Fonar Corp was incorporated in the state of Delaware on July 17, 1978. The Company conducts its business in two segments: Medical equipment segment which is conducted directly through Fonar and Health Management Corporation of America segment which is conducted through its wholly owned subsidiary Health Management Corporation of America. FONAR is engaged in the research, development, production and marketing of medical scanning equipment, which uses principles of Magnetic Resonance Imaging (MRI) for the detection and diagnosis of human diseases. In addition to deriving revenues from the direct sale of MRI equipment, revenue is also generated from its installed-base of customers through its service and upgrade programs. Fonar, through its wholly-owned subsidiary Health Management Corporation of America (HMCA) provides management services to diagnostic imaging facilities. The services provided by the Company include development, administration, leasing of office space, facilities and medical equipment, provision of supplies, staffing and supervision of non-medical personnel, legal services, accounting, billing and collection and the development and implementation of practice growth and marketing strategies. It is the originator of the iron-core non-superconductive and permanent magnet technology. The Company introduced the first open MRI in 1980. Since that time it has concentrated on further application of its open MRI, introducing recently the Upright Multi-Position MRI scanner and the Fonar 360 MRI scanner. Its current products are the Upright MRI and the Fonar 360. The Upright MRI is the only MRI scanner which allows patients to be scanned while standing, sitting or reclining, either horizontally or at an angle. The Fonar 360 is an enlarged room sized magnet in which the floor, ceiling and walls of the scan room are part of the magnet frame. The Upright MRI and Fonar 360 scanners share much of the same fundamental technology and offer the same speed, precision and image quality. The markets for the Company's scanners are private scanning centers and hospitals. Fonar has targeted orthopedic surgeons and neurosurgeons, particularly spine surgeons, as important markets for the Upright MRI. Fonar's advertising has been directed at four target audiences: neurosurgeons, orthopaedic surgeons, radiologists and physicians in general. The Company's open iron frame MRI scanners are competing with high-field air core scanners. It faces competition within the MRI industry from such firms as General Electric Company, Philips N.V., Toshiba Corporation, Hitachi Corporation and Siemens A.G. The Food and Drug Administration in accordance with Title 21 of the Code of Federal Regulations regulates the manufacturing and marketing of Fonar's MRI scanners. The regulations can be classified as either pre-market or post-market. The pre-market requirements include obtaining marketing clearance, proper device labeling, establishment registration and device listing. Once the products are on the market, Fonar must comply with post-market surveillance controls. These requirements include the Quality Systems Regulation, or "QSR", also known as Current Good Manufacturing Practices or CGMPs, and Medical Device Reporting, also referred to as MDR regulations. The QSR is a quality assurance requirement that covers the design, packaging, labeling and manufacturing of a medical device. The MDR regulation is an adverse event-reporting program.