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, 1995 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 at March 28, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $ 12,340,640. 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 $ 8.00.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of March 28, 1996: 4,722,709 shares.
Documents incorporated by reference: The information required by Part III is
incorporated by reference from the proxy statement for the 1995 Annual Meeting
of Shareholders.
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PART I.
Item 1. Business
The Daxor Corporation (the "Company") was formed in 1971, to develop
cryopreservation technology for the freezing techniques of human semen. The
Company's Idant Laboratory division ("Idant"), was the first human semen bank
developed in the United States for general public use. In 1985, Idant developed
the first autologous blood bank in the United States where individuals could
store their own blood. In 1985, the Company also initiated the development of
an instrument for the measurement of the total amount of blood in the human
body, the Blood Volume Analyzer (BVA-100).
The Company has completed successful testing the BVA-100. The instrument
utilizes an isotope (Albumin I-131) which is injected into a patient from whom
blood samples are drawn at timed intervals. The instrument provides an accurate
and rapid measurement of the total volume of blood in the human body. The
technique currently employed takes 4-8 hours and is rarely performed in most
hospitals. The BVA-100 will provide preliminary results within 20 minutes and
complete results within 35 minutes. The instrument will also calculate the
normal blood volume of a specific individual. It will, for example, provide a
very accurate measurement of the amount of blood lost by a patient during
surgery. Current methods of estimating blood loss are frequently inaccurate,
and many have errors as large as 35%. At the present time, there is no similar
instrument on the market. The instrument will require the use of a separate kit
which will require FDA approval. The isotope in the kit has previously been
specifically approved by the FDA for the measurement of blood volume. On March
20, 1996, the Company received approval for its U.S. patent application for the
injection kit. The patent is for an injection syringe which will be used to
provide a fixed quantitative amount of isotope for use with the BVA-100. To
date over 300 patients have had their blood volumes measured utilizing these
measurement techniques. The repeatability of the test is estimated to be + 2%.
In 1991, the Company received a U.S. patent for the Blood Volume Analyzer itself
and is the first U.S. patent issued for an instrument which successfully
measures the total amount of blood in the human body. In November 1992, the
Company received a European patent for its Blood Volume Analyzer covering 12
countries. On March 26, 1996, the Company received a Japanese patent for its
BVA-100. This is the first patent ever issued in Japan to measure human blood
volume.
The introduction and approval of the Company's Blood Volume Analyzer has been
delayed by the lack of Albumin I-131. Squibb Pharmaceuticals, who was the only
U.S. F.D.A.-approved manufacturer who was producing the isotope Albumin I-131,
transferred its license to Iso-Tex Diagnostics. Iso-Tex has experienced
multiple delays in the approval process of the isotope. In December 1995, a
meeting was held in Washington, D.C. with representatives of the F.D.A., Iso-Tex
and Daxor to facilitate the approval process. Iso-Tex was given specific
guidelines for completion of the approval process and Daxor believes that the
approval process will occur within 1996.
In 1985, the Company established the first facility in the United States for
long-term autologous (self-storage) blood banking. The Company began exploring
the possibility of long-term storage of blood utilizing freezing technology in
1974. However, market surveys indicated that the public underappreciated the
risk free alternative of autologous blood banking because of a misperception
that the traditional blood banking system was safe despite evidence that there
were many risks from blood transfusions. 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. These groups have a large financial stake in the
continuity of the current system and have opposed the creation of autologous
frozen blood banks.
Utilizing cryobiology technology, frozen blood has been shown to be capable of
being stored for up to 20 years. The present donor systems of blood
transfusions presents risks to those individuals receiving blood. A risk which
can be avoided by utilizing one's previously stored blood. There are
approximately 12 - 15 million blood transfusions administered annually. One
third of the blood utilized in New York City is imported from sources outside of
NYS and overseas because of severe shortages. At the present time, an
individual has a 1-in-50 chance of contracting hepatitis from transfused blood
and a much smaller but still real risk of contracting AIDS. Autologous storage
of blood protects an individual against these and other multiple problems
associated with transfusions. The concept that the "safest blood is one's own"
is specifically endorsed by the American Medical Association, a committee of the
National Institute of Health, and transfusion committees of multiple hospitals.
Daxor's Idant division was formed in 1971, and established the world's first
human sperm bank for storage of human semen and donor semen for artificial
insemination. Idant has provided frozen semen to physicians for use in
artificial insemination. The semen was obtained from third-party donors who
were anonymous to the recipients. The donors were recruited and screened by
Idant with their physical characteristics matched to the extent practicable to
the needs of the recipient. Idant also offered its "sperm bank" storage
facilities for use by men undergoing vasectomies and patients undergoing
chemotherapy and radiation treatment, who are in danger of becoming sterile.
This division also has provided fertility testing services. The Company
maintains the largest human sperm bank in the U.S.
Since August 21, 1995, the Idant semen bank and blood bank have been operating
on a partial storage basis only. On August 21, Daxor's New York State licenses
were revoked without a hearing. Some of these licenses date back 25 years and
the Company has responded with multiple lawsuits, which are more completely
described in the Legal Proceedings section of this report. (Item 3) The
Company has been able to ship previously stored client depositor semen
specimens, but has not been able to process and/or store new specimens.
