Item 1A Risk Factors: Risks Relating to an Investment in FONAR An investment in the securities of the Company is subject to various risks, the most significant of which are summarized below. 1. Proposed Acquisition of the Company. New York Tort Reform. On July 7, 2025, the Board of Directors received January 13, 2026 New York Governor Kathy Hochul proposed a non-binding proposal from a group led by Timothy Damadian, the Companys Chief Executive Officer, and Luciano Bonanni, the Companys Chief Operating Officer, pursuant series of tort reform measures related to which proposal the group would acquire all of the outstanding common stock and other securities of the Company not currently owned by the members of the group. Members of the group have voting control of the Companys equity securities and the group advised the Company that it was unwilling New York automotive insurance industry. These proposals include changes to support any alternative transaction. The Board of Directors has established a Special Committee of independent and disinterested directors to consider the proposal and negotiate New York comparative negligence law, imposing caps on behalf of the Company and its stockholders. There can be no assurance that any agreement will be executed or that the transaction contemplated non-economic damages recoverable in the proposal, or any other transaction, will be approved or consummated. The Special Committee may suspend or terminate its consideration of a possible going private transaction at any time, automotive lawsuits, and the Proposed Acquisition Group may suspend or terminate its exploration of a possible going private transaction at any time. Until the Company enters into or declares that it will not enter into a definitive agreement with the Proposed Acquisition Group, or any alternative transaction, the price of the Companys common stock may change to reflect market assumptions as to whether or not any transaction is likely to occur. In addition, the Company has incurred, and will continue to incur, significant costs, expenses and fees extending time periods for professional services and other transaction costs in connection with the proposal, and many of these fees and costs are payable by the Company regardless of whether or not any potential transaction is consummated. 2. Impact of Government Shutdown. The Federal Government shut down effective October 1, 2025, after Congress failed insurers to pass funding legislation for 2026. As of the date of this filing, the shutdown has not been resolved and the federal government has temporarily suspended services. The Center for Medicare Services (CMS) initially announced that it would pause payments for services rendered after October 1, 2025. CMS subsequently limited that announcement investigate fraud claims. Florida enacted similar changes to certain telehealth and other services. However, CMS may change its position those proposed by Governor Hochul in the future if the shutdown continues, and we anticipate slower claims processing time and increased delays 2023 which resulted in reimbursement while the government remains shutdown. This will negatively impact our financial results in the immediate future. We may also suffer other, indirect adverse effects as a consequence of the shutdown. The impact on health insurance premiums more unpaid bills, higher administrative costs, lower volume, and lower reimbursement rates as a result of the expiration of Affordable Care Act subsidies that form the basis for the government shutdown may also have a negative impact on our operations. 3. rates. 2. Reduced Reimbursement Rates. Most of our revenues are derived from our scanning center business conducted by HMCA. Our scanning center clients and the Florida facilities owned by HMCA are experiencing lower reimbursement rates from Medicare, other government programs and private insurance companies. To the extent possible, we counter these reductions by increasing scanning volume and controlling operating expenses. Inflation in the cost of both materials and labor have limited our ability to control our costs, negatively impacting our ability to maintain profitability in this business segment. Page 40 FONAR CORPORATION AND SUBSIDIARIES 4. 3. Inflation. Inflation has drastically increased our costs for both materials and labor. Diagnostic imaging facilities require significant amounts of capital to operate, particularly in the context of opening new diagnostic imaging centers. These increased costs make it more difficult to achieve organic growth and extend the time that a new center takes to achieve profitability. Continued cost increases, coupled with reduced reimbursement rates may threaten the profitability of our current operations and cause the cost of expansion to become prohibitively high. 5. Page 50 FONAR CORPORATION AND SUBSIDIARIES 4. Cybersecurity threats. Diagnostic imaging centers have increasingly become a target for threat actors. Our organization relies on information technology systems and computer networks to operate. Our partners, vendors, and business associates are equally reliant on their own computer systems to provide the services that we depend on to perform core functions. Data incidents in the form of breaches, ransomware attacks, denial-of-service attacks, and a variety of other hazards could materially disrupt our operations, or the operations of our partners. The costs to respond to such incidents related to rebuilding internal systems, restoring data, responding to regulatory investigations and/or litigation could be significant. Our cybersecurity liability insurance may be inadequate to cover these losses. Management has identified a material weakness in our internal controls over our information technology systems during the fiscal year ending June 30, 2025. While management has enacted a