-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OtUmheZugnCSARnijoZ2HFitajyIJJmm80OUOtjdgBdQUnWTzlVXumKU8STiAgHq jMMujGozPqabm4PwqQQ64g== 0000355019-04-000019.txt : 20040628 0000355019-04-000019.hdr.sgml : 20040628 20040625213207 ACCESSION NUMBER: 0000355019-04-000019 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20040628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FONAR CORP CENTRAL INDEX KEY: 0000355019 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 112464137 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-116908 FILM NUMBER: 04883185 BUSINESS ADDRESS: STREET 1: 110 MARCUS DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 6316942929 MAIL ADDRESS: STREET 1: 110 MARCUS DRIVE CITY: MELVILLE STATE: NY ZIP: 11747 S-3 1 vs3body.txt As filed with the Securities and Exchange Commission On June 25, 2004 Registration No. SECURITIES AND EXCHANGE COMMISSION FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FONAR CORPORATION (Exact name of registrant as specified in its charter) Delaware 3845 11-2464137 - ---------------- ---------------- ------------------- (State or other Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification No.) incorporation or Classification organization) Code Number 110 Marcus Drive Melville, New York 11747 (631) 694-2929 - -------------------------------------------------------------------------------- (Address, including zip code, and telephone number of registrant's principal executive offices) Raymond V. Damadian, M.D. FONAR CORPORATION 110 Marcus Drive Melville, New York 11747 (631) 694-2929 - -------------------------------------------------------------------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service) Please send copies of all communications to: Henry T. Meyer, Esq. FONAR Corporation 110 Marcus Drive Melville, New York 11747 (631) 694-2929 ------------------------ Approximate date of commencement of proposed sale to the public: At any time and from time to time after the effective date of this Registration Statement If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [ X ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] CALCULATION OF REGISTRATION FEE Proposed Proposed Title of maximum maximum each class of Amount offering aggregate Amount of securities to to be price offering registration be registered registered per unit price fee - -------------------------------------------------------------------------------- Common Stock(1) Par value $0.0001 per share 3,500,000 $1.29 $4,515,000 $572.05 - -------------------------------------------------------------------------------- 1) Pursuant to Rule 457, subsection (c): Specified date: June 13, 2004 The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8 (a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8 (a), may determine. PROSPECTUS - ---------- 3,500,000 Shares FONAR CORPORATION Common Stock This prospectus will allow us to offer and sell to the public up to 3,500,000 shares of our common stock from time to time in one or more issuances. We may sell the shares in open market transactions from time to time at market prices through dealers, brokers, or agents, to underwriters or dealers, or directly to investors. See "PLAN OF DISTRIBUTION" at page 9 of this prospectus for a more detailed discussion of the manner in which the shares may be sold. Our common stock is traded on the Nasdaq Small Cap Market under the symbol "FONR." On June 13, 2004, the last reported sales price for our common stock was $1.29 per share. This prospectus provides you with a general description of the shares that we may offer. Each time we sell shares, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading "Where You Can Find More Information" before you make your investment decision. Investing in our common stock involves a high degree of risk. You should consider carefully the risk factors described in this prospectus before making a decision to purchase our stock. See "RISK FACTORS" at page 5 of this prospectus. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Date of this Prospectus is June 25, 2004. You may rely only on the information contained in this prospectus and in any prospectus supplement, including the information incorporated by reference. We have not authorized anyone to provide information or to make representations not contained in this prospectus. This prospectus is neither an offer to sell nor a solicitation of an offer to buy any securities other than those registered by this prospectus, nor is it an offer to sell or a solicitation of an offer to buy securities where an offer or solicitation would be unlawful. Neither the delivery of this prospectus, nor any sale made under this prospectus, means that the information contained in this prospectus is correct as of any time after the date of this prospectus. TABLE OF CONTENTS ABOUT THIS PROSPECTUS....................................................... 2 ABOUT FONAR...................................................................2 RISK FACTORS..................................................................5 FORWARD LOOKING STATEMENTS....................................................8 USE OF PROCEEDS...............................................................9 PLAN OF DISTRIBUTION .........................................................9 LEGAL MATTERS................................................................10 EXPERTS......................................................................10 INDEMNIFICATION .............................................................10 WHERE YOU CAN FIND MORE INFORMATION..........................................11 INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................11 ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission using a "shelf" registration process. Under this shelf process we may issue and sell from time to time in one or more offerings up to 3,500,000 shares of our common stock in the aggregate. Each time we sell shares of our common stock, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with the additional information described below under the heading "Where You Can Find More Information." The registration statement that contains this prospectus, including the exhibits to the registration statement and the information incorporated by reference, contains additional information about the common stock offered under this prospectus. The registration statement can be read at the Securities and Exchange Commission's web site or at the Securities and Exchange Commission offices mentioned below under the heading "Where You Can Find More Information." ABOUT FONAR CORPORATION At Fonar we design, manufacture and market magnetic resonance imaging (MRI) scanners. MRI scanners use magnetic fields to generate images of organs, bones and tissue inside the human body. The MRI scanner uses a magnetic field which causes the hydrogen atoms in tissue to align. When the magnetic force is withdrawn, the atoms fall out of alignment emitting radio signals as they do. The speed at which the atoms fall out of alignment, or "relaxation time" and radio signals vary depending on the type of tissue and whether any pathology is present. The radio signals provide the data from which the scanner's computers generate an image of the body part being scanned. Fonar offers the following MRI scanners: the Stand-Up(TM) MRI and Fonar-360(TM). For the 2003 fiscal year, the revenues recognized by our medical equipment segment (including product sales, service and certain license fees and royalties product) were $30 million and for the first nine months of fiscal 2004 the revenues recognized by our medical equipment segment were $33 million. The Stand-Up(TM) MRI allows patients to be scanned while standing, bending, sitting or lying down. This means that an abnormality or injury, such as a slipped disc, will be able to be scanned under full weight-bearing conditions, or, more often than not, in the position in which the patient experiences pain. An elevator built into the floor brings the patient to the desired height in the scanner. An adjustable bed allows the patients to stand, sit or lie on their backs, sides or stomachs, at an intermediate angle or in any of the conventional recumbent positions. In the future, the Stand-Up(TM) may also be useful for MRI directed surgical procedures. The Fonar 360 is an enlarged room sized magnet in which the floor, ceiling and walls of the room are part of the magnet frame. Consequently, this scanner allows 360 degree access to the patient. The Fonar 360 is presently marketed as a diagnostic scanner and is sometimes referred to as the Open Sky MRI. In the future, we may also further develop the Fonar 360 to function as an operating room. We sometimes refer to this contemplated version of the Fonar 360 as the OR-360. In addition to manufacturing MRI scanning systems, we formed a subsidiary in 1997, Health Management Corporation of America, which we sometimes call HMCA. HMCA is engaged in the business of managing MRI imaging facilities and physical rehabilitation and therapy practices. HMCA provides and supervises the non-medical personnel for the clients at their sites. At HMCA we also provide our clients centralized billing, collection, marketing, advertising, accounting and financial services. We also provide office equipment and furnishings, consumable supplies and in some cases the office space used by our clients. All of HMCA's client professional corporations are owned by Fonar's founder, President and Chairman of the Board, Dr. Raymond V. Damadian. Negotiations are in progress, however, for the physical therapy and rehabilitation practices to be transferred to other physicians. As presently contemplated, the new physicians would substitute their own professional corporations for Dr. Damadian's professional corporations rather than for Dr. Damadian to sell the stock or assets of his professional corporations to the new physicians. HMCA or its subsidiary Dynamic Healthcare Management, Inc. would continue to manage the facilities. Professional corporations owned by Dr. Damadian would continue to own the MRI facilities. HMCA currently manages 10 MRI facilities and six physical therapy and rehabilitation practices. In April 2003, HMCA sold its subsidiary, A&A Services, Inc. which managed primary care medical practices. For the 2003 fiscal year, the revenues HMCA recognized from the MRI facilities were $13.5 million and the revenues recognized from the physical therapy and rehabilitation practices were $9.4 million. The revenues recognized from the management of the primary care medical practices were $1.2 million through April 9, 2003, when we sold this part of our business. These revenues and the results of the operation of this part of our business are part of discontinued operations and are not included in our discussion of the results of our consolidated or HMCA's operations for current or prior periods. Since this sale of A&A Services, Inc., none of HMCA's clients are parties to capitated or other risk sharing plans with HMO's, managed care companies or other insurers. For the first nine months of fiscal 2004, the revenues recognized by HMCA's clients from the MRI facilities were $10.9 million and the revenues recognized from the physical therapy and rehabilitation practices were $11.1 million. Approximately 65.2% of our consolidated revenues for the first nine months of fiscal 2004, 56.6% of our consolidated revenues for the fiscal year ended June 30, 2003 and 37.4% of our consolidated revenues for the fiscal year ended June 30, 2002 were from our medical equipment segment. Approximately 34.8% of our consolidated revenues for the first nine months of fiscal 2004, 43.4% of our consolidated revenues for the fiscal year ended June 30, 2002 and 62.6% of our consolidated revenues for the fiscal year ended June 30, 2002 were from HMCA's management services. This change is principally due to the increased sales revenues from our Stand-Up(TM) MRI scanners, which increased from $11.1 million in fiscal 2002 to $24.3 million in fiscal 2003 and to $28.6 million for the first nine months of fiscal 2004. Revenues attributable to HMCA's continuing operations declined, however, by 15.1% to $22.9 million in fiscal 2003 from $27.0 million in fiscal 2002. For the first nine months of fiscal 2004, however, HMCA revenues were $17.6 million as compared to $17.3 million for the first nine months of fiscal 2003. The earlier decrease in revenues reflected a decline in MRI scan volume prior to upgrading older scanners and the closing of certain MRI facilities and other facilities we managed. The number of facilities with new scanners managed by HMCA, however, has been increasing. Presently, five of the ten MRI facilities managed by HMCA are equipped with Stand-Up(TM) MRI scanners. Approximately 44% of our consolidated revenues and 100% of HMCA's revenues for the first nine months of fiscal 2004, 58% of our consolidated revenues and 99% of HMCA's revenues for the fiscal year ended June 30, 2003 and 78% of our consolidated revenues and 99% of HMCA's revenues for the fiscal year ended June 30, 2002 were derived from professional corporations and other entities controlled by Dr. Raymond V. Damadian or members of his family. The consolidated revenues include revenues from sales and service by Fonar to such entities: $4.4 million for the first nine months of fiscal 2004, $7.7 million for fiscal 2003 and $6.5 million for fiscal 2002. Confirming our expectation of increased demand for our MRI scanners, product sales revenues in the medical equipment segment to unrelated parties increased by 229% in fiscal 2003 to $17.7 million from $5.4 million in fiscal 2002. For the first nine months of fiscal 2004 product sales revenues in the medical equipment segment has already reached $24.7 million, surpassing the total of $17.7 million for the full fiscal 2003 year. This increase in product sales to unrelated parties is the principal reason for the reduction of the percentage of our revenues derived from sales to related parties. Our address is 110 Marcus Drive, Melville, New York 11747, our telephone number there is (631) 694-2929 and our Internet address is http://www.fonar.com. HMCA's address is at 6 Corporate Center Drive, Melville, New York 11747, its telephone number there is (631) 694-2816 and its internet address is www.hmca.com. RISK FACTORS An investment in our stock is high risk. You should carefully consider the risk factors in this prospectus before deciding whether to purchase the shares offered. See "RISK FACTORS." RISK FACTORS An investment in Fonar is highly speculative and subject to a high degree of risk. Therefore, you should carefully consider the risks discussed below and other information contained in this prospectus before deciding to invest in shares of our common stock. 