BLOOD BANKING
In December 1985, Daxor received the first FDA registration in the U.S. for
long-term frozen autologous blood banking. The current donor system of blood
banking exposes a transfusion recipient to the dangers of infections such as
AIDS and hepatitis. There are over 50,000 cases of hepatitis from transfusions
annually despite testing, of which a significant number develop into major
illnesses. The current system of AIDS screening does not completely eliminate
AIDS carriers as donor; it only reduces the risk of an AIDS carrier donating
blood. Other viral diseases, such as the cytomegalo virus, are also transmitted
via blood transfusion and are not detected by current screening methods. Blood
matching of minor subtypes is never done and an individual has less than one
chance in 100,000 of receiving a perfect match from an unrelated stranger.
Approximately 5% of all transfusions result in transfusion reactions. Another
major problem is the fact that diseases such as hepatitis and AIDS may be
undetectable for six months or longer in healthy appearing, infected carriers.
In March 1996, the NY Times reported a case of a blood donor infected with
AIDS who donated 33 times before his condition was ever detected. Daxor
introduced the quarantine the concept, donated blood and sperm specimens are
frozen and stored for a minimum of six months and the donor is then retested for
infectious diseases such as AIDS and hepatitis before his donation can be
released for use. In 1987, Daxor signed the first U.S. corporate cantract with
Warner Communications to develop a pool of frozen autologous blood and frozen
quarantined donor blood. Frozen quarantined donor blood, is blood from donors
which has been stored for a minimum of 6 months and the donors then retested for
AIDS and hepatitis. Infected carriers of AIDS and hepatitis may be undetectable
by standard antibody tests for periods of up to six months (and on rare
occasions even longer). Quarantined frozen blood provides a much safer form of
donated blood than refrigerated blood in which the donor is tested once and the
blood must be used within 42 days or less. The utilization of frozen
quarantined blood also permits transfusion of multiple units of blood from a
single donor. This significantly diminishes the risk as compared to when the
same quantity is obtained from multiple donors.
Compounding the risks of infection and other complications,is the frequent
withholding of blood from severly anemic patients by their physicians because of
these 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 the
equivalent. This problem has not been brought to public attention, but 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.
These complications and problems can be avoided by autologous storage
(self-storage) of blood by individuals. The Company believes that a
considerable 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 who have great financial stakes in insuring the
continuity of the present donor system. The Company views its entry into this
field as a major long-term commitment. The current blood banking system is a
monopoly, or semi-monopoly, in most areas and is controlled by tax-exempt
organiztions. One such non-taxpayer has "excess revenues" (i.e. profits) in
excess of 50 million dollars in a recent year. These organizations, while
maintaining a public posture of altruism, have been very aggressive in trying to
maintain a monopoly on the supply of blood resources and the income derived from
these blood banking activities. In N.Y.S., the prime supplier of blood in the
lower NYS, Long Island and NYC region is the New York Blood Center. In the
upper region of NYS, the Red Cross is the prime supplier of blood. Some
individual hospitals have small in-house blood banks which provide a small
portion of the hosptials transfusion needs. All hospitals within the region are
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dependent for their blood banking needs from the regional blood center structure
in their geographic area.
Under the present system, it is a common practice to fractionate or separate
whole blood into red blood cells, platelets, and plasma. Plasma contains the
clotting elements of blood plus antibodies. Sometimes patients continue to
bleed because they are transfused with red cells and salt water and no clotting
factors. This can cause a patient to require even more transfusions than if
they had been initially transfused with whole blood. Anyone who bleeds loses
all of these components simultaneously. However, they regularly receive only
partial replcement. As a result, when a patient receives complete replacement
of one pint of blood, for example, he could receive red cells from one donor,
platelets from another donor and plasma from yet another donor. A patient who
requires complete replacemnt of 3 units of whole blood could be exposed to 9
different donors, each of whom is capable of transmitting an infection such as
AIDS or hepatitis. The Red Cross and others have claimed that directed donation
(i.e. a donation from a known source) is not safer than blood from an unknown
source. Under the frozen quarantined blood banking system that Idant developed,
directed donations will be far safer - in the example cited, the risk of
infection drops from approximately 4% to less than 1/2%. This is because
instead of having 9 donors the recipient would receive 3 units of whole blood
from one donor. In addition, the risk of sensitization which increases with
each donor would also be reduced by the same amount when blood from a single
donor is used. Also, the use of doubly tested quarantined donor blood
significantly reduces infection risks as compared to single tested donor blood.
Another major problem addressed by Daxor's blood program is the severe shortage
of blood. At the present time, 1/3 of the blood and blood products used in the
New York region are imported from Europe, and out of state sources. France,
Germany and Japan have been rocked by blood banking scandals in which AIDS
contaminated blood was transfused despite knowledge by officials that the blood
was dangerous. In France, senior blood banking officials have been sentenced to
jail terms. The shortage of blood compounded by the risk from blood trasfusion
have made it a common practice to replenish individuals who have lost as much as
3 pints of blood with only salt water. In some cases, individuals who have lost
as much as 4 pints of blood are replaced only by salt water. The human body,
depending on its size, holds only 7 to 12 pints of blood. The practice of
replacing blood with salt water, widely known to physicians, is almost unknown
to the public at large. This practice of replacing blood with salt water leads
to a significant number of unreported heart attacks, strokes, and sudden deaths
every year. Some patients who receive salt water instead of blood develop a
condition called pulmonary edema, where their lungs fill up with water.
