SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
December 31, 2001 0-12248
Daxor Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2682108
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
350 Fifth Avenue
Suite 7120
New York, New York 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 244-0555
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $.01 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ ]
As of March 11, 2001, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $ 28,203,811. The market value of Common
Stock of the Registrant, par value $.01 per share, was computed by reference to
the closing price of one share on such date, as reported by the American Stock
Exchange, which was $18.64.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of March 11, 2001: 4,664,909 shares.
Documents incorporated by reference: The information required by Part III is
incorporated by reference from the proxy statement for the 2001 Annual Meeting
of Shareholders.
PART I.
Item 1. Business
Daxor Corporation is a medical device manufacturing Company with additional
biotech services. Daxor was originally founded for cryobanking services. For the
past 10 years, its major focus has been on the development of an instrument that
rapidly and accurately measures human blood volume. The Company developed an
instrument called the BVA-100 which is used in conjunction with a single use
diagnostic injection and collection kit. The Company maintains a website,
www.daxor.com which describes its operations.
In 1997, the Company achieved marketing clearance from the FDA for the
instrument. Then in 1998, the Company received clearance for it's specialized
single use injection kit known as Volumex. In 1999, the Company initiated beta
testing for the Blood Volume Analyzer at Hospitals in the New York Metropolitan
region. In the year 2000, the Company initiated marketing efforts outside of the
New York region. Test results from hospital sites indicated that the Blood
Volume Analyzer was accurate and provided information that was important in a
wide variety of acute and chronic medical and surgical situations. The Company
manufactures its own injection kit components. The Company established its own
small scale manufacturing facility in Oak Ridge, Tennessee for research and
development purposes. The Blood Volume Analyzer is manufactured for the Company
by an Original Equipment Manufacturer (OEM). This combination also provides
flexibility to meet potential increased market demand. The injection kit filling
is performed by an FDA licensed radiopharmaceutical manufacturer. The Company
has received United States, European Common Market, and Japanese patents for its
Blood Volume Analyzer.
Blood volume measurement has been available for more than 60 years in formats
which required as much as three to six hours of technician time with variable
degrees of accuracy. Because of the time required, certain technical shortcuts
were often used which reduced the accuracy of the measurement. An additional
problem was the difficulty of calculating an accurate expected normal blood
volume for a specific individual. Normal blood volume has been shown to vary in
relation to the degree of deviation from ideal weight. A leaner individual has a
higher blood volume percentage of body weight as compared to an obese
individual. The computations for an individual's normal expected blood volume
were complex and time consuming. The Blood Volume Analyzer automated these
computations. The BVA-100 Blood Volume Analyzer calculates blood volume
measurement to within an accuracy of approximately 98% while providing the
precise measurement of the normal blood volume for that specific individual
based on the height, weight and sex of the patient. In emergency situations,
preliminary results can be available within 15 to 20 minutes, and final results
within 25 to 35 minutes.
Measurement of blood volume is achieved by the use of an indicator or tracer
which is injected into a patient, which is then followed by the collection of
timed blood samples. The volume of blood in a patient is inversely proportional
to the dilution of the tracer. The measurement, while relatively simple in
principle, has been difficult to perform accurately and rapidly because of the
high degree of precision required in each step. The standard techniques require
the hospital or user to prepare an exactly matching set of standards and tracer
injectate with precise and complete injection of the tracer. Because of the
difficulty in achieving this type of precision blood volume measurements are
currently performed in only a small minority of hospitals in the United States.
The standard tests used to diagnose anemia, the hemoglobin or the hematocrit,
measure only the thickness (percentage of red cells to plasma within the blood)
and not the volume of an individual's blood. These surrogate or proxy tests are
well known to be misleading in many situations where blood volume is abnormal.
In acute situations, such as during surgical blood loss or after trauma, it may
take as long as 24 to 72 hours for the hematocrit to accurately or reasonably
reflect the degree of blood loss. Patients may have delayed transfusions because
the full degree of blood loss is not reflected by these proxy tests. Delayed
transfusions or fluid replacement may result in serious complications, including
the death of the patient.
2
The largest potential use for the Blood Volume Analyzer is for evaluation and
treatment of outpatients' medical problems. Many disease conditions result in
alterations of blood volume which may have serious consequences for the patient.
Syncope, or sudden loss of consciousness, is a major cause for hospitalization
in the United States. As many as one million individuals per year experience an
episode of syncope. Recent news events focused on President George W. Bush and
former Attorney General Janet Reno, who have experienced syncope. Patients who
experience syncope may suffer severe injuries when they collapse. Some patients
may experience light headedness without complete loss of consciousness.
Evaluation of such patients includes neurological and cardiovascular testing,
however, they do not usually include a blood volume measurement. Low blood
volume can be a predisposition to syncope. Patients with this condition are
frequently treated with different types of drugs without precise knowledge of
the underlying cause of the syncope. In March 2000, the Cardiovascular
Department of the Cleveland Clinic obtained a BVA-100 Blood Volume Analyzer for
their Syncope Section. Results on over 1000 patients in the Cleveland Clinic
have demonstrated that a significant percentage of such patients have moderate
to severe hypovolemia (low blood volume) which would not have been diagnosed by
the standard test. This scientific data is currently being prepared for
submission for publication in a medical journal. The Cleveland Clinic
Cardiovascular Department is ranked number one in the United States according to
the Annual US News & World Report Survey of US Hospitals. The Hospital itself is
ranked number 4 overall out of more than 6200 hospitals in the country. At the
present time most patients evaluated for syncope in hospitals have tilt-table
testing which identifies patients who may be at risk for syncope. Tilt-table
testing, however, does not differentiate patients who have low blood volume from
those who have neurological dysfunction of their blood pressure. Only a blood
volume measurement can provide this differential diagnosis. The treatment for
low blood volume involves medication to expand the blood volume to normal. The
treatment for neurological dysfunction involves different medical treatment to
control the low blood pressure. Blood volume measurement provides a key test to
facilitate correct treatment of patients.