1. We have and continue to experience significant losses. For the fiscal years ended June 30, 2003 and June 30, 2002, we experienced net losses of $15.0 million and $22.9 million respectively and losses from operations of $15.1 million and $14.4 million, respectively. Total net losses from continuing operations for fiscal 2003 and fiscal 2002 were $15.2 million and $17.0 million respectively. In fiscal 2003, we recognized a total net gain of $194,000 from discontinued operations as compared to a loss of $5.9 million in fiscal 2002. The gain in fiscal 2003 was attributable to a gain of $510,000 realized from the sale of the discontinued operations. For the first nine months of fiscal 2004, we experienced a net loss of $8.0 million and a net loss from operations of $7.6 million as compared to a net loss of $12.0 million and a loss from operations of $11.1 million for the first nine months of fiscal 2003. We have been able to fund our losses to date from the $10,641,000 in funding received from The Tail Wind Fund Ltd. between May, 2001 and April 2004 (which includes proceeds from the exercise of warrants) and the $128.7 million judgment, net $77.2 million after attorney's fees, received from General Electric Company in 1997 for patent infringement and the settlement proceeds from other patent litigation settlements with other competitors. The terms of these settlement agreements are required to be kept confidential. More recently, we have improved our liquidity and cash position not only through revenues generated by the sale of Stand-Up(TM) MRI scanners but by the issuance of shares of our common stock in connection with the payment of vendors and suppliers of goods and services. The greater number of these shares were used in lieu of cash to pay the costs of manufacturing our MRI scanners. As of June 30, 2003, our consolidated balance sheet reflected $9.3 million in cash and cash equivalents and $5.8 million in marketable securities out of total current assets of $35.3 million as compared to $7.5 million in cash or cash equivalents and $5.6 million in marketable securities out of total current assets of $45.1 million as of June 30, 2002. As of March 31, 2004, our consolidated balance sheet showed $7.0 million in cash and cash equivalents and $11.3 million in marketable securities out of total current assets of $52.3 million, reflecting the investment of more cash in marketable securities. We believe that we will be able to reverse our operating losses by continuing the marketing of our new MRI scanners, particularly our Stand-Up(TM) MRI scanners. HMCA operating losses from continuing operations increased to $3.8 million in fiscal 2003 from $1.1 million in fiscal 2002. Contributing to the operating loss of HMCA, was an impairment loss of $795,237 on a management agreement with an unprofitable physical rehabilitation and therapy facility which ceased operations in the beginning of the second quarter of fiscal 2003. Since that time all HMCA managed facilities have been owned by Dr. Damadian. We are optimistic that we can restore HMCA to profitability principally by upgrading scanners at MRI facilities we manage to Stand-Up(TM) MRI scanners. Five of our 10 managed MRI facilities now have the Stand-Up(TM) MRI. For the nine months ended March 31, 2004, HMCA's operating results had improved to an operating loss of $429,000 as compared to an operating loss of $2.4 million for the first nine months ended March 31, 2003. There can be no assurance, however, that we can reverse our operating losses. 2. Fonar is dependant on the success of its new products to become profitable. Our ability to generate future operating profits will depend on our ability to market and sell our MRI products. The Stand-Up(TM) MRI and Fonar 360 scanners have been introduced into the market. Although we are optimistic that these scanners' features will make them competitive, and we perceive that the Stand-Up(TM) MRI is successfully penetrating the market, there can be no assurance as to the degree, timing or continuation of market acceptance of these products. We have received orders, however, for 8 Stand-Up(TM) MRI scanners in fiscal 2001, 16 Stand-Up(TM) MRI scanners in fiscal 2002, 23 Stand-Up(TM) MRI scanners in fiscal 2003 and as of June 16, 2004, 40 Stand-Up(TM) MRI scanners in fiscal 2004. The product we are promoting most vigorously is the Stand-Up(TM) MRI. We believe the Stand-Up(TM) MRI is the most promising because it enables scans to be performed on patients in weight bearing positions, such as sitting, standing or lying at an intermediate angle or in any of the conventional recumbent positions. The following chart shows the revenues attributable to each model during fiscal year 2003 and fiscal year 2002 and the first nine months of fiscal 2004. Please note that we recognize the revenue on scanner sales on a percentage of completion basis. This means we book revenue not as cash is received or sales are made, but as the scanner is built. Consequently, the revenues for a fiscal period do not necessarily relate to the orders placed in that period. Revenues Recognized ------------------- Model Fiscal Year Fiscal Year Fiscal Year 2004 (9 months) 2003 2002 --------------- ---- ---- Stand-Up $28,605,240 $24,298,460 $ 11,089,675 Fonar 360 0 0 0 Beta (used) 0 $ 100,000 $ 361,000 3. We must compete in a highly competitive market against competitors with greater financial resources than we have. The medical equipment industry is highly competitive and characterized by rapidly changing technology and extensive research and development. The market demand for a continuing supply of new and improved products requires that we be engaged continuously in research and development. New products also require continuous retooling or at least modifications to our manufacturing facilities, and our sales and marketing force must continuously adjust to new products and product features. This is highly expensive and companies with substantially greater financial resources than we have engage in the marketing of magnetic resonance imaging scanners which compete with the Company's scanners. Competitors include large, multinational companies or their affiliates such as General Electric Company, Siemens A.G., Philips N.V., Toshiba Corporation and Hitachi Corporation. There can be no assurance that Fonar's products will be able to successfully compete with products of its competitors. 4. The success of some of the businesses purchased by HMCA depends on the continued employment of the former owners of those businesses. The businesses acquired by HMCA are essentially service organizations whose continued success depends on retaining and developing existing business relationships. Although these acquisitions have been essentially integrated with the business of HMCA, or in the case of the management of primary care medical practices, discontinued, some of these relationships still depend on the personal efforts of key persons in the acquired company. HMCA has retained certain of these key people through employment agreements which include both noncompetition covenants and financial incentives. Nevertheless, there can be no assurance that these key people will remain as employees or produce results sufficient to make the acquired companies profitable. 5. HMCA's profitability depends on its ability to successfully perform billing and collection services for its clients. HMCA performs billing and collection services for the medical practices and MRI facilities it manages. The viability of HMCA's clients and their ability to remit management fees to HMCA depends on HMCA's ability to collect the clients' receivables. Collectibility of these receivables can be adversely affected by the longer payment cycles and rigorous informational requirements of some insurance companies or other third party payors. Proper authorizations, referrals and confirmation of coverage for patients, as well as issues of medical necessity, need to be addressed prior to the rendering of service to assure prompt payment of claims. HMCA believes it is properly addressing billing and collection requirements and issues for its clients and that its collection rates are good. Nevertheless, the regulations and requirements applicable to medical billing and collections could change in the future and result in reduced or delayed collections. Approximately 99% of the receivables billed and collected by HMCA in fiscal 2003 were from professional corporations owned by Dr. Raymond V. Damadian and 100% of the receivables billed and collected by HMCA for the nine months ended March 31, 2004 were from professional corporations owned by Dr. Damadian. 6. The profitability of HMCA could be adversely affected if medical insurance reimbursement rates change. HMCA receives substantially all of its revenue from physician practices and providers of MRI services. Consequently, HMCA would be indirectly affected by changes in medical insurance reimbursement policies, HMO policies, referral patterns, no-fault and workers compensation reimbursement levels and other factors affecting the profitability of a medical practice or MRI facility. The types of medical providers served by HMCA are MRI facilities and physical therapy and rehabilitation practices. There are currently 10 MRI facilities served by HMCA located in New York, Florida and Georgia. The physical therapy and rehabilitation practices consist of six offices located in New York. Approximately 57.6% of HMCA's clients' revenues in fiscal 2003 and approximately 43.0% of HMCA's clients' revenues in fiscal 2002 were generated from no-fault and personal injury protection claims. Approximately 10.8% of HMCA's clients' revenues were from workers' compensation claims in fiscal 2003 as compared to 9.3% in fiscal 2002. For the first nine months of fiscal 2004 approximately 58.2% of HMCA's clients' revenues were generated from no-fault and personal injury protection claims and 6.5% were generated from workers' compensation claims. In addition, in fiscal 2003, approximately 12.0% of the revenues of HMCA's clients were attributable to Medicare and 0.5% were attributable to Medicaid. In fiscal 2002, approximately 8.8% of the revenues of HMCA's clients were attributable to Medicare and 0.2% were attributable to Medicaid. For the first nine months of fiscal 2004, approximately 8.3% of the revenues of HMCA's clients were attributable to Medicare and 0.73% were attributable to Medicaid. Although we do not know of any pending adverse development affecting these types of programs, future changes in the reimbursement levels for MRI, workers compensation, no fault reimbursement or Medicare, or changes in utilization policies for MRI or physical rehabilitation therapy could adversely affect the ability of HMCA's clients to pay HMCA's fees. In addition, HMCA depends on the ability of its clients to attract and retain physicians and other professional staff. 7. The amortization of the management agreements on our consolidated balance sheet will reduce future profits. HMCA acquired businesses in 1997 and 1998 which were essentially service businesses for purchase prices based on earnings multiples rather than net tangible assets. As the fair value of the tangible assets was small relative to the purchase price, the consolidated balance sheet of Fonar and its subsidiaries has reflected an allocation of the purchase price in excess of the fair value of the tangible assets exclusively to management agreements, an intangible asset. For fiscal 2003 and fiscal 2002, amortization of management agreements, which is over a period of twenty (20) years, reduced net profits by $696,285 for both fiscal years. For fiscal 2004, the amortization was reduced to approximately $634,000 annually because of the impairment loss of $795,237 on the management agreement for an unprofitable site which was closed during the second quarter of fiscal 2003. This amortization is a non-cash expense. 8. Professional liability claims against HMCA or its clients may exceed insurance coverage levels. Although HMCA does not provide medical services, it is possible that a patient suing one of HMCA's client medical practices or MRI facilities would also sue HMCA. Except for two of the 10 current MRI facilities, neither HMCA nor its clients carry professional liability insurance. Physicians working for HMCA's clients, however, are required to maintain professional liability insurance in the minimum amount of $1,000,000/$3,000,000. Such insurance would not cover HMCA or a client professional corporation, which was not insured, however, in the event a claim were made which was not covered by the physician's insurance. Claims in excess of insurance coverage might also have to be satisfied by HMCA or its uninsured clients if they were named as defendants. 9. We are dependent upon the services of Dr. Damadian. Our success is greatly dependent upon the continued participation of Dr. Raymond V. Damadian, Fonar's founder, Chairman of the Board and President. Dr. Damadian has acted as our CEO since 1978 and will continue to do so for the foreseeable future. In addition to providing general supervision and direction, he provides active direction, supervision and management of our sales, marketing and research and development efforts. In connection with the physician and diagnostic management services business conducted by HMCA, Dr. Damadian now owns all of the professional corporations which are HMCA clients. With the exception of one professional corporation which provided management fees to HMCA of approximately $25,000 in the aggregate in fiscal 2003, all of HMCA's revenues in fiscal 2003 were provided by professional corporations which are owned by Dr. Damadian. Loss of the services of Dr. Damadian would have a material adverse effect on our business. We do not have an employment or noncompetition agreement with Dr. Damadian. We do not currently carry "key man" life insurance on Dr. Damadian. 10. Dr. Raymond V. Damadian has voting control of Fonar; the management cannot be changed or the Company sold without his agreement. Dr. Raymond V. Damadian, the President, Chairman of the Board and principal stockholder of Fonar is and will continue to be in control of Fonar and in a position to elect all of the directors of Fonar. As of June 15, 2004, there were outstanding 98,199,765 shares of common stock, having one vote per share, 4,153 shares of Class B common stock, having ten votes per share and 9,562,824 shares of Class C common stock, having 25 votes per share. Of these totals Dr. Damadian owns 2,488,274 shares of common stock and 9,561,174 shares of Class C common stock, giving him approximately 72% of the voting power of Fonar's voting stock. This means that the holders of the common stock will not be able to control decisions concerning any merger or sale of Fonar, the election of directors or the determination of business and management policy. 11. The provisions of our warrants provide for reductions in the exercise price if we issue common stock at prices below the warrant exercise prices. In connection with the issuance of 4% convertible debentures issued to The Tail Wind Fund, Ltd. in May 2001, we issued purchase warrants and callable warrants. As of June 15, 2004 there were outstanding purchase warrants to purchase an aggregate of 1,454,875 shares of our common stock at an exercise price of $0.79 per share, subject to adjustment. All of the callable warrants have been exercised. Of the purchase warrants, 1,000,000 are held by The Tail Wind Fund, Ltd. and 454,875 were issued to the placement agent and its designees. The placement agent, exercised its warrant on or about June 17, 2004 to purchase 151,625 shares at an exercise price of $0.79 per share. The remainder of the purchase warrant have not been exercised and are outstanding. The exercise period for the purchase warrants extends to May 24, 2009. Originally the number of purchase warrants issued were 659,501 to The Tail Wind Fund, Ltd. and 300,000 to the placement agent and its designees. The original exercise period for the purchase warrants was through to May 24, 2006. Because of the terms of the antidilution provisions of the purchase warrants originally issued, the exercise price has been reduced and the number of shares covered by the warrants increased. The antidilution provisions, provided for proportionate adjustments in the event of stock splits, stock dividends and reverse stock splits. In addition, the antidilution provisions provided that the exercise price would be reduced if we issued shares at lower prices than the warrant exercise price, or less than the market price for our common stock. The purchase warrants also provided that the number of underlying shares would be inversely proportionately increased or decreased in the event of a change in the exercise price, such that the aggregate purchase price for the underlying warrant shares upon full exercise of the purchase warrants would remain the same. In brief, a reduction of the exercise price would increase the shares covered by the purchase warrants. Since issuing the purchase warrants, we registered and issued shares of our common stock to suppliers of goods and services in lieu of cash. Our suppliers would credit us for the net proceeds they received from the sale of the shares. Because the market price for our common stock was under the $1.801 exercise price of the purchase warrants at many times during our program of paying vendors with stock in lieu of cash, we were credited by our suppliers at rates below the $1.801 per share exercise price under the purchase warrants. The holders of the purchase warrants and Fonar executed amendments to the purchase warrants, providing for the increase in the number of shares and the reduction of the exercise prices. Although the new exercise price of $0.79 per share was determined in accordance with the terms of the purchase warrants as a result of the vendor issuances previously described, the number of underlying shares represented an agreement on the part of warrant holders to accept an adjustment representing a lesser number of shares than would have resulted from the strict application of the formula in the purchase warrants. In addition, among other things, the antidilution provisions were amended to provide that if Fonar were to sell shares below the warrant exercise price, the exercise price would not automatically be reduced to the lower price, but that it would be adjusted based on the price and number of shares sold relative to the total number of shares outstanding before and after the sale. In addition, the provision that required an adjustment in the exercise price if Fonar sold shares below the market price was eliminated. These modifications were accepted by the holders in consideration for, among other things, the term of the purchase warrants being extended three years to May 24, 2009. Since the exercise price under the purchase warrants is now $0.79, however, further adjustments based on sales below the warrant exercise price would not be made unless the effective purchase price per share was less than $0.79. FORWARD-LOOKING STATEMENTS We make statements in this prospectus and the documents incorporated by reference that are considered forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 contains the safe harbor provisions that cover these forward-looking statements. We are including this statement for purposes of complying with these safe harbor provisions. We base these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions including, among other things: - continued losses and cash flow deficits; - the continued availability of financing in the amounts, at the times and on the terms required to support our future business; - uncertain market acceptance of our products; and - reliance on key personnel. Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate" and variations of such words and similar expressions are intended to identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Because of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this document may not occur. USE OF PROCEEEDS We cannot guarantee that we will receive any proceeds in connection with this offering, except for the $119,784 which was paid by the placement agent in June, 2004 upon the exercise of its purchase warrant for 151,625 shares. We intend to use the net proceeds of this offering for general corporate purposes, including working capital to fund operating expenses, accounts payable and capital expenditures. Accordingly, our management will have broad discretion in the application of any net proceeds received. Pending such uses, we may invest the net proceeds from this offering in short-term, interest-bearing, investment grade securities. PLAN OF DISTRIBUTION We may sell the shares being offered by us in this prospectus: through dealers, brokers or agents; through underwriters; directly to purchasers; or through a combination of any of these methods of sale. We and our agents and underwriters may sell the shares being offered by us in this prospectus from time to time in one or more transactions: at market prices prevailing at the time of sale; at prices related to such prevailing market prices; at a fixed price or prices, which may be changed; or at negotiated prices. In addition to any underwriters we may use, any brokers, dealers or agents who participate in the distribution of the shares may be deemed to be underwriters, and any profits on the sale of shares by them and any discounts, commissions or concessions received by any broker, dealer or agent might be deemed to be underwriting discounts and commissions under the Securities Act. In any such case, any such underwriters may be subject to statutory liabilities, including, but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act. These provisions of the securities laws provide, in general terms, for liability for fraud, untrue statements contained in a prospectus or otherwise made in connection with the sale of securities, and the failure to disclose significant information which is necessary to prevent information disclosed from being misleading. We may solicit directly offers to purchase shares. We may also designate agents from time to time to solicit offers to purchase shares. Any agent that we designate, may then resell such shares to the public at varying prices to be determined by such agent at the time of resale. We may engage in at the market offerings of our common stock. An "at the market" offering is an offering of our common stock at other than a fixed price to or through a market maker. Under Rule 415(a)(4) of the Securities Act, the total value of at the market offerings made under this prospectus may not exceed 10% of the aggregate market value of our common stock held by non-affiliates. If we use underwriters to sell shares, we will enter into an underwriting agreement with the underwriters at the time of the sale to them. The names of the underwriters will be set forth in the prospectus supplement which will be used by them together with this prospectus to make sales of the shares to the public. Details of our arrangement with the underwriter, including commissions, underwriting discounts or fees paid by us and whether the underwriter is acting as principal or agent, would be described in the prospectus supplement. Underwriters may also receive commissions from purchasers of the shares. Underwriters may use dealers to sell shares. If this happens, the dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Any underwriters to whom we sell shares for public offering and sale may make a market in the shares that they purchase, but the underwriters will not be obligated to do so and may discontinue any market making at any time without notice. Underwriters and agents also may engage in transactions with, or perform services for, us in the ordinary course of business. Regardless of the method used to sell the common stock, we will provide a prospectus supplement that will disclose: - the identity of any underwriters, dealers or agents who purchase the common stock; - the material terms of the distribution, including the number of shares sold and the consideration paid; - the amount of any compensation, discounts or commissions to be received by the underwriters, dealers or agents; - the terms of any indemnification provisions, including indemnification from liabilities under the federal securities laws; and - the nature of any transaction by an underwriter, dealer or agent during the offering that is intended to stabilize or maintain the market price of the common stock. In order to comply with certain state securities laws, if applicable, the shares may be sold in such jurisdictions only through registered or licensed brokers or dealers. In certain states, the shares may not be sold unless the shares have been registered or qualified for sale in such state or an exemption from regulation or qualification is available and is complied with. Sales of shares must also be made by us in compliance with all other applicable state securities laws and regulations. MANNER OF SALES. The shares may be sold according to one or more of the following methods: A block trade in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction. Purchases by a broker or dealer as principal and resale by the broker or dealer for its account. Ordinary brokerage transactions and transactions in which the broker solicits purchasers. Pledges of shares to a broker-dealer or other person, who may, in the event of default, purchase or sell the pledged shares. An exchange distribution under the rules of the exchange. In private transactions without a broker-dealer. By writing options. Any combination of the foregoing, or any other available means allowable under law. EXPENSES ASSOCIATED WITH REGISTRATION. We will pay the expenses of registering the shares under the Securities Act, including registration and filing fees, printing expenses, administrative expenses, legal fees and accounting fees. If we sell the shares through underwriters or broker-dealers, we will be responsible for underwriting discounts, underwriting commissions and agent commissions. INDEMNIFICATION AND CONTRIBUTION. Underwriters, dealers, agents and other persons may be entitled, under agreements that may be entered into with us, to indemnification by us against certain civil liabilities, including liabilities under the Securities Act of 1933, or to contribution with respect to payments which they may be required to make in respect of such liabilities. SUSPENSION OF THIS OFFERING. We may suspend the use of this prospectus if we learn of any event that causes this prospectus to include an untrue statement of material fact or omit to state a material fact required to be stated in the prospectus or necessary to make the statements in the prospectus not misleading in light of the circumstances then existing. If this type of event occurs, a prospectus supplement or post-effective amendment, if required, will be distributed. Computershare Trust Company, Inc., formerly called American Securities Transfer & Trust, Inc., located at 350 Indiana Street, Suite 800, Golden, Colorado, 80401 is the transfer agent and registrar for our common stock. LEGAL MATTERS Certain legal matters with respect to the validity of the shares being offered by the prospectus will be passed upon by Henry T. Meyer, Esq., 110 Marcus Drive, Melville, New York 11747. Mr. Meyer is Fonar's General Counsel. EXPERTS The consolidated financial statements contained in Fonar's latest annual report on Form 10-K, incorporated by reference into this prospectus, have been audited by Marcum & Kliegman LLP, a registered independent public accounting firm, to the extent set forth in their report. Such consolidated financial statements were included therein in reliance upon their reports, given on their authority as experts in accounting and auditing. INDEMNIFICATION The Delaware General Corporation Law and Fonar's by-laws provide for the indemnification of an officer or director under certain circumstances against reasonable expenses incurred in connection with the defense of any action brought against him by reason of his being a director or officer. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or other persons under Fonar's by-laws or the Delaware General Corporation Law, Fonar has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. WHERE YOU CAN FIND MORE INFORMATION We file reports, proxy statements and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are also available over the Internet at the Securities and Exchange Commission's web site at http://www.sec.gov. You may also read and copy any document we file at the Securities and Exchange Commission's public reference rooms in Washington, D.C. and New York, New York. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more information on the public reference rooms. Our Commission File No. is 0-10248. INCORPORATION OF INFORMATION WE FILE WITH THE SEC The Securities and Exchange Commission allows us to "incorporate by reference" the information we file with them, which means: - incorporated documents are considered part of this prospectus; - we can disclose important information to you by referring you to those documents; and - information that we file with the Securities and Exchange Commission will automatically update and supersede this prospectus. We are incorporating by reference the documents listed below which were filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934: - Annual Report on Form 10-K for the year ended June 30, 2003, which was filed on September 30, 2003; - Quarterly Reports on Form 10-Q for the quarters ended on September 30, 2003, December 31, 2003 and March 31, 2004, which were filed on November 14, 2003, February 13, 2004 and May 17, 2004. We also incorporate by reference each of the following documents that we will file with the Securities and Exchange Commission after the date of this prospectus but before the end of the offering: - Reports filed under Sections 13(a) and (c) of the Securities Exchange Act of 1934; - Definitive proxy or information statements filed under Section 14 of the Securities Exchange Act of 1934 in connection with any subsequent stockholders' meeting; and - Any reports filed under Section 15(d) of the Securities Exchange Act of 1934. You may request a copy of these filings, at no cost, by contacting us at the following address or phone number: Fonar Corporation 110 Marcus Drive Melville, New York 11747 Attention: Investor Relations PArt II Information Not Required in prospectus ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of the common stock being registered. All amounts are estimates except the registration fee. AMOUNT TO BE PAID SEC Registration Fee $ 572.05 Printing 1,000.00 Legal Fees and Expenses 1,000.00 Accounting Fees and Expenses 5,000.00 Blue Sky Fees and Expenses 5,000.00 Transfer Agent and Registrar Fees 5,000.00 Miscellaneous 1,000.00 ----------- Total............................................................$ 18,572.05 ============ ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 102(b)(7) of the General Corporation Law of the State of Delaware (the "Delaware Law") grants corporations the right to limit or eliminate the personal liability of their directors in certain circumstances in accordance with provisions therein set forth. Our Certificate of Incorporation contains a provision eliminating director liability to us and our stockholders for monetary damages for breach of fiduciary duty as a director. The provision does not, however, eliminate or limit the personal liability of a director: (i) for any breach of such director's duty of loyalty to us or our stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under the Delaware statutory provision making directors personally liable, for improper payment of dividends or improper stock purchases or redemptions; or (iv) for any transaction from which the director derived an improper personal benefit. This provision offers persons who serve on our Board of Directors protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above). As a result of this provision, our ability or a stockholder's ability to successfully prosecute an action against a director for a breach of his duty of care is limited. However, the provision does not affect the availability of equitable remedies such as an injunction or rescission based upon a director's breach of his duty of care. The SEC has taken the position that the provision will have no effect on claims arising under federal securities laws. Section 145 of the Delaware Law grants corporations the right to indemnify their directors, officers, employees and agents in accordance with the provisions therein set forth. Our By-laws provide that the corporation shall, subject to limited exceptions, indemnify its directors and executive officers to the fullest extent not prohibited by the Delaware Law. Our By-laws provide further that the corporation shall have the power to indemnify its other officers, employees and her agents as set forth in the Delaware Law. Such indemnification rights permit reimbursement for expenses incurred by such director, executive officer, other officer, employee or agent in advance of the final disposition of such proceeding in accordance with the applicable provisions of the Delaware Law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of us pursuant to these provisions, or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. Item 16. Exhibits and Financial Statement Schedules Exhibits 3.1 * Certificate of Incorporation, as amended, of the Company incorporated herein 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 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. 