plan for remediation by improving these internal controls and implementing additional controls, there is no guarantee these remediation efforts will be adequate. Further, there is no guarantee that other, unidentified risks could negatively impact our operations in the future. The cost of maintaining and improving our information technology security to protect ourselves from these threats, and to comply with associated regulatory requirements related to cybersecurity, has increased substantially and will continue to increase in the future. Previous cybersecurity incidents have not materially affected our results of operations or financial condition. However, cybersecurity threats have the potential to significantly impair our operations and the operations of the various third parties upon whom we rely. Risks outside of our control, such as cybersecurity attacks to our partners, vendors and business associates could threaten our ability to operate and reduce operating margins. 6. 5. Dependence on Referrals. HMCA derives substantially all of its revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at the facilities. We depend on referrals of patients from unaffiliated physicians and other third parties to the facilities we manage or own for the services we perform. If these physicians and other third parties were to reduce the number of patients they refer or discontinue referring patients, scan volumes could decrease, which would reduce our net revenue and operating margins. 7. Current 6. Recent and future changes in Florida Insurance Law. On March 24, 2023, Florida enacted House Bill 837. Dubbed the Tort Reform Act, the bill made sweeping changes to Floridas negligence laws that negatively impact our Florida diagnostic imaging facilities (both those we own and those we manage) with more unpaid bills, higher administrative costs, lower volume, and lower reimbursement rates. Florida legislators continue to propose significant changes to the current structure of Floridas insurance industry, including an annual proposal to repeal of Floridas no-fault insurance law and replace it with a fault-based system. This proposal was vetoed by Governor Ron DeSantis after passing both houses in 2021, but similar legislation was proposed in 2022, 2023, 2023 and 2025. A similar proposal is expected proceeding in the 2026 legislative sessions. sessions in the form of Senate Bill 522 and House Bill 1181. A repeal of the no-fault law will result in significant delays in payment for the services we render and will have a negative effect on our operations. Page 41 FONAR CORPORATION AND SUBSIDIARIES 8. 7. Scanning Facility Competition. The market for diagnostic imaging services is highly competitive. The facilities we manage or own compete for patients on the basis of reputation, location and the quality of diagnostic imaging services. Groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment are the principal competitors. The Florida market in particular is experiencing a high level of competition, which, coupled with recent Tort Reform, has created a challenging landscape for the centers we own and manage in that state, and may deter future expansion. 9. Page 51 FONAR CORPORATION AND SUBSIDIARIES 8. Pressure to Control Healthcare Costs. One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services. Healthcare providers participating in managed care plans may be required to refer diagnostic imaging tests to certain providers depending on the plan in which a covered patient is enrolled. In addition, managed care contracting has become very competitive. The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations in New York or Florida could have a negative impact on the utilization and pricing of services performed at the facilities HMCA manages or owns to the extent these organizations exert control over patients access to diagnostic imaging services, selections of the provider of such services and reimbursement rates for those services. 10. 9. Eligibility Changes to Insurance Programs. Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. Healthcare reform legislation will continue to increase the participation of individuals in the Medicaid program in states that elect to participate in the expanded Medicaid coverage. A shift in payor mix from managed care and other private payors to government payors or an increase in the number of uninsured patients may result in a reduction in the rates of reimbursement or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in net revenue. Policies now being offered under various insurance plans are expected to reduce demand for MRI scans as they become less affordable. Changes in the eligibility requirements for governmental programs such as the Medicaid program and state decisions on whether to participate in the expansion of such programs also could increase the number of patients who participate in such programs and the number of uninsured patients. Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition, and results of operations. 11. 10. Federal and state privacy and information security laws. We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act. If we fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, or protect our proprietary rights to our systems, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected. 12. 11. Demand for MRI Scanners. The reduced reimbursement rates have a negative effect on our sales of MRI scanners. With lower revenue projections, prospective customers would demand lower prices for scanners. Although the reduced reimbursements may not affect foreign demand, a lower number of sales in the aggregate could reduce economies of scale and consequently, profit margins. Page 42 FONAR CORPORATION AND SUBSIDIARIES 13. 