A recent Mayo Clinic study estimated that there are 50 million Americans who
have hypertension (high blood pressure). Hypertension is caused primarily by two
variables. There is either too much blood (hypervolemia) or fluid retention
within the circulation or too much tightening of the blood vessels
(vasoconstriction). Diuretics are one major category of drugs used to treat
hypertension. Diuretics cause the kidney to excrete salt and water thereby
decreasing the blood volume and lowering the blood pressure. A second major
category of medications is vasodilators. These drugs relax the blood vessels and
lower the blood pressure. Within each of these two major categories are drugs
which work by different mechanisms but they all essentially fall into one of
these two main therapeutic categories, diuretics or vasodilators. Treatment is
often a trial and error approach because neither vasoconstriction or blood
volume is actually measured in a patient (with rare exception). One of the most
serious complications of hypertension is loss of kidney function (renal failure)
which may require a patient to undergo permanent renal dialysis. Over the past
year, the company has received reports on patients treated for hypertension with
diuretics, who have a low blood volume. The physicians treating these patients
reduced or removed the diuretic therapy. African-Americans have been reported to
have significantly higher rates of strokes, and kidney failure as compared to
whites for comparable levels of elevated blood pressure. Diuretic therapy would
be expected to be beneficial for patients whose elevated blood pressure is
caused by an expanded blood volume and would be expected to be harmful for
patients whose high blood pressure is accompanied by low blood volume. At the
present time, there is inadequate data to determine whether African Americans as
a group are more likely to be individuals treated with diuretics. It is well
known that diuretics can cause blood volume to decrease to the point of causing
disruption of kidney function. The kidney is particularly vulnerable to low
blood volume. Kidney failure is a common complication of severe low blood
volume. Medications which cause low blood volume may contribute to premature
renal failure. The measurement of blood volume in the treatment of hypertension
may help prevent these types of complications. By measuring the blood volume
within the patient, the physician can make a more rational or scientific choice
in regard to the medical therapy to be administered.
3
Surgical patients who lose blood are obviously at risk for blood volume
derangements. It is widely recognized that surrogate tests such as hemocratic or
hemoglobin are inaccurate. Sometimes, physicians resort to the use of Pulmonary
Artery Catheterization (PAC). PAC involves the insertion of a catheter into a
vein through the right chambers of the heart and has frequently been used as a
surrogate technique to evaluate blood volume in critically ill patients.
However, PAC directly measures pressure, not volume. In 1999, the Lutheran
Medical Center (New York) presented its research on the first comparison of PAC
with direct blood volume measurements in patients. Their findings confirmed that
PAC could be inaccurate and misleading in patients who had significant blood
volume deficits. Hypovolemia, or low blood volume, can be particularly dangerous
during surgery and may lead to sudden severe drops in blood pressure. Such a
drop in blood pressure, also known as shock, is associated with strokes, heart
attacks or even sudden death.
The Company has received preliminary reports on the use of the Blood Volume
Analyzer in septic or toxic shock. Septic shock has death rates as high as
40-70%. Using the BVA-100, Lutheran Medical Center reported preliminary results
in 40 patients diagnosed with septic shock who were found to have unanticipated
low blood volume. The patients who were treated with fluids and blood to restore
their blood volume to normal levels had a markedly reduced death rate. These
findings, if verified on a larger scale, would be very important for marketing
the Blood Volume Analyzer. A primary goal of the Company is to have the Blood
Volume Analyzer become a standard of care within hospitals as part of the
decision-making process for administration of blood and intravenous therapy. If
these preliminary findings in the treatment of septic shock are verified, it
could be expected to have a significant impact on hospital demand for obtaining
a Blood Volume Analyzer. Septic shock is a common daily occurrence in all
hospitals. Major pharmaceutical companies have attempted to find pharmaceutical
agents that will reverse shock. To date, these tests have been unsuccessful. A
recent report on patients in septic shock indicated a slight improvement in
patients who were treated with an experimental drug. It was reported that the
anticipated cost of this drug would be $5,000 per treatment. If additional
studies confirm that correction of blood volume should be the primary focus on
treating septic shock, then blood volume would become an integral part of the
therapy for septic shock. The cost of a diagnostic kit is approximately $279.00.
The combined cost of blood volume measurement and fluid and/or blood replacement
would be significantly lower than the anticipated cost of the experimental
septic shock drug.
It is estimated that 5 million individuals are treated annually for congestive
heart failure. The January 2000 issue of the American College of Cardiology
reported on a series of patients treated for congestive heart failure who had
low blood volume and were decompensated. Over-treatment of congestive heart
failure is very difficult to detect and symptoms of over-treatment can be
confused with the primary disease itself. It is estimated that $38 billion is
spent annually on treatment for congestive heart failure. Congestive heart
failure is the number one reason for admission to hospitals in the US for
patients over 65 years of age. $23 billion is spent annually on hospital
treatment of congestive heart failure patients. Three thousand patients annually
receive heart transplants. The overwhelming majority of patients treated for
heart failure must be treated medically with a varied combination of drugs. The
BVA-100 is currently undergoing testing for utilization in optimizing the
treatment for congestive heart failure patients. Results of this testing from
the Heart Failure Center of Columbia Presbyterian Medical Center has been
submitted for publication. Preliminary reports on the use of the Blood Volume
Analyzer have demonstrated that congestive heart failure patients may have
serious blood volume derangements which cannot be correctly diagnosed without an
actual blood volume measurement.
Researchers at Columbia Presbyterian are beginning a new study on patients with
so-called diastolic heart failure utilizing the BVA-100. Diastolic heart failure
is a major category of difficult to treat heart failure patients where a blood
volume measurement may provide essential information for optimum treatment.
According to the Journal of Clinical Geriatrics, one out of every three elderly
patients has a condition known as orthostatic hypotension. Orthostatic
hypotension is a condition when a person rises from a sitting or reclining
position, the blood pressure drops. This sudden drop in blood pressure may cause
dizziness or even loss of consciousness.
4
One in eight elderly Americans experiences a hip fracture. It is unknown how
many of these hip fractures are caused by patients having a transient drop in
blood pressure. A blood volume measurement can help differentiate the cause of
orthostatic hypotension. Some patients with low blood volume caused by either
low red cell volume or low plasma volume can be treated with medications.
Patients who have a normal blood volume with orthostatic hypotension have a
condition related to autonomic dysfunction or ineffective control of the
constriction of small blood vessels. A medication is available for treating this
condition.
Low red cell volume, or Anemia, is a common occurrence in patient's undergoing
chemotherapy for AIDS or cancer. Epogen and Procrit, which are manufactured by
the Amgen Corporation, can provide therapy for such conditions. Procrit is
distributed by the Ortho Division of Johnson & Johnson. The standard surrogate
tests, hematocrit and hemoglobin, may not reflect the full degree of decreased
red blood cell volume in such patients. A blood volume measurement can detect
unrecognized low blood volume or "hidden anemia" in such patients which may be
contributing to a profound feeling of weakness common in such conditions.
Chronic fatigue syndrome is a condition said to affect approximately one million
Americans, particularly patients with low blood pressure. Low blood volume has
been reported to be a factor in such conditions. The ability to measure blood
volume with a high degree of precision and accuracy may identify patients who
have low blood volume and are not optimally treated at the present time.