4.1 * Specimen Common Stock Certificate incorporated herein by reference to Exhibit 4.1 to the Registrant's registration statement on Form S-1, Commission File No. 33-13365. 4.2 * Specimen Class B Common Stock Certificate incorporated herein by reference to Exhibit 4.2 to the Registrant's registration statement on Form S-1, Commission File No. 33-13365. 4.3 * Form of 4% Convertible Debentures due June 30, 2002 incorporated herein by reference to Exhibit 4.1 of the Registrant's current report on Form 8-K filed on June 11, 2001. Commission File No. 0-10248. 4.4 * Form of Purchase Warrants incorporated herein by reference to Exhibit 4.2 of the Registrant's current report on Form 8-K filed on June 11, 2001. Commission File No. 0-10248. 4.5 * Form of Callable Warrants incorporated herein by reference to Exhibit 4.3 of the Registrant's current reports on Form 8-K filed on June 11, 2001. Commission File No. 0-10248. 4.6 *Form of Replacement Callable Warrants incorporated herein by reference to Exhibit 4.7 of the Registrant's registration statement on Form S-3, Commission File No. 333-10677. 4.7 Form of Amended and Restated Purchase Warrant for The Tail Wind Fund, Ltd. See Exhibits. 4.8 Form of Amended and Restated Purchase Warrant for Placement Agent and Designees. See Exhibits. 5 Opinion of Counsel re: Legality. See Exhibits. 10.1 * License Agreement between Fonar and Raymond V. Damadian incorporated herein by reference to Exhibit 10 (e) to Form 10-K for the fiscal year ended June 30, 1983, Commission File No. 0-10248 10.2 * 1993 Incentive Stock Option Plan incorporated herein by reference to Exhibit 28.1 to the Registrant's registration statement on Form S-8, Commission File No. 33-60154. 10.3 * 1997 Non-Statutory Stock Option Plan incorporated herein by reference to Exhibit 28.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-27411. 10.4 * 1997 Stock Bonus Plan incorporated herein by reference to Exhibit 28.2 to the Registrant's registration statement on Form S-8, Commission File No. 333-27411 10.5 * 2000 Stock Bonus Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333- 66760. 10.6 * 2002 Stock Bonus Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-89578. 10.7 * 2002 Incentive Stock Option Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-96557. 10.8 * 2003 Stock Bonus Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-89578. 10.9 * 2003 Supplemental Stock Bonus Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333-106626. 10.10* 2004 Stock Bonus Plan incorporated herein by reference to Exhibit 99.1 to the Registrant's registration statement on Form S-8, Commission File No. 333- 112577. 10.11* Stock Purchase Agreement, dated July 31, 1997 by and between U.S. Health Management Corporation , Raymond V. Damadian, M.D. MR Scanning Centers Management Company and Raymond V. Damadian, incorporated herein by reference to Exhibit 2.1 to the Registrant's Form 8-K, July 31, 1997, Commission File No: 0-10248. 10.12*Merger Agreement and Supplemental Agreement dated June 17, 1997 and Letter of Amendment dated June 27, 1997 by and among U.S. Health Management Corporation and Affordable Diagnostics Inc. et al., incorporated herein by reference to Exhibit 2.1 to the Registrant's 8-K, June 30, 1997, Commission File No: 0-10248. 10.13*Stock Purchase Agreement dated March 20, 1998 by and among Health Management Corporation of America, Fonar Corporation, Giovanni Marciano, Glenn Muraca et al., incorporated herein by reference to Exhibit 2.1 to the Registrant's 8-K, March 20, 1998, Commission File No: 0-10248. 10.14* Stock Purchase Agreement dated August 20, 1998 by and among Health Management Corporation of America, Fonar Corporation, Stuart Blumberg and Steven Jonas, incorporated herein by reference to Exhibit 2 to the Registrant's 8-K, September 3, 1998, Commission File No. 0-10248. 10.15*Purchase Agreement dated May 24, 2001 by and between Fonar and The Tail Wind Fund Ltd. incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed June 11, 2001. Commission File No. 0-10248. 10.16* Registration Rights Agreement dated May 24, 2001 by and among Fonar, The Tail Wind Fund Ltd. and Roan Meyers, Inc. incorporated herein by reference to Exhibit 10.2 to the Registrant's current report on Form 8-K filed June 11, 2001. Commission File No. 0-10248. 10.17 Amendment to Callable Warrant dated April 28, 2004 by and between The Tail Wind Fund, Ltd. and Fonar Corporation. 10.18 First Amendment to Purchase Warrant dated April 28, 2004 by and between The Tail Wind Fund, Ltd. and Fonar Corporation. 10.19 Form of First Amendment to Purchase Warrant dated June 1, 2004 by and between each of Roan/Meyers Associates, L.P. and its designees. 23.1 Marcum & Kliegman LLP, Independent Registered Public Accounting Firm's Consent. (See Exhibits). 23.2 (Consent of Counsel is included in Exhibit 5). * Exhibits incorporated by reference. Financial Statement Schedules None Item 17. Undertakings The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (b) That for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13 (a) or section 15 (d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on June 25, 2004. Dated: June 25, 2004 FONAR CORPORATION By: /s/ Raymond V. Damadian Raymond V. Damadian, President, Acting Chief Financial Officer and Acting Principal Accounting Officer Signing in his capacities as Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to the requirements of the Securities Act of 1933, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Raymond V. Damadian Chairman of the Board of Directors, - ----------------------- Raymond V. Damadian President and a Director June 25, 2004 (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) /s/ Claudette J.V. Chan Director June 25, 2004 - ----------------------- Claudette J.V. Chan /s/ Robert J. Janoff Director June 25, 2004 - -------------------- Robert J. Janoff /s/ Charles N. O'Data Director June 25, 2004 - --------------------- Charles N. O'Data /s/ Robert Djerejian - -------------------- Director June 25, 2004 Robert Djerejian EX-4 2 x047.txt EXHIBIT 4.7 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. Original Issuance Date: May 24, 2001 FONAR CORPORATION AMENDED AND RESTATED PURCHASE WARRANT WARRANT ("WARRANT") TO PURCHASE SHARES OF COMMON STOCK, $0.0001 PAR VALUE PER SHARE This is to certify that, for VALUE RECEIVED, THE TAIL WIND FUND, LTD. ("Warrantholder"), is entitled to purchase, subject to the provisions of this Warrant, from Fonar Corporation, a corporation organized under the laws of Delaware ("Company"), at any time after the date of the issuance hereof but not later than 5:00 P.M., Eastern time, on May 24, 2009 ("Expiration Date"), 1,000,000 shares ("Warrant Shares") of Common Stock, $0.0001 par value ("Common Stock"), of the Company, at an exercise price per share equal to $0.79 (the exercise price in effect from time to time hereafter being herein called the "Warrant Price"). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. This Warrant has been issued pursuant to the terms of the Purchase Agreement ("Purchase Agreement") dated on or about the date hereof between the Company and the Warrantholder. Capitalized terms used herein and not defined shall have the meaning specified in the Purchase Agreement. Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of the Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended ("Securities Act") or an exemption from registration thereunder. Subject to such restrictions, the Company shall transfer this Warrant from time to time, upon the books to be maintained by the Company for that purpose, upon surrender hereof for transfer properly endorsed or accompanied by appropriate instructions for transfer upon any such transfer, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. (a) Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time and from time to time after the date of issuance hereof upon surrender of the Warrant, together with delivery of the duly executed Warrant exercise form attached hereto (the "Exercise Agreement") (which may be by fax), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Warrant Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which the completed Exercise Agreement shall have been delivered to the Company (or such later date as may be specified in the Exercise Agreement). Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall (subject to Section 3(b) below), at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. (b) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the Warrantholder shall not be required to physically surrender this Warrant to the Company unless such holder is purchasing the full amount of Warrant Shares represented by this Warrant. The Warrantholder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the Warrantholder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. The Warrantholder and any assignee, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof. Section 4. Compliance with the Securities Act of 1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor any other security issued or issuable upon exercise of this Warrant may be offered or sold except as provided in this Warrant and in conformity with the Securities Act of 1933, as amended, and then only against receipt of an agreement of such person to whom such offer of sale is made to comply with the provisions of this Section 4 with respect to any resale or other disposition of such security. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant until the Warrant Shares have been registered for resale under the Registration Rights Agreement or until Rule 144 is available, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant in respect of which such shares are issued. The holder shall be responsible for income taxes due under federal or state law, if any such tax is due. Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if reasonably requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved, out of the authorized and unissued Common Stock, a number of shares sufficient to provide for the exercise of the rights of purchase represented by the Warrant in full (without regard to any restrictions on beneficial ownership contained herein), and the transfer agent for the Common Stock, including every subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of any of the right of purchase aforesaid ("Transfer Agent"), shall be irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares of Common Stock as shall be requisite for such purpose. The Company agrees that all Warrant Shares issued upon exercise of the Warrant in accordance with its terms shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. The Company will keep a conformed copy of this Warrant on file with its Transfer Agent. The Company will supply from time to time the Transfer Agent with duly executed stock certificates required to honor the outstanding Warrant. Section 8. Warrant Price. The Warrant Price, subject to adjustment as provided in Section 9, shall, if payment is made in cash or by certified check, be payable in lawful money of the United States of America. Section 9. Adjustments. Subject and pursuant to the provisions of this Section 9, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company or any of its subsidiaries shall at any time or from time to time while the Warrant is outstanding, pay a dividend or make a distribution on its capital stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event. Such adjustment shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitations, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Company, the obligation to deliver to the holder of the Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (c) In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets or subscription rights or warrants, the Warrant Price to be in effect after such record date shall be determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Fair Market Value per share of Common Stock (as defined below), less the fair market value (on a per share basis) (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current Fair Market Value per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. "Fair Market Value" of the Common Stock shall be the closing price of the Common Stock as reported by the Nasdaq Stock Market (or other exchange or market on which the Common Stock is principally traded) on the trading day immediately preceding the date on which such value is being determined. (d) For the duration of the term of this Warrant, if the Company or any subsidiary shall at any time or from time to time issue or sell securities (other than issuances of Underlying Shares pursuant to Debentures and Warrants under the Purchase Agreement, shares or options issued or which may be issued pursuant to the Company's current employee or director option plans or shares issued upon exercise of options, warrants or rights outstanding on the date of the Agreement and listed in the Company's SEC Filings and other than issuances described in and permitted under 7.2(b)(iii) of the Purchase Agreement) at an effective a Per Share Selling Price (as defined below) which is less than the Warrant Price, then in each such case, the Warrant Price in effect immediately prior to such issue or sale shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Warrant Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at the Warrant Price, and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale. The foregoing provision of this subsection shall not apply to issuances or sales pursuant to the Company's duly adopted employee or director bona fide options plans and/or compensation arrangements or to issuances of up to 1,500,000 shares of the Company's Common Stock to the stockholders of Advanced Medical Diagnostic Corporation, a majority-owned subsidiary of Fonar ("AMD"), in exchange for their shares of stock of AMD (which shall not be a capital raising transaction). For the purposes of the foregoing adjustment, in the case of the issuance of any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock ("Convertible Securities"), the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities. For the purposes of this Section 9(d), "Per Share Selling Price" shall include the amount actually paid by third parties for each share of Common Stock. In the event a fee is paid by the Company in connection with such transaction, any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of rights, options, warrants or convertible, exchangeable or exercisable securities under which the Company is or may become obligated to issue shares of Common Stock, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Company upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction, over the life of such securities. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Company and the Purchaser. (e) An adjustment shall become effective immediately after the record date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (f) In the event that, as a result of an adjustment made pursuant to Section 9, the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. (g) In the event of any adjustment in the number of Warrant Shares issuable hereunder upon exercise, the Warrant Price shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same. Similarly, in the event of any adjustment in the Warrant Price, the number of Warrant Shares issuable hereunder upon exercise shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same. Section 10. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon the exercise of the Warrant (or specified portions thereof), the Company shall round such calculation to the nearest whole number and disregard the fraction. Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall forthwith give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. In the event of a dispute with respect to any such calculation, the certificate of the Company's independent certified public accountants shall be conclusive evidence of the correctness of any computation made, absent manifest error. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. At the Warrantholder's request, the Company shall deliver to the Warrantholder as of a requested date a notice specifying the Warrant Price and the number of Warrant Shares into which this Warrant is exercisable as of such date. Section 13. Identity of Transfer Agent. The initial Transfer Agent for the Common Stock is: Computershare (f/k/a Securities Transfer Trust, Inc.) 350 Indiana Street, Suite 800 Golden, Colorado 80401 Forthwith upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will fax to the Warrantholder a statement setting forth the name and address of such transfer agent. Section 14. Notices. Any notice pursuant hereto to be given or made by the Warrantholder to or on the Company shall be sufficiently given or made if delivered personally or by facsimile or if sent by an internationally recognized courier, addressed as follows: Fonar Corporation 110 Marcus Drive Melville, New York 11747 Telephone: (631) 694-2929 Fax: (631) 249-3734 or such other address as the Company may specify in writing by notice to the Warrantholder complying as to delivery with the terms of this Section 14. Any notice pursuant hereto to be given or made by the Company to or on the Warrantholder shall be sufficiently given or made if personally delivered or if sent by an internationally recognized courier service by overnight or two-day service, to the address set forth on the books of the Company or, as to each of the Company and the Warrantholder, at such other address as shall be designated by such party by written notice to the other party complying as to delivery with the terms of this Section 14. All such notices, requests, demands, directions and other communications shall, when sent by courier, be effective two (2) days after delivery to such courier as provided and addressed as aforesaid. All faxes shall be effective upon receipt. Section 15. Registration Rights. The initial holder of this Warrant is entitled to the benefit of certain registration rights in respect of the Warrant Shares as provided in the Registration Rights Agreement. Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 17. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of New York, without giving effect to its conflict of law principles, and for all purposes shall be construed in accordance with the laws of said State. Section 18. 4.9% and 19.9% Limitations. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the holder upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder at such time (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrant Shares) that have limitations on the holder's right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) by the Warrantholder's "affiliates" at such time (as defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 4.9% of the total issued and outstanding shares of the Common Stock (the "Restricted Ownership Percentage"). Each holder shall have the right (x) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (y) (subject to waiver) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned, of a change of control transaction (including without limitation a transaction that would result in a transfer of more than 50% of the Company's voting power or equity, or a sale of all or substantially all of the Company's assets, or a transaction that would result in a person or "group" being deemed the beneficial owner of 50% or more of the Company's voting power or equity). (b) The Company's obligation to issue Common Stock which would exceed such limits referred to in this Section 18 shall be suspended to the extent necessary until such time, if any, as shares of Common Stock may be issued in compliance with such restrictions. (c) Notwithstanding anything contained herein, in the event that the Warrantholder has timely exercised this Warrant and the issuance of all or a portion of the Warrant Shares to be issued pursuant to such exercise would constitute a breach of the Company's obligations under the rules or regulations of the Nasdaq Stock Market as they apply to the Company, or any other principal securities exchange or market ("Principal Market") upon which the Common Stock is or becomes traded (the "Cap Regulations"), then the Company shall not be obligated to issue any such Warrant Shares to the extent such shares are in excess of the maximum permissible amount under such Cap Regulations ("Excess Shares"). Within five (5) days following any occurrence of Excess Shares, the Company shall promptly pay to the Purchaser, in lieu of the Purchaser's right to receive such Excess Shares, an amount equal to 120% of the difference between (a) the number of Excess Shares multiplied by the closing sale price per share of Common Stock on the Principal Market on the trading day immediately preceding the date of the exercise of this Warrant, and (b) the aggregate exercise price for such Excess Shares. Only shares of Common Stock acquired pursuant to the Purchase Agreement (including Underlying Shares and Warrant Shares) will be included in determining whether the limitation contained herein would be exceeded for purposes of this Section 18(c). Section 19. Replacement Warrants. The Company agrees that within ten (10) business days after any request from time to time of the Warrantholder, it shall deliver to such holder a new Warrant in substitution of this Warrant which is identical in all respects except that the then Warrant Price shall be appropriately specified in the Warrant, and the Warrant shall specify the fixed number of Warrant Shares into which this Warrant is then exercisable. Such changes are intended not as amendments to the Warrant but only as clarification of the foregoing numbers for convenience purposes, and such changes shall not affect any provisions concerning adjustments to the Warrant Price or number of Warrant Shares contained herein. Section 20. Absolute Obligation to Issue Warrant Shares. The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the holder hereof to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the holder hereof or any other Person of any obligation to the Company or any violation or alleged violation of law by the holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the holder hereof in connection with the issuance of Warrant Shares. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. Section 21. Assignment, Etc. The Warrantholder may assign or transfer this Warrant to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Warrantholder may assign or transfer this Warrant to any of such Warrantholder's affiliates without the consent of the Company and (ii) upon any Event of Default (as defined in the Debentures), the Warrantholder may assign or transfer this Warrant without the consent of the Company. The Warrantholder shall notify the Company of any such assignment or transfer promptly. This Warrant shall be binding upon the Company and its successors and shall inure to the benefit of the Warrantholder and its successors and permitted assigns. This Warrant was originally issued on May 24, 2001 and has been amended and restated as of the date set forth on the signature page hereto pursuant to that certain First Amendment to Purchase Warrant entered into between the Company and the Warrantholder on the date set forth on the signature page hereto. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of April 28, 2004. FONAR CORPORATION By: /s/Raymond V. Damadian Name: Title: Attest: Sign:/s/Henry T. Meyer Print Name: FONAR CORPORATION WARRANT EXERCISE FORM Fonar Corporation 110 Marcus Drive Melville, New York 11747 Telephone:________(631) 694-2929 Fax: _________(631) 249-3734 Attention:________President This undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant ("Warrant") for, and to purchase thereunder _______________ shares of Common Stock* ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: ------------------------------- Name ------------------------------- Address =============================== and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares. The undersigned hereby represents that all the representations and warranties contained in Sections 5.3 through 5.8 of the Securities Purchase Agreement dated on or about May 24, 2001 between Fonar Corporation and the Purchasers named therein are true and correct in all material respects as of the date hereof and as if the undersigned were the Purchaser stated therein (if the undersigned is not such Purchaser). In lieu of delivering physical certificates representing the Warrant Shares purchasable upon exercise of this Warrant, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder, the Company shall use its commercially reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon conversion or exercise to the undersigned, by crediting the account of the undersigned's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. Dated:_______________________ Signature: ______________________________ ------------------------------ Name (please print) ------------------------------ Address * NOTE: If exercise of the Warrant is made by surrender of the Warrant and the number of shares indicated exceeds the maximum number of shares to which a holder is entitled, the Company will issue such maximum number of shares purchasable upon exercise of the Warrant registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and deliver same to the address stated below. EX-4 3 x048.txt EXHIBIT 4.8 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. Original Issuance Date: May 24, 2001 FONAR CORPORATION AMENDED AND RESTATED PURCHASE WARRANT WARRANT ("WARRANT") TO PURCHASE SHARES OF COMMON STOCK, $0.0001 PAR VALUE PER SHARE This is to certify that, for VALUE RECEIVED, __________________ ("Warrantholder"), is entitled to purchase, subject to the provisions of this Warrant, from Fonar Corporation, a corporation organized under the laws of Delaware ("Company"), at any time after the date of the issuance hereof but not later than 5:00 P.M., Eastern time, on May 24, 2009 ("Expiration Date"), 151,625 shares ("Warrant Shares") of Common Stock, $0.0001 par value ("Common Stock"), of the Company, at an exercise price per share equal to $0.79 (the exercise price in effect from time to time hereafter being herein called the "Warrant Price"). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. This Warrant has been issued pursuant to the terms of the Purchase Agreement ("Purchase Agreement") dated on or about the date hereof between the Company and the Warrantholder. Capitalized terms used herein and not defined shall have the meaning specified in the Purchase Agreement. Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of the Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended ("Securities Act") or an exemption from registration thereunder. Subject to such restrictions, the Company shall transfer this Warrant from time to time, upon the books to be maintained by the Company for that purpose, upon surrender hereof for transfer properly endorsed or accompanied by appropriate instructions for transfer upon any such transfer, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. (a) Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time and from time to time after the date of issuance hereof upon surrender of the Warrant, together with delivery of the duly executed Warrant exercise form attached hereto (the "Exercise Agreement") (which may be by fax), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Warrant Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which the completed Exercise Agreement shall have been delivered to the Company (or such later date as may be specified in the Exercise Agreement). Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall (subject to Section 3(b) below), at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. (b) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the Warrantholder shall not be required to physically surrender this Warrant to the Company unless such holder is purchasing the full amount of Warrant Shares represented by this Warrant. The Warrantholder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the Warrantholder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. The Warrantholder and any assignee, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof. Section 4. Compliance with the Securities Act of 1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor any other security issued or issuable upon exercise of this Warrant may be offered or sold except as provided in this Warrant and in conformity with the Securities Act of 1933, as amended, and then only against receipt of an agreement of such person to whom such offer of sale is made to comply with the provisions of this Section 4 with respect to any resale or other disposition of such security. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant until the Warrant Shares have been registered for resale under the Registration Rights Agreement or until Rule 144 is available, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant in respect of which such shares are issued. The holder shall be responsible for income taxes due under federal or state law, if any such tax is due. Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if reasonably requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved, out of the authorized and unissued Common Stock, a number of shares sufficient to provide for the exercise of the rights of purchase represented by the Warrant in full (without regard to any restrictions on beneficial ownership contained herein), and the transfer agent for the Common Stock, including every subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of any of the right of purchase aforesaid ("Transfer Agent"), shall be irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares of Common Stock as shall be requisite for such purpose. The Company agrees that all Warrant Shares issued upon exercise of the Warrant in accordance with its terms shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. The Company will keep a conformed copy of this Warrant on file with its Transfer Agent. The Company will supply from time to time the Transfer Agent with duly executed stock certificates required to honor the outstanding Warrant. Section 8. Warrant Price. The Warrant Price, subject to adjustment as provided in Section 9, shall, if payment is made in cash or by certified check, be payable in lawful money of the United States of America. Section 9. Adjustments. Subject and pursuant to the provisions of this Section 9, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company or any of its subsidiaries shall at any time or from time to time while the Warrant is outstanding, pay a dividend or make a distribution on its capital stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event. Such adjustment shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitations, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Company, the obligation to deliver to the holder of the Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (c) In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets or subscription rights or warrants, the Warrant Price to be in effect after such record date shall be determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Fair Market Value per share of Common Stock (as defined below), less the fair market value (on a per share basis) (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current Fair Market Value per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. "Fair Market Value" of the Common Stock shall be the closing price of the Common Stock as reported by the Nasdaq Stock Market (or other exchange or market on which the Common Stock is principally traded) on the trading day immediately preceding the date on which such value is being determined. (d) For the duration of the term of this Warrant, if the Company or any subsidiary shall at any time or from time to time issue or sell securities (other than issuances of Underlying Shares pursuant to Debentures and Warrants under the Purchase Agreement, shares or options issued or which may be issued pursuant to the Company's current employee or director option plans or shares issued upon exercise of options, warrants or rights outstanding on the date of the Agreement and listed in the Company's SEC Filings and other than issuances described in and permitted under 7.2(b)(iii) of the Purchase Agreement) at an effective a Per Share Selling Price (as defined below) which is less than the Warrant Price, then in each such case, the Warrant Price in effect immediately prior to such issue or sale shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Warrant Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at the Warrant Price, and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale. The foregoing provision of this subsection shall not apply to issuances or sales pursuant to the Company's duly adopted employee or director bona fide options plans and/or compensation arrangements or to issuances of up to 1,500,000 shares of the Company's Common Stock to the stockholders of Advanced Medical Diagnostic Corporation, a majority-owned subsidiary of Fonar ("AMD"), in exchange for their shares of stock of AMD (which shall not be a capital raising transaction). For the purposes of the foregoing adjustment, in the case of the issuance of any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock ("Convertible Securities"), the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities. For the purposes of this Section 9(d), "Per Share Selling Price" shall include the amount actually paid by third parties for each share of Common Stock. In the event a fee is paid by the Company in connection with such transaction, any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of rights, options, warrants or convertible, exchangeable or exercisable securities under which the Company is or may become obligated to issue shares of Common Stock, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Company upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction, over the life of such securities. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Company and the Purchaser. (e) An adjustment shall become effective immediately after the record date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (f) In the event that, as a result of an adjustment made pursuant to Section 9, the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. (g) In the event of any adjustment in the number of Warrant Shares issuable hereunder upon exercise, the Warrant Price shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same. Similarly, in the event of any adjustment in the Warrant Price, the number of Warrant Shares issuable hereunder upon exercise shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same. Section 10. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon the exercise of the Warrant (or specified portions thereof), the Company shall round such calculation to the nearest whole number and disregard the fraction. Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall forthwith give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. In the event of a dispute with respect to any such calculation, the certificate of the Company's independent certified public accountants shall be conclusive evidence of the correctness of any computation made, absent manifest error. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. At the Warrantholder's request, the Company shall deliver to the Warrantholder as of a requested date a notice specifying the Warrant Price and the number of Warrant Shares into which this Warrant is exercisable as of such date. Section 13. Identity of Transfer Agent. The initial Transfer Agent for the Common Stock is: Computershare (f/k/a Securities Transfer Trust, Inc.) 350 Indiana Street, Suite 800 Golden, Colorado 80401 Forthwith upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will fax to the Warrantholder a statement setting forth the name and address of such transfer agent. Section 14. Notices. Any notice pursuant hereto to be given or made by the Warrantholder to or on the Company shall be sufficiently given or made if delivered personally or by facsimile or if sent by a nationally recognized courier, addressed as follows: Fonar Corporation 110 Marcus Drive Melville, New York 11747 Telephone: (631) 694-2929 Fax: (631) 249-3734 or such other address as the Company may specify in writing by notice to the Warrantholder complying as to delivery with the terms of this Section 14. Any notice pursuant hereto to be given or made by the Company to or on the Warrantholder shall be sufficiently given or made if personally delivered or if sent by a nationally recognized courier service by overnight service, to the address set forth on the books of the Company or, as to each of the Company and the Warrantholder, at such other address as shall be designated by such party by written notice to the other party complying as to delivery with the terms of this Section 14. All such notices, requests, demands, directions and other communications shall, when sent by courier, be effective one (1) day after delivery to such courier as provided and addressed as aforesaid. All faxes shall be effective upon receipt. Section 15. Registration Rights. The initial holder of this Warrant is entitled to the benefit of certain registration rights in respect of the Warrant Shares as provided in the Registration Rights Agreement. Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 17. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of New York, without giving effect to its conflict of law principles, and for all purposes shall be construed in accordance with the laws of said State. Section 18. 4.9% and 19.9% Limitations. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the holder upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder at such time (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrant Shares) that have limitations on the holder's right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) by the Warrantholder's "affiliates" at such time (as defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 4.9% of the total issued and outstanding shares of the Common Stock (the "Restricted Ownership Percentage"). Each holder shall have the right (x) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (y) (subject to waiver) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned, of a change of control transaction (including without limitation a transaction that would result in a transfer of more than 50% of the Company's voting power or equity, or a sale of all or substantially all of the Company's assets, or a transaction that would result in a person or "group" being deemed the beneficial owner of 50% or more of the Company's voting power or equity). (b) The Company's obligation to issue Common Stock which would exceed such limits referred to in this Section 18 shall be suspended to the extent necessary until such time, if any, as shares of Common Stock may be issued in compliance with such restrictions. (c) Notwithstanding anything contained herein, in the event that the Warrantholder has timely exercised this Warrant and the issuance of all or a portion of the Warrant Shares to be issued pursuant to such exercise would constitute a breach of the Company's obligations under the rules or regulations of the Nasdaq Stock Market as they apply to the Company, or any other principal securities exchange or market ("Principal Market") upon which the Common Stock is or becomes traded (the "Cap Regulations"), then the Company shall not be obligated to issue any such Warrant Shares to the extent such shares are in excess of the maximum permissible amount under such Cap Regulations ("Excess Shares"). Within five (5) days following any occurrence of Excess Shares, the Company shall promptly pay to the Purchaser, in lieu of the Purchaser's right to receive such Excess Shares, an amount equal to 120% of the difference between (a) the number of Excess Shares multiplied by the closing sale price per share of Common Stock on the Principal Market on the trading day immediately preceding the date of the exercise of this Warrant, and (b) the aggregate exercise price for such Excess Shares. Only shares of Common Stock acquired pursuant to the Purchase Agreement (including Underlying Shares and Warrant Shares) will be included in determining whether the limitation contained herein would be exceeded for purposes of this Section 18(c). Section 19. Replacement Warrants. The Company agrees that within ten (10) business days after any request from time to time of the Warrantholder, it shall deliver to such holder a new Warrant in substitution of this Warrant which is identical in all respects except that the then Warrant Price shall be appropriately specified in the Warrant, and the Warrant shall specify the fixed number of Warrant Shares into which this Warrant is then exercisable. Such changes are intended not as amendments to the Warrant but only as clarification of the foregoing numbers for convenience purposes, and such changes shall not affect any provisions concerning adjustments to the Warrant Price or number of Warrant Shares contained herein. Section 20. Absolute Obligation to Issue Warrant Shares. The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the holder hereof to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the holder hereof or any other Person of any obligation to the Company or any violation or alleged violation of law by the holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the holder hereof in connection with the issuance of Warrant Shares. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. Section 21. Assignment, Etc. The Warrantholder may assign or transfer this Warrant to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Warrantholder may assign or transfer this Warrant to any of such Warrantholder's affiliates without the consent of the Company and (ii) upon any Event of Default (as defined in the Debentures), the Warrantholder may assign or transfer this Warrant without the consent of the Company. The Warrantholder shall notify the Company of any such assignment or transfer promptly. This Warrant shall be binding upon the Company and its successors and shall inure to the benefit of the Warrantholder and its successors and permitted assigns. This Warrant was originally issued on May 24, 2001 and has been amended and restated as of the date set forth on the signature page hereto pursuant to that certain First Amendment to Purchase Warrant entered into between the Company and the Warrantholder on the date set forth on the signature page hereto. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of June 1, 2004. FONAR CORPORATION By: /s/Raymond V. Damadian Name: Title: Attest: Sign: /s/Henry T. Meyer Print Name: FONAR CORPORATION WARRANT EXERCISE FORM Fonar Corporation 110 Marcus Drive Melville, New York 11747 Telephone: (631) 694-2929 Fax: (631) 249-3734 Attention: President This undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant ("Warrant") for, and to purchase thereunder _______________ shares of Common Stock* ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: ------------------------------- Name ------------------------------- Address =============================== and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares. The undersigned hereby represents that all the representations and warranties contained in Sections 5.3 through 5.8 of the Securities Purchase Agreement dated on or about May 24, 2001 between Fonar Corporation and the Purchasers named therein are true and correct in all material respects as of the date hereof and as if the undersigned were the Purchaser stated therein (if the undersigned is not such Purchaser). In lieu of delivering physical certificates representing the Warrant Shares purchasable upon exercise of this Warrant, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder, the Company shall use its commercially reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon conversion or exercise to the undersigned, by crediting the account of the undersigned's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. Dated:_______________________ Signature: ______________________________ ------------------------------ Name (please print) ------------------------------ Address * NOTE: If exercise of the Warrant is made by surrender of the Warrant and the number of shares indicated exceeds the maximum number of shares to which a holder is entitled, the Company will issue such maximum number of shares purchasable upon exercise of the Warrant registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and deliver same to the address stated below. EX-5 4 x05.txt EXHIBIT 5 Fonar Corporation June 25, 2004 110 Marcus Drive Melville, New York 11747 Re: Fonar Corporation Registration Statement on Form S-3 Gentlemen: I have represented Fonar Corporation, a Delaware corporation (the "Company"), in connection with the preparation of the registration statement filed with the Securities and Exchange Commission on Form S-3 (the "Registration Statement") relating to the proposed issuance of up to 3,500,000 shares (the "Shares") of the Company's common stock, par value $.0001 per share (the "Common Stock"). In this connection, I have examined originals or copies of such documents, corporate records, certificates of public officials and other documents as I deemed necessary to examine for purposes of this opinion. I am of the opinion that when the shares of Common Stock covered by the Registration Statement have been issued in accordance with the terms of any prospectus or prospectus supplement thereunder, such shares of Common Stock will be duly authorized, validly issued, fully paid and nonassessable. I hereby consent to the filing of this Opinion as an Exhibit to the Registration Statement. Very truly yours, /s/ Henry T. Meyer Henry T. Meyer, Esq. EX-10 5 x1017.txt EXHIBIT 10.17 AMENDMENT TO CALLABLE WARRANT This AMENDMENT TO CALLABLE WARRANT ("Amendment") is made as of this 28th day of April, 2004 by and between FONAR CORPORATION, a Delaware corporation (the "Company"), and THE TAIL WIND FUND LTD. ("Holder"). W I T N E S S E T H: WHEREAS, pursuant to that certain Purchase Agreement ("Purchase Agreement") dated as of May 24, 2001 by and between the Company and the Holder, the Company sold and issued to the Holder on May 24, 2001, among other securities, a callable warrant ("Initial Callable Warrant") expiring May 24, 2004 to purchase 2,000,000 shares of the Company's Common Stock, par value $0.0001 per share ("Common Stock"); WHEREAS, pursuant to those certain First and Second Amendments to Callable Warrant dated as of June 21, 2002 and August 15, 2002 by and between the Company and the Holder, the Holder exercised the Initial Callable Warrant in full and the Company issued to the Holder on August 30, 2002 a new callable warrant ("Warrant") expiring August 30, 2005 to purchase 2,000,000 shares of Common Stock, which Warrant provides for adjustment of the Warrant Price and number of unexercised Warrant Shares remaining under the Warrant due to issuances of Common Stock by the Company under the circumstances described therein; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Warrant; WHEREAS, the 2,000,000 Warrant Shares initially underlying the Warrant were registered for resale pursuant to a registration statement originally filed with the SEC under the Securities Act of 1933, as amended ("Securities Act"), on October 22, 2002 and declared effective November 1, 2002 ("Registration Statement"); and WHEREAS, the parties wish to amend the Warrant Price and the number of unexercised Warrant Shares remaining under the Warrant in exchange for the Holder exercising the Warrant under such new terms in full; NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendment. Notwithstanding anything contained in the Warrant, the Warrant Price under the Warrant shall equal $1.00 per share of the Company's Common Stock and the number of unexercised Warrant Shares remaining under the Warrant shall equal 3,000,000 Warrant Shares as of the date of this Amendment. It is understood that the new Warrant Price and increased number of Warrant Shares reflect an agreement reached by the parties after discussions concerning the effect of the applicable provisions of the Warrant relating to the adjustment of the number and price of Warrant Shares, and that Holder has previously exercised its rights to purchase 400,000 Warrant Shares under the Warrant. Consequently, the Holder acknowledges that 1,400,000 of the 3,000,000 Warrant Shares are not covered by the Registration Statement or otherwise yet registered under the Securities Act, and Holder agrees to accept such unregistered 1,400,000 Warrant Shares (the "Unregistered Warrant Shares") upon Holder's exercise of the Warrant for all the remaining Warrant Shares pursuant to Section 2 of this Amendment. The Company represents and warrants to the Holder that the 400,000 Warrant Shares previously issued were duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, free and clear of any liens, claims and encumbrances, and the Holder is not aware of any claim against or liability of the Company arising out of the issuance of such 400,000 Warrant Shares previously issued. The issuance and prices paid for the 400,000 Warrant Shares previously issued are ratified and approved by Holder and the Company. In addition, the Company shall have no liability to the Holder for not notifying the Holder of any adjustment to the price or number of Warrant Shares that may have resulted from past issuance of Common Stock by the Company, whether under the terms of the Warrant, the Purchase Agreement, the Registration Rights Agreement or otherwise. Under no circumstances shall the number of Warrant Shares be increased or the price of the Warrant Shares be lowered by reason of any provision of the Warrant, the Purchase Agreement or the Registration Rights Agreement or otherwise beyond the number and price set forth herein (assuming all the Warrant Shares are issued contemporaneously with the execution hereof, otherwise the adjustment provisions contained in Section 9 of the Warrant shall apply for any stock split, stock dividends, distributions, stock issuances, and similar events covered by such Section 9 which occur after execution hereof). 