in New York and 18 are located in Florida.

 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
$7.6 million for the year ended June 30, 2024 and $8.4 million for the year ended June 30, 2025.

 In order to promote profitability and to reduce demands
on our cash and other liquid reserves, we maintain an aggressive program of cost containment. Previously, these measures included consolidating
HMCA's office space with FONAR's office space and reducing the size of our workforce, compensation and benefits. We continue
to attempt to contain expenses across the board, despite significant increases in the cost of labor and materials as the result of inflation.
The cost control efforts are intended to keep expenditures at levels which can be supported by service revenues and HMCA revenues. To
this end, in February 2024, we have formed a subsidiary, Opus Diagnostic Management, LLC, to provide in-house repair and maintenance of
third party manufactured MRI equipment that we operate. We hope this entity will contain the maintenance and repair costs of our equipment
fleet, and eventually expand into providing service to outside entities, including third party equipment operated by FONAR's existing
installed base.

 Current economic credit conditions have contributed
to a slower than optimal business environment. As a result our business may suffer, should the credit markets not improve in the near
future. The direct impact of these conditions is not fully known.

 Revenues from HMCA have been the principal reason
for our profitability, and we have so far been able to maintain such revenues by increasing the number of scans being performed by the
sites we manage and those we own, notwithstanding reductions in reimbursement rates and increases in operating costs.

 Capital expenditures for fiscal 2025 approximated
$3.8 million and capitalized patent costs were approximately $25,000. Purchases of property and equipment were approximately $3.8 million.

 We have committed to making material capital expenditures
in the 2026 fiscal year. We expect to complete the installation of an additional high field scanner in Lynbrook, New York in the first
quarter of fiscal 2026.The capital expenditures for this project will approximate $1.5 million for the purchase of a new scanner. We also
intend to open an additional location in New York, and we hope to have that center operational before the end of the fiscal year. The
expected cost of this project will approximate $400,000 for the purchase of a new scanner and related buildout costs to be approximately
$500,000.

 The Company believes that its business plan has been
responsible for the past five consecutive fiscal years of profitability (fiscal 2025, fiscal 2024, fiscal 2023, fiscal 2022 and fiscal
2021), our current cash balance of $56. 3 million, along with a working capital of $127. 5 million and its capital resources will be adequate
to support operations at current levels through September 30, 2026.

 On September 13, 2022, the Company adopted a stock
repurchase plan. On September 26, 2022, the Board of Directors has approved up to $9 million to be repurchased under the plan which will
be purchased on the open market at prevailing prices. During fiscal 2025, we repurchased 114,588 shares for $1.8 million. Since the adoption
of the repurchase plan, the Company has repurchased 373,942 shares for $6.1 million.

 ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES
ABOUT MARKET RISK

 The Company does not have any significant investments
in marketable securities, foreign currencies, mutual funds, certificates of deposit or other fixed rate instruments. The Company currently
has 2 certificates of deposits totaling approximately $120,000 with maturities under 1 year. Most of our funds are in cash accounts or
money market accounts which are liquid. The Company has been investing in short term Treasury bills with a maturity date of 90 days or
less.

 All of our revenue, expense and capital purchasing
activities are transacted in United States dollars.

 ITEM 8. – FINANCIAL STATEMENTS AND FOOTNOTES

 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 PAGE

 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

 CONSOLIDATED BALANCE SHEETS As of June 30, 2025 and 2024

 CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended June 30, 2025 and 2024

 CONSOLIDATED STATEMENTS OF EQUITY For the Years Ended June 30, 2025 and 2024

 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2025 and 2024

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

 To the Shareholders and Board of Directors of

 FONAR Corporation and Subsidiaries

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance
sheet of FONAR Corporation and Subsidiaries (the "Company") as of June 30, 2025 and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of June 30, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

 We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial
reporting as of June 30, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated September 19, 2025 expressed an adverse
opinion.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters communicated below are
matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.

 Medical Receivable – Refer to Note 2 to the
financial statements

 Critical
Audit Matter Description

 Net realizable value of patient fee revenue and medical
receivables are due under fee-for-service contracts from third-party payors, such as hospitals, government sponsored healthcare programs,
patients legal counsel, and directly from patients. Medical receivables are recorded at net realizable value based on the estimated amounts
the Company expects to receive from patients and third-party payors. The medical receivable is reduced by contractual adjustments estimated
by management based on historical experience with each payor class at each location. Given these factors, the related audit effort in
evaluating management's judgments in determining the medical receivables was challenging, subjective, and complex and required a
high degree of auditor judgment.

 How the
Critical Audit Matter Was Addressed in the Audit

 Our audit procedures related to the net realizable
value of patient fee revenues and medical receivables included the following:

 -
 We tested the effectiveness of internal controls related to the measurement of patient fee revenue and
medical receivables.

 -
 We evaluated management's significant accounting policies related to patient fee revenue for reasonableness.

 -
 We tested information technology general controls around the Company's billing system and associated
database.

 -
 We tested the underlying data related to the recognition of patient level charges and the subsequent activities,
including cash collections and non-cash adjustments.

 -
 We tested the estimated contractual adjustments set forth by the third-party payors.

 -
 We tested the mathematical accuracy of the estimates applied to patient fee revenue and medical receivables.

 Management Fees Receivable – Refer to Note
2 to the financial statements.

 Management fees receivable is related to management
fees outstanding from the related and non-related professional corporations ("PCs") under management agreements. The Company
has established a current expected credit loss ("CECL") to address the risk that a portion of the contractually obligated
management fees receivable from the PCs may not be paid. The PCs may be limited in their ability to pay the full management fee receivable
if they do not collect sufficient expected fees from third-party payors and patients. The Company's management fees are collateralized,
individually and collectively, by the assets of the PCs. The CECL is determined based on the difference between the management fee receivable
and the current amount of outstanding fees estimated to be collected by the PCs. The Company's considerations into the estimate
of the PCs' fee collection include historical loss rates to pools of receivables with similar risks characteristics, current and
forward-looking economic conditions, and the financial condition of each PC. Given these factors, the related audit effort in evaluating
management's judgments in determining CECL was challenging, subjective, and complex and required a high degree of auditor judgment.

 How the
Critical Audit Matter Was Addressed in the Audit

 Our audit procedures related to the CECL estimate
of management fees receivable included the following:

 -
 We tested the effectiveness of internal controls that address the risk of material misstatement related
to the measurement of the CECL estimate.

 -
 We evaluated management's significant accounting policies related to CECL for reasonableness.

 -
 We tested that management fees for the year agreed with the executed management fee contracts with each
PC.

 -
 We tested information technology general controls surrounding the billing system utilized by the PCs.

 -
 We tested the mathematical accuracy of the calculations used to determine the CECL estimate.

 We have served as the auditors since 2025

 /s/ CohnReznick LLP

 Melville, NY

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

 To the Board of Directors and

Stockholders of FONAR Corporation and Subsidiaries

 Adverse Opinion on Internal Control over Financial
Reporting

 We have audited FONAR Corporation and Subsidiaries'
(the Company's) internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of
the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria,
the Company has not maintained effective internal control over financial reporting as of June 30, 2025, based on criteria established
in Internal Control—Integrated Framework (2013) issued by COSO.

 A material weakness is a control deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company's annual or interim consolidated financial statements will not be prevented or detected on a timely
basis. The following material weakness has been identified and included in management's assessment. Management has identified a
material weakness in logical access within its systems supporting the Company's accounting and reporting processes. This material
weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial
statements, and this report does not affect our report dated September 19, 2025, on those consolidated financial statements.

 We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet and the related consolidated
statements of income, stockholders' equity, and cash flows of the Company as of and for the year ended June 30, 2025, and our report
dated September 19, 2025 expressed an unqualified opinion.

 Basis for Opinion

 The Company's management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 Definition and Limitations of Internal Control
over Financial Reporting

 A company's internal control over financial
reporting is a process designed 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. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the consolidated financial statements.

 Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, 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.

 /s/
CohnReznick LLP

 Melville, NY

 September 22,
2025

 Report of Independent Registered Public Accounting
Firm

 To the Stockholders and Board of Directors of

 Fonar Corporation and Subsidiaries

 Opinion on the Financial Statements

 We have audited, before the effects of the retrospective
adjustments to the disclosures for the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
("ASU 2023-07") discussed in Notes 2 and 15 and before the effects of the retrospective adjustments to the disclosures for
the adoption of ASU 2023-09, Improvements to Income Tax Disclosures discussed in Notes 2 and 10 to the consolidated financial statements,
the accompanying consolidated balance sheet of Fonar Corporation and Subsidiaries (the "Company") as of June 30, 2024, the
related consolidated statements of income, stockholders' equity and cash flows for the year ended June 30, 2024, and the related
notes (collectively referred to as the "financial statements") (the 2024 financial statements before the effects of the adjustments
discussed in Notes 2 and 10 and 15 to the financial statements are not presented herein). In our opinion, the June 30, 2024 financial
statements before the effects of the retrospective adjustments to the disclosures for the adoption of ASU 2023-07 discussed in Notes 2
and 15 to the financial statements and before the effects of the retrospective adjustments to the disclosures for the adoption of ASU
2023-09 discussed in Notes 2 and 10 to the financial statements, the financial statements present fairly, in all material respects, the
financial position of the Company as of June 30, 2024, and the results of its operations and its cash flows for the year ended June 30,
2024, in conformity with accounting principles generally accepted in the United States of America.

 We were not engaged to audit, review, or apply any
procedures to the retrospective adjustments to the disclosures for the adoption of ASU 2023-07 discussed in Notes 2 and 15 and we were
not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for the adoption of ASU 2023-09
discussed in Notes 2 and 10.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.

 Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. we believe that our audit provides a reasonable basis for our opinion.

 /s/Marcum LLP

 Marcum LLP

 We served as the Company's auditor from 1990, such date takes into
account the merger of Tabb, Conigliaro, McGann, P.C. ("Tabb") into another firm in approximately 2001 and the former partners
of Tabb joining Marcum LLP in 2002 to 2024.

 New York, NY
September 27, 2024

 CONSOLIDATED BALANCE SHEETS

 ASSETS

 2025

 2024

 Current Assets:

 Cash and cash equivalents

 $

 56,333,636

 $

 56,341,193

 Short-term investments

 120,494

 136,102

 Accounts receivable – net of allowances for credit losses of $ 264,212 and $ 166,049 at June 30, 2025 and 2024, respectively

 5,304,698

 4,035,336

 Medical receivables

 24,489,808

 23,991,533

 Management and other fees receivable – net of allowances for credit losses of $ 14,295,988 and $ 12,369,921 at June 30, 2025 and 2024, respectively

 43,401,252

 41,953,657

 Management and other fees receivable – related party medical practices – net of allowances for credit losses of $ 7,136,836 and $ 6,110,399 at June 30, 2025 and 2024, respectively

 9,748,521

 9,865,061

 Inventories - net

 2,812,682

 2,715,441

 Prepaid expenses and other current assets – related party

 410,659

 —

 Prepaid expenses and other current assets

 2,050,060

 1,285,962

 Total Current Assets

 144,671,810

 140,324,285

 Accounts receivable – long term

 3,549,956

 829,473

 Note receivable – related party

 554,857

 581,183

 Deferred income tax asset

 6,349,194

 7,223,255

 Property and equipment – net

 18,531,919

 18,708,920

 Right-of-use-asset – operating leases

 35,136,412

 38,427,757

 Right-of-use-asset – finance lease

 376,569

 530,348

 Goodwill

 4,269,277

 4,269,277

 Other intangible assets – net

 2,992,203

 2,870,324

 Other assets

 475,680

 481,147

 Total Assets

 $

 216,907,877

 $

 214,245,969

 CONSOLIDATED BALANCE SHEETS

 LIABILITIES

 2025

 2024

 Current Liabilities:

 Current portion of long-term debt

 $

 —

 $

 47,002

 Accounts payable

 1,302,317

 1,855,879

 Other current liabilities

 6,974,997

 7,941,039

 Operating lease liabilities – current portion

 3,382,675

 3,473,674

 Finance lease liability – current portion

 244,237

 225,786

 Unearned revenue on service contracts

 4,865,936

 3,870,229

 Customer deposits

 354,244

 443,471

 Total Current Liabilities

 17,124,406

 17,857,080

 Long-Term Liabilities:

 Unearned revenue on service contracts

 3,800,746

 1,174,844

 Deferred income tax liability

 321,159

 371,560

 Due to related party medical practices

 92,663

 92,663

 Operating lease liabilities – net of current portion

 35,148,907

 37,467,746

 Finance lease liability – net of current portion

 142,523

 394,723

 Long-term debt, less current portion

 —

 66,938

 Other liabilities

 172,853

 32,026

 Total Long-Term Liabilities

 39,678,851

 39,600,500

 Total Liabilities

 $

 56,803,257

 $

 57,457,580

 Commitments and Contingencies

 CONSOLIDATED BALANCE SHEETS

 EQUITY

 2025

 2024

 Equity:

 Class A non-voting preferred stock $.0001 par value; 453,000 shares authorized at June 30, 2025 and 2024, 313,438 issued and outstanding at June 30, 2025 and 2024

 $

 $

 Preferred stock $.001 par value; 567,000 shares authorized at June 30, 2025 and 2024, issued and outstanding – none

 —

 —

 Common stock $.0001 par value; 8,500,000 shares authorized at June 30, 2025 and 2024, 6,203,465 and 6,328,494 issued at June 30, 2025 and 2024, respectively 6,168,625 and 6,283,213 outstanding at June 30, 2025 and 2024, respectively

 Class B convertible common stock (10 votes per share) $.0001 par value; 227,000 shares authorized at June 30, 2025 and 2024, 146 issued and outstanding at June 30, 2025 and 2024

 —

 —

 Class C common stock (25 votes per share) $.0001 par value; 567,000 shares authorized at June 30, 2025 and 2024, 382,513 issued and outstanding at June 30, 2025 and 2024

 Paid-in capital in excess of par value

 178,756,712

 180,607,510

 Accumulated deficit

 ( 5,289,324

)

 ( 13,623,585

)

 Treasury stock, at cost – 34,840 and 45,081 shares of common stock at June 30, 2025 and 2024, respectively

 ( 859,893

)

 ( 1,016,632

)

 Total Fonar Corporation's Stockholders' Equity

 172,608,186

 165,967,997

 Noncontrolling interests

 ( 12,503,566

)

 ( 9,179,608

)

 Total Equity

 160,104,620

 156,788,389

 Total Liabilities and Equity

 $

 216,907,877

 $

 214,245,969

 CONSOLIDATED STATEMENTS OF OPERATIONS

 2025

 2024

 Revenues

 Patient fee revenue – net of contractual allowances and discounts

 $

 33,179,446

 $

 33,815,796

 Product sales

 563,296

 737,727

 Service and repair fees

 8,234,053

 7,452,212

 Service and repair fees – related parties

 180,000

 139,167

 Management and other fees

 49,900,555

 48,789,287

 Management and other fees – related medical practices

 12,293,968

 11,949,900

 Total Revenues – Net

 104,351,318

 102,884,089

 Costs and Expenses

 Costs related to product sales

 1,018,029

 1,052,159

 Costs related to service and repair fees

 4,508,518

 3,577,570

 Costs related to service and repair fees – related parties

 323,504

 144,413

 Costs related to patient fee revenue

 19,130,935

 18,199,579

 Costs related to management and other fees

 30,073,045

 28,626,595

 Costs related to management and other fees – related medical practices

 6,388,281

 6,143,728

 Research and development

 1,576,086

 1,735,949

 Selling, general and administrative expenses

 29,734,163

 26,868,732

 Total Costs and Expenses

 92,752,561

 86,348,725

 Income from Operations

 11,598,757

 16,535,364

 Other Income and (Expenses):

 Interest expense

 ( 25,611

)

 ( 76,997

)

 Interest income – related party

 51,917

 25,959

 Investment income

 2,118,980

 2,126,439

 Other income – related party

 —

 576,857

 Other income

 36,195

 78,763

 Income before Provision for Income Taxes and Noncontrolling Interests

 13,780,238

 19,266,385

 Provision for Income Taxes

 ( 3,106,805

)

 ( 5,168,968

)

 Consolidated Net Income

 $

 10,673,433

 $

 14,097,417

 Net Income – Noncontrolling Interests

 ( 2,339,172

)

 ( 3,530,021

)

 Net Income – Attributable to FONAR

 $

 8,334,261

 $

 10,567,396

 CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

 2025

 2024

 Net Income Available to Common Stockholders

 $

 7,802,351

 $

 9,908,920

 Net Income Available to Class A Non –Voting Preferred Stockholders

 $

 396,443

 $

 490,776

 Net Income Available to Class C Common Stockholders

 $

 135,467

 $

 167,700

 Basic Net Income Per Common Share Available to Common Stockholders

 $

 1.26

 $

 1.56

 Diluted Net Income Per Common Share Available to Common Stockholders

 $

 1.23

 $

 1.53

 Basic and Diluted Income Per Share – Class C Common

 $

 0.35

 $

 0.44

 Weighted Average Basic Shares Outstanding – Common Stockholders

 6,210,852

 6,351,008

 Weighted Average Diluted Shares Outstanding – Common Stockholders

 6,338,356

 6,478,512

 Weighted Average Basic and Diluted Shares Outstanding – Class C Common

 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 FOR THE YEARS ENDED JUNE 30, 2025 AND 2024

 Common Stock Issued (Shares)

 Class A Preferred Stock (Shares)

 Class A Preferred Stock

 Class C Common Stock (Shares)

 Balance – July 1,2023

 $

 6,450,882

 $

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 ( 12

)

 ( 122,588

)

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Balance – June 30, 2024

 $

 6,328,294

 $

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 ( 13

)

 ( 124,829

)

 —

 —

 —

 Sale – Non controlling interest

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Balance – June 30, 2025

 $

 6,203,465

 $

 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 FOR THE YEARS ENDED JUNE 30, 2025 AND 2024

 Paid-in Capital in Excess of Par Value

 Treasury Stock (Shares)

 Treasury Stock

 Balance – July 1, 2023

 $

 $

 182,612,518

 11,463

 $

 ( 515,820

)

 —

 —

 —

 —

 —

 —

 156,206

 ( 2,505,832

)

 —

 ( 2,005,008

)

 ( 122,588

)

 2,005,020

 —

 —

 —

 —

 —

 —

 —

 —

 Balance – June 30, 2024

 $

 $

 180,607,510

 45,081

 $

 ( 1,016,632

)

 —

 —

 —

 —

 —

 —

 114,588

 ( 1,806,646

)

 —

 ( 1,963,373

)

 ( 124,829

)

 1,963,385

 Sale – Non controlling interest

 —

 112,575

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Balance – June 30, 2025

 $

 $

 178,756,712

 34,840

 $

 ( 859,893

)

 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 FOR THE YEARS ENDED JUNE 30, 2025 AND 2024

 Accumulated Deficit

 Non Controlling Interests

 Total

 Balance – July 1, 2023

 $

 ( 24,190,981

)

 $

 ( 7,079,293

)

 $

 150,827,140

 10,567,396

 —

 10,567,396

 —

 —

 ( 2,505,832

)

 —

 —

 —

 —

 ( 5,630,336

)

 ( 5,630,336

)

 —

 3,530,021

 3,530,021

 Balance – June 30, 2024

 $

 ( 13,623,585

)

 $

 ( 9,179,608

)

 $

 156,788,389

 8,334,261

 —

 8,334,261

 —

 —

 ( 1,806,646

)

 —

 —

 ( 1

)

 Sale – Non controlling interest

 —

 19,425

 132,000

 —

 ( 5,682,555

)

 ( 5,682,555

)

 —

 2,339,172

 2,339,172

 Balance – June 30, 2025

 $

 ( 5,289,324

)

 $

 ( 12,503,566

)

 $

 160,104,620

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 CASH FLOWS FROM OPERATING ACTIVITIES

 2025

 2024

 Consolidated Net Income

 $

 10,673,433

 $

 14,097,417

 Adjustments to reconcile consolidated net income to net cash provided by operating activities:

 Depreciation and amortization

 4,698,321

 4,596,421

 Provision for credit losses

 3,206,756

 1,882,061

 Deferred income tax - net

 823,660

 2,795,507

 Net change in operating right-of-use assets and lease liabilities

 ( 493

)

 ( 229,590

)

 Gain on sale of equipment – related party

 —

 ( 581,183

)

 Gain on disposition of fixed assets

 —

 ( 75,411

)

 Abandoned patents

 55,707

 225,419

 Changes in operating assets and liabilities, net:

 Accounts, medical and management fee receivable(s)

 ( 9,005,766

)

 ( 11,676,139

)

 Notes receivable

 —

 55,200

 Notes receivable – related party

 26,326

 —

 Inventories

 ( 97,241

)

 ( 145,775

)

 Prepaid expenses and other current assets

 ( 1,194,922

)

 266,606

 Other assets

 5,467

 42,359

 Accounts payable

 ( 553,562

)

 276,669

 Other current liabilities

 2,655,567

 2,949,962

 Customer advances

 ( 89,227

)

 ( 158,906

)

 Finance lease liabilities

 ( 79,970

)

 ( 217,569

)

 Other liabilities

 140,826

 ( 9,724

)

 NET CASH PROVIDED BY OPERATING ACTIVITIES

 11,264,882

 14,093,294

 CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

 2025

 2024

 CASH FLOWS FROM INVESTING ACTIVITIES

 Purchases of property and equipment

 ( 3,791,581

)

 ( 789,961

)

 Proceeds (Purchase) from short-term investment

 15,608

 ( 103,303

)

 Proceeds from sale of equipment

 —

 75,411

 Cost of patents

 ( 25,325

)

 ( 32,885

)

 NET CASH USED IN INVESTING ACTIVITIES

 ( 3,801,298

)

 ( 850,738

)

 CASH FLOWS FROM FINANCING ACTIVITIES:

 Repayment of borrowings and finance obligations

 ( 113,940

)

 ( 44,902

)

 Sale of noncontrolling interest

 132,000

 —

 Purchase of treasury stock

 ( 1,806,646

)

 ( 2,505,832

)

 Distributions to noncontrolling interests

 ( 5,682,555

)

 ( 5,630,336

)

 NET CASH USED IN FINANCING ACTIVITIES

 ( 7,471,141

)

 ( 8,181,070

)

 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 ( 7,557

)

 5,061,486

 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

 56,341,193

 51,279,707

 CASH AND CASH EQUIVALENTS - END OF YEAR

 $

 56,333,636

 $

 56,341,193

 NOTE 1 - DESCRIPTION OF BUSINESS AND LIQUIDITY AND CAPITAL RESOURCES

 Description of Business

 FONAR 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 MRI 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.

 FONAR, through its wholly-owned subsidiary Health
Management Company of America ("HMCA") 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.

 On July 1, 2015, the Company restructured the corporate
organization of the management of diagnostic imaging centers segment of our business. The reorganization was structured to more completely
integrate the operations of Health Management Corporation of America and Health Diagnostics Management ("HDM"). Imperial contributed
all of its assets (which were utilized in the business of Health Management Corporation of America) to HDM and received a 24.2 % interest
in HDM. Health Management Corporation of America retained a direct ownership interest of 45.8 % in HDM, and the original investors in HDM
retained a 30.0 % ownership interest in the newly expanded HDM. As of June 30, 2024 the Company had direct ownership interest of 70.8 %
and the investors' a 29.2 % ownership interest. During the year ended June 30, 2025, the Company sold non-controlling interests to
a minority shareholder for $ 132,000. Currently, the Company has a direct ownership interest of 70.63 % and the investors have a 29.37 %
ownership interest. The entire management of diagnostic imaging centers business segment is now being conducted by HDM, operating under
the name "Health Management Company of America".