There are over 4 million patients who receive blood transfusions every year. The
Company believes that if the BVA-100 were available in every hospital, it would
be feasible for the hospital to routinely perform a blood volume test on every
patient for whom a blood transfusion appeared to be indicated. There are several
manufacturers which include Northfield Laboratories, Biopure, and Hemosol
Corporation which are testing blood substitutes. These substitutes can be used
for surgical procedures instead of donor transfusions. These artificial blood
substitutes have the advantage of a long shelf life and the ability to be
sterilized. They have the disadvantage of a shortened half-life in the body
after transfusion. There have been recent reports in the New England Journal of
Medicine that as many as 60% of patients undergoing Cardiac Bypass Surgery
(CABG) experience some degree of measurable permanent brain damage such as
memory loss. Under current transfusion practices, patients may undergo major
surgery with half the concentration of normal red cells. The practice of
undertransfusion is widespread. In the Journal Transfusion, Dr. Robert Valeri, a
senior researcher of the Boston Naval Hospital estimated that there may be as
many as 40,000 heart attacks per one million operations due to
undertransfusions. The Company is attempting to initiate a cooperative program
which will involve the use of blood volume measurement combined with the use of
blood substitutes during surgery. The Company believes that it can provide a
significant advantage to companies currently testing blood substitutes on
patients without a precise knowledge of the patients actual blood volume.
Patients who have low blood volume at the start of surgery may respond very
differently than a patient with a normal blood volume who is treated with a
blood substitute. The Company has been involved in discussions with
representatives of the Hemosol Corporation about the possible utilization of the
BVA-100 for validation of their blood substitute products.
The Company also has initiated discussions with representatives of both Johnson
& Johnson and Amgen for sponsorship of studies utilizing blood volume
measurements combined with products which stimulate increased red cell
production. The current guidelines for the use of these products is based on
hemoglobin and hematocrit measurements. These tests, however, may be very
misleading in regard to the total amount of red cells a patient has in his/her
body. A patient who has a low blood volume that is undetected may have an
artificially elevated hematocrit. Such a patient may experience severe fatigue
and other symptoms which could be improved by appropriate treatment. These
patients have a form of "hidden anemia" and are not optimally treated. It is
only with the use of a blood volume measurement that the lower red cell volume
could be detected and treated. Blood volume measurement which could detect low
blood volume in patients with cancer, kidney disease, or heart failure could
significantly increase the justification and use of these blood stimulants.
5
The Company is currently helping develop low blood volume detection and
treatment programs in conjunction with several hospitals. Blood volume
measurement is a recognized test reimbursable by insurance companies, and
Medicare approved. Many patients undergoing elective surgery donate blood to
themselves prior to that surgery. Some patients have undetected low blood volume
and should not be donating blood. Undetected "hidden anemia" can be corrected if
diagnosed prior to surgery by the use of medications such as Epogen or Procrit.
A woman has 20% less red cell volume than a man of equal height and weight.
Women suffer a higher rate of complications and require more transfusion during
Cardiac Bypass surgery (CABG). The use of low blood volume detection and
treatment programs can result in a significant improvement in patients at the
time they are undergoing surgery. Common complications from acute low blood
volume are strokes, heart attacks, and kidney failure. Surgical patients who
experience these complications require extended hospital stays for which the
hospitals are often not reimbursed. Hospitals operate under a diagnostic
regulatory guideline (DRG) system for reimbursement. The DRG system means that a
hospital will be reimbursed according to a diagnosis, not according to the
number of days that a patient spends in the hospital. Therefore, hospitals have
a significant monetary incentive, aside from the desire to provide better
patient care, to avoid having patients undergo surgery in a blood depleted
state. A low blood volume detection and treatment program can significantly
improve the opportunity for patients to avoid complications from hypovolemia as
well as transfusions with donor blood.
The Company believes that the most significant market for its blood volume
measurement equipment consists of approximately 8,500 hospitals and Radiology
Imaging Centers in the United States. The Company believes that there is an
additional international market of 10 to 14,000 potential users of its BVA-100.
Blood volume measurement is an approved test with six separate CPT codes.
Reimbursement has been received from a number of insurance companies for
measurement of blood volume using the BVA-100. Reimbursement is particularly
important for hospitals because hospitals may receive reimbursement and income
from non-hospitalized patients who undergo blood volume measurement.
SCIENTIFIC MEDICAL SYSTEMS SUBSIDIARY (wholly owned by Daxor)
BLOOD BANKING
The Company's frozen blood bank is the only blood bank in New York that allows
people to store their own blood for up to ten years. In 1985, the Company
established the first facility in the United States for long-term autologous
(self-storage) blood banking. The blood banking industry is a group of
for-profit and not-for-profit corporations whose total revenue is estimated to
exceed six billion dollars.
Utilizing cryobiology technology, frozen blood has been shown to be capable of
being stored for up to 20 years, however the current legal limit is 10 years for
red cells. The present donor system of blood transfusions presents risks to
those individuals receiving blood. This is a risk which can be avoided by
utilizing one's previously stored blood. There are approximately 15-18 million
blood transfusions administered annually to 4 million patients.
The risks of infection and other complications are compounded by the frequent
withholding of blood from severely anemic patients by their physicians because
of the known risks of transfusion.
It is a common medical practice to replace the first three pints of lost blood
with three pints of sterile water or their equivalent. This problem has not been
brought to the public's attention, but it is widely known among physicians who
have treated patients who have lost blood. The number of patients who suffer
major complications, including sudden death from under-transfusion, is unknown
but significant. The Blood Volume Analyzer has the potential to detect such
individuals before complications from under-transfusion occurs. Physicians who
fear the complications of transfusion with potentially contaminated blood do not
have these concerns when patients use autologous blood (self-storage).
6
The Company believes that an educational process will be required to establish
the desirability of autologous blood storage and to overcome opposition to any
change in the current blood banking system from established tax-exempt
(non-profit) and profit-making entities. The Company believes that it can work
with some voluntary blood banks and hospitals to establish joint marketing of
long term frozen personal blood storage programs.
Blood Banking services are provided by a broad spectrum of organizations.
Approximately one-half of the blood supply used for transfusions is supplied by
the American Red Cross and its affiliates. The other portion is supplied by
various other tax-exempt and for-profit organizations. Some hospitals operate
their own donor services, but require the services of outside vendors such as
the Red Cross for adequate supplies of blood products. At the present time there
are no other organizations providing long-term personal frozen blood storage in
the Northeastern United States. It is the Company's intentions to form alliances
with other short-term donor blood banks to expand frozen personal blood storage
services. The Company views personal blood storage as a supplement to and not as
a competition to other existing blood donor services.
Idant (Division of Scientific Medical Systems, subsidiary of Daxor Corporation)
Semen (Sperm) Banking
In 1985, Idant was the first semen bank to institute an AIDS quarantine period
for frozen semen. Viruses such as HIV and Hepatitis B or C may be undetectable
for up to six months in infected individuals. By freezing the semen of donors
and re-testing the donor six months later, the risk of Hepatitis or AIDS can be
virtually eliminated. In 1989, New York State and a number of other states
enacted laws requiring sperm banks to freeze and quarantine sperm for a minimum
of six months. The donors are tested at the beginning and at the end of the
six-month period. By storing semen from a large cross-section of donors, Idant
is able to offer anonymous donor semen with varying physical characteristics
that meet our client's needs. The Company maintains a complete physical
description of each donor on file and matches multiple physical characteristics
and additional special characteristics sought by the family to those of the
sterile father. The Company also provides, on request, special screening for
rare hereditary recessive genetic traits. The increased likelihood of a child
who resembles his recipient father can make the child, who results from
artificial insemination, much more psychologically acceptable to the father.
