FONAR CORP Leases Disclosure

NOTE 6 – OPERATING AND FINANCE LEASES

 

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

 

Schedule of Operating Lease and Finance Lease Payments
Year Ending June 30,			Operating Lease Payments				Finance Lease Payments
2026			$	5,753,674			$	244,343
2027				5,718,999				142,534
2028				5,629,193				—
2029				5,240,019				—
2030				5,120,717				—
Thereafter				25,496,885				—
Present value discount				(14,427,905	)			(117	)
Total lease liability			$	38,531,582			$	386,760

 

Weighted Average Remaining Lease Term

 

Schedule of Weighted Average Remaining Lease Term
		As of June 30,
		2025				2024
Operating leases - years			10.2				11.0
Finance lease - years			1.6				2.6
Weighted Average Discount Rate
Operating leases			6.5	%			6.4	%
Finance lease			3.6	%			3.6	%

 

The components of lease expense were as follows:

 

Schedule of components of lease expense

Components of lease expense
		For Year Ended June 30,
		2025				2024
Operating lease cost		$	6,110,496			$	5,685,008
Finance lease cost:
Depreciation of leased equipment		$	198,881			$	198,881
Interest on lease liabilities			16,812				26,534
Total finance lease cost		$	215,693			$	225,415

 

Supplemental cash flow information related to leases was as follows:

 

Schedule of supplemental cash flow information related to leases
Supplemental cash flow information related to leases
		For Year Ended June 30,
Cash paid for amounts included in the measurement of lease liabilities:		2025				2024
Operating cash flows from operating leases		$	5,729,571			$	6,363,561
Financing cash flows from finance leases		$	264,705			$	244,344
Right-of-use and equipment assets obtained in exchange for lease obligations:
Operating leases		$	2,319,913			$	3,715,138

 

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

 

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

 

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