2. Exercise. The Holder hereby exercises the Warrant, pursuant to the Warrant Exercise Form attached hereto, for the remaining 3,000,000 Warrant Shares underlying the Warrant at the $1.00 Warrant Price for an aggregate price of $3,000,000. Upon the delivery of said remaining Warrant Shares to Holder in accordance with Holder's written instructions, the Company will have no further obligation to issue shares under the Warrant, and the Warrant shall be deemed exercised in full. Holder shall pay such aggregate price by wire transfer to the account designated by the Company immediately following full execution and delivery of this Amendment. It is understood, however, that said shares will not be issued and released to Holder until payment is received. 3. Registration Rights. a) Prospectus Supplement. Within three (3) business days following the date hereof, the Company, at its sole cost and expense and in accordance with the Securities Act, shall file a prospectus supplement to the prospectus under the Registration Statement previously filed with the SEC, covering the changes to the Warrant described herein. b) Registration Rights. The Company shall, at its sole cost and expense and in accordance with the Securities Act, use its best efforts (1) to promptly file and have declared effective a resale registration statement on the appropriate form under the Securities Act with the SEC covering the 1,400,000 Unregistered Warrant Shares to be issued upon exercise of the Warrant hereunder, and (2) to keep such registration statement current and effective until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act, or until such earlier date as all such shares covered thereby shall have been sold ("Registration Period"). All the terms and conditions of the Registration Rights Agreement dated as of May 24, 2001 by and between the Company and the Holder ("Registration Rights Agreement"), shall apply mutatis mutandis to the registration of such Unregistered Warrant Shares and the continued registration of Warrant Shares under the Registration Statement, including without limitation the indemnification and contribution provisions contained therein, and all such terms are incorporated by reference herein, provided that (a) the Registration Date with respect to the Unregistered Warrant Shares shall mean the date which is six (6) months following the date hereof, (b) the "Registration Period" with respect to the Warrant Shares registered under the Registration Statement shall continue from the date hereof until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act or until such earlier date as all such shares covered thereby shall have been sold, and (c) the "Registration Period" with respect to the Unregistered Warrant Shares shall have the meaning set forth in the previous sentence. 4. Condition Precedent. This Amendment is being executed concurrently with a First Amendment to Purchase Warrant dated the date hereof, which Purchase Warrant was issued pursuant to the Purchase Agreement, and this Amendment will not be effective until such First Amendment to Purchase Warrant is also effective. 5. Miscellaneous. (a) Full Force and Effect. Except as otherwise expressly provided herein, each of the Purchase Agreement, the Registration Rights Agreement, the Warrant, the First and Second Amendments to Callable Warrant, and the other agreements and transactions contemplated thereby shall remain in full force and effect, to the extent they are presently in force, provided, however, that to the extent any provision thereof is inconsistent with any of the terms of this Amendment, the provisions of this Amendment will apply. (b) Consent to Jurisdiction, Etc. Each of the Company and Holder agree that any legal action or proceeding relating to or arising out of or under this Amendment may be brought in the state or federal courts in the State of New York, County of New York, and each party accepts with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts. To the fullest extent permitted by applicable law, each party hereby waives, and agrees not to assert, by way of motion, defense, counterclaim or otherwise, in any such suit, action or proceeding any claim that (i) it is not personally subject to the jurisdiction of any of the above-named courts by reason of any immunity or otherwise, (ii) its properties are exempt or immune from setoff, execution or attachment, either prior to judgment or in aid of execution or (iii) any suit, action or proceeding so brought is in an inconvenient forum or that the venue of the suit, action or proceeding is improper or that the subject matter hereof may not be enforced in or by such courts. (c) Authority. Each party hereto hereby represents and warrants to the other party that the execution and delivery by such party of this Amendment, and the performance by such party of its obligations hereunder, have been duly and validly authorized by such party, with no other action on the part of such party being necessary. This Amendment has been duly and validly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms. (d) Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York. (e) Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by courier or by facsimile transmission or mailed (first class postage prepaid) to the parties at the addresses or facsimile numbers set forth in the Purchase Agreement. (f) Counterparts. This Amendment may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Amendment may be executed by facsimile. (g) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby. (h) Expenses. Upon execution hereof the Company shall pay to Tail Wind Advisory & Management Ltd. the non-accountable sum of $10,000 as and for legal and due diligence expenses in connection with the transactions contemplated hereby and by the amendment of the purchase warrant issued to the Holder under the Purchase Agreement. (i) Assignment; Successors. Neither Holder nor the Company may assign this Agreement or its respective rights or obligations hereunder without the prior written consent of the other, which may not be unreasonably withheld or delayed. This Amendment shall be binding upon the Company's successors. *** Signatures Appear on the Next Page*** IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed as of the date first written above. FONAR CORPORATION By:/s/Raymond V. Damadian, M.D., Pres. Raymond Damadian, M.D., President THE TAIL WIND FUND LTD. By: TAIL WIND ADVISORY AND MANAGEMENT LTD., as investment manager By: /s/David Crook Name: David Crook Title: CEO FONAR CORPORATION WARRANT EXERCISE FORM Fonar Corporation 110 Marcus Drive Melville, New York 11747 Telephone: (631) 694-2929 Fax: (631) 249-3734 Attention: President This undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant, as amended on the date hereof ("Warrant"), for, and to purchase thereunder payment in the aggregate amount of U.S. $3,000,000, by cash, wire transfer or certified check 3,000,000 shares of Common Stock* ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: Name: THE TAIL WIND FUND LTD. Address for shares to be sent: c/o Bishop Rosen & Co. 100 Broadway, 16th Floor New York, New York 10005 In lieu of delivering physical certificates representing the Warrant Shares purchasable upon exercise of this Warrant, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder, the Company shall, if convenient, cause its transfer agent to electronically transmit the Warrant Shares issuable upon conversion or exercise to the undersigned, by crediting the account of the undersigned's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. Dated: April ___, 2004 Signature: THE TAIL WIND FUND LTD. By: TAIL WIND ADVISORY AND MANAGEMENT LTD., as investment manager By: _________________________ Name: David Crook Title: CEO Address: c/o Tail Wind Advisory & Mgmt. Ltd. 1 Regent Street, 1st Floor London SW1Y 4NS England If exercise of the Warrant is made by surrender of the Warrant and the number of shares indicated exceeds the maximum number of shares to which a holder is entitled, the Company will issue such maximum number of shares purchasable upon exercise of the Warrant registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and deliver same to the address stated below. EX-10 6 x1018.txt EXHIBIT 10.18 FIRST AMENDMENT TO PURCHASE WARRANT This FIRST AMENDMENT TO PURCHASE WARRANT ("Amendment") is made as of this 28th day of April, 2004 by and between FONAR CORPORATION, a Delaware corporation (the "Company"), and THE TAIL WIND FUND LTD. ("Holder"). W I T N E S S E T H: WHEREAS, pursuant to that certain Purchase Agreement ("Purchase Agreement") dated as of May 24, 2001 by and between the Company and the Holder, the Company sold and issued to the Holder on May 24, 2001, among other securities, a purchase warrant ("Warrant") expiring May 24, 2006 to purchase 659,501 shares of the Company's Common Stock, par value $0.0001 per share ("Common Stock"), which Warrant provides for adjustment of the Warrant Price and number of unexercised Warrant Shares remaining under Warrant due to issuances of Common Stock by the Company in accordance with the terms set forth therein; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Warrant; WHEREAS, the 659,501 Warrant Shares initially underlying the Warrant were registered for resale pursuant to a registration statement (file no. 333-63782) originally filed with the SEC under the Securities Act of 1933, as amended ("Securities Act"), on June 25, 2001 and declared effective November 1, 2001 ("Registration Statement"); and WHEREAS, in lieu of effectuating adjustments to the Warrant due to past issuances of Common Stock by the Company, the parties desire to amend the terms of the Warrant as provided herein; NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments. Notwithstanding anything contained in the Warrant, the Warrant shall be amended as follows: (a) Warrant Price. The Warrant Price under the Warrant shall equal $0.79 per share of Common Stock of the Company, subject to further adjustment in accordance with the terms of the Warrant as amended hereby; (b) Warrant Shares. The number of unexercised Warrant Shares remaining under the Warrant as of the date hereof shall equal 1,000,000 Warrant Shares; the parties acknowledge that none of the Warrant Shares have been exercised; (c) Adjustment for Securities Issuances. Clauses 9(d)(A) and 9(d)(B) (and the colon preceding such clauses) shall be deleted in their entirety and replaced with the following: "the Warrant Price, then in each such case, the Warrant Price in effect immediately prior to such issue or sale shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Warrant Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at the Warrant Price, and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale." In addition, the second sentence of the second paragraph of 9(d) reading, "For purposes of the preceding paragraph, in the event that the effective purchase price is less than both the Fair Market Value and the Warrant Price, then the calculation method which yields the greatest downward adjustment in the Warrant Price shall be used," shall be deleted. (d) Term. The term of the Warrant shall be extended three (3) years such that the Expiration Date under the Warrant shall be May 24, 2009. (e) Beneficial Ownership Cap. The Restricted Ownership Percentage in Section 18(a) shall be reduced from 9.9% to 4.9%. All of Section 18(b) shall be deleted except for the last paragraph. (f) Additional Exclusion from Adjustments. Section 9(d) shall be amended to provide that neither the price nor number of Warrant Shares covered by this Warrant shall be adjusted by any issuance of up to 1,500,000 shares of the Company's Common Stock to the stockholders of Advanced Medical Diagnostics Corporation, a majority-owned subsidiary of Fonar ("AMD"), in exchange for their shares of stock of AMD (which shall not be a capital raising transaction). (g) No Liability for Not Giving Notice. The Company shall have no liability to the Holder for failure in the past to notify the Holder of any adjustments to the price or number of Warrant Shares that may have resulted from past issuances of Common Stock by the Company, whether under the terms of the Warrant, the Purchase Agreement, the Registration Rights Agreement or otherwise (provided that this provision shall not affect liability for adjustment notices required in the future). 2. Replacement Warrant. The Company agrees to promptly execute and deliver to the Holder a replacement Warrant reflecting the foregoing amendments in substitution of the originally issued Warrant, the form of which replacement Warrant is attached hereto as Exhibit A. The Company shall deliver such replacement Warrant to the Holder's counsel or as otherwise directed by the Holder promptly following the return to the Company of the originally issued Warrant. Notwithstanding any delay in the exchange of the replacement Warrant for the original Warrant, the amendment contained herein shall become effective upon the execution and delivery of this Amendment, subject to the condition precedent set forth in Section 4 hereof. 