Patients who develop these complications rarely have their complications
attributed to the severe under transfusion they have received. In the case of
sudden death, the autopsy will reveal the heart attack or storke which will
usually be listed as the cause of death instead of the real cause, which is
inadequate replacement of blood. Blood volume depletion is very difficult to
prove as a cause of death. In animals bled experimentally, death comes rapidly
and with almost no warning as the brain is deprived of blood, with sudden loss
of consiousness followed by sudden death. The practice of keeping patients,
including elderly patients, severely blood-depleted, would end if a safe and
adequate source of blood were available.
The Company plans to develop a nationwide network of autologous blood banks.
This would possibly eliminate the shortage of blood, and the blood would be
virtually AIDS-free and would be markedly less likely to transmit infection than
the current system of donor blood transfusion. The special features of the
Idant blood bank would include quarantined doubly tested frozen donor blood.
The major Daxor advance is the provision of multiple units of donor blood from a
single donor. These concepts could provide significant competition for the
current blood banking system which has serious risks because diseases such as
AIDS and hepatitis may be undetectable for periods as long as six months from
infected yndividuals, and occasionally even longer. The Company's concept faces
fierce opposition from tax-exempt blood banks which have often held a geographic
monopoly postition. (see RICO/Anti trust lawsuit)
In the late 1980's, the use of autologous blood was encouraged by increaing
numbers of hospitals. These programs, however, are short-term programs in which
liquid blood (unfrozen) is kept up to 42 days prior to use. In these programs
individuals who face elective surgery are encouraged to store between 2 - 5
pints of blood in a 5-week period prior to surgery. Some patients are even bled
72 hours prior to surgery. This practice usually results in a patients being
operated upon in an anemic (blood-thinned) or blood-depleted state because
almost no one is able to replace blood at the rate at which it has been removed.
It is gernerally acknowledged that the more blood-depleted an individual is, the
greater the risk of a compliction. The decision to operate on individuals in a
blood-depleted state is a compromise between increasing the risk of surgery in a
blood-depleted stated and the risks from donor transfusions.
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It is significant that the FDA guidelines for donors will not permit blood
donations more frequently than once in 8 weeks, except in certain circumstances.
These new practices of self donation violate these medical guidelines and may
place the patients at greater risk than if non-autologous donors had been used.
Under Daxor's program these risks are eliminated by obtaining blood donations
which are frozen over an extended period of time, instead of days and weeks
just prior to surgery. Therefore, the patient does not become depleted.
Patients undergoing surgery who had stored blood under the Company's program
would not begin their surgery in a blood-depleted state as contrasted to
patients who had their blood taken just prior to surgery.
In 1991, the Company's president, Dr. Joseph Feldschuh, authored a book
entitiled "Safe Blood" which was published by the Free Press division of
Macmillan Publishers. This book provides a detailed exposition of the problems
and risks of the current blood banking system as well as an explanation of the
mechanics of a family frozen blood banking program. The book details the use of
quarantined donor blood and the advantages of obtaining multiple units of blood
from a single donor. The book was specifically written to counter the false and
misleading information which is provided to the public by the so-called
'non-profit' blood collecting agencies. This practice of splitting blood into
multiple components further increases the risk of multiple exposure for a
specific quantity of blood.
The current blood supply is and has been dangerous because there have been no
competitive alternatives to the current monopoly structure. A blood transfusion
is the most intimate contact one can have with another human being. It is more
intimate than sexual contact, yet the public has almost no control or choice
from whom transfusions are obtained. At the present time only a few states in
the United States have so called "Safe Blood" acts. These legislative changes
provide individuals such basic rights as the right to have access to ones own
stored blood as well as the right to choose a donor.
In 1993 and 1995, a bill had been introduced in the New York State legislature
to guarantee these rights. It was also lobbied against by New York State blood
bank regulators. It was blocked by intensive lobbying efforts of the blood
banking industry's representatives. This bill, called the Vellela-Weisenberg-
Polonetsky Safe Blood Act, will be reintroduced. Presently, in New York, a
hospital may take a patient's blood prior to surgery and give that blood to
another patient without the first patients' permission even if that patient is
left blood depleted. Blood banks may skim off the plasma without a patient's
knowledge or permission and transfuse only the red cells. Blood banking
monopolies are also protected in many states from liabilities by special blood
shield laws which often protect them from lawsuits of negligence and their false
claims about the safety of their blood supply. The proposed New York State Safe
Blood Act, if enacted, will mandate informed consent disclosure of the risks of
transfusion and the alternatives available to a transfusion candidate.
