NOTE 11 – COMMITMENTS AND CONTINGENCIES

Litigation

The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

On February 2, 2026, a Verified Stockholder Class Action Complaint entitled Bruce Taylor v. Fonar Corporation et al., C.A. No. 2026-0142-JTL (Del. Ch.) (the “Complaint”), was filed in the Delaware Court of Chancery by a putative FONAR stockholder (the “Delaware Plaintiff”), on behalf of himself and all other similarly situated stockholders, against FONAR, the Parent Entities and members of the FONAR Board. The Complaint alleges that the Parent Entities reached an “agreement, arrangement or understanding,” as those terms are defined in Section 203 of the Delaware General Corporation Law (“DGCL”) (“Section 203”), among certain FONAR stockholders prior to the FONAR Board’s approval of the Merger, thereby triggering Section 203’s requirement that at least 66 2/3% of the outstanding Company Capital Stock unaffiliated with the Parent Entities vote in favor of the Merger (after giving effect to the respective voting powers of each class of Company Capital Stock under FONAR’s existing amended and restated certificate of incorporation). The Complaint seeks, among other things, (1) an order declaring that the Merger is subject to Section 203’s supermajority voting requirement, (2) an order enjoining the vote on the Merger unless and until stockholders are informed that the Merger can close only if it is subject to Section 203’s supermajority voting requirement, and (3) a finding that the members of the Board of Directors breached their fiduciary duties by entering into the Merger Agreement without providing for a supermajority stockholder vote contemplated by Section 203. FONAR disputes the Complaint’s allegations, including the allegation that Section 203’s supermajority voting requirement applies to the Merger.

In the ordinary course of its business, the Company is a party to various lawsuits arising from the operations at the MRI sites and other insurance related matters, which are generally handled by the Company’s insurance carriers. Management believes, based in part on the advice counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Other than as described under Note 14, there were no material changes in litigation from that reported in our Form 10-K for the fiscal year ended June 30, 2025.

Other Matters

On September 13, 2022, the Company adopted a stock repurchase plan. The plan has no expiration date and the Company cannot determine the number of shares which will be repurchased. On September 26, 2022, the Board of Directors approved up to $9,000 to be repurchased under the plan which will be purchased on the publicly traded open market at prevailing prices. The stock repurchase plan was suspended in the fourth quarter of fiscal 2025 due to the pending take private offer. During the nine months ended March 31, 2026 and 2025, the Company repurchased 0 and 115 shares at a cost of $0 and $1,806, respectively. The Company cancelled 31 shares and 125 shares at a cost of $465 and $1,963 for the nine months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the remaining balance under the repurchase plan was $2,928.

The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third-party insurer to limit the maximum potential liability for individual claims to $150 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of March 31, 2026 and June 30, 2025, the Company had approximately $108 and $260, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the condensed consolidated balance sheets.

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