 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.

 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 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, and revenue recognition. 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 or net realizable value.

 Property and Equipment

 Property and equipment is stated at cost less accumulated
depreciation. 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 $ 2,751,000 and $ 2,948,000 for the years
ended June 30, 2025 and 2024 respectively. The estimated useful lives in years are generally as follows:

 Schedule of Estimated Useful Life in Years for Property and Equipment

 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

 5 – 10

 Building

 Other Intangible Assets

 1) Patents and Copyrights

 Patent and copyrights are professional costs
incurred to acquire certain patent and copyrights. Amortization is calculated on the straight-line basis over 15 years.

 2) Non-Competition Agreements

 The non-competition agreements are agreements entered
into with past principal owners of entities that the Company had acquired. The non-competition agreements are being amortized on the straight-line
basis over the length of the agreement ( 7 years).

 3) Customer Relationships

 Customer relationships represents customer lists acquired
in acquisition of prior entities. Amortization is calculated on the straight-line basis over 20 years.

 4) Software License

 Software license represents a license to improve the
image quality and efficiency of the MRI scanners. Amortization is calculated on the straight-line basis over 3 years.

 Goodwill

 Goodwill represents the cost of a business acquisition
in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for impairment annually, or more frequently
if facts and circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying
amount including goodwill. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the
Company performs a quantitative test to identify and measure the amount of goodwill impairment loss. The Company compares the fair value
of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, goodwill of the reporting unit is considered
impaired, and that excess is recognized as a goodwill impairment loss.

 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 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 Financial Accounting Standards Board ("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. As of June 30, 2024, the Company had unearned revenue
on service contracts of $3,870,229 of which all was recognized as revenue in the fiscal year ending June 30, 2025.

 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, 2025, the Company has 22 management agreements of which 3 were with PC's
owned by Timothy Damadian, Chairman of the Board, President, Chief Executive Officer and Treasurer (formerly 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 four unrelated radiologists.
The contractual fees for services rendered to the PCs consists of fixed monthly fees per diagnostic imaging facility ranging from approximately
$ 70,000 to $ 460,000. All fees are re-negotiable at the anniversary of the agreements and each year thereafter. The Company records a credit
loss expense for estimated uncollectible fees, which is reflected in other operating expenses on the Consolidated Statement of Operations.

 The Company currently recognizes revenue in accordance
with the recognition accounting standard issued by the FASB and codified in the 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.

 Revenue Recognition (Continued)

 The Company's 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 for the years ended June 30, 2025 and 2024 are summarized in the following table.

 Schedule of patient fee
 revenue - net

 Patient Fee Revenue - Net

 For the Years Ended June 30

 2025

 2024

 Commercial Insurance/ Managed Care

 $

 4,957,159

 $

 4,952,712

 Medicare/Medicaid

 1,160,839

 1,138,176

 Workers' Compensation/Personal Injury

 19,876,923

 20,673,483

 Other

 7,184,525

 7,051,425

 Net Patient Fee Revenue

 $

 33,179,446

 $

 33,815,796

 Medical Receivable

 Medical receivables are due under fee-for-service
contracts from third-party payors, such as hospitals, government sponsored healthcare programs, patient's legal counsel and directly
from patients. Substantially all the revenue relates to patients residing in Florida. Medical receivables are recorded at net realizable
value based on the estimated amounts the Company expects to receive from patients and third-party payers. The medical receivable is reduced
by an allowance for contractual adjustments based on the historical experience with each payor class at each location. The medical fee
receivable as of July 1, 2023 was $ 21,259,262.

 For LLCs owned by the Company, approximately 57 %
and 67 % of net revenues were derived from no-fault and personal injury protection for the years end June 30, 2025 and 2024.

 Management and Other Fees Receivable

 Management fees receivable is related to management
fees outstanding from the related and non related PCs under management agreements. The Company has established a current expected credit
loss ("CECL") reserve to address the risk that a portion of the contractually obligated management fees receivable from the
PCs may not be collectible. The PC's may be limited in their ability to pay the full management fee receivable if they do not collect
sufficient expected fees from third-party payors and patients. The Company's management fees are collateralized, individually and
collectively, by the assets of the PCs. The CECL reserve is determined based on the difference between the management fee receivable and
the current amount of outstanding fees estimated to be collected by the PCs.

 The Company's considerations into the estimate
of the PC's fee collection is based on a combination of factors. As each management agreement specifies the Company's ultimate
collateral for unpaid management fees are the patient fee receivables owned by each PC, the Company considers the historical loss rates
to pools of receivables with similar risks characteristics, aging of the patient fee receivables, and the financial condition of each
PC. In addition, the Company subjectively adjusts its estimated expected credit losses for current and forward-looking economic conditions
which would include trends seen within the industry and newly enacted regulation. Specifically, insurance carriers covering automobile
no-fault and workers compensation claims incur longer payment cycles and rigorous informational requirements and certain other disallowed
claims.

 The Company combines an objective
and subjective loss-rate methodology to estimate expected credit losses based on the collateral owned by each PC. This involves objectively
using historical loss rates to pools of receivables with similar risk characteristics (i.e., various insurance payors) and then subjectively
adjusting for current and forward-looking economic conditions which would include trends seen within the industry and newly enacted regulation.

 The provision for credit losses for the year ended June 30, 2025 was
$3,079,261. The provision for credit losses is attributable to scan volume at all the PC's and the nature of the payor classes,
where there can be longer expected payment terms. Also, during the year ended June 30, 2025, the Company recorded an additional reserve
of approximately $2,300,000 for a specific receivable that is attributable to a American Transit Insurance Company (ATIC). This reserve
for credit losses relates specifically to ATIC, which owes no-fault insurance claims by the PCs to the PCs, which are collateral for the
Company's management and other fees receivable. ATIC is a New York based motor vehicle insurer primarily focused on for-hire automobile
insurance. During Fiscal 2025, ATIC posted over $750 million in net losses and has indicated that they are approaching insolvency. ATIC
continues to operate and is working with the New York Department of Financial Services (DFS) to resolve its issues. We continue to monitor
the situation for new developments. However, at the time of this filing, DFS has not publicly announced approval of any plans for ATIC
to resolve its financial situation. In addition, Uber has filed a lawsuit against ATIC alleging they are not properly paying claims. Additional
legislation in New York City to reduce coverage minimums and increase premiums may help to resolve the crisis, but there is no certainty
these efforts will be successful. If ATIC enters receivership or suffers additional adverse consequences, we may need to take additional
reserves in the future. The management fee receivable
for unrelated and related parties as of July 1, 2023 was $ 35,888,253 and $ 9,161,870, respectively.

 Accounts Receivable

 Credit risk with respect to the Company'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. The account receivable balance for scanner service contracts as of July 1,
2023 was $ 4,571,597.

 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 $ 773,000 and $ 731,000 and for the years ended June 30, 2025 and 2024, 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.

 The ultimate realization of deferred tax assets is
dependent on the generation of future taxable income during the periods in which temporary differences become deductible or when such
net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry,
and tax planning strategies in making this assessment. At present, the Company believes that it is more likely than not that the benefits
from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance
was established for the partial value of the deferred tax asset, which principally related to certain state net operating losses. A valuation
allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation.

 Income Taxes (Continued)

 ASC 740, "Accounting for Income Taxes",
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 unrecognized benefits. 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'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 740. The Company believes there are no uncertain tax positions in prior year's tax filings and therefore it
has not recorded a liability for unrecognized tax benefits.

 In accordance with ASC 740, interest costs related
to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as "Interest expense, net. Penalties
if incurred would be recognized as a component of "Selling, general and administrative" expenses. Penalties for the years
ended June 30, 2025 and June 30, 2024 were $ 0 and $ 20,444, respectively.

 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, 2025 and 2024.

 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, 2025 and 2024, diluted EPS for common shareholders includes 127,504 shares upon conversion of
Class C Common.

 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 Earnings Per Share (Continued)

 Schedule of earnings per share

 Basic

 Total

Stock

 Numerator:

 Net income available to common stockholders

 $

 8,334,261

 $

 7,802,352

 $

 135,467

 $

 396,443

 Denominator:

 Weighted average shares outstanding

 6,906,803

 6,210,852

 Basic income per common share

 $

 1.21

 $

 1.26

 $

 0.35

 $

 1.26

 Diluted

 Denominator:

 Weighted average shares outstanding

 6,210,852

 127,504

 —

 Total Denominator for diluted earnings per share

 6,338,356

 Diluted income per common share

 $

 1.23

 $

 0.35

 Basic

 Total

Stock

 Numerator:

 Net income available to common stockholders

 $
 10,567,396

 $
 9,908,920

 $
 167,700

 $
 490,776

 Denominator:

 Weighted average shares outstanding

 7,046,959

 6,351,008

 Basic income per common share

 $
 1.50

 $
 1.56

 $
 0.44

 $
 1.57

 Diluted

 Denominator:

 Weighted average shares outstanding

 6,351,008

 127,504

 —

 Total Denominator for diluted earnings per share

 6,478,512

 Diluted income per common share

 $
 1.53

 $
 0.44

 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

 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. Interest is recorded as earned.

 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, 2025, the Company had cash
on deposit of approximately $ 53,676,000 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, 2025 and 2024. Net management fee receivables
from the related party medical practices accounted for approximately 12 % of the consolidated accounts receivable as of June 30, 2025 and
2024.

 For the years ended June 30, 2025 and June 30, 2024,
the Company made purchases from two vendors that accounted for 36 % and 0 % of total purchases, respectively.

 See Note 3 regarding the Company's concentrations
in the healthcare industry.

 Fair Value of Financial Instruments

 The Company measures fair value in accordance with
ASC 820-10, "Fair Value Measurements and Disclosures". ASC 820-10 clarifies that fair value is an exit price, representing
the amount that would be received by selling an asset or paid to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined based on assumptions.

 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.

 Fair Value of Financial Instruments (Continued)

 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.

 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.

 Recently Adopted Accounting Standards

 In December 2023, The Financial Accounting Standards Board ("FASB")
issued ASU 2023-09, "Income Taxes (740) "Improvements to Income Tax Disclosures", which requires the annual financial
statements to include consistent categories and great disaggregation of information in the rate reconciliation and income taxes paid disaggregated
by jurisdiction. ASU 2023-09 is effective for the Company's annual reporting beginning after December 15, 2024, with early adoption
permitted, and should be applied on a prospective basis, with a retrospective option. The Company recently adopted this ASU retrospectively
for the year ended June 30, 2025 and 2024 and it impacts only our disclosures with no impacts to our financial condition and results of
operations.

 In November 2023, FASB issued ASU 2023-07, "Segment
Reporting (Topic 280)", which is intended to improve reportable segment disclosure requirements through enhanced disclosures about
significant segment expenses. The amendments require disclosure of significant segment expenses regularly provided to the chief operating
decision maker (CODM) as well as other segment items, extended certain annual disclosures to interim periods, clarify the applicability
to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require
disclosure of the title and position of the CODM. The effective date for public entities is for fiscal years beginning after December
15, 2023 and interim periods with fiscal years beginning after December 15, 2024. The Company adopted ASU for the year ended June 30,
2025 and it impacts only our disclosures with no impacts to our financial condition and results of operations.

 In November 2024, the FASB issued ASU 2024-03, "Income
Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures" (Subtopic 220-40): Disaggregation of
Income Statement Expenses". This ASU requires disaggregation of certain income statement expense captions into specified categories
to be disclosed within the notes to the financial statements, but does not change the expense captions on the income statement. The amendments
in this ASU are to be applied prospectively, although retrospective application is permitted, and is effective for annual financial statements
starting in fiscal 2028 and interim periods starting in fiscal 2029, with early adoption permitted. The Company is currently evaluating
the effect that the adoption of ASU 2024-03 will have on our disclosures.