Daxor family blood banking programs provide for donor exposure reduction by the
following steps: 1) Storage of an indivieual's whole blood (i.e. both the red
blood cells and the plasma). 2) Donor Reduction Program. Utilization of
multiple units of frozen blood from a single donor where additional blood is
necessary. For example, a person who has stored 2 units of whole blood
comprising of 2 units of red ceells and 2 units of plasma could provide that
blood to another individual who would be exposed to only a single donor for the
quantity of blood which would currently be directed from four separate donors.
3) Utilization of Quarantined Blood. In 1985, Daxor's Idant Laboratory division
was the first sperm bank in the United Staes to initiate the concept of
quarantined sperm to reduce the risk of AIDS and hepatitis. The public is
unaware that the current tests for the AIDS virus does not actually test for the
virus, but is only a test for the antibodies to the virus which usually take
months to appear. A blood or sperm donor recently infected with AIDS therefore
will test negative on the standard test, but will be capable of transmitting
AIDS to the recipient of the donation. A blood transfusion recipient
receiving blood product from someone infected with the AIDS virus has almost a
100% guarantee of becoming infected. Some of these people, in turn, will
infect other members of their family with the AIDS virus. Elizabeth Glazer is
an example of a widely publicized case of a woman who received a single AIDS
infected unit of blood and then, in turn, infected two of her children. There
have been many cases where an individual infected from a transfusion infects
other family members.
To prevent this problem, in 1985, Dxor's Idant laboratory division started the
first quarantine in the United States (and possibly the world) for sperm donors
whereby a sperm donor's semen was stored for a minimum of six months and the
donor retested a second time. Most AIDS infected individuals will develop
antibodies within 6 months so that a second negative test would indicate that
the six month old semen was AIDS free. This concept was adopted by the American
Association of Tissue Banks in 1986, and is now the law in states
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which regulate sperm banking. In 1987, Idant adopted a similar concept for its
blood bank, encouraging individuals to be retested so that their blood would
meet the criteria for "quarantined blood". Daxor was the first blood bank in
the United States to offer this service. It is the only blood bank in the
United States providing this type of blood. At the present time, there is a 95%
chance that an individual will require a transfusion within one's lifetime. The
utilization of autologous blood storage combined with a quarantined donor blood
program, could reduce the risk of donor exposure by over 90%.
There is an important parallel between sperm banking and blood banking. In the
1970's, Idant was alone in advocating frozen semen in the use in artificial
insemination. It was not until the 1980's, when the safety and advantages of
sperm banks (whereby donors could be properly tested before their semen was
released) was appreciated by the general medical community. Today, frozen semen
is the standard in the land and the use of untested fresh donor semen is illegal
in many states.
To date, privately held blood banking companies focusing primarily on storage
facilities have not been profitable. The many factors behind the slow
acceptance of the concept have been: 1) Monopoly practices of tax-exempt blood
suppliers. 2) The use of exclusive supply contracts of anti trust laws. 3)
Relationships between regulators and blood bank monopolies enforcement
activities of some regulatory agencies which provide extremely difficult entry
barriers to innovators wishing to provide competing or alternative services.
Some services such as frozen blood banking which Daxor provides. The passage of
"Safe Blood" acts by various states is a major step towards protecting the
rights of the public. We believe a federal law will provide uniform protection
to patients throughout the United States.
It is a goal of the Company to develop a network of Family Frozen Blood Banks
which will also have sperm banking capabilities throughout the United States.
The Company believes that as the public becomes increasingly aware of the
deceptions about the safety and inadequacy of current blood transfusion
practices, that individuals will seek to provide this essential form of
insurance for themselves.
In March 1995, Daxor assisted in the development of U.S. Cryobanks of Florida
which provides both semen and blood banking. Daxor has a 29% interest in U.S.
Cryobanks of Florida, which is under independent management.
Measurement of Human Blood Volume
The diagnostic data to be provided by the Company's blood volume measurement
equipment would be usable by physicians in a variety of medical fields,
including critical care, cardiology, peediatrics and surgery, to identify and
quantify the amount of blood loss the patient has suffered, to determine the
percentage of red blood cells or hemoglobin the patient has lost, and to help to
determine the need for continuing treatment. An estimated 12 million blood
transfusions per year are performed in U.S. hospitals. The Company believes
that, if its blood volume measurement equipment were available in a 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. Blood
volume measurement would also provide a valuable diagnostic tool in treating
certain types of heart and kidney disease. At the present time multiple medical
conditions are associated with inadequate blood volume and occasionally excess
blood volume.
The ability to accurtately measure the quantitiy or volume of blood in an
individual would be expected to be particularly useful in surgical situations.
The standard methods of estimating the amount of blood an individual has are
called the hematocrit or hemoglobin. These tests actually measure the
thickness of or quantity of red blood cells in an individual's blood rather than
the blood volume itself. Blood is composed of cells, primarily red cells for
carrying oxygen, white cells for fighting infections, and platelets, small cells
used for clotting purposes. The remainder of the blood is called the plasma,
which is primarily water in which are suspended the cells with various clotting
factors and special blood proteins. When an individual bleeds, the body will
attempt to maintain the same total blood volume by the transfer of water from
other parts of the body into the circulatory system. This process causes a
thinning of the blood called anemia. The thinning process may take hours or
many days to occur, or may never occur completely. When the blood thinning
process has not occurred completely, the hematocrit will overestimate the amount
of blood the individual actually has.