Storage of Sperm for Personal Use
Idant pioneered both the technology and the commercial application of long-term
preservation of human sperm for use in artificial insemination. The division has
provided frozen semen services to physicians worldwide. Idant holds
approximately 50,000 human semen units in long-term storage at its central New
York City facility. The Company was the first semen bank in the state of New
York, out of more than 50 licensed banks, to be accredited by the American
Association of Tissue Banks. Idant provides semen storage services for clients
which remains viable for many years. Semen stored for 23 years, at minus 321
degrees, has shown minimal change. Idant has received confirmation of normal
births from semen stored as long as 16 years. The Company's facility is used by
men who, for a variety of reasons, anticipate impairment of their ability to
father children and by men who have been found to be marginally fertile. These
men may now be able to have children by use of techniques that increase their
fertility by treating their sperm to artificially inseminate their partners. The
facility is also used by men who plan to undergo sterilization by vasectomy, but
who believe that they might desire children in the future. Artificial
insemination using stored sperm is much more effective and less expensive than
present techniques of vasectomy reversal. In addition, patients with a variety
of diseases, including many types of cancer, store semen prior to undergoing
treatment by chemotherapy or radiation. By utilizing cryogenic preservation
facilities, these patients, who are frequently in their teens or twenties, will
be able to father their own children after cancer treatment, despite the high
risk of sterility and birth defects associated with treatments. The Company
receives referrals for these services from multiple sources, primarily
physicians.
7
The Company uses a customized carousel canister system in its sperm bank storage
system. This permits retrieval of specimens from lower levels without removal of
upper specimens. Only a few other sperm banks in the U.S. are known to have such
a system. Most other banks use a "rack and cane" pull-up system, which requires
removal of upper specimens from the tank to retrieve specimens at lower levels.
In such a bank, a specimen may be exposed to a temperature change of -321oF (the
temperature of the liquid nitrogen) to room temperature of 72oF more than 100
times during its storage lifetime. This will result in a gradual degradation of
the specimen. In the Idant system the specimen remains under liquid nitrogen
almost continuously while in storage. The Company is aware of only one other
semen bank, which uses the carousel system for long term storage of semen. Idant
periodically spot-checks its bank storage to test viability of selected
specimens of stored semen; results of these spot-checks have shown sperm samples
held in excess of 23 years to have almost no loss in viability or change in
condition.
Patent and Copyright Protection
The Company has received separate United States patents on its Blood Volume
Analyzer (BVA-100) and for its Volumex injection kit. These are the only US
patents ever issued for an instrument dedicated to the measurement of total
human blood volume for a specific individual. The Company received a European
patent covering 12 countries. The Company has received a Japanese patent for the
BVA-100. The Company received the first patent ever issued for an instrument in
Japan to measure human blood volume. The instrument is designed to work with an
injection kit manufactured by the Company. It is theoretically possible to use
the Blood Volume Analyzer without the kit by preparing the reagents used for the
test. However, the cost and time for such preparations would be uneconomical and
it is unlikely that a purchaser of the instrument would use it without
purchasing the reagent kit. This is the first U.S. patent ever issued for a
system, which permits a fixed quantitative amount of isotope to be injected for
diagnostic purposes. The injection system was specifically designed for use with
the BVA-100. However, it can be used for other diagnostic test purposes where a
precise complete quantitative injection of a diagnostic reagent is required. The
Company is currently investigating the filing of additional patents involving
the BVA-100 system.
Marketing
The Company is marketing its Blood Volume Analyzer either on a direct sale,
lease, or an instrument loaner basis to potential users. Primarily, users are
expected to be hospitals, surgi-centers, and imaging centers (radiology). The
Company also has been demonstrating its equipment at major trade shows such as
Nuclear Medicine, Surgical Anesthesiology, and trauma conferences. The Company
is also in the process of developing a network of dealers as well as its own
internal sales force. The Company recognized after the initial beta testing in
1999, that it was important to have the Blood Volume Analyzer at leading medical
institutions. Publications and reports from such institutions are particularly
important for acceptance by the general medical community. During the past 2
years, a number of leading facilities acquired a Blood Volume Analyzer. The US
News and World Report provides an annual ranking of 6200 Hospitals in the United
States. Johns Hopkins Medical Center, the Mayo Clinic, and The Cleveland Clinic,
ranked respectively 1,2, and 4 in the annual ranking of hospitals have a
BVA-100. The Cleveland Clinic Cardiovascular Department ranked number 1 in the
US will soon be reporting on over 1000 patients on who blood volume testing was
performed. In addition to these facilities, Vanderbilt Medical Center, and the
New York Hospital Presbyterian Medical Center ranked in the top 20 in the Annual
Survey of Hospitals also have a Blood Volume analyzer. The National Institutes
of Health, the leading US government research agency, has acquired a Blood
Volume Analyzer.
Hospitals and health facilities are exceedingly cost conscientious in regard to
acquiring additional medical technology. Blood volume measurement is an approved
and reimbursable Medicare test. The Company's marketing efforts are focused on
documenting the beneficial effects of blood volume measurement as well as
developing cost benefit analysis studies. Such studies are particularly
important to HMO's which focus on avoiding hospitalization when possible.
Congestive heart failure for example, affects over 5 million Americans and is
the number one cause of hospitalization in the US. Blood volume derangements are
an integral part of the disease process.
8
The Company believes that patients whose blood volume is known can be more
precisely and scientifically treated and have fewer hospitalizations. As these
studies become available, they will be incorporated into the marketing program
of the Company.
The Company's website (http://www.daxor.com) contains extensive detail about the
BVA-100 Blood Volume Analyzer as well as examples of actual cases (with patient
identities removed). The website permits rapid communication between marketing
personnel and potential users prior to an onsite visit.
Competition
Blood Volume Analyzer
The medical technology market is intensely competitive. However, there are no
direct competing instruments manufactured or marketed which perform rapid
semi-automated blood volume analysis, such as the BVA-100. The Company believes
that its receipt of a United States, European and Japanese patent for its Blood
Volume Analyzer provides significant protection against any future potential
competition in the blood volume analysis field. The receipt of the U.S. patent
for the injection kit system provides significant additional protection as the
Company believes that the kits will be a major source of revenue. The Company
believes that its main hindrance to market acceptability will be the need to
demonstrate that its blood volume measurement equipment is capable of producing
accurate data on a cost effective basis. Test kit costs will be modest relative
to the cost of the critical information derived from the test. The Company is
evaluating the filing of additional patents in regards to its injection
collection kit system for blood volume analysis.