 FASB, the Emerging Issues Task Force and the SEC have
issued certain other accounting standards, updates, and regulations as of June 30, 2025 that will become effective in subsequent periods;
however, management does not believe that any of those updates would have significantly affected the Company's financial accounting
measures or disclosures had they been in effect during 2025 or 2024, and it does not believe that any of those standards will have a significant
impact on the Company's consolidated financial statements at the time they become effective.

 NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL
RECEIVABLE AND MANAGEMENT AND OTHER FEES RECEIVABLE

 Long Term Accounts Receivable

 Long term accounts receivable balances at June 30,
2025 and June 30, 2024 amounted to $ 3,549,956 and $ 829,473, respectively. The Company will generate revenue from long-term, non-cancellable
contracts to provide service and repair services. Future revenue to be recognized over the following four years at June 30, 2025 is as
follows:

 Schedule of Long Term Accounts Receivable

 Receivables - Non Current - net

 2027

 $
 1,592,426

 2028

 1,031,910

 2029

 831,660

 2030

 344,750

 Total

 $
 3,800,746

 The following represents a summary of allowance for
credit losses for the years ended June 30, 2025 and 2024, respectively:

 Schedule of Summary of Allowance For Credit Losses

 Summary of Allowance For Credit Losses

 Description

 Balance

 Additions (1)

 Deductions

 Balance

 Accounts receivable

 $

 166,049

 $

 107,330

 $

 9,167

 $

 264,212

 Management and other fees receivable

 12,369,921

 2,052,824

 126,757

 14,295,988

 Management and other fees receivable - related medical practices

 6,110,399

 1,026,437

 —

 7,136,836

 Notes receivable

 777,354

 —

 777,354

 —

 Balance

 Balance

 Description

 June 30, 2023

 Additions(Recovery)

 Deductions

 Accounts receivable

 $

 198,593

 $

 —

 $

 32,544

 $

 166,049

 Management and other fees receivable

 12,608,567

 ( 238,646

)

 —

 12,369,921

 Management and other fees receivable - related medical practices

 3,989,692

 2,120,707

 —

 6,110,399

 Notes receivable

 777,354

 —

 —

 777,354

 (1)

 Included in provision for credit losses.

 NOTE 3 – ACCOUNTS RECEIVABLE, MEDICAL RECEIVABLE
AND MANAGEMENT AND OTHER FEES RECEIVABLE (CONTINUED)

 Net revenues from management and other fees
charged to the related party medical practices accounted for approximately 11 %
and 12 % of the consolidated net revenues for the years ended June 30, 2025 and 2024, respectively.

 Tallahassee Magnetic Resonance Imaging, Inc., Stand
Up MRI of Boca Raton, Inc. and Stand Up MRI & Diagnostic Center, Inc. (all related party 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.

 The following table sets forth the number of our facilities
for the years ended June 30, 2025 and 2024.

 Total Facilities

 Schedule of facilities

 For the Year Ended June 30,

 2025

 2024

 Total Facilities Owned or Managed (at Beginning of Year)

 Facilities Added by:

 Internal development

 —

 Managed Facilities Closed

 —

 —

 Total Facilities Owned or Managed (at End of Year)

 NOTE 4 – INVENTORIES

 Inventories included in the accompanying consolidated
balance sheets consist of:

 Schedule of inventories

 As of June 30,

 2025

 2024

 Purchased parts and components

 $

 2,630,439

 $

 2,524,201

 Work-in-process

 182,243

 191,240

 Inventories

 $

 2,812,682

 $

 2,715,441

 NOTE 5 - PROPERTY AND EQUIPMENT

 Property and equipment, at cost, less accumulated
depreciation and amortization, at June 30, 2025 and 2024, is comprised of:

 Schedule of Property and equipment

 As of June 30,

 2025

 2024

 Diagnostic equipment

 $

 35,276,823

 $

 33,243,694

 Research, development and demonstration equipment

 6,490,872

 6,199,941

 Machinery and equipment

 2,128,398

 2,069,055

 Furniture and fixtures

 3,756,017

 3,742,169

 Leasehold improvements

 17,707,234

 16,312,904

 Building

 939,614

 939,614

 66,298,958

 62,507,377

 Less: Accumulated depreciation and amortization

 47,767,039

 43,798,457

 $

 18,531,919

 $

 18,708,920

 Depreciation of property and equipment for the years
ended June 30, 2025 and 2024 was $ 3,968,582 and $ 4,227,414, respectively.

 NOTE 6 – OPERATING AND FINANCE LEASES

 The Company accounts for its various operating leases
in accordance with Accounting Standards Codification ('ASC') 842 – Lease, as updated by ASU 2016-02. At the inception
of a lease, the Company recognizes right-of-use lease assets and related lease liabilities measured at present value of future lease payments
on its balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. Our most common initial term varies
in length from 2 to 19 years. Including renewal options negotiated with the landlord, we have a total span of 2 to 16 years at the facilities
we lease. The Company reviewed its contracts with vendors and customers, determining that its right-to-use lease assets consisted of only
office space operating leases. In determining the right-to-use lease assets and liabilities, the Company did recognize lease extension
options which the Company feels would be reasonably exercised. Our incremental borrowing rate ("IBR") used to discount the
stream of operating lease payments is closely related to the interest rates available to the Company. A reconciliation of operating and
finance lease payments undiscounted cash flows to lease liabilities recognized as of June 30, 2025 is as follows:

 NOTE 6 – OPERATING AND FINANCE LEASES (CONTINUED)

 Schedule of Operating Lease and Finance Lease Payments

 Year Ending June 30,

 Operating Lease Payments

 Finance Lease Payments

 2026

 $
 5,753,674

 $
 244,343

 2027

 5,718,999

 142,534

 2028

 5,629,193

 —

 2029

 5,240,019

 —

 2030

 5,120,717

 —

 Thereafter

 25,496,885

 —

 Present value discount

 ( 14,427,905
)

 ( 117
)

 Total lease liability

 $
 38,531,582

 $
 386,760

 Weighted Average Remaining Lease Term

 Schedule of Weighted Average Remaining Lease Term

 As of June 30,

 2025

 2024

 Operating leases - years

 10.2

 11.0

 Finance lease - years

 1.6

 2.6

 Weighted Average Discount Rate

 Operating leases

 6.5

 %

 6.4

 %

 Finance lease

 3.6

 %

 3.6

 %

 The components of lease expense were as follows:

 Schedule of components of lease expense

 Components of lease expense

 For Year Ended June 30,

 2025

 2024

 Operating lease cost

 $

 6,110,496

 $

 5,685,008

 Finance lease cost:

 Depreciation of leased equipment

 $

 198,881

 $

 198,881

 Interest on lease liabilities

 16,812

 26,534

 Total finance lease cost

 $

 215,693

 $

 225,415

 NOTE 6 – OPERATING AND FINANCE LEASES (CONTINUED)

 Supplemental cash flow information related to leases
was as follows:

 Schedule
 of supplemental cash flow information related to leases

 Supplemental cash flow information related to leases

 For Year Ended June 30,

 Cash paid for amounts included in the measurement of lease liabilities:

 2025

 2024

 Operating cash flows from operating leases

 $

 5,729,571

 $

 6,363,561

 Financing cash flows from finance leases

 $

 264,705

 $

 244,344

 Right-of-use and equipment assets obtained in exchange for lease obligations:

 Operating leases

 $

 2,319,913

 $

 3,715,138

 The Company rents its operating facilities and certain
equipment, pursuant to operating lease agreements expiring at various dates through November 2033. The leases for certain facilities contain
escalation clauses relating to increases in real property taxes as well as certain maintenance costs.

 Rent expense for operating leases approximated $ 6,110,000
and $ 5,685,000, for the years ended June 30, 2025 and 2024, respectively.

 Rent expense for the finance lease approximated
$ 216,000 and $ 225,000 for the years ended June 30, 2025 and 2024, respectively.

 NOTE 7 - OTHER INTANGIBLE ASSETS

 Other intangible assets, net of accumulated amortization,
at June 30, 2025 and 2024, are comprised of:

 Schedule of other intangible assets, net of accumulated amortization

 Weighted average useful lives

 Gross carrying amount – June 30, 2025

 Accumulated amortization – June 30, 2025

 Net carrying amount – June 30, 2025

 Capitalized software development costs

 5 years

 $

 7,004,847

 $

 ( 7,004,847

)

 $

 —

 Software License

 3 years

 1,260,000

 ( 756,000

)

 504,000

 Patents and copy rights

 15 years

 5,229,429

 ( 4,255,393

)

 974,036

 Non-compete

 7 years

 4,150,000

 ( 4,150,000

)

 —

 Customer relationships

 20 years

 3,900,000

 ( 2,385,833

)

 1,514,167

 Total

 $

 21,544,276

 $

 ( 18,552,073

)

 $

 2,992,203

 Weighted average useful lives

 Gross carrying amount – June 30, 2024

 Accumulated amortization – June 30, 2024

 Net carrying amount – June 30, 2024

 Capitalized software development costs

 5 years

 $

 7,004,847

 $

 ( 7,004,847

)

 $

 —

 Patents and copy rights

 15 years

 5,259,811

 ( 4,103,654

)

 1,156,157

 Non-compete

 7 years

 4,150,000

 ( 4,150,000

)

 —

 Customer relationships

 20 years

 3,900,000

 ( 2,185,833

)

 1,714,167

 Total

 $

 20,314,658

 $

 ( 17,444,334

)

 $

 2,870,324

 NOTE 7 - OTHER INTANGIBLE ASSETS (CONTINUED)

 The estimated amortization of other intangible assets
for the five years ending June 30, 2030 and thereafter is as follows:

 Schedule of estimated amortization of other intangible assets

 Schedule Of Other Intangible Assets For the Years Ending June 30,

 Total

 Software License

 Patents and Copyrights

 Customer Relationships

 2026

 $
 756,880

 $
 420,000

 $
 136,880

 $

 2027

 402,426

 84,000

 118,426

 2028

 306,103

 —

 106,103

 2029

 295,898

 —

 95,898

 2030

 291,464

 —

 91,464

 Thereafter

 939,432

 —

 425,265

 514,167

 Other intangible assets - net

 $
 2,992,203

 $
 504,000

 $
 974,036

 $
 1,514,167

 The weighted average amortization period for other
intangible assets is 9.0 years and they have no expected residual value.

 Information related to the above intangible assets
for the years ended June 30, 2025 and 2024 is as follows:

 Schedule of other
 intangible assets

 Other Intangible Assets

 For the Year-ended June 30,

 2025

 2024

 Balance – Beginning of Year

 $

 2,870,324

 $

 3,431,865

 Amounts capitalized

 25,325

 32,885

 Patents written off

 ( 55,707

)

 ( 225,419

)

 Correction of an error (Note 2)

 882,000

 —

 Amortization

 ( 729,739

)

 ( 369,007

)

 Balance – End of Year

 $

 2,992,203

 $

 2,870,324

 Amortization of patents and copyrights for the years
ended June 30, 2025 and 2024 amounted to $ 151,739 and $ 169,007, respectively.

 Amortization of customer relationships for the years
ended June 30, 2025 and 2024 amounted to $ 200,000 and $ 200,000, respectively.

 Amortization of software licenses for the years
ended June 30, 2025 and 2024 amounted to $ 378,000 and $ 0, respectively.

 NOTE 8 - CAPITAL STOCK

 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.

 Class B Common Stock

 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 146 of such shares outstanding at June 30,
2025and 2024.

 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.

 Class A Non-Voting Preferred Stock

 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.

 The Class A non-voting preferred stock is entitled
to a special dividend equal to 3-1/4% of the first $10 million, 4-1/2% of the next $20 million and 5-1/2% on amounts in excess of $30
million of the amount of any cash awards or 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.

 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).

 NOTE 8 - CAPITAL STOCK (CONTINUED)

 Stock Bonus Plans

 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, 2025, 450,177 shares of common stock of FONAR were available for future grant under this
plan. For the years ended June 30, 2025 and 2024, no shares were issued.