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The more rapid the blood loss, the less likely the hematocrit will reflect the
true picture of the patient's blood volume. For example, an individual who has
just donated a pint of blood (usually over a 6-10 minute period) obviously has
one pint less blood at the end of the donation than at the beginning. Yet a
hematocrit measurement at the beginning and at the end of the donation may be
almost unchanged, therefore giving no indication that the individual has just
lost a pint of blood. Surgery is a situation in which individuals lose
relatively large quantitites of blood in a short time. Despite infusion of
saline (salt water) and other blood substitutes, the hematoctit is frequently
very misleading at the end of surgery as to the quantity of blood lost.
Patients may have lost 25 to 35 percent more blood than estimated from
hematocrit measurement and the weighing of blood-soaked sponges. Patients
losing more than 3 pints may have circulatory collapse when undergoing
anesthesia. Even the loss of 1 - 2 pints in an individual with heart disease
may have serious consequences.
The Blood Volume Analyzer, BVA-100, will permit patients to have their blood
volume measured to within an estimted accuracy of +2% prior to surgery. It will
also permit estimates of +5% during surgery within 20 minutes and +2% within 35
minutes.
The instrument will also calculate the normal blood volume for a specific
individual. The normal blood volume for an individual is related to a complex
interplay of height and weight. The instrument will provide these calculations.
The instrument will calculate the deficit of excess of both the red cells and
the plasma. The provision of this type of data in the opinion of the Company
will provide critical information in a timely fashion not only in surgery but in
other conditions such as heart failure and kidney failure.
The Company has developed a special injection kit which is used with the machine
for each test. The injection system provides a quantitative highly precise
injection. The system can be used in this situation where a precise injection
is needed. The injection system received the first United States patent ever
issued for such a kit on March 20, 1996. The Company, in 1991, recived a U.S.
patent on the instrument itself, 12 European patents the following year and a
Japanese patent on March 26, 1996. The Company is awaiting approval of the Iso-
Tex Diagnostics, Inc. to manufacture Albumin I-131. The isotope itself has been
previously approved by the F.D.A. for the measurement of human blood volume.
Approval is needed for this specific manufacturing facility (Iso-Tex). The
instrument could theoretically be used without the kit, but then the user would
need several hours to obtain results. In addition, the costs of preparing a kit
substitute would most likely be greter to any user than the purchase cost of the
kit itself. The cost of a kit to hospitals is estimated to be about 1/5 of the
cost which a hospital would charge for the test.
The Company believes that the most significant market for its blood volume
measurement equipment consists of the approximately 8,000 hospitals and large
clinics in the United States and other hospitals outside the U.S. The Company
believes that there is an international market of 10 -14,000 potential users of
its BVA-100. In addition, many physicians conducting extensive practices in
cardiology, radiology or internal medicine might purchase equipment and related
test kits for diagnostic use.
The Company plans to demonstrate its blood volume equipment at trade shows
across the United Staets and to market the equipment to the nation's hospitals
on both an outright sale and lease basis. The Company will use its own capital
to develop lease programs where hospitals will not purchase the equipment, but
will commit to use a minimum number of kits per week. This marketing approch
has been successfully used by other medical technology equipment manufacturers.
The Company may possibly be in a position to market the BVA-100 overseas before
final approval in the United States. In ddition, the Company may attempt to
enter into distribution contracts with one or more large hospital supply
companies. The Company will train hospital technicians to utilize its products
and expects to supply test kits to users of its equipment on a continuing basis.
The Company will initially manufacture its instrument on a subcontract basis.
It plans to establish service centers and currently plans to manufacture its own
kits.
Patent and Copyright Protection
The Company in 1991, after a five-year application period, received a United
States patent on its Blood Volume Analyzer (BVA-100). This is the only patent
ever issued for an instrument dedicated to the measurement of the total human
blood volume for a specific individual. In 1992, the Company received a
European patent covering 12 countries. On March 26, 1996, the Company received
a Japanese patent for the BVA-100. The patent application was originally filed
in 1989, and is the first patent ever issued in Japan to measure human blood
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volume. The Japanese patent provides protection until the year 2009. The
instrument is designed to work with an injection kit to be 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 puchaser
of the instrument would use it without purchasing the reagent kit. On March 20,
1996, the Company recived approval for its U.S. patent application for its
injection kit, which is specifically designed to be used with the in instrument.
This is the first US 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 precisse complete
quantitative injection of a diagnostic reagent is required. Patent protection
will extend for 17 years from the official date of issuance, which is expected
to be within the next 60 - 90 days. The Company has explored a number of
variations of the kit and recently successfully completed key tests on the
final version of the kit.
Idant Laboratory Division
Idant pioneered both the technology and the commercial application of long-term
preservation of human sperm for use in artificial insemenination. The division
has provided frozen semen and services to physicians worldwide. As of February
1, 1996, Idant held approximately 55,000 human semen units in long-term storage
at its central New York City facility. The Company maintains the largest human
sperm bank in the U.S. A decrease in the number of adoptable children because
of increased birth control and abortion has contributed to an increase in the
number of patients and physicians seeking to utilize donor semen collected and
stored by Idant in its sperm banking facilities.