Blood Banking
The Idant frozen blood bank is the only facility that provides long term
personal blood storage in the Northeastern United States.
Semen Banking
There are at least 300 sperm banks in the United States operated by either
commercial entities or by academic institutions. The Idant semen bank was the
first semen bank in the State of New York that was accredited by the American
Association of Tissue Banks. There are less than 10 semen banking organizations
in the United States that have achieved this accreditation. The Company has
developed a web site (http://www.Idant.com), which will be helpful for marketing
purposes.
Regulation
The development, testing, production and marketing of medical devices is subject
to regulation by the FDA under the Federal Food, Drug and Cosmetic Act, and may
be subject to regulation by similar agencies in various states and foreign
countries. The governing statutes and regulations generally require
manufacturers to comply with regulatory requirements designed to assure the
safety and effectiveness of medical devices. The FDA clearance for marketing of
the Blood Volume Analyzer, BVA-100, and the associated quantitative injection
kit marks one of the most important milestones in the history of Daxor. The
products manufactured by and for the Company in regard to the BVA-100 are
subject to continuing FDA regulations and inspections.
The New York State Department of Health regulates the Company's Idant semen and
blood bank within New York State. The Idant Semen Bank and Blood Bank are
divisions of Scientific Medical Systems, which is wholly owned by the Daxor
Corporation. Scientific Medical Systems has its own separate Directors. These
facilities are licensed and annually inspected by the New York State Department
of Health.
9
Employees
On March 11, 2001, the Company had 30 employees. None of the Company's employees
are covered by a collective bargaining agreement. The Company believes that its
employee relations are good.
Item 2. Properties
In February 1992, the Company signed a thirteen-year lease for a new facility at
the Empire State Building. The initial space was for 6,500 square feet, with
option provisions in the lease for up to 24,000 square feet. The company
currently occupies approximately 8,000 square feet. In 1998 the company signed a
lease for approximately 11,000 of manufacturing and office space in Rochester
New York. The lease was signed when Daxor acquired the assets of the Wellport
Corporation. Both leases contain CPI escalation clauses. The Rochester lease was
subject to renewal in October 2001. The company elected not to renew its lease
and sold some of its assets to the original principles of the Wellport
Corporation. The Company established a manufacturing facility in Oak Ridge,
Tennessee which is currently manufacturing the BVA-100 Blood Volume Analyzers.
The Company also signed a contract with an Original Equipment Manufacturer (OEM)
for manufacturing the BVA-100.
Item 3. Legal Proceedings
The Company had no litigation in 2001 and no pending lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 2001.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock is traded on the American Stock Exchange under the symbol DXR.
2000
High Low
---- ---
First Quarter 30.63 13.88
--------------------------------------------------------------------------------
Second Quarter 20.75 10.25
--------------------------------------------------------------------------------
Third Quarter 16.25 10.25
--------------------------------------------------------------------------------
Fourth Quarter 13.37 10.00
--------------------------------------------------------------------------------
2001
High Low
---- ---
First Quarter 15.00 10.06
--------------------------------------------------------------------------------
Second Quarter 18.24 12.75
--------------------------------------------------------------------------------
Third Quarter 17.50 15.00
--------------------------------------------------------------------------------
Fourth Quarter 19.74 16.30
--------------------------------------------------------------------------------
On March 11,2001, the Company had approximately 208 holders of record of the
Common Stock. The Company believes there are approximately 1800 beneficial
holders.
The Company paid a single cash dividend, $.50, on the Common Stock in 1997. Any
future dividends will be dependent upon the Company's earnings, financial
condition and other relevant factors.
10
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data with respect to
the Company and is qualified in its entirety by reference to the financial
statements and notes thereto, from which these data were derived, included
elsewhere in the report.
Selected Operations
Statement Data:
Year Ended December 31,
------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ------------ ------------ ------------ ------------
Operating revenues $ 591,692 $ 635,868 $ 500,969 $ 324,192 $ 529,737
Other revenues 166,676 109,920 74,407
Dividend income 1,860,289 1,842,583 1,856,119 1,942,759 2,138,755
Gains on sale of investments 97,719 57,399 469,595 362,487 144,681
----------- ------------ ------------ ------------ ------------
Total revenues 2,716,376 2,645,770 2,901,090 2,629,438 2,813,173
----------- ------------ ------------ ------------ ------------
Costs and expenses:
Operations of laboratories
& costs of production 814,657 1,052,000 833,751 961,031 628,729
Selling, general and
administrative 1,412,687 1,429,395 2,016,004 1,561,159 2,161,626
Interest expenses, net
of interest income 119,926 198,341 147,105 484,563 167,452
----------- ------------ ------------ ------------ ------------
Total costs and expenses 2,347,270 2,679,736 2,996,860 3,006,753 2,957,807
----------- ------------ ------------ ------------ ------------
Net loss before
income taxes 369,106 (33,966) (95,770) (377,315) (144,634)
Provision for income taxes 69,751 21,228 1,360 43,145 14,219
----------- ------------ ------------ ------------ ------------
Net income/(loss) $ 299,355 $ (55,194) $ (97,130) $ (420,460) $ (158,853)
=========== ============ ============ ============ ============
Weighted average number of
shares outstanding 4,664,909 4,675,826 4,721,492 4,762,542 4,696,876
----------- ------------ ------------ ------------ ------------
Net income per common
equivalent share $ 0.06 $ (0.01) $ (0.02) $ (0.09) $ (0.03)
=========== ============ ============ ============ ============
Selected Balance Sheet Data:
Year Ended December 31,
------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ------------ ------------ ------------ ------------
Working capital 34,979,217 38,309,247 28,869,309 34,837,930 32,501,404
Total assets 43,540,153 49,575,118 35,846,065 44,056,349 41,322,592
Total liabilities* 8,211,186 10,903,280 6,566,496 8,752,515 8,404,868
Shareholders' equity 35,328,967 38,671,838 29,279,569 35,303,834 32,917,724
Return on equity* 0.77% 0.00% 0.00% 0.00% 0.00%
* Return on equity is calculated by dividing the Company's net income for the
period by the shareholders' equity at the beginning of the period.
* Total liabilities include deferred taxes of $7,135,446 for unrealized
gains.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Idant Laboratories subsidiary contributed 54%, 59% and 99% of operating revenues
in 2001, 2000 and 1999 respectively. The Companies operations in semen banking
and blood banking (laboratories) have received limited promotion. The Company
has taken steps to increase awareness of these services. The Company in the year
2000 received its first revenue from the Blood Volume analyzer. The potential
market for the Blood Volume Analyzer is significantly larger than the Company's
current operations. The Company anticipates that proceeds from Daxor's Blood
Volume Analyzer will be the primary source of revenue in the immediate future.