 Treasury Stock

 On September 13, 2022, the Company adopted a stock
repurchase plan. The plan has no expiration date and cannot determine the number of shares which will be repurchased. On September 26,
2022, the Board of Directors has approved up to $ 9 million to be repurchased under the plan which will be purchased on the publicly traded
open market at prevailing prices.

 The Company utilizes the cost method of accounting
to value the treasury stock when repurchasing stock. Under this method, the shares are valued at the price paid and recorded to treasury
stock. When the treasury stock is cancelled, the par value of the stock is reduced and the additional paid in capital is reduced for the
remaining value based upon the original stock sale. For the year ended June 30, 2025, the Company purchased 114,588 shares at a cost of
$ 1,806,646 and cancelled 124,829 shares valued at $ 1,963,385. For the year ended June 30, 2024, the Company purchased 156,206 shares at
a cost of $ 2,505,832 and cancelled 122,588 shares valued at $ 2,005,020.

 NOTE 9 – CONTROLLING AND NONCONTROLLING
INTERESTS

 On February 13, 2013, the Company entered into an
agreement with outside investors to acquire a 50.5% controlling interest in a newly formed limited liability company, Health Diagnostics
Management LLC (HDM). According to the February 13, 2013, LLC operating agreement of HDM there are two classes of members; Class A members
and one Class B member. The Class A members have an ownership interest of 49.5 % of HDM. The Class B member (HMCA) has an ownership of
 50.5 % of HDM. On all matters on which members may vote every member is entitled to cast the percentage of votes equal to their percentage
of ownership interest. Profits and losses on all items of income, gain or loss, deductions or other allocations of the Company will be
allocated among the members in the same proportions as their membership interests in the Company bear to all the Class A and Class B membership
interests of the Company in the aggregate outstanding. All of the depreciation and amortization of the assets of the Company will be allocated
solely to the Class A members, unless and until their interests have been redeemed by the Company in full pursuant to the provisions of
the operating agreement. The Company contributed $ 20,200,000 to HDM and the group of outside investors contributed $ 19,800,000 for its
non-controlling membership interest.

 NOTE 9 – CONTROLLING AND NONCONTROLLING
INTERESTS (CONTINUED)

 On March 5, 2013, HDM purchased from Health Diagnostics,
LLC ("HD") and certain of its subsidiaries, a business managing twelve ( 12) Stand-Up MRI Centers and two ( 2) other scanning
centers located in the States of New York and Florida for a total purchase price (including consideration of $ 1.5 million to outside investors)
aggregating $ 35.9 million. Concurrently with the acquisition, HDM entered into several consulting and non-competition agreements for a
consideration of $ 4.1 million. The acquisition was accounted for using the purchase method in accordance with ASC 805, "Business
Combinations". The Company recognized and measured goodwill as of the acquisition date, as the excess of the fair value of the consideration
paid over the fair value of the identified net assets acquired.

 On January 8, 2015, the Company purchased 20 % of the
Class A members ownership interest at a cost of $ 4,971,094. The Company has a 60.4 % ownership interest in HDM after this transaction.
During the year ended June 30, 2025, the Company sold non-controlling interests to a minority shareholder for $ 132,000. Currently, the
Company has a direct ownership interest of 70.63 % and the investors have a 29.37 % ownership interest.

 The amount of each class of HDM members' equity
as of June 30, 2025 and 2024 is as follows:

 Schedule of HDM members equity

 Class A Members

 Class B Member

 Class A Members

 Class B Member

 Opening Members' Equity

 ($

 9,179,608

)

 $

 61,817,830

 ($

 7,079,293

)

 $

 54,781,813

 Share of Net Income

 2,339,172

 16,727,492

 3,530,021

 20,705,681

 Buyout of noncontrolling interests

 19,425

 —

 —

 —

 Distributions

 ( 5,682,555

)

 ( 13,717,445

)

 ( 5,630,336

)

 ( 13,669,664

)

 Ending Members' Equity

 ($

 12,503,566

)

 $

 64,827,877

 ($

 9,179,608

)

 $

 61,817,830

 NOTE 10 - INCOME TAXES

 Income tax expense is computed using an asset and
liability method using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from
temporary differences in the financial reporting basis and the income tax basis of assets and liabilities. The measurement of deferred
tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized.
When it appears more than likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred
tax asset to its realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether or
net deferred tax assets are more likely than not to be realized.

 The Company has recorded a deferred tax asset of $ 6,349,194
and a deferred tax liability of $ 321,159 as of June 30, 2025, primarily relating to its allowance for credit losses of $4,366,000, non
deductible accruals of $ 759,000 and capitalized research and development costs of approximately $ 960,000. During fiscal 2025, the Company
utilized all tax credits pertaining to research and development costs. In addition the Company has state operating loss carryforwards
of approximately $ 3,694,000. The Company has also fully recorded a valuation allowance against all of the state operating losses since
the Company doesn't anticipate being able to utilize them.

 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 2021.

 Future ownership changes as determined under Section
382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of June 30, 2025, no such
changes in ownership have occurred.

 On July 4, 2025, the One Big Beautiful Act ("OBBBA)
was signed into law, which enacts significant changes to the U.S. tax and related laws. Some of the provisions of the new tax law that
affect corporations include but are not limited to expensing of domestic specified research or experimental expenditures, increasing the
limit of the deduction to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January
19, 2025. The Company is currently evaluating the impact that the new tax law will have on its financial condition and results of operations.

 The valuation allowance for deferred tax assets decreased
during the year ended June 30, 2025, by approximately $ 67,000. The valuation allowance decreased by approximately $ 171,000 during the
year ended June 30, 2024.

 NOTE 10 - INCOME TAXES (CONTINUED)

 Components of the provision for income taxes are as
follows:

 Schedule of Components of the provision for income taxes

 Components Of The Provision For Income Taxes

 Years Ended June 30,

 Current:

 2025

 2024

 Federal

 $
 1,374,724

 $
 429,873

 State

 908,421

 1,943,588

 Subtotal

 2,283,145

 2,373,461

 Deferred:

 Federal deferred taxes

 838,154

 2,585,515

 State deferred taxes

 ( 14,494
)

 209,992

 Subtotal

 823,660

 2,795,507

 Provision (Benefit) for Income Taxes - Net

 $
 3,106,805

 $
 5,168,968

 A reconciliation of the federal statutory income tax
rate to the Company's effective tax rate as reported is as follows:

 Schedule of
 reconciliation of federal statutory income tax rate to company's effective tax rate

 For the Year Ended

 For the Year Ended

 Amount

 Percent

 Amount

 Percent

 Taxes at federal statutory rate

 $
 2,893,850

 %

 $
 4,169,123

 %

 State and local income taxes

 $
 978,397

 7.1
 %

 $
 1,409,561

 7.1
 %

 Noncontrolling interests

 ($
 657,307
)

 ( 4.6
 %)

 ($
 1,049,294
)

 ( 5.3
 %)

 Valuation Allowance

 ($
 218,390
)

 ( 1.6
 %)

 ($
 48,179
)

 ( 0.2
 %)

 Permanent items – Meals and Entertainment

 $
 131,956

 1.0
 %

 $
 126,719

 1.5
 %

 Other

 ($
 21,701
)

 ( 0.8
 %)

 $
 561,038

 2.7
 %

 Provision for income taxes

 ($
 3,106,805
)

 22.8
 %

 $
 5,168,968

 26.8
 %

 NOTE 10 - INCOME TAXES (CONTINUED)

 The Company has, for federal income tax
purposes, research and development tax credits and investments tax credits carryforwards aggregating $ 1,323,000
as of June 30, 2024. The Company will utilize the full amount for the tax return for the year ended June 30, 2025. These credits can
only be applied after all net operating losses have been used.

 Significant components of the Company's
deferred tax assets and liabilities at June 30, 2025 and 2024 are as follows:

 Schedule of deferred tax assets and liabilities

 2025

 2024

 Deferred tax assets:

 Allowance for credit losses

 $

 4,366,361

 $

 3,969,819

 Non-deductible accruals

 758,700

 758,700

 Net operating carryforwards

 259,319

 396,092

 Tax credits

 —

 1,323,018

 Capitalized research and development

 960,343

 747,407

 Right of use assets and lease liabilities

 146,934

 114,116

 Inventories

 116,856

 106,879

 Deferred Tax Assets - gross

 6,608,513

 7,416,031

 Valuation allowance

 ( 259,319

)

 ( 192,776

)

 Total deferred tax assets

 6,349,194

 7,223,255

 Property and equipment and depreciation

 165,532

)

 ( 267,124

)

 Intangibles

 ( 155,627

)

 ( 104,436

)

 Total deferred tax liabilities

 ( 321,159

)

 ( 371,560

)

 Net deferred tax asset

 $

 6,028,035

 $

 6,851,695

 NOTE 11 - OTHER CURRENT LIABILITIES

 Included in other current liabilities are the following:

 Schedule of other current liabilities

 2025

 2024

 Accrued salaries, commissions and payroll taxes

 $

 3,993,773

 $

 4,677,690

 Sales tax payable

 248,845

 197,317

 State income taxes payable

 —

 1,461,336

 Legal and other professional fees

 93,207

 11,207

 Property taxes

 391,479

 —

 Utilities

 449,277

 —

 Accounting fees

 38,000

 119,800

 Software Licenses

 442,305

 —

 Recruiting fees

 135,952

 —

 Self-funded health insurance reserve

 259,661

 121,445

 Accrued interest and penalty

 3,534

 3,534

 Other general and administrative expenses

 918,964

 1,348,710

 Other Current Liabilities

 $

 6,974,997

 $

 7,941,039

 NOTE 12 - COMMITMENTS AND CONTINGENCIES

 Employee Benefit Plans

 The Company has a non-contributory 401(k) Plan (the
"401(k) Plan"). 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, 2025 and 2024.

 NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

 The stockholders of the Company approved the 2000
Employee Stock Purchase Plan ("ESPP") at the Company's annual stockholders' 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, 2025.

 Other Matters

 The Company is subject to other legal
proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment
claims besides the claim above. The Company is also subject to Cyber security threats that could lead to future litigation. In the
opinion of management, and with consultation with legal counsel, 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. The company
continuosly evaluates these actions to ensure they are not material, however, it is possible that management estimate may change in
the near term and the effect could have a material impact on the consolidated financial statements.

 The Company maintains a self-funded health insurance
program with a stop-loss umbrella policy with a third-party insurer to limit the maximum potential liability for individual claims to
$ 150,000 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company
considers historical and projected medical utilization data when estimating its health insurance program liability and related expense.
As of June 30, 2025 and 2024, the Company had approximately $ 260,000 and $ 121,000, respectively, in reserve for its self-funded health
insurance programs. The reserves are included in "Other current liabilities" in the consolidated balance sheets.

 The Company regularly analyzes its reserves for incurred
but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company
believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical
paid claims, average lags between the claims' incurred date, reported dates and paid dates, and the frequency and severity of claims.
There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense
once a probable amount is known. There were no significant adjustments recorded in the years covered by this report.

 NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION

 During the years ended June 30, 2025 and 2024 the
Company paid $ 25,611 and $ 76,997 for interest, respectively.

 During the years ended June 30, 2025 and 2024 the
Company paid $ 4,664,984 and $ 507,139 for income taxes, respectively.

 During the years ended June 30, 2025 and June 30,
2024, the Company obtained right-of-use and equipment assets in exchange for lease obligations of $ 2,319,913 and $ 9,471,883 respectively.

 During the year ended June 30, 2025, the Company sold
a 0.197 % interest in HDM to an employee. The interest was sold for $ 132,000 in a noncash transaction.

 NOTE 14 – RELATED PARTY TRANSACTIONS

 On December 31, 2023, the Company entered into an
agreement with Magnetic Resonance Management, LLC ("MRM") for the sale of a MRI scanner. MRM is owned by the CEO and President
of the Company. The sales price of the equipment was $ 576,857 which is payable based upon a promissory note dated December 1, 2023. The
note bears interest at a rate of 9 % and is payable in full at the maturity of the note in December 2028. The MRI scanner had zero basis,
which resulted in a gain of $ 576,857. The Company has the option but not the obligation to re-take possession of the scanner in lieu of
payment upon maturity of the note. During fiscal year ended June 30, 2025, MRM paid $ 22,000 towards the principal balance.