Use of Frozen Sperm for Artificial Insemination by Donors
Idant, in 1985, was the first semen bank to institue an AIDS quarantine period
for frozen semen. 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 with donors being tested at the beginning and at the end of the six-month
period. By storing semen from a large cross-section of sperm donors, Idant can
closely match the physical characteristics of the sperm donor (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 reipient father cn make the
child, who results from atrificial insemination, much more psychologically
acceptable to the father. In February 1988, the Centers for Disease Control and
the American Fertility Society both officially endorsed frozen semen as the only
recommended form of semen for use in artificial insemination.
By eliminating the requirement of immediate donor availability, a physician
utilizing frozen semen can more precisely match ovulation and insemination
times. In addition, the use of frozen semen may enable a couple to utilize the
same donor for future children, regardless of the availability of the donor at
the time they desire a future child.
The Company is very selective in its choice of donors and estimates that only 5
- - - 10 percent of all donors are ultimately accepted as semen donors. Idant
recruits these donors from the approximately 130 colleges and schools of
advanced learning in the New York metropolitan area and does not accept donors
from the public at large. Prospective donors are also screened on the basis of
a three-generation family medical history and a battery of over 30 blood tests,
including tests for AIDS and multiple forms of hepatitis. All semen specimens
are checked for vibility of sperm, cultured to insure germ-free condition and
screened for various forms of hereditary and metabolic disorders. Idant also
screens semen for genetic diseases common to persons of the prospective donor's
racial or ethnic background. The Company, upon request, also screens for rare
genetic traits. Doctors who use fresh semen face potentially large lawsuits
from patients who become infected. Fresh semen always involves the risk of
infection.
The FDA is now instituting semen bank regulations and is expected to restrict
the use of fresh donor semen, except for very special situations.
Storage of Sperm for Personal Use
- - -7-
<PAGE>
The Company's sperm bank facilities contain stored sperm which should remain
viable for many years. Semen stored for 23 years, at minus 321 degrees, has
shown minimal change (the Company has had documented normal births from semen
stored 16 years). The Company's facilities are used by men who, for a variety
of reasons, anticipate imapairment 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 facilities are also
used by men who plan to undergo steriliztion 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 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.
Different technologies and methods have been used for freezing semen.
Historically, sperm banking had a poor reputation for effective preservation of
human semen. However, the Company's preservation techniques and methods
overcame the difficulties associated with freezing human semen. Dr. Jack Shuber
of Mount Sinai Hospital in Toronto reported almost identical pregnancy rates
withfrozen semen as with fresh semen based on treatments of 193 patients
verifying the effectiveness of Idant techniques. In addition, Dr. I. Ray King
of Knoxville, Tennessee, completed an independent study which showed markedly
higher pregnancy ratios in artificial inseminations using Idant semen as opposed
to semen obtained from a competing semen bank. In Dr. King's study, Idant semen
produced a 17.5% rate of pregnancy per insemination cycle and a 67.1% cumulative
percentage of pregnancies over 11 cycles, as opposed to results of 10.3% and
42.3%, respectively, for its competitor. These results are significant when
compared to studies using frozen semen from a variety of sources, which showed
pregnancy rates from artificial insemination by thawed donor sperm to be much
lower than results of artificial insemination by "fresh" donor sperm. 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 vability or change in
condition.
A major recent development has been the ability to achieve pregnancy by
injecting a single sperm into a human egg. The fertilized egg is then placed
within the uterus. This means that individuals with very low sperm counts may
still be able to have their own children.
The Company is engaged in an area which requires a high degree of diligence.
The Company utilizes a semen identification and quality control program which
has 21 check points for identification and verifiction from the time the
specimen is received from a patient storing his specimen and its eventual use by
the patient's wife. A key part of the identification system is a numbering and
labeling system in which the patient's specimen receives a unique (used only
once) code number. The patient participates in the identification and labeling
of his own specimen. This unique number is placed on the patient's aluminum
storage canister and on the plastic straw containers which contain the patient's
semen. The patient collects his semen in a special container with this code
number. The patient's semen is mixed with a cryoprotective agent which prevents
damage when the specimen is frozen. There is only a single physical transfer
from the collection container to the storage straws. There are a total of 21
check points before the specimen is ready for long-term storage. Idant's system
is designed so that the original storage straws can be used diretly for
insemination. When specimens are shipped to the physician there are an
additional five chick points with two (2) initial checks at the time of recipt
of the specimen. Prior to use the physician should go through another triple
check: (a) the shipping documents (b) the tags on the semen holder which contain
the patient's code number, his name and social security number and most
significantly, (c) the plastic straws themselves. In fact, patients can
participate with their physician in this checking process. Utilized as
designed, the Idant semen collection system is virtually fool-proof.
Proprietary Technology and Procedures
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 tmeperature change of
- - -8-
<PAGE>
minus 321 degrees F (the temperature of the liquid nitrogen) to room temperature
of 78 degrees 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.