The Company believes that the potential market for blood volume measurement and
analysis is between 15-20 million tests per year. Successful penetration of even
a small fraction of the market would significantly change the company's
structure. The Company intends to focus its major marketing efforts on the Blood
Volume Analyzer. The Company intends to increase its marketing efforts to add to
its operational income. Some of the steps the Company has undertaken, such as
consolidating certain manufacturing facilities at Oak Ridge, Tennessee and
simultaneously contracting with an Original Equipment Manufacturer (OEM) will
permit greater economies of scale. The Company's primary focus will be to
increase operating revenues even if this initially results in lower profits.
YEAR ENDED DECEMBER 31, 2001 AS COMPARED TO DECEMBER 31, 2000
Total revenues were $ 2,716,376 in 2001, up from $2,645,770 reported in 2000.
Dividend income earned on the Company's securities portfolio was $, 1,860,289 an
increase from the $1,842,583 reported in 2000. Gains on the sale of investments
was $97,719 in 2001 as compared to $ 57,399 in 2000. Net income before income
taxes was $ 369,106 in 2001 vs. a loss of ($33,966) in 2000. This is the first
reported profit in 6 years.
YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO DECEMBER 31, 1999
Total revenues were $2,645,770 in 2000, down from $2,901,090 reported in 1999.
Dividend income earned on the Company's securities portfolio was $ 1,842,583 a
decrease from the $1,856,119 reported in 1999. Gains on the sale of investments
was $ 57,399 in 2000 as compared to $469,595 in 1999. Net income before income
taxes was a loss of ($ 33,966) in 2000 vs. a loss of ($ 95,770) in 1999.
11
LIQUIDITY AND CAPITAL RESOURCES
The Company's management has pursued a policy of maintaining sufficient
liquidity and capital resources in order to assure continued availability of
necessary funds for the viability and projected growth of all ongoing projects.
The Company continues to maintain its diversified securities portfolio comprised
primarily of electric utility preferred and common stocks. The income derived
from these investments has helped to offset the operating and marketing expenses
of developing the Blood Volume Analyzer. The Company has followed a conservative
policy of assuring adequate liquidity so that it can expand its marketing and
research development without the sudden necessity of raising additional capital.
The securities in the company's portfolio were selected to provide stability of
both income and capital.
At December 31, 2001, the Company had $1,000,000 in short-term debt vs.
$1,775,363 in 2000. At year-end 2001, shareholders' equity was $35,328,967. At
year-end 2000, the Company had shareholders' equity of $38,671,838. At December
31, 2001 the Company's security portfolio had a market value of $42,271,902 vs.
$48,722,403 in 2000.
In 1998 The Company purchased the assets of the Wellport Manufacturing Company.
This Company had previously manufactured the injection kit. The Company now
manufactures its own injection kit. The final filling and shipping of the kit is
performed by an FDA licensed radiopharmaceutical manufacturer. In the year 2000,
the Company leased additional space in Oak Ridge, Tennessee to manufacture its
own BVA-100 Blood Volume Analyzers. The Company has a separate contract with an
Original Equipment Manufacturer to manufacture additional Blood Volume
Analyzers. The Company is considering developing additional manufacturing
facilities for its kit system in Oak Ridge and transferred its Rochester
operations to Oak Ridge. The Company is reviewing options to purchase some of
the original equipment manufacturers who provide various parts of the BVA-100
Blood Volume Analyzer system. The Company is also involved in discussions with
independent medical distributors to market the BVA-100. The Company offers to
lease or rent, as well as sell its Blood Volume Analyzer (BVA-100) as part of an
overall marketing plan. The Company will also loan an instrument for evaluation
purposes.
The Company is also developing with one of its clients, a blood volume
laboratory staffing program. Under such program, the Company may provide
management services as well as equipment services. With respect to blood
banking, the Company believes that it may be a valuable partner to companies
which produce blood substitutes as well as companies that produce blood
stimulants such as Epoetin Alfa. Blood volume measurement would enhance the
validation of these products. The Company will actively look to form such
marketing alliances.
Year-end 2001 finds the Company in a satisfactory financial position with
adequate funds available for its immediate anticipated needs.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
DAXOR CORPORATION
by: /s/ Joseph Feldschuh
Joseph Feldschuh, M.D.
President and Chief
Executive Officer
Chairman of the Board
Dated: March 22, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Joseph Feldschuh President and Director March 22, 2001
------------------------ (Principal Executive Officer)
Joseph Feldschuh, M.D.
/s/ Gary Fischman Vice President March 22, 2001
------------------------
Gary Fischman
/s/ Octavia Atanasiu Corporate Treasurer March 22, 2001
------------------------ Accounting Supervisor
Octavia Atanasiu (Principal Financial Officer)
/s/ Virginia Fitzpatrick Corporate Secretary March 22, 2001
------------------------
Virginia Fitzpatrick
/s/ Stephen M. Moss Director March 22, 2001
------------------------
Stephen M. Moss, PhD
/s/ Bruce Hack Director March 22, 2001
------------------------
Bruce Hack
/s/ James Lombard Director March 22, 2001
------------------------
James Lombard
/s/ Martin Wolpoff Director March 22, 2001
------------------------
Martin Wolpoff
Board of Directors:
Name Title
Dr. Joseph Feldschuh Chairman, President, & CEO
Stephen Moss Director
James Lombard Director
Martin Wolpoff Director
Bruce Hack Director
13
DAXOR CORPORATION
Item 14(a) (1). Index to Financial Statements
The following statements and schedules of Daxor Corporation are submitted
herewith:
Page
Report of Independent Accountants F-1
Consolidated Financial Statements as at December 31, 2001
and 2000 and for the three years ended December 31, 2001
Balance Sheets F-2
Statements of Income F-3
Statements of Shareholders' Equity F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5
Schedule I - Marketable Securities - Other Investments - Year ended
December 31, 2001 F-6
Schedule IX - Short-term Borrowings - Years ended December 31, 2001
2000, and 1999 F-6
Schedule X - Supplementary Income Statement Information -
Years ended December 31, 2001, 2000, and 1999 F-7
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or the required information is set forth
in the financial statements filed herewith, including notes thereto, and
therefore have been omitted.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of Daxor Corporation:
We have audited the accompanying consolidated balance sheets of Daxor
Corporation as at December 31, 2001 and 2000, the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2001. Our audits also included the
financial statement schedules listed in the Index at Item F-9.
These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Daxor Corporation as at December 31, 2001
and 2000, and the results of their operations and its cash flows for each of the
three years in the period ended December 31, 2001 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
herein.
Frederick A. Kaden & Co.