 Bensonhurst MRI Limited Partnership ("Bensonhurst"),
in which the CEO and President of the Company holds an interest, is party to an agreement with the Company for the service and maintenance
of its Upright MRI Scanner for a price of $110,000 per annum. On February 1, 2024, Bensonhurst entered into a second contract with the
Company for the service and maintenance of a High-Field MRI Scanner for a price of $70,000 per annum. Also during fiscal year ended June
30, 2025 and 2024, the Company charged Bensonhurst MRI Limited Partnership $344,068 and $190,362, respectively, for reimbursable salaries
and marketing expenses.

 Integrity Healthcare Management, LLC, which is owned
by the CEO and President of the Company owns a 7.1% interest in HMCA's Class A membership and receives distributions from the Company.

 Radian Healthcare Management, LLC ("Radian"),
which is owned by the son-in-law of the CEO and President of the Company provided the Company with personnel recruitment of new employees
at a fee of approximately $165,000 and $200,000 during the fiscal year ended June 30, 2025 and 2024, respectively.

 There are two board of directors that own.04% and
.02% interest in HMCA's Class A membership, respectively. Each board member receives distributions from the Company with regards
to these interests.

 NOTE 15 - SEGMENT AND RELATED INFORMATION

 The Company provides segment data in accordance with
the provisions of ASC 280, "Disclosures about Segments of an Enterprise and Related Information" which was adopted during
our fiscal ending June 30, 2025.

 Our chief operating decision maker ("CODM"),
who is also our CEO, evaluates the financial performance of our segments based upon their respective revenue and segmented internal profit
and loss statements prepared on a basis not consistent with GAAP. The CODM considers actual to budget and current year actual to prior
year actual for revenue and other profit and loss measures on a monthly basis for evaluating performance of each segment and making decisions
about allocating capital and other resources to each segment.

 The Company operates in two industry segments - manufacturing
and the servicing of medical equipment and management of diagnostic imaging centers.

 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.

 NOTE 15 - SEGMENT AND RELATED INFORMATION

 Summarized financial information concerning the Company's
reportable segments is shown in the following table:

 Summarized Segment Financial Information

 Schedule
of Segment Financial Information

 Manufacturing and Servicing of Medical

 Management of Diagnostic Imaging

 Fiscal
2025:

 Equipment

 Centers

 Totals

 Net
revenues from external customers

 $

 8,977,349

 $

 95,373,969

 $

 104,351,318

 Cost
of Sales

 2,905,311

 19,384,410

 22,289,721

 Rent
expense

 —

 4,822,044

 4,822,044

 Other
Cost of sales expenses**

 2,944,740

 31,385,807

 34,330,547

 Total
Cost of sales

 $

 5,850,051

 $

 55,592,261

 $

 61,442,312

 Research
and development

 766,963

 —

 766,963

 Other
research and development costs**

 809,123

 —

 809,123

 Total
 Research and development costs

 $

 1,576,086

 $

 —

 1,576,086

 Selling,
general and administrative expenses

 4,934,716

 10,983,643

 15,918,359

 Rent
expense

 1,251,924

 36,528

 1,288,452

 Other
selling, general and administrative expenses**

 2,970,693

 9,556,659

 12,527,352

 Total
Selling, general and administrative expenses

 $

 9,157,333

 $

 20,576,830

 $

 29,734,163

 Total
costs and expenses

 $

 16,619,740

 $

 76,133,091

 $

 92,752,561

 (Loss)
Income from operations

 $

 ( 7,606,121

)

 $

 19,204,878

 $

 11,598,757

 Investment
income

 107,777

 2,011,203

 2,118,980

 Other
income

 52,508

 9,993

 62,501

 (Loss)
Income before provision for income taxes

 $

 ( 7,445,836

)

 $

 21,226,074

 $

 13,780,238

 Provision
for income taxes

 ( 2,885,852

)

 ( 220,953

)

 ( 3,106,805

)

 Net
(Loss) income

 $

 ( 10,331,688

)

 $

 21,005,121

 $

 10,673,433

 Intersegment
net revenues *

 1,189,130

 —

 1,189,130

 Depreciation
and amortization

 209,325

 4,488,996

 4,698,321

 Total
identifiable assets

 $

 34,401,915

 $

 182,646,336

 $

 217,048,251

 Capital
expenditures

 375,599

 3,441,307

 3,816,906

 Fiscal
2024:

 Net
revenues from external customers

 $

 8,329,106

 $

 94,554,983

 $

 102,884,089

 Cost
of Sales

 2,684,218

 18,913,412

 21,597,630

 Rent
expense

 —

 4,532,535

 4,532,535

 Other
Cost of sales expenses**

 2,089,924

 29,523,955

 31,613,879

 Total
Cost of sales

 $

 4,774,142

 $

 52,969,902

 $

 57,744,044

 Research
and development

 781,012

 —

 781,012

 Other
research and development costs**

 954,937

 —

 954,937

 Total
Research and development costs

 $

 1,735,949

 $

 —

 $

 1,735,949

 Selling,
general and administrative expenses

 4,794,512

 10,156,520

 14,951,032

 Rent
expense

 1,076,069

 73,676

 1,149,745

 Other
selling, general and administrative expenses**

 2,906,446

 7,861,509

 10,767,955

 Selling,
general and administrative expenses

 $

 8,777,027

 $

 18,091,705

 $

 26,868,732

 Total
costs and expenses

 $

 15,287,118

 $

 71,061,607

 $

 86,348,725

 (Loss)
Income from operations

 $

 ( 6,958,012

)

 $

 23,493,376

 $

 16,535,364

 Investment
income

 120,387

 2,006,052

 2,126,439

 Other
income (expenses)

 640,952

 ( 36,370

)

 604,582

 (Loss)
Income before provision for income taxes

 $

 ( 6,196,673

)

 $

 25,463,058

 $

 19,266,385

 Provision
for income taxes

 ( 4,788,028

)

 ( 380,940

)

 ( 5,168,968

)

 Net
(Loss) income

 $

 ( 10,984,701

)

 $

 25,082,118

 $

 14,097,417

 Intersegment
net revenues *

 1,073,333

 —

 1,073,333

 Depreciation
and amortization

 238,802

 4,357,619

 4,596,421

 Total
identifiable assets

 $

 30,360,188

 $

 183,885,781

 $

 214,245,969

 Capital
expenditures

 32,885

 789,961

 822,846

 *

 Amounts eliminated in consolidation

 **

 Other segment costs include supplies, professional fees, marketing expenses, repairs and maintenance and other operational costs.

 NOTE 15 - SEGMENT AND RELATED INFORMATION (CONTINUED)

 Export Product Sales

 The Company's areas of operations are principally
in the United States. The Company had export sales of medical equipment amounting to 1.4 % and 0.2 % of product sales revenues to third
parties for the years ended June 30, 2025 and 2024, respectively.

 The foreign product sales, as a percentage of product
sales to unrelated parties, were made to customers in the following countries:

 Schedule of export product sales

 For the Years Ended June 30

 2025

 2024

 Canada

 —

 0.2

 %

 Puerto Rico

 1.4

 %

 —

 1.4

 %

 0.2

 %

 Foreign Service and Repair Fees

 The Company'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 7.7 % and 7.4 %
of consolidated net service and repair fees for the years ended June 30, 2025 and 2024, respectively. Foreign service and repair fees,
as a percentage of total service and repair fees, were provided principally to the following countries:

 Foreign Service and Repair Fees

 Schedule of Foreign Service and Repair Fees

 2025

 2024

 Puerto Rico

 1.3
 %

 1.9
 %

 Switzerland

 0.3

 0.3

 Germany

 3.0

 2.0

 England

 1.3

 0.7

 United Arab Emirates

 0.1

 0.3

 Dominican Republic

 1.2

 1.2

 Canada

 0.1

 —

 Greece

 0.4

 0.3

 Australia

 —

 0.7

 7.7
 %

 7.4.4
 %

 The Company does not have any material assets
outside of the United States.

 NOTE 16 – SUBSEQUENT EVENTS

 The Company evaluates events that have occurred after
the balance sheet date, but before the consolidated financial statements are issued.

 On July
7, 2025, the board of directors received a non-binding proposal from a group led by Timothy Damadian, the Company's Chief
Executive Officer, and Luciano Bonanni, the Company's Chief Operating Officer, pursuant to which proposal the group would
acquire all of the outstanding common stock and other securities of the Company not currently owned by the members of the group.
Members of the group have voting control of the Company's equity securities and the group advised the Company that it was
unwilling to support any alternative transaction. As proposed, the transaction, if completed, would result in the Company no
longer being a publicly held company, and its Common Stock would be de-listed from the NASDAQ Stock Market. The Board of
Directors has established a Special Committee of independent and disinterested directors to consider the proposal and negotiate on
behalf of the Company and its stockholders. The Special Committee has retained its own independent financial and legal advisors to
assist it in this process. The group and the Special Committee are engaged in negotiations related to the proposed going private
transaction. No definitive agreements or terms have been executed by the parties and there is no assurance that the
transaction will be completed. Any definitive agreement and transaction will require approval by the Company's common
stock holders and will require the filing of definitive proxy materials in accordance with the SEC's proxy rules to obtain
such approval. In July 2025, the Company entered into a new 10 year
lease for a property in New York where a new MRI is to be built.

 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 There have been no disagreements with our independent
registered public accounting firm or other matters requiring disclosure under Regulation S-K, Item 304(b).

 ITEM 9A. CONTROLS AND PROCEDURES

 Evaluation of Disclosure Controls and Procedures

 We maintain disclosure controls and procedures to
ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, to allow timely decisions regarding required disclosure.

 Our Chief Executive Officer and our Chief
Operating Officer, Executive Vice President and acting Finance Officer after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have concluded that, due to the existence of material
weaknesses in our internal controls in the Company's internal control over financial reporting described below, that the
Company's disclosure controls and procedures were not effective as of June 30, 2025.

 Management's Annual Report on Internal
Control over Financial Reporting

 Management of the Company is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
The Company's internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer, 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.

 Because of its inherent limitations, internal control
over financial reporting may not prevent or detect all misstatements. Also, 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.

 Management, including our Chief Executive
Officer and our Chief Operating Officer, Executive Vice President and acting Finance Officer assessed the effectiveness of the
Company's internal control over financial reporting as of June 30, 2025. In making this assessment, management used the
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).

 A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

 Based on its assessment, management has concluded
that the Company did not maintain effective internal control over financial reporting as of June 30, 2025, due to the following material
weakness identified by management during the current period:

 • Management did not maintain effective information
technology general controls in the areas of user access management within its systems supporting the Company's accounting and reporting
processes.

 Although this material weaknesses did not result in
any material misstatement of our consolidated financial statements for the periods presented, there is a possibility they could lead to
a material misstatement of account balances or disclosures. Accordingly, management has concluded that these control deficiencies constitute
material weaknesses.

 Management's Plan for Remediation

 In response to the material weaknesses, management,
with oversight of the Audit Committee of the Board of Directors, has identified and begun to implement steps to remediate the material
weaknesses. While the Company has made progress during the fiscal year 2025, the remediation efforts are ongoing, as additional time is
needed to complete the remediation and allow for the internal controls to be tested by management. Our continued internal control remediation
efforts include the following:

 • Enhancing risk assessment processes,
user authentication and monitoring controls to enforce appropriate system access.

 We are committed to ensuring that our internal controls
over financial reporting are designed and operating effectively. Management believes the efforts taken to date and the planned remediation
will improve the effectiveness of our internal control over financial reporting. While these remediation efforts are ongoing, the controls
must be operating effectively for a sufficient period of time and be tested by management in order to consider them remediated and conclude
that the design is effective to address the risks of material misstatement.