Research into preservation of human sperm has shown that without tightly
controlled conditions, a marked drop-off in viability of sperm (i.e. the number
of live, active sperm in a sample which could be expected to fertilize an egg)
occurs within one to two years of storage. In addition, frequent handling of
specimens decreases the viability of sperm. Based on this research, Idant
utilizes a non-patented proprietary technique of staged freezing combined with
the use of Cryopreservation agents, prior to storage of the semen in liquid
nitrogen at minus 321 degrees F. Levels of liquid nitrogen in its sperm bank
storage tanks are continuously monitored. The liquid nitrogen tanks can
maintain their temperature for over one week without additional liquid nitrogen.
The Company has tecnicians on call during night hours as back-up for
emergencies. The freezing sytems do not require electric power for maintenance
of temperature levels. In addition, the Company has established and follows a '
complex procedure for collection, processing and retrieval designed to minimize
the handling of specimens. The Company also uses liquid nitrogen in connection
with its quality control and strict adherence to shipping, storage and handling
procedures designed to minimize the exposure of its stored sperm to changes
which would impair viability are major reasons for Idant's recognition in the
industry as the major source for effective, viable frozen semen.
Marketing
Idant markets its services directly to physicians, primarily through attendance
at medical trade shows and conferences at which its services are described. In
addition, Idant offers education seminars in the use of frozen semen and
advances in artificial insemination to medical and technical audiences and
participates in numerous medical conferences. The Company's work in both semen
preservation and blood banking has been featured multiple times on all national
television networks as well as international networks and in the national
magazine and major newspapers.
Consultation, Labortory Management and Training Program
Daxor provides consultation with regard to the requisite personnel, equipment
and facilities for small specialized medical laboratories and offers, on a
contract basis, to design, staff and manage such laboratories. Where Daxor
provides management services for laboratories on an on-going basis, it employs
and supervises laboratory personnel, establishes and maintains procedures and
provides other continuing services.
Competition
The medical technology market is intensely competitive. There are, however, no
competing instruments manufactured or marketed which perform semi-automatic
blood volume analysis, such as the BVA-100. The Company believes that its
receipt of a United States, European and Japanes patent for its Blood Volume
Analyzer provides significant protection against any future portential
competition in the blood volume ananlysis field. The receipt of the U.S. patent
for the injection kit system provides significant additional protections 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 cost of a trnsfusion and the critical information derived from the test.
There are at least 150 sperm banks in the United States operated by either
commercial entities or by academic institutions. The Company believes that
increased public awareness of the efficacy of frozen semen stored by it along
with recent medical journal articles emphasizing the necessity of or careful
screening of donors for artificial insemination will result in an increasing use
of frozen semen for this purpose. The Company believes that Idant's reputation
has been damaged by the false charges of the NYSDOH. The Company believes that
the effects of its RICO/Anti trust lawsuits will enable us to regain a
significant portion of its former clients, when Idant's full licenses are
reinstated.
- - -9-
<PAGE>
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 branches. 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. The current practice in
the blood banking field has been to split blood into various components such as
red cells, platelets and plasma, which are then sold as separate units.
Components of the plasma are usually sold to pharmaceutical companies which
manufacture separate clotting and diagnostic factors. In many regions, blood
banking is a monopoly or semi-monopoly structure. Blood banks almost unifomly
do the minimum required testing on collected donor blood. Hospitals usually
have one primary supplier and occasionally supplemental suppliers of donor
blood. Many hospitals are very dependent on their primary geographic supplier
of donor blood. The primary supplier is usually a monopoly, which may have
exclusive contracts with the hospitals that they supply. Patients have almost
no choice with respect to storage of their own blood prior to needing a
transfusion for elective surgery. The blood banking industry has historically
been opposed to the concept of frozen autologous storage of blood, even during a
period when 1 in 10 transfused patients contracted hepatitis. The development
of frozen autologous blood banking and quarantined frozen blood banking programs
by tax paying corporations such as Daxor has been met by an extreme hostile
response from the monopolistic controllers of donor blood. The advent of frozen
autologous blood banking poses a fundamental threat to the staus quo of the
current donor blood industry. These organizations, as far back as 1983,
conducted internal reviews of the amount of income that they would lose for each
percentage of the population that elected to store their own blood. Blood
banking organizations have repeatedly made false claims concerning the
availability of stored frozen blood. The New York Blood Center is the primary
supplier of blood in lower NYS and the Red Cross is the primary supplier in the
upper region of NYS. A number of hospitals maintains a small in house blood
bank to supplement their blood supply which are inadequate for their internal
needs. Therefore, they are very dependent on their blood suppliers.
Daxor's program of quarantined donor blood and multiple units of donor blood
from a single donor provides a basic fundamental threat to the existing blood
banking system. Frozen blood banking incorporating quarantined blood and multi-
unit single donor blood is demonstrably far safer than the existing blood
banking system.
Daxor believes that it has been extensively damaged by the collusive actions of
the New York Blood Center and key members of the blood banking regulatory agency
of New York State Department of Health (NYSDOH).