12. Manufacturing Competition. Many if not most of our competing scanner manufacturers have significantly greater financial resources, production capacity, and other resources than we do. Such competitors would include General Electric, Siemens, Hitachi and Phillips. Although FONAR is the only company which can manufacture and sell the unique Stand-Up (Upright) MRI scanner, potential customers must be convinced that the purchase of a FONAR scanner is their best choice. We believe that with time, that objective will be reached, particularly with customers scanning patients having neck, back, knee and various orthopedic issues who would benefit from being scanned in weight-bearing positions. 14. Page 52 FONAR CORPORATION AND SUBSIDIARIES 13. Other changes in Domestic and Worldwide Economic Conditions. We are subject to risk arising from adverse changes in general domestic and global economic and other conditions, including tariffs, recessions or economic slowdowns, disruptions of credit markets and military conflicts. Turbulence and uncertainty in the United States and international markets and economies may adversely affect our workforce, liquidity, financial condition, revenues, profitability and business operations generally. Risks Relating to the Merger Agreement and the Merger The Merger may not be completed on the terms or timeline currently contemplated or at all, which could adversely affect our stock price, business, financial condition and results of operations. As previously disclosed, on December 23, 2025, FONAR entered into the Merger Agreement providing for our acquisition by FONAR, LLC (Parent) through a Merger with FONAR Acquisition Sub, Inc. (Merger Sub). Parent and Merger Sub are entities affiliated with and owned and controlled, directly or indirectly, by Timothy Damadian, the Companys Chief Executive Officer and Chairman of our Board Directors, and the sole manager of Parent. The completion of the Merger is subject to the satisfaction of various conditions, including, among other things: (i) the approval by the Companys stockholders in favor of the adoption of the Merger Agreement providing for the Merger by the Requisite Company Vote (consisting of the Company Stockholder Approval and the Disinterested Stockholder Approval) at the Special Meeting; (ii) the expiration or termination of any applicable waiting periods; (iii) that the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction; (iv) the receipt of all consents, approvals and other authorizations of any governmental entity required to consummate the Merger and the other transactions contemplated by the Merger Agreement, free of any condition that would reasonably be expected to have a Company Material Adverse Effect or a material adverse effect on Parents and Merger Subs ability to consummate the transactions contemplated by the Merger Agreement; (v) the accuracy of the parties representations and warranties, subject to certain qualifiers; and (vi) the parties compliance in all material respects with their respective pre-closing covenants, subject to the terms of the Merger Agreement. While FONAR currently expects to complete the Merger in FONARs third fiscal quarter of 2026 (and no later than the End Date of March 12, 2026, as may be extended in accordance with the terms of the Merger Agreement), there can be no assurance that the foregoing conditions will be satisfied in a timely manner or at all, or that events will not occur that could delay or prevent satisfaction of these conditions. If the Merger is not consummated for any reason, the trading price of our Common Stock may decline to the extent that it reflects positive market assumptions that the Merger will be completed and related benefits realized, and our business, prospects or results of operations may be adversely impacted. We may also be subject to additional risks if the Merger is not completed, including: investor confidence in us could decline, additional stockholder litigation could be brought against us, relationships with existing and prospective customers, service providers, investors, lenders and other business partners may be adversely impacted, we may be unable to retain key personnel, and our operating results may be adversely impacted due to costs incurred in connection with the Merger; we have incurred, and will continue to incur, significant expenses for professional services in connection with the Merger for which we will have received little or no benefit if the Merger is not consummated; Page 53 FONAR CORPORATION AND SUBSIDIARIES any disruptions to our business resulting from the announcement and pendency of the Merger, including adverse changes in our relationships with customers, suppliers, partners and employees, may continue or intensify in the event the Merger is not consummated or is significantly delayed; managements focus and resources of FONAR may be diverted from operational matters and other strategic opportunities while working to implement the proposed Merger and defend against related stockholder litigation; and the requirement under certain circumstances for FONAR to pay Parent the termination fee of $450,000 in cash (including Parents reasonable and documented out-of-pocket fees and expenses). Further, FONAR or Parent may terminate the Merger Agreement if the Merger has not been consummated by the End Date, subject to an automatic extension to the later of 90 days following (i) the date the Companys definitive proxy statement in connection with the Special Meeting is filed and (ii) the date, if applicable, upon which any SEC or other governmental review or investigation is completed. FONAR or Parent also may terminate the Merger Agreement (i) by mutual written consent; (ii) if any governmental entity of competent jurisdiction shall have enacted any law or order making illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement, and such law or order shall have become final and nonappealable (provided, however, that such right to terminate the Merger Agreement shall not be available to any party whose breach of any representation, warranty, covenant, or agreement set forth in the Merger Agreement has been the principal cause of the issuance, promulgation, enforcement, or entry of any such law or order) ; or (iii) if the Requisite Company Vote is not obtained at the Special Meeting. In addition, Parent may terminate the Merger Agreement if a Company Adverse Recommendation Change occurs, if certain non-solicitation or stockholder meeting covenants are breached, or if other specified Company breaches occur that are not cured, and FONAR may terminate the Merger Agreement to enter into a Company Acquisition Agreement with respect to a Superior Proposal or for specified Parent breaches that are not cured, in each case subject to the conditions and procedures in the Merger Agreement. The occurrence of any of the foregoing could adversely affect our stock price, business, financial condition and results of operations. If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay the termination fee to Parent, which could require us to use available cash that would have otherwise been available for other uses. If the Merger is not completed, in certain circumstances, we could be required to pay the termination fee of $450,000 to Parent (including Parents reasonable and documented out-of-pocket fees and expenses), payable in cash. If the Merger Agreement is terminated, any termination fee we may be required to pay, if any, could require us to use available cash that would have otherwise been available for general corporate purposes or other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business, results of operations or financial condition, which in turn could adversely affect the trading price of our Common Stock. We are subject to various uncertainties while the Merger is pending, which could have a material adverse effect on our business, results of operations and financial condition. Uncertainty about the pendency of the Merger and its effect on employees, customers and other third parties may adversely affect our business, results of operations and financial condition. These uncertainties may impair our ability to attract, retain and motivate key personnel pending consummation of the Merger and divert management attention, and our continuing business relationships with customers, suppliers and other partners may be adversely affected, including potential loss of key personnel and negative perceptions about our prospects. In addition, interim operating covenants and related restrictions may delay or prevent us from undertaking certain strategic or operational initiatives that we might otherwise pursue prior to completion, which could impact our operations. We are currently subject to stockholder litigation and we may become subject to additional stockholder litigation, and we will continue to incur substantial transaction-related costs regardless of whether the Merger is completed. Page 54 FONAR CORPORATION AND SUBSIDIARIES These factors, together with the risk that our Common Stock price may fluctuate during the pendency of the Merger and could decline significantly if the Merger is not completed, could materially and adversely affect our business, results of operations, financial condition and trading price. While the Merger Agreement is in effect, we are subject to certain interim covenants. The Merger Agreement generally requires us to operate our business in the ordinary course consistent with past practices, including using commercially reasonable efforts to preserve FONARs and our subsidiaries business organization, retain present officers and key employees and preserve the good will of our customers, suppliers and other persons with whom we have business relationships with, pending consummation of the Merger. It also imposes customary interim operating covenants that restrict us from taking specified actions until the Merger is completed or the Merger Agreement is terminated, subject to certain exceptions, including, but not limited to, restrictions on: amending our organizational documents; declaring dividends or repurchases; issuing or encumbering securities; increasing compensation or accelerating benefits; making acquisitions or significant asset dispositions; incurring or guaranteeing indebtedness; entering into or materially modifying material contracts; instituting, settling or compromising any legal action involving payments by the Company or its subsidiaries exceeding $50,000; making material changes in accounting or tax election; entering joint ventures; adopting stockholder rights plans; and other actions, in each case as detailed in the Merger Agreement. Any of these restrictions could prevent us from pursuing certain financing, strategic, or operational initiatives that may arise prior to the consummation of the Merger and may affect our ability to execute our business strategies, attain financial and other goals, and impact our financial condition, results of operations and cash flows. Provisions within the Merger Agreement, along with certain voting agreements and statements by the Acquisition Group, could deter potential competing acquirers or lead to lower alternative acquisition proposals than might otherwise be offered. The Merger Agreement contains customary no-shop restrictions that, subject to a limited fiduciary out, restrict our ability to solicit or facilitate competing acquisition proposals, provide non-public information, or engage in discussions or negotiations with third parties, except in response to a bona fide , unsolicited written proposal that the Special Committee determines is, or could reasonably be expected to lead to, a Superior Proposal and only after making specified determinations and complying with notice and other