3. Registration Rights. (a) Prospectus Supplement. Within three (3) business days following the date hereof, the Company shall, at its sole cost and expense and in accordance with the Securities Act, file a prospectus supplement to the Registration Statement with the SEC covering the changes to the Warrant described herein. (b) Registration Rights. In the event that there are an insufficient number of shares remaining covered by Registration Statement, the Company shall, at its sole cost and expense and in accordance with the Securities Act, use its best efforts (1) to promptly file and have declared effective a resale registration statement on the appropriate form under the Securities Act with the SEC covering all additional Warrant Shares issued or issuable upon exercise of the Warrant which are not covered by the Registration Statement, and (2) to keep such registration statement current and effective until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act, or until such earlier date as all such shares covered thereby shall have been sold ("Registration Period"). All the terms and conditions of the Registration Rights Agreement dated as of May 24, 2001 by and between the Company and the Holder ("Registration Rights Agreement"), shall apply mutatis mutandis to the registration of such Warrant Shares and the continued registration of Warrant Shares under the Registration Statement, including without limitation the indemnification and contribution provisions contained therein, and all such terms are incorporated by reference herein, provided that (a) the Registration Date for any such new registration statement shall mean the date which is six (6) months following the date on which counsel to either the Company or Holder makes a reasonable determination that an insufficient number of shares remain covered by the Registration Statement, and (b) the "Registration Period" with respect to such new registration statement shall have the meaning set forth in the previous sentence. (c) Amendment to Registration Rights Agreement. The Registration Rights Agreement is hereby amended such that the "Registration Period" as defined therein shall continue from the date hereof until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act or until such earlier date as all such shares covered by the applicable Registration Statement have been sold. 4. Condition Precedent. This Amendment is being executed concurrently with an Amendment to Callable Warrant dated the date hereof and will not be effective until such Amendment to Callable Warrant is also effective. 5. Miscellaneous. (a) Full Force and Effect. Except as otherwise expressly provided herein, each of the Purchase Agreement, the Registration Rights Agreement, the Warrant, the First and Second Amendments to Callable Warrant, and the other agreements and transactions contemplated thereby shall remain in full force and effect, to the extent they are presently in force, provided, however, that to the extent any provision thereof is inconsistent with any of the terms of this Amendment, the provisions of this Amendment will apply. (b) Consent to Jurisdiction, Etc. Each of the Company and Holder agree that any legal action or proceeding relating to or arising out of or under this Amendment may be brought in the state or federal courts in the State of New York, County of New York, and each party accepts with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified U.S. mail, postage prepaid, to it at its addresses provided in the Purchase Amendment, such service to become effective upon receipt or five (5) days after such mailing, whichever shall first occur. To the fullest extent permitted by applicable law, each party hereby waives, and agrees not to assert, by way of motion, defense, counterclaim or otherwise, in any such suit, action or proceeding any claim that (i) it is not personally subject to the jurisdiction of any of the above-named courts by reason of any immunity or otherwise, (ii) its properties are exempt or immune from setoff, execution or attachment, either prior to judgment or in aid of execution or (iii) any suit, action or proceeding so brought is in an inconvenient forum or that the venue of the suit, action or proceeding is improper or that the subject matter hereof may not be enforced in or by such courts. (c) Authority. Each party hereto hereby represents and warrants to the other party that the execution and delivery by such party of this Amendment, and the performance by such party of its obligations hereunder, have been duly and validly authorized by such party, with no other action on the part of such party being necessary. This Amendment has been duly and validly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms. (d) Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York. (e) Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by courier or by facsimile transmission or mailed (first class postage prepaid) to the parties at the addresses or facsimile numbers set forth in the Purchase Agreement. (f) Counterparts. This Amendment may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Amendment may be executed by facsimile. (g) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby. (h) Assignment; Successors. Neither Holder nor the Company may assign this Amendment or its respective rights or obligations hereunder without the prior written consent of the other, which may not be unreasonably withheld or delayed. This Amendment shall be binding upon the Company's successors. *** Signatures Appear on the Next Page*** IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed as of the date first written above. FONAR CORPORATION By:/s/Raymond V. Damadian Raymond Damadian, M.D., President THE TAIL WIND FUND LTD. By: TAIL WIND ADVISORY AND MANAGEMENT LTD., as investment manager By: /s/David Crook Name: David Crook EX-10 7 x1019.txt EXHIBIT 10.19 FORM OF FIRST AMENDMENT TO PURCHASE WARRANT This FIRST AMENDMENT TO PURCHASE WARRANT ("Amendment") is made as of this 1st day of June, 2004 by and between FONAR CORPORATION, a Delaware corporation (the "Company"), and _________________ ("Holder"). W I T N E S S E T H: WHEREAS, pursuant to that certain Purchase Agreement ("Purchase Agreement") dated as of May 24, 2001 by and between the Company and THE TAILWIND FUND LTD, and the instructions of Roan/Meyers Associates, L.P., the Company issued to the Holder on May 24, 2001, a purchase warrant ("Warrant") expiring May 24, 2006 to purchase 100,000 shares of the Company's Common Stock, par value $0.0001 per share ("Common Stock"), which Warrant provides for adjustment of the Warrant Price and number of unexercised Warrant Shares remaining under Warrant due to issuances of Common Stock by the Company in accordance with the terms set forth therein; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Warrant; WHEREAS, the 100,000 Warrant Shares initially underlying the Warrant were registered for resale pursuant to a registration statement (file no. 333-63782) originally filed with the SEC under the Securities Act of 1933, as amended ("Securities Act"), on June 25, 2001 and declared effective November 1, 2001 ("Registration Statement"); and WHEREAS, in lieu of effectuating adjustments to the Warrant due to past issuances of Common Stock by the Company, the parties desire to amend the terms of the Warrant as provided herein; NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments. Notwithstanding anything contained in the Warrant, the Warrant shall be amended as follows: (a) Warrant Price. The Warrant Price under the Warrant shall equal $0.79 per share of Common Stock of the Company, subject to further adjustment in accordance with the terms of the Warrant as amended hereby; (b) Warrant Shares. The number of unexercised Warrant Shares remaining under the Warrant as of the date hereof shall equal 151,625 Warrant Shares; the parties acknowledge that none of the Warrant Shares have been exercised; (c) Adjustment for Securities Issuances. Clauses 9(d)(A) and 9(d)(B) (and the colon preceding such clauses) shall be deleted in their entirety and replaced with the following: "the Warrant Price, then in each such case, the Warrant Price in effect immediately prior to such issue or sale shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Warrant Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at the Warrant Price, and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale." In addition, the second sentence of the second paragraph of 9(d) reading, "For purposes of the preceding paragraph, in the event that the effective purchase price is less than both the Fair Market Value and the Warrant Price, then the calculation method which yields the greatest downward adjustment in the Warrant Price shall be used," shall be deleted. (d) Term. The term of the Warrant shall be extended three (3) years such that the Expiration Date under the Warrant shall be May 24, 2009. (e) Beneficial Ownership Cap. The Restricted Ownership Percentage in Section 18(a) shall be reduced from 9.9% to 4.9%. All of Section 18(b) shall be deleted except for the last paragraph. (f) Additional Exclusion from Adjustments. Section 9(d) shall be amended to provide that neither the price nor number of Warrant Shares covered by this Warrant shall be adjusted by any issuance of up to 1,500,000 shares of the Company's Common Stock to the stockholders of Advanced Medical Diagnostics Corporation, a majority-owned subsidiary of Fonar ("AMD"), in exchange for their shares of stock of AMD (which shall not be a capital raising transaction). (g) No Liability for Not Giving Notice. The Company shall have no liability to the Holder for failure in the past to notify the Holder of any adjustments to the price or number of Warrant Shares that may have resulted from past issuances of Common Stock by the Company, whether under the terms of the Warrant, the Purchase Agreement, the Registration Rights Agreement or otherwise (provided that this provision shall not affect liability for adjustment notices required in the future). 2. Replacement Warrant. The Company agrees to promptly execute and deliver to the Holder a replacement Warrant reflecting the foregoing amendments in substitution of the originally issued Warrant, the form of which replacement Warrant is attached hereto as Exhibit A. The Company shall deliver such replacement Warrant to the Holder's counsel or as otherwise directed by the Holder promptly following the return to the Company of the originally issued Warrant. Notwithstanding any delay in the exchange of the replacement Warrant for the original Warrant, the amendment contained herein shall become effective upon the execution and delivery of this Amendment. 3. Registration Rights. (a) Prospectus Supplement. Within three (3) business days following the date hereof, the Company shall, at its sole cost and expense and in accordance with the Securities Act, file a prospectus supplement to the Registration Statement with the SEC covering the changes to the Warrant described herein. (b) Registration Rights. In the event that there are an insufficient number of shares remaining covered by Registration Statement, the Company shall, at its sole cost and expense and in accordance with the Securities Act, use its best efforts (1) to promptly file and have declared effective a resale registration statement on the appropriate form under the Securities Act with the SEC covering all additional Warrant Shares issued or issuable upon exercise of the Warrant which are not covered by the Registration Statement, and (2) to keep such registration statement current and effective until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act, or until such earlier date as all such shares covered thereby shall have been sold ("Registration Period"). All the terms and conditions of the Registration Rights Agreement dated as of May 24, 2001 by and between the Company and the Holder ("Registration Rights Agreement"), shall apply mutatis mutandis to the registration of such Warrant Shares and the continued registration of Warrant Shares under the Registration Statement, including without limitation the indemnification and contribution provisions contained therein, and all such terms are incorporated by reference herein, provided that (a) the Registration Date for any such new registration statement shall mean the date which is six (6) months following the date on which counsel to either the Company or Holder makes a reasonable determination that an insufficient number of shares remain covered by the Registration Statement, and (b) the "Registration Period" with respect to such new registration statement shall have the meaning set forth in the previous sentence. (c) Amendment to Registration Rights Agreement. The Registration Rights Agreement is hereby amended such that the "Registration Period" as defined therein shall continue from the date hereof until all such shares covered thereby are available for resale pursuant to Rule 144(k) under the Securities Act or until such earlier date as all such shares covered by the applicable Registration Statement have been sold. 4. Miscellaneous. (a) Full Force and Effect. Except as otherwise expressly provided herein, each of the Purchase Agreement, the Registration Rights Agreement, the Warrant, the First and Second Amendments to Callable Warrant, and the other agreements and transactions contemplated thereby shall remain in full force and effect, to the extent they are presently in force, provided, however, that to the extent any provision thereof is inconsistent with any of the terms of this Amendment, the provisions of this Amendment will apply. (b) Consent to Jurisdiction, Etc. Each of the Company and Holder agree that any legal action or proceeding relating to or arising out of or under this Amendment may be brought in the state or federal courts in the State of New York, County of New York, and each party accepts with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified U.S. mail, postage prepaid, to it at its addresses provided in the Purchase Amendment, such service to become effective upon receipt or five (5) days after such mailing, whichever shall first occur. To the fullest extent permitted by applicable law, each party hereby waives, and agrees not to assert, by way of motion, defense, counterclaim or otherwise, in any such suit, action or proceeding any claim that (i) it is not personally subject to the jurisdiction of any of the above-named courts by reason of any immunity or otherwise, (ii) its properties are exempt or immune from setoff, execution or attachment, either prior to judgment or in aid of execution or (iii) any suit, action or proceeding so brought is in an inconvenient forum or that the venue of the suit, action or proceeding is improper or that the subject matter hereof may not be enforced in or by such courts. (c) Authority. Each party hereto hereby represents and warrants to the other party that the execution and delivery by such party of this Amendment, and the performance by such party of its obligations hereunder, have been duly and validly authorized by such party, with no other action on the part of such party being necessary. This Amendment has been duly and validly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms. (d) Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York. (e) Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by courier or by facsimile transmission or mailed (first class postage prepaid) to the parties at the addresses or facsimile numbers set forth in the Purchase Agreement. (f) Counterparts. This Amendment may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Amendment may be executed by facsimile. (g) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby. (h) Assignment; Successors. Neither Holder nor the Company may assign this Amendment or its respective rights or obligations hereunder without the prior written consent of the other, which may not be unreasonably withheld or delayed. This Amendment shall be binding upon the Company's successors. *** Signatures Appear on the Next Page*** IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed as of the date first written above. FONAR CORPORATION By: /s/Raymond V. Damadian Raymond Damadian, M.D., President -------------------------- Holder EX-23 8 x231.txt EXHIBIT 23.1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated September 29, 2003, which appears on page 40 of the annual report on Form 10-K of Fonar Corporation and Subsidiaries for the year ended June 30, 2003 and to the reference to our Firm under the caption "Experts" in the Prospectus, which is part of this Registration Statement. /s/Marcum & Kliegman LLP Marcum & Kliegman LLP New York, New York June 25, 2004 EX-23 9 x232.txt EXHIBIT 23.2 CONSENT OF COUNSEL The consent of Henry T. Meyer, Esq. is included in his opinion filed as Exhibit 5 to this Registration Statement. -----END PRIVACY-ENHANCED MESSAGE-----