Brentwood, New York
March 22, 2002
F-1
DAXOR CORPORATION
FINANCIAL STATEMENTS
================================================================================
DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2001 2000
---- ----
-------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 431,949 $ 18,439
Marketable Securities at Fair Value
December 31,2001 and December 31,
2000. (Notes 1 and 2) 42,271,902 48,722,403
Accounts receivable 174,242 107,927
Other current assets 312,310 363,758
------------ ------------
Total Current Assets 43,190,403 49,212,527
EQUIPMENT AND IMPROVEMENTS
Storage tanks 125,815 125,815
Leasehold improvements, furniture
and equipment 837,807 836,813
Laboratory equipment 288,087 278,087
------------ ------------
1,251,709 1,240,715
Less: Accumulated depreciation and amortization 975,593 919,414
------------ ------------
Net equipment and improvements 276,116 321,301
Other Assets 73,634 41,290
Total Assets $ 43,540,153 $ 49,575,118
------------ ------------
-------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 52,855 $ 42,431
Loans payable (Notes 1 and 2) 1,000,000 1,775,363
Other Liabilities 22,885 73,741
Deferred Taxes (Note 1) 7,135,446 9,011,745
------------ ------------
Total Liabilities 8,211,186 10,903,280
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 10,000,000 shares: issued and
outstanding shares 4,664,909 December 31,
2001 and 4,664,909 December 31, 2000 53,097 53,097
Additional Paid in capital 9,798,232 9,798,232
Net unrealized holding gains
on available-for-sale securities (Note 1) 13,851,161 17,493,387
Retained earnings 16,440,007 16,140,652
Treasury stock (4,813,530) (4,813,530)
------------ ------------
Total Shareholders' Equity 35,328,967 38,671,838
Total Liabilities and Shareholders' Equity $ 43,540,153 $ 49,575,118
------------ ------------
See accompanying notes to financial statements
F-2
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
---------------------------------------
2001 2000 1999
---------- ----------- -----------
Revenues:
------------------------------------------------------------------------------------------
Operating revenues $ 591,692 $ 635,868 $ 500,969
Other revenues 166,676 109,920 74,407
Dividend income 1,860,289 1,842,583 1,856,119
Gains on sale of securities 97,719 57,399 469,595
---------- ----------- -----------
Total Revenues 2,716,376 2,645,770 2,901,090
---------- ----------- -----------
------------------------------------------------------------------------------------------
Costs and expenses:
------------------------------------------------------------------------------------------
Operations of Laboratories & Costs of Production 814,657 1,052,000 833,751
Selling, General, and Administrative 1,412,687 1,429,395 2,016,004
Interest expense, net of interest income 119,926 198,341 147,105
---------- ----------- -----------
Total costs and expenses 2,347,270 2,679,736 2,996,860
---------- ----------- -----------
Net Income/( Loss) before Income Taxes 369,106 (33,966) (95,770)
Provision for income taxes (Note 9) 69,751 21,228 1,360
---------- ----------- -----------
Net Loss $ 299,355 $ (55,194) $ (97,130)
========== =========== ===========
Weighted Average Number of Shares Outstanding 4,664,909 4,675,826 4,721,492
========== =========== ===========
Net Income per Common Equivalent Share $ 0.06 $ (0.01) $ (0.02)
========== =========== ===========
See accompanying notes to financial statements
================================================================================
DAXOR CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
Three Years Ended December 31, 2001
-----------------------------------------------------------------
Common stock Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock
------------ ------- ---------- ----------- ----------
--------------------------------------------------------------------------------------------------
Balance at January 1,1999 4,752,709 53,097 9,798,232 16,292,976 (3,658,036)
--------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31,1999 (97,130)
Purchase of Treasury Stock (59,800) (799,779)
--------------------------------------------------------------------------------------------------
Balance December 31,1999 4,692,909 53,097 9,798,232 16,195,846 (4,457,815)
--------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31,2000 (55,194)
Purchase of Treasury Stock (28,000) (355,715)
--------------------------------------------------------------------------------------------------
Balance December 31,2000 4,664,909 53,097 9,798,232 16,140,652 4,813,530
--------------------------------------------------------------------------------------------------
Net income for the year ended
December 31,2001 299,355
--------------------------------------------------------------------------------------------------
Balance December 31,2001 4,664,909 $ 53,097 $9,798,232 $16,440,007 $ 4,813,530
==================================================================================================
See accompanying notes to financial statements
F-3
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------------------
2001 2000 1999
--------- ----------- -----------
Cash flows from operating activities:
Net income or (loss) $ 299,355 $ (55,194) $ (97,130)
--------- ----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation & Amortization 57,735 58,258 72,395
(Gain) loss on sale of investments (97,719) (57,399) (469,595)
(Gain) loss on sale of equipment (4,554)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (66,315) (101,182) 144,489
(Increase) decrease in accounts receivable-
Related Parties -- -- 75,979
(Increase) decrease in other current assets 51,448 130,233 (232,394)
(Increase) decrease in tax refunds receivable -- -- 5,881
(Increase) decrease in other assets
net of amortization (33,900) 2,700 (6,019)
Increase (decrease) in accounts payable,accrued
expenses and other liabilities net of "short sales" 11,024 (83,910) 39,747
Total adjustments (77,727) (51,300) (374,071)
--------- ----------- -----------
Net cash provided by operating activities 221,628 (106,494) (471,201)
--------- ----------- -----------
Csah flows from investing activities:
Payment for purchase of equipment and
improvements (10,994) (13,289) (55,114)
Proceeds from sale of equipment -- -- 48,936
Net cash provided or (used) in purchase
and sale of investments 962,111 1,027,001 843,604
Net proceeds (repayments) of loans from
brokers used to purchase investments (775,363) (668,431) 393,245
Proceeds from "short sales" not closed 16,128 67,584 28,581
--------- ----------- -----------
Net cash provided by/(used in) investing activities 191,882 412,865 1,259,252
--------- ----------- -----------
Cash flows from financing activities
Payment for purchase of treasury stock -- (355,715) (799,779)
--------- ----------- -----------
Net cash used in financing activities -- (355,715) (799,779)
--------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 413,510 (49,344) (11,728)
Cash and cash equivalents at beginning of year 18,439 67,783 79,511
--------- ----------- -----------
Cash and cash equivalents at end of year $ 431,949 $ 18,439 $ 67,783
========= =========== ===========
See accompanying notes to financial statements
F-4
DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements as at December 31, 2001
and 2000 and for the three years ended December 31, 2001 have been prepared in
conformity with principles of accounting applicable to a going concern. Daxor
Corporation operates in the medical services and technology industry.
The consolidated financial statements include the accounts of the Company
and its subsidiary. All significant inter-company transactions and balances have
been eliminated in consolidation.
(1) MARKETABLE SECURITIES
Upon adoption of FASB No. 115, management has determined that the company's
portfolio is best characterized as "Available-For-Sale". This has resulted in
the balance sheet carrying value of the company's marketable securities
investments, as of December 31, 2001 and December 31, 2000 being increased
approximately 98.60% and 119.30% respectively over its historical cost. A
corresponding increase in shareholders' equity has been effectuated. In
accordance with the provisions of FASB No. 115, the adjustment in shareholders'
equity to reflect the company's unrealized gains has been made net of the tax
effect had these gains been realized.