 Attestation Report of Independent Registered Public
Accounting Firm

 Our independent registered public accounting
firm, CohnReznick LLP, has independently assessed our internal control over financial reporting and its report is included in Part
II, Item 8 of the Annual Report on Form 10-K.

 Changes in Internal Control Over Financial Reporting

 Other than the material weakness and the remediation
plan described above, there were no changes in the Company's internal controls over financial reporting that have materially affected,
or are reasonably likely to materially affect, the Company's internal control over financial reporting during the fourth quarter
of fiscal year 2025.

 Item 9B. OTHER INFORMATION

 Rule 10b5-1 Trading Plan

 During the fiscal quarter ended June 30, 2025, none of our directors or
executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that
was intend to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement".

 Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 None.

 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

 Directors serve from the date of their election until
the next annual meeting of stockholders and until their successors are elected and qualify. During fiscal 2025, each director received
a base fee of $20,000 per annum for his or her service as a director, with greater amounts for additional services on the Board of Directors.
Officers serve at the discretion of the Board of Directors.

 A majority of our board of directors is composed of
independent directors: consisting of, Ronald G. Lehman, Richard E. Turk and Jessica Maher. The outside directors also serve as the members
of the audit committee, which is a standing committee of the board of directors having a charter describing its responsibilities.

 Claudette J.V. Chan retired from her role on the Board
of Directors on June 23, 2025. Ms. Chan has been an instrumental figure in the Company for the majority of its existence, and we are grateful
for her innumerable contributions to our success during her thirty seven years of service.

 On July 2, 2025, the board seat vacated by Ms. Chan
was filled by Robert M. Carrino. Mr. Carrino is an independent director pursuant to NASDAQ standards.

 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.

 The officers and directors of the Company are set
forth below:

 Timothy R. Damadian

 Chairman of the Board, President, Chief Executive Officer and Treasurer

 Luciano B. Bonanni

 Executive Vice President, Chief Operating Officer and acting Principal Financial Officer

 Claudette J.V. Chan

 Ronald J. Lehman

 Richard E. Turk

 Jessica Maher

 Robert M. Carrino

 Timothy Damadian has been the Chairman of the Board
and Treasurer of FONAR since September 7, 2022 and the President and Chief Executive Officer of FONAR since February 11, 2016. From 2010
to 2016 he served as an independent consultant, with a focus on the Company's MRI facility management business. Timothy Damadian
began his career at FONAR in 1985, installing MRI scanners and components for FONAR customers. Over the course of the following 16 years,
he held positions of increasing authority, eventually becoming Vice President of Operations. In 1997, Timothy Damadian was appointed President
of the newly formed Health Management Corporation of America (HMCA), a wholly-owned subsidiary of FONAR that was formed to manage medical
and diagnostic imaging offices. In 2001, Timothy Damadian left FONAR to form Integrity Healthcare Management, Inc., a diagnostic imaging
management company that would eventually manage MRI scanning centers in New York and Florida. The company was a success and was sold to
Health Diagnostics, LLC in 2007. Mr. Damadian returned to FONAR as a consultant in 2010. He also serves as a Manager of Health Diagnostics
Management, LLC, which are subsidiaries of HMCA.

 Luciano B. Bonanni has served as Chief Operating Officer
(COO) and Executive Vice President (EVP) for FONAR Corporation since June 27, 2016. In September 2022, he was appointed to fill the position
of acting Principal Financial Officer. Prior to his appointment as COO, Mr. Bonanni had served the Company as Vice President since 1989,
during which time he oversaw general operations, research and development, manufacturing, service, sales, finance, accounting and regulatory
compliance. Prior to 1989, Mr. Bonanni held the title of Vice President of Production and Engineering from the time of FONAR's initial
public offering in 1981. Mr. Bonanni joined the Company as an electrical engineer in 1978. He holds a Bachelor of Electrical Engineering
degree from Manhattan College.

 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, as "site inspector," 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 "Meals on Wheels"
program, a program which cares for the elderly. From approximately 1983 to 1989, Mrs. Chan was President of the Claudette Penot Collection,
a retail mail-order business specializing in women's apparel and gifts. 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.

 Ronald G. Lehman has been a Director of FONAR since
April, 2012, and chair of the audit committee since 2021. Mr. Lehman is Managing Director and Head of Investment Banking at Bruderman
Advisory Group, LLC where he is responsible for the firm's sell-side advisory and capital raising processes. Mr. Lehman is also
a Partner at Sandy Hill Investors, LLC, participating in and overseeing many of the firm's investments. He is Chairman of portfolio
company Persante Acquisition Corp., and was a board member at Seviroli Foods, LLC during the firm's investment period. From 2000-2008,
Mr. Lehman worked for various Bruderman entities as a buy and sell-side advisor, and as a principal in several private equity transactions.
In 2008, Mr. Lehman joined Health Diagnostics, LLC, one of the country's fastest growing diagnostic imaging providers, as Senior
Vice President of Acquisitions, where he managed the company's acquisition and corporate finance activities. Mr. Lehman returned
to Bruderman in 2010 to lead the firm's investment banking efforts. Lehman is a graduate of Columbia University and worked at Deutsche
Bank from 1998-2000.

 Richard E. Turk has been a Director of FONAR since
June, 2020. Mr. Turk is the Chief Financial Officer of PRISM Vision Group, a subsidiary of McKesson Corporation (MCK). PRISM Vision Group
is a multi-location, outpatient comprehensive eye care practice headquartered in New Providence, New Jersey. Mr. Turk joined PRISM in
November, 2018 as the Chief Development Officer and became CFO in March 2021. Mr. Turk has helped PRISM expand from a single-specialty
(retina) provider with 17 locations and 21 physicians to a comprehensive, vertically-integrated, multi-specialty, eye care organization
with approximately 190 physicians and more than 90 locations across New Jersey, Pennsylvania, Delaware, Virginia, Washington, DC, and
Maryland. Mr. Turk helped lead the sale of PRISM Vision Group to McKesson Corporation in 2025. Prior to his tenure at PRISM, Mr. Turk
was employed by Professional Physical Therapy, a private equity-backed outpatient physical and occupational therapy company headquartered
in Uniondale, New York with more than 180 locations across New York, New Jersey, Connecticut, Massachusetts and New Hampshire. During
his four years at Professional Physical Therapy, Mr. Turk sourced, analyzed, and completed 32 acquisitions comprised of 116 clinics, expanding
the company's services and adding three states to its geographic footprint. From 2007 to 2014, Mr. Turk was employed by Bruderman
Brothers, a broker dealer involved in investment banking, merchant banking, investment advisory, and consulting for lower middle market
companies ($10M-$250M of enterprise value) in a variety of industries, including healthcare. Mr. Turk was Vice President of Bruderman
Brothers from 2011 to 2014. Mr. Turk graduated from Columbia University in 2007.

 Jessica Maher has been a Director of FONAR since March
2023. Mrs. Maher is a staff accountant at Ives & Sultan, LLP in Woodbury, New York, where she is responsible for preparing audited
financial statements for various clients, overseeing audit testing areas, audits of 401(k) plans, and personal and company tax returns.
Mrs. Maher holds a Bachelor of Science in Accounting with a minor in Accounting Information Systems, and a Master of Science in Accounting
from Fairfield University in Fairfield, Connecticut. During her early undergraduate years, Mrs. Maher worked for Tritech Healthcare Management
in Melville, New York, where she reviewed patient files, insurance, charts and documents to ensure that the services provided by clients
were being properly billed. In her senior year, Mrs. Maher interned at Northwell Health in Westbury, New York, where she supported the
financial reporting team for two hospitals, reported into accounts receivable software, and analyzed patient billing records to identify
overpayments. Mrs. Maher's first position out of college was with PriceWaterhouseCoopers in Melville, New York, where she was assigned
to two private equity clients, was responsible for a variety of the audit areas, and assisted managers in reviewing financial statements,
footnote disclosures, and audit opinions.

 Robert M. Carrino has been a Director of FONAR since
July 2025. Mr. Carrino is a Partner at CFGI, LLC, the leading global independent accounting and business advisory firm, backed by The
Carlyle Group and CVC Capital Partners. At CFGI, Mr. Carrino provides complex accounting and consulting services to both public and private
companies of all sizes across various industries. Additionally, Mr. Carrino leads the firms SPAC practice. Mr. Carrino joined CFGI in
2016 as a Manager and became Partner in January 2023. Prior to joining CFGI, Mr. Carrino was an audit manager at KPMG, LLP's Metro
New York Long Island Office servicing clients mainly in the media and entertainment industry. Mr. Carrino, a Certified Public Accountant,
earned the degree of Bachelor of Science in Business Administration with a concentration in accounting from Western New England University.

 ITEM 11. EXECUTIVE COMPENSATION.

 With the exception of the Chief Executive Officer
and the Chairman of the Board of Directors, the compensation of the Company's executive officers consist of salary and bonuses based
on performance. The Chief Executive Officer and the Chairman of the Board has no understanding with the Company with respect to bonuses,
options or other incentives, and is not subject to our general policy later discussed.

 The Board of Directors does not have a compensation
Committee. The Chief Executive Officer and the Chief Operating Officer participate in the determination of compensation for the Company's
management and other employees.

 The Board of Directors has established an audit committee.
The members of the committee are Ronald G. Lehman, Richard E. Turk and Jessica Maher.

 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' compensation tend to be individualized, based on a
combination of the employees' 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.

 There is set forth in the following Summary
Compensation Table the compensation provided by us during fiscal 2025, 2024 and 2022 to our Principal Executive Officer, and our acting
Principal Financial Officer. There is set forth in the following Outstanding Equity Awards Table and Director Compensation Table the required
information.

 I.
 SUMMARY COMPENSATION TABLE

 (Reflects information up to end of Fiscal 2024)

 Name and All Other Principal Position

 Year

 Salary
 ($)

 Cash Bonuses
 ($)

 Stock Awards
 ($)

 Total Compensation ($)

 (a)

 (b)

 (c)

 (d)

 (e)

 (f)

 Timothy R. Damadian

 2025

 $

 $
 295,000

 $

 $
 295,000

 President, Principal

 2024

 $

 $
 372,885

 $

 $
 372,885

 Executive Officer

 2023

 $

 $
 152,900

 $

 $
 152,900

 Luciano Bonanni

 2025

 $
 148,241

 $
 350,000

 $

 $
 498,241

 Chief Operating Officer,

 2024

 $
 148,241

 $
 350,000

 $

 $
 498,241

 Executive Vice President and

 2023

 $
 143,416

 $
 305,800

 $

 $
 449,216

 acting Principal Financial Officer

 Raymond V. Damadian

 2025

 $

 $

 $

 $

 Chairman of the Board,

 2024

 $

 $

 $

 $

 Treasurer and

 2023

 $
 23,553

 $
 305,800

 $

 $
 329,353

 Principal Financial Officer

 John P. Collins [1]

 2025

 $
 294,988

 $
 142,167

 $

 $
 437,155

 General Counsel

 2024

 $
 249,990

 $
 172,000

 $

 $
 421,990

 2023

 $

 $

 $
 —

 $

 [1] John Collins was promoted to General Counsel on September 17,
2023.

 II.
 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 Name

 Number Of Securities Underlying Unexercised Options (#) Exercisable

 Option Exercise Price ($)

 Option Exercise Expiration Date

 (a)

 (b)

 (c)

 Timothy R. Damadian, President and Principal Executive Officer

 N/A

 Luciano Bonanni, Chief Operating Officer, Executive Vice President and acting Principal Financial Officer

 N/A

 Raymond V. Damadian Chairman of the Board, Treasurer and Principal Financial Officer

 N/A

 III
 DIRECTOR COMPENSATION

 The following table shows the compensation paid to the Directors for fiscal
2025:

 Name

 Fees earned in paid
in cash ($)

 Stock awards ($)

 Option awards ($)

 Non-equity incentive plan compen-
sation

 Nonqualified deferred compen-
sation earnings
($)

 All other compen-
sation ($)

 Total
($)

 (a)

 (b)

 (c)

 (d)

 (e)

 (f)

 (g)

 (h)

 A. Claudette J.V. Chan

 $

 20,000

 39,486

 $

 59,486

 B. Ronald G. Lehman

 $

 20,000

 65,000

 $

 85,000

 C. Richard E. Turk

 $

 20,000

 $

 15,000

 $

 35,000

 D. Jessica Maher

 $

 20,000

 $

 15,000

 $

 35,000

 EMPLOYEE COMPENSATION PLANS

 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, 2025, 450,177 shares were available for issuance.