obligations under the Merger Agreement. In addition, before the Board of Directors (acting upon the recommendation of the Special Committee) may change its recommendation or terminate the Merger Agreement to enter into a Company Acquisition Agreement in response to a Superior Proposal, the Company must provide Parent with prompt advance written notice, identify the offeror and material terms and negotiate in good faith to make such adjustments in the terms and conditions of the Merger Agreement so that such Takeover Proposal (as defined in the Merger Agreement) ceases to constitute a Superior Proposal. If the Merger Agreement is terminated in certain circumstances, including to accept a Superior Proposal or following a Company Adverse Recommendation Change, we must pay Parent the termination fee of $450,000 (including Parents reasonable and documented out-of-pocket fees and expenses). Further, members of the Acquisition Group who are FONAR stockholders have entered into voting agreements to vote their shares in favor of the Merger, and certain public statements by the Acquisition Group that its members may not support or vote in favor of alternative transactions proposed by a third party were considered as part of the Special Committees independent process, all of which could deter competing proposals. These provisions and arrangements could discourage a potential competing acquirer from making a proposal, or could cause a potential acquirer to offer a lower price than it might otherwise offer due to the no-shop restrictions, Parents negotiation rights and notice periods, the termination fee, and the existing voting commitments and statements made by the Acquisition Group. Page 55 FONAR CORPORATION AND SUBSIDIARIES We will continue to incur substantial transaction-related costs in connection with the Merger. We have incurred, and expect to continue to incur, significant legal, advisory and other professional fees and expenses in connection with the Merger, and such costs will be borne by FONAR if the Merger is not completed, and by the surviving corporation if it is completed. We also expect additional costs associated with satisfying closing conditions, including soliciting the Requisite Company Vote at the Special Meeting and making required filings and obtaining approvals from governmental authorities, as well as cooperating in related regulatory processes and current and any future stockholder litigation, each of which may require continued expenditures regardless of whether the Merger is consummated. If the Special Meeting is adjourned or postponed to solicit additional proxies, or if the closing of the Merger is otherwise delayed, our proxy solicitation, advisory and other transaction-related expenses may continue and could increase, including fees payable to our proxy solicitor and other solicitation costs borne by FONAR. If the Merger is consummated, our stockholders, other than the Acquisition Group members, will not be able to participate in any further upside to our business. If the Merger is consummated, our stockholders will receive the applicable Per Share Price for their FONAR shares, as follows: $19.00 for each share of Common Stock and Class B Common Stock, $6.34 for each share of Class C Common Stock, and $10.50 for each share of Class A Non-voting Preferred Stock. This consideration will be without interest and subject to applicable tax withholding, and stockholders will not receive any equity interests in the surviving corporation or Parent. As a result, following the Merger, our stockholders will only have the right to receive the applicable Per Share Price and will no longer have any rights as stockholders of FONAR. Instead, all equity of the surviving corporation will be owned, indirectly through Parent, by the Acquisition Group, and Parent will be the sole direct beneficiary of FONARs future earnings and growth, if any. Our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our other stockholders. Our directors and executive officers have financial interests in the Merger that may be different from, or in addition to, the interests of our other stockholders. These interests may include: continued indemnification and insurance coverage under the Merger Agreement, the Companys organizational documents, and indemnification agreements the Company has entered into with each of its directors and executive officers; the roles and equity arrangements of certain directors and officers who are members of the Acquisition Group and FONAR stockholders, including: (i) Mr. Damadian (our Chief Executive Officer, President, Treasurer and Chairman of the FONAR Board), who will continue following the Merger as the sole manager of Parent and pursuant to the terms of the Merger Agreement will serve as the President, Chief Executive Officer, Treasurer and sole director of the surviving corporation, will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares) to Parent in exchange for an aggregate of 125,262 Class B membership units of Parent and has also committed to subscribe for an aggregate of 554,714 Class B membership units of Parent for a total subscription price of $10,539,572 in cash; (ii) Mr. Luciano Bonanni (our Chief Operating Officer, Executive Vice President and acting Principal Financial Officer), who pursuant to the terms of the Merger Agreement will serve as the Chief Operating Officer and Executive Vice President of the surviving corporation, will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares)to Parent in exchange for an aggregate of 54,963 Class B membership units of Parent and has also committed to subscribe for an aggregate of 34,211 Class B membership units of Parent for a total subscription price of $650,000 in cash; and (iii) Mr. Ronald Lehman (a director of the Company), who will contribute all of his FONAR shares (or, alternatively, may