Daxor believes that the availability of safer frozen blood to the public,
utilizing either autologous blood or quarantined donor blood, would result in a
basic chnge in the blood banking system. Sperm donors are usually paid. Sperm
banking operates at a much higher level of donor testing safety and donated
sperm is now usually quarantined at all AATB member sperm banks. The advent of
quarantined frozen blood with paid donors could have a negative financial impact
on tax exempt organizations which rely on free donors. Fifteen years ago, the
majority of semen donations for artificial insemination derived from
utilization of fresh semen with limiting testing of donors. Today, almost all
donor semen is derived from frozen donor semen which has been quarantined for a
minimum of six months and the donor retested. Despite the advantages of frozen
blood programs, such as Daxor's, more than 99% of all donated blood used for
transfusion is derived from refrigerated blood and transfused in under 42 days
and where the donor has only been tested initially.
The Company is aware of two other lawsuits instutited by small private blood
banks against the Red Cross. A successful conclusion of the Company's anti
trust suit against the New York Blood Center will enable the Company to provide
blood transfusion products that are clearly safer.
Regulation
The Idant Sperm Bank was first licensed by New York City in 1971, and its Blood
Bank in 1985. In 1989, Idant's blood bank was temporarily closed for four
months after a number of false charges by an inspector of the New York City
Department of Health. Following a hearing in the fall of 1989, Idant had its
full Blood Bank license restored by the New York City Department of Health. The
City inspector primarily responsible for the false charges against Idant took
the Fifth Amendement against self-incrimination five times just prior to the
hearings being stopped by mutual agreemtnet; he was later dismissed. The New
York State Department of Health unexpectedly removed Idant's state permit in
January 1990, just after New York City had restored its blood banking permit.
The Company has retained attorneys to obtain full state licensing. The Company
- - -10-
<PAGE>
believes that the difficulties with the New York State Department of Health
(NYSDOH) are the result of a concerted effort by a combination of key regulators
acting in conjunction with a major blood banking semi-monopoly system to destory
Daxor's frozen blood banking program. In 1987, the signing of the Warner
Communication contract for qurantine frozen blood and autologous blood provided
for the development of frozen quarantined blood pools. This concept, if
successful, would have a major financial impact on the New York Blood Center and
any other blood banking semi-monopoly. The Company's president, Dr. Joseph
Feldschuh, has been an outspoken critic of the blood banking establishment and
has written a book entitled "Safe Blood" published by the Free Press division of
the Macmillan Publishing Company which details deficiencies in the current blood
banking system.
In NYS, blood banking and semen banking are under the control of Dr. Jeanne
Linden. Blood banking regulations are developed by a quasi governmental body,
the Council on Human Blood and Transfusion Services, which enacts blood banking
regulations. Individuals such as Dr. Celso Bianco of the New York Blood Center,
representatives of the Red Cross, and advisors to these organizations serve on
this committee. One member of the Council on Human Blood and Transfusion
Services told Dr. Feldschuh in 1988, that Idant would be put out of business.
Since 1985, Idant has been inspected annually by the FDA and continously
approved for operation, inspected by New York CIty since 1985, and approved
annually, and has been inspected and accredited by the American Association of
Blood Banks annually since 1986. Since January 1990, the state has blocked
renewal of laboratory license and issued a providional semen bank license.
Despite approval from the other aforementioned organizations, the NYSDOH has
repeatedly denied Idant's licenses. The Company operated legally on the basis
of its New York City licenses. In response to the repetitive denial of its
state license, the Company istituted a number of legal actions. In 1994, the
New York City and State licensing functions were merged and the state assumed
sole control of all licensing. The background of the state's actions have been
extensively described in a 2nd quarter 1995 special report that was issued to
shareholders. (see Legal Proceedings section and 2nd quarter special report)
On August 21, 1995, Daxor was ordered to close all of its facilities, including
its blood bank without a hearing. This action was a culmination of a campaign
dating back to at least 1989, to terminate Daxor's blood banking services.
Daxor iniated a $100 million RICO/Anti trust suit against a number of key
officials in both the city and state Departments of Health and Dr. Celso Bianco
from the New York Blood Center. Daxor also instituted an immediate appeal.
Daxor has tape recordings documenting perjury by inspectors of the NYSDOH and
also has extensive evidence of falsified inspection reports.
The August 21, 1995, closure order by the State Health Department attempted to
force the 3,000 blood and semen depositors to transfer their semen and blood
specimens to another facility within 30 days of the closure order or have said
specimens destroyed. A class afction suit was institute on behalf of the
depositors which prevented this from taking place. On January 29, 1996, the
Company had a hearing in the Appellate court concerning the issue of revocation
of its licenses without a hearing. A decision is pending.
Daxor has maintained that when the city and state licnsing functions were
merged, that the Company was entitled to a state license or else a hearing on
the basis for the denial . The Company believes that it has been the victim of
collusive action by members of the regulatory agency which is partially
controlled by monopolistic competitive blood banking organizations. These
organizations would face a major change to their basic operations if Daxor's
frozen blood programs become widely accepted.
The Idant Semen Bank has been the subject of a separate hearing concerning a
1993, inspection during which the department claimed that men storing semen to
have their own children with surrogate mothers were a form of directed donors.
The men in question had voluntarily undergone 40 tests, including tests for