 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

 The following table sets forth the number and percentage of shares of FONAR's
securities held by each director, by each person known by us to own in excess of five percent of FONAR's voting securities and by
all officers and directors as a group as of August 8, 2025.

 Name
 and Address of Beneficial Owner (1)

 Shares
 Beneficially Owned

 Percent
 of Class

 Timothy R. Damadian, as Trustee
 of the FONAR Class C Trust

 c/o FONAR Corporation, Melville,
 New York

 Class C Stock

 382,447

 99.98
 %

 Kayne Anderson Rudnick

 Investment Management LLC

 1800 Avenue of the Stars,
 2nd Floor

 Los Angeles, CA 90067

 544,036

 8.77
 %

 Money Concepts Capital Corp..

 11440 North Jog Road

 Palm Beach Gardens, FL 33418-3764

 462,760

 7.46
 %

 The Vanguard Group, Inc.

 100 Vanguard Boulevard

 Malvern, PA 19355-2331

 390,345

 6.29
 %

 Dimensional Fund Advisors
 LP

 Building One

 6300 Bee Cave Road

 Austin, Texas 78746

 372,563

 6.01
 %

 Renaissance Technologies,
 LLC

 800 Third Avenue

 New York, NY 10022

 315,516

 5.09
 %

 Timothy R. Damadian,

 Chairman
 of the Board, President, Chief Executive Officer and Treasurer

 79,059

 *

 *

 Continued:

 Name and Address of Beneficial Owner (1)

 Shares Beneficially Owned

 Percent of Class

 Luciano B. Bonanni,

 Executive Vice President,

 Chief Operating Officer and acting Principal Financial Officer

 54,253

 *

 1,285

 *

 Claudette Chan

 Director and Secretary

 *

 *

 Ronald G. Lehman

 4,330

 *

 Richard E. Turk

 *

 Jessica Maher Director Common Stock

 *

 Robert M. Carrino Director Common Stock

 *

 All Officers and Directors as a Group (6 persons)

 137,721

 2.18

 %

 Class C Stock

 382,447

 99.98

 %

 2,117

 *

 * Less than one percent

 1. Address provided for each beneficial owner owning more than five percent
of the voting securities of FONAR.

 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE.

 Pursuant to HMCA's management agreements with
its clients, HMCA provides comprehensive non-medical management and administrative services, including billing and collection of accounts,
payroll and accounts payable processing, office facilities, supplies and utilities. Under the management agreements, HMCA also provides
service for the Fonar Upright MRI scanners through Fonar. In total, as of September 5, 2025, 22 of our clients had management agreements
with HMCA. Six sites in Florida are owned and operated directly by HMCA subsidiaries.

 The fees charged under the management agreements are
flat fees charged on a monthly basis. These fees ranged from $70,358 to $459,544 per month in fiscal 2025.

 Timothy Damadian, Chairman of the Board, President,
Chief Executive Officer and Treasurer owned three of the imaging facilities in Florida managed by HMCA. (See note below) The facilities
owned by Timothy Damadian in Florida pay HMCA flat rate monthly fees ranging from $271,517 to $411,589 per month. These fees are renegotiable
on an annual basis.

 During the fiscal years ended June 30, 2025, June
30, 2024 and June 30, 2023, the net revenues received by HMCA from the imaging facilities owned by Timothy Damadian were approximately
$11.9 million, $11.9 million and $11.9 million respectively.

 Magnetic Resonance Management, LLC, in which Timothy
Damadian, the CEO and President of the Company owns, entered into an agreement to purchase equipment from the Company. The selling price
of such equipment was $567,857 which is payable based upon a promissory note dated December 1, 2023. The note bears interest at a rate
of 9% and is payable in full at the maturity of the note in December 2028. The equipment had a zero basis which resulted in a gain of
$576,857. The Company has the option but not the obligation to re-take possession in lieu of payment upon maturity of the note. The balance
of the note as of June 30, 2025 was $554,857.

 Bensonhurst MRI Limited Partnership, in which Timothy
Damadian, the CEO and President of the Company holds an interest, is party to two agreements with the Company for the service and maintenance
of its Upright MRI and High-Field Scanners for a price of $110,000 per annum and $70,000 per annum, respectively. Also during fiscal year
ended June 30, 2025 and fiscal year ended June 30, 2024, the Company charged Bensonhurst MRI Limited Partnership $301,480 and $190,362,
respectively for reimbursable salaries and marketing expenses.

 Radian Healthcare Management, LLC which Matt Pluta,
the son-in-law of Timothy Damadian, the CEO and President of the Company owns, provided the Company with personnel recruitment of employees
at a fee $165,000 and $200,347 during the fiscal years ended June 30, 2025 and June 30, 2024, respectively.

 Ronald Lehman, a Director of Fonar, holds a.0378%
interest in Health Management Company of America's Class A membership interests.

 Jessica Maher, a Director of Fonar, holds a.015%
interest in Health Management Company of America's Class A membership interests.

 Claudette J.V. Chan, a Director Fonar until June 23,
2025, owns a.0378% interest in Health Management Company of America's Class A Membership interests.

 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 Audit Fees

 The aggregate fees billed by Cohn Reznick LLP for
the audit of our annual consolidated financial statements for the fiscal year ended June 30, 2025 and the reviews of the financial statements
included in our Forms 10-Q for the second and third quarter of the fiscal year ended June 30, 2025 were $478,000.

 The aggregate fees billed by Marcum LLP for the reviews
of the financial statements included in our Form 10-Q for the first quarter and audit of annual consolidated financial statements for
the fiscal year ended June 30, 2025 were $67,600

 The aggregate fees billed by Marcum LLP for the audit
of our annual financial statements for the fiscal year ended June 30, 2024 and the reviews of the financial statements included in our
Forms 10-Q for the fiscal year ended June 30, 2024 were $379,000.

 Audit Related Fees

 No fees were billed by CohnReznick LLP for the fiscal
year ended June 30, 2025 for services related to the Audit or review of our financial statements that are not included under the caption
"Audit Fees".

 No fees were billed by Marcum LLP for the fiscal years
ended June 30, 2025 or June 30, 2024 for services related to the Audit or review of our financial statements that are not included under
the caption "Audit Fees".

 No fees were billed by CohnReznick LLP for the fiscal
year ended June 30, 2025 for designing, operating, supervising or implementing any of our financial information systems or any hardware
or software systems for our financial information.

 No fees were billed by Marcum LLP for the fiscal years
ended June 30, 2025 or June 30, 2024 for designing, operating, supervising or implementing any of our financial information systems or
any hardware or software systems for our financial information.

 Tax Fees

 No fees were billed by CohnReznick LLP for tax compliance,
tax advice and tax planning in the fiscal year ended June 30, 2025.

 No fees were billed by Marcum LLP for tax compliance,
tax advice and tax planning in the fiscal year ended June 30, 2025.

 No fees billed by Marcum LLP for tax compliance, tax
advice and tax planning in the fiscal year ended June 30, 2024.

 All Other Fees

 No fees were billed by CohnReznick LLP for any other
services during the fiscal year ended June 30, 2025.

 No fees were billed by Marcum LLP for any other services
during the fiscal years ended June 30, 2025 and June 30, 2024.

 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.

 Our audit committee believes that the provision by
Marcum LLP of services in addition to audit services in previous years were compatible with maintaining their independence.

 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.

 a)
 FINANCIAL STATEMENTS AND SCHEDULES

 The following consolidated financial statements are
included in Part II, Item 8.

 Report of Independent Registered Public Accounting
Firm (PCAOB ID 596)

 Consolidated Balance Sheets as at June 30, 2025 and
2024.

 Consolidated Statements of Income for the Years Ended
June 30, 2025 and 2024.

 Consolidated Statements of Stockholders' Equity
for the Years Ended June 30, 2025 and 2024.

 Consolidated Statements of Cash Flows for the Years
Ended June 30, 2025 and 2024.

 Notes to Consolidated Financial Statements.

 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 consolidated financial
statements.

 b)
 REPORTS ON FORM 8-K

 1.

 Registrant's Report on Form 8-K: Item 2.02, Results of Operations and Financial Condition for the Fiscal Year ended June 30, 2022, reported September 28, 2022. Commission File No. 0- 10248.

 2.

 Registrant's Report on Form 8-K: Item 5.02, Departure of Directors or Certain Officers, reported March 20, 2023. Commission File No. 0-10248.

 3.

 Registrant's Report on Form 8-K: Item 5.07, Submission of Matters to a Vote of Security Holders, at the annual meeting of stockholders, reported on May 22, 2023. Commission File No. 0-10248.

 c)
 EXHIBITS

 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.

 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.

 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's registration statement on Form S-3, Commission File No. 333-63782.

 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's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, Commission File No. 0-10248.

 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.

 4.1

 Specimen Common Stock Certificate incorporated by reference
to Exhibit 4.1 to the Registrant's registration statement on Form S-1, Commission File No. 33-13365.

 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.

 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.

 10.2

 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.

 10.3

 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.

 10.4

 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.

 10.5

 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.

 10.6

 2002 Incentive Stock Option Plan incorporated by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No.: 333-96557.

 10.7

 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's Form 8-K, August 2, 2005, Commission File No. 0-10248.

 10.8

 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.

 10.9

 2010 Stock Bonus Plan, incorporated by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-168771.

 10.10

 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.

 10.11

 Operating Agreement for Health Diagnostics Management, LLC, incorporated by reference to Exhibit 10.38 to Form 10-K for the fiscal year ended June 30, 2013. Commission File No. 0-10248.

 10.12

 Modification to Operating Agreement for Health Diagnostics Management, LLC., See Exhibits. incorporated by reference to Exhibit 10.38 to Form 10-K for the fiscal year ended June 30, 2013. Commission File No. 0-10248.

 10.13

 Purchase Agreement dated March 5, 2013 among Health Diagnostics Management, LLC, Health Diagnostics, LLC and others. Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed March 11, 2013. Commission File No. 0-10248.

 14.1

 Code of Ethics, incorporated by reference to Exhibit 14.1 of Registrant's Form 10-K for the fiscal year ended June 30, 2004, Commission File No.: 0-10248.

 21.1

 Subsidiaries of the Registrant.

 23.1

 Consent of Cohn Reznick LLP
Independent Registered Public Accounting Firm.

 23.2

 Consent
of Marcum LLP Independent Registered Public Accounting Firm.

 31.1

 Section
302 Certification.

 32.1

 Section
906 Certification.

 97.1

 Policy for the Recovery of Erroneously Awarded Compensation Pursuant to SEC Exchange Act Rule 10D-1

 SIGNATURES.

 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.

 FONAR CORPORATION

 Dated: September 15, 2025

 By:

 /s/Timothy Damadian

 Timothy Damadian,

 Chairman of the Board of Directors

 Chief Executive Officer

 President and Treasurer

 By

 /s/Luciano B. Bonanni

 Luciano B. Bonanni

 Executive Vice President,

 Chief Operating Officer and

 Acting Principal Financial Officer

 Signature

 Title

 Date

 /s/ Timothy R. Damadian

 Chairman of the Board of Directors

 Timothy R. Damadian

 Chief Executive Officer

 President and Treasurer

 /s/Claudette J.V. Chan

 Claudette J.V. Chan

 /s/Ronald G. Lehman

 Ronald G. Lehman

 /s/Richard E. Turk

 Richard E. Turk

 /s/Jessica Maher

 Jessica Maher