MRI vendor Fonar said that it would reject a proposal from a shareholder to buy the company, one week after the Melville, NY, firm posted a higher net loss on lower revenues for its first quarter of fiscal 2009 (end-September 30).
On November 14, investment firm Diversified Lending Group of Sherman Oaks, CA, said it sent a letter to Fonar's board proposing to acquire the company's stock at a price of $5 per share. The bid represents a "significant premium" over Fonar's price of 67¢ a share at the close of the market on November 13. Fonar shares closed at $1.35 on November 19.
Diversified Lending accused Fonar and chief executive Dr. Raymond Damadian of "waste and mismanagement" in a "series of related-party transactions that benefit insiders at the direct expense of shareholders." Diversified Lending said that if it gained control of Fonar it would infuse the company with additional capital to make its MRI technology more available in the U.S. and worldwide.
In a press release issued November 18, however, Fonar said it was not interested in entering into a merger or other agreement with Diversified Lending that called for the company to buy all of Fonar's stock.
The week before, Fonar posted first-quarter financial results in which the company had revenues of $6.8 million, down 22% compared with revenues of $8.7 million in the corresponding quarter the year before. The company's net loss grew to $450,000, compared with $209,000 in the same quarter a year ago.
Damadian said that the medical device industry has not been immune to the financial crisis that has affected the U.S. economy, and that the company has been "exercising careful control" of R&D and selling, general, and administrative costs. As a result, Fonar's operating loss has fallen to its lowest level since fiscal 2005, according to Damadian.
Related Reading
Fonar receives Nasdaq warning, October 17, 2008
Fonar grows sales, narrows loss in fiscal 2008, October 14, 2008
Nasdaq to hold hearing for Fonar, July 22, 2008
Nasdaq puts Fonar on notice, July 14, 2008
Fonar completes Florida sale, July 1, 2008
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