elect in accordance with the terms of his Equity Commitment Agreement to contribute an amount of cash equal to the aggregate Per Share Price for all of his FONAR shares) to Parent in exchange for an aggregate of 4,330 Class B membership units of Parent and has also committed to subscribe for an aggregate of 48,684 Class B membership units of Parent for a total subscription price of $925,000 in cash, pursuant to Parents equity financing; and Page 56 FONAR CORPORATION AND SUBSIDIARIES Special one-time cash fees paid to the Companys disinterested directors for their service on the Special Committee, which were paid in six equal monthly installments beginning in July 2025 and ending in December 2025 and were not contingent on consummation of the Merger or upon any other factor, with Mr. Turk receiving $200,000 as Chair and Mr. Carrino receiving $175,000. FONAR or Parent may waive one or more of the conditions to closing of the Merger without re-soliciting stockholder approval. Under the Merger Agreement, certain closing conditions may be satisfied or waived by the applicable party to the extent permitted by law, including conditions relating to the accuracy of representations and warranties, compliance with covenants, and the absence of certain legal restraints, among others. The Merger Agreement may also be amended or supplemented, whether before or after receipt of the Disinterested Stockholder Approval, by written agreement signed by FONAR and Parent. However, after receipt of the Requisite Company Vote, no amendment that requires further stockholder approval under the DGCL may be made without such approval. If the Merger Agreement is terminated under specified circumstances, including to accept a Superior Proposal or following a Company Adverse Recommendation Change, FONAR may be required to pay Parent the termination fee of $450,000, including Parents reasonable and documented out-of-pocket fees and expenses. See If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay the termination fee to Parent, which could require us to use available cash that would have otherwise been available for other uses. If Parents financing in connection with the Merger becomes unavailable or is insufficient, the Merger may not be completed. Parent has obtained financing commitments to fund the Merger, including a $35,000,000 debt commitment from OceanFirst Bank, N.A. pursuant to the bank commitment letter, $10,225,000 of private debt commitments, and an aggregate of $ 47,440,504 of commitments comprised of rollover equity and new cash pursuant to Parents equity financing, together with the Companys cash on hand to fund the aggregate Per Share Price to be paid to the Companys unaffiliated stockholders pursuant to the Merger Agreement and all related fees, expenses and other amount required. These financing commitments are subject to conditions, including execution of definitive documentation, specified minimum equity and private debt funding, liquidity and other customary closing conditions. The bank commitment letter terminates on the earliest of the closing of the Merger, the valid termination of the Merger Agreement, or April 22, 2026. Although the bank debt financing is not subject to due diligence or a market out provision, which allows lenders not to fund their commitments if certain conditions in the financial markets prevail, there is still a risk that the bank debt financing or any other financing may not be funded when required. As of the date of this Form 10-Q, no alternative financing arrangements or alternative financing plans have been made if the bank debt financing or any other financing is not available as anticipated, which could delay or prevent completion of the Merger. However, the transactions contemplated by the Merger Agreement are not contingent on Parents ability to obtain the contemplated financing or any alternative financing. Page 57 FONAR CORPORATION AND SUBSIDIARIES The Company , the members of Board of Directors and Mr. Bonanni are subject to litigation related to the Merger, and we may become subject to further litigation in connection with the Merger, any of which may be costly, prevent the consummation of the Merger, divert managements attention or otherwise materially harm our business . FONAR is subject to litigation related to the Merger. On Monday, February 2, 2026, we received notice that a stockholder filed the Complaint challenging the Merger (see Note 14, Subsequent Events, of Part I Item 1of this Form 10-Q for additional information). It is possible that additional claims beyond those which have already been filed will be brought in an effort to enjoin the Merger or seek monetary relief from FONAR. FONAR cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation concerning the Merger could delay or prevent the consummation of the Merger. In addition, the costs of defending the litigation, even if resolved in FONARs favor, could be substantial and such litigation could distract FONAR from pursuing the consummation of the Merger and other potentially beneficial business opportunities. Regardless of the outcome of any current or future litigation related to the Merger Agreement and the transactions it contemplates, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of managements attention and resources to address the claims and counterclaims in any litigation related to the Merger Agreement and the transactions it contemplates may materially adversely affect our business, financial condition and/or operating results. Furthermore, if the Merger is not consummated, for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could negatively impact the trading price of our Common Stock, impair our ability to recruit or retain employees, damage our business relationships, or otherwise materially harm our operations, financial performance and prospects.