The following tables summarize the company's investments as of:
December 31, 2001
-----------------
Unrealized Unrealized
holding holding
Type of security Cost Fair Value gains losses
---------------- ----------- ----------- ----------- -----------
Equity $21,270,436 $42,271,002 $21,182,144 $ 181,578
Debt 14,859 900 0 13,959
----------- ----------- ----------- -----------
Total $21,285,295 $42,271,902 $21,182,144 $ 195,537
=========== =========== =========== ===========
December 31, 2000
-----------------
Unrealized Unrealized
holding holding
Type of security Cost Fair Value gains losses
---------------- ----------- ----------- ----------- -----------
Equity $22,202,412 $48,721,503 $27,425,484 $ 906,393
Debt 14,859 900 0 13,959
----------- ----------- ----------- -----------
Total $22,217,271 $48,722,403 $27,425,484 $ 920,352
=========== =========== =========== ===========
At December 31, 2001, the securities held by the Company had a market value
of $42,271,902 and a cost basis of $21,285,295 resulting in a net unrealized
gain of $20,986,607 or 98.60% of cost.
At December 31, 2000, the securities held by the Company had a market value
of $48,722,403 and a cost basis of $22,217,271 resulting in a net unrealized
gain of $26,505,132 or 119.30% of cost.
F-5
At December 31, 2001 and December 31, 2000, marketable securities,
primarily consisting of preferred and common stocks of utility companies, are
valued at fair value.
(2) Loans Payable
As at December 31, 2001 and December 31, 2000, the Company had loans
outstanding aggregating $1,000,000 and $1,000,000 borrowed on a short term basis
from a bank, which are secured by certain marketable securities of the Company.
The loans bear interest at approximately 5.7%.
Short term margin debt due to brokers, secured by the Companies marketable
securities, was $775,363 at December 31,2000. There was zero margin debt at
December 31,2001.
(3) Accounts receivable
Accounts receivable are deemed to be fully collectible.
(4) Equipment and Improvements
Depreciation of equipment and improvements is taken using the straight line
method. For 2001, 2000 and 1999 the charges to income for depreciation using
this method were $56,179, $58,258 and $72,395 respectively.
The cost of maintenance and repairs is charged to expense as incurred. The
cost of betterments and additions are capitalized and depreciated over the life
of the asset. The cost of assets disposed of or determined to be non-revenue
producing, together with the related accumulated depreciation applicable
thereto, are eliminated from the accounts, and any gain or loss is recognized.
(5) Other Liabilities
At December 31, 2001 and December 31, 2000, the Company also maintained a
short position in certain marketable securities. These positions were sold for
$16,128 at December 31, 2001, and $67,584 at December 31, 2000, and had
respective market values of $14,337 and $43,287 resulting in unrealized gains of
$1,791 at December 31, 2001 and $24,297 at December 31, 2000.
(6) Commitments and Contingencies
(A) Operating Leases
Future minimum rental payments under non-cancelable operating lease are as
follows:
2002 $184,482
2003 $184,482
2004 $184,482
2005 $184,482
Rent expense for all non-cancelable operating leases was $386,248,
$406,768, and $378,372 for the years ended December 31, 2001, 2000 and 1999
respectively.
B) Contingent Liabilities
The Company is not aware of any contingent liabilities at year end.
(7) Research and Development Expenses
Research and development expenses were $325,745, $15,000, and $15,000 for
2001, 2000, and 1999 respectively. All research and development costs are
expensed in the year they occur.
(8) Interest Expense and Income
Interest expense was $200,741, $200,741, and $150,617 and interest income
was $2,400, $2,000, and $3,512 in 2001, 2000 and 1999 respectively.
F-5
(9) Income Taxes
The following is a reconciliation of the federal statutory tax rate of 35%
for 2001,2000 and 1999, with the provision for income taxes:
2001 2000 1999
---------- ---------- ----------
Statutory tax rate 107,774 0 0
TAX Benefit of NOL -107,774
State and city taxes 21,228 21,228 1,360
---------- ---------- ----------
Provision for income taxes 21,228 21,228 1,360
---------- ---------- ----------
Effective federal tax rate 0% 0% 0%
---------- ---------- ----------
(10) Subsidiaries
In 1988, Daxor Corporation formed a wholly owned subsidiary, Scientific
Medical Systems, Inc., which has taken over the operations of the sperm bank,
blood bank and laboratory. The results of operations have been consolidated in
these financial statements.
F-5
SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
The following tables summarize the company's investments as of:
December 31, 2001
Type of Unrealized Unrealized
Security Cost Fair Value Holding gains holding losses
---------------- ----------- ----------- ------------- --------------
Equity $21,270,436 $42,271,002 $21,182,144 $ 181,578
Debt 14,859 900 0 13,959
----------- ----------- ----------- -----------
Total $21,285,295 $42,271,902 $21,182,144 $ 195,537
=========== =========== =========== ===========
SCHEDULE IX
SHORT-TERM BORROWINGS
Years Ended December 31, 2001, 2000, 1999
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Category of aggregate Balance at the end Weighted average Maximum amount Average amount Weighted average
short-term borrowings of period interest rate at outstanding during outstanding during interest rates
end of the period this period the period during the period
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
2001
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 1,000,000 5.7% 1,000,000 1,000,000 6.95%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 0 6.12% 1,054,607 678,343 6.01%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 1,000,000 5.91% 2,054,607 1,678,343 6.54%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
2000
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 1,000,000 8.16% 1,000,000 1,000,000 8.05%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 775,363 8.12% 1,443,794 1,089,312 7.71%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 1,775,000 8.14% 2,443,794 2,089,312 7.93%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
1999
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 1,000,000 7.65% 1,000,000 1,000,000 7.65%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 1,443,794 7.47% 1,443,794 1,312,442 7.43%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 2,443,794 7.54% 2,443,794 2,312,442 7.51%
----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
The average borrowings were determined on the basis of the amounts outstanding
at each month-end. The weighted interest rate during the year was computed by
dividing actual interest expense in each year by average short-term borrowings
in such year.
F-6
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
-----------------------------------------------------------------------------------------------------------------
COLUMN A COLUMB B
-----------------------------------------------------------------------------------------------------------------
Item Charged to costs and expenses
Year ended December 31,
2001 2000 1999
---- ---- ----
Maintenance and repairs $ * $ * $ *
Depreciation and amortization
of intangible assets pre-operating
costs and similar deferrals 57,735 58,258 72,395
Taxes, other than payroll and
income taxes * * *
Royalties --- --- ---
Advertising costs * * *
-----------------------------------------------------------------------------------------------------------------
* less than 1% of total revenues for the year.
-----------------------------------------------------------------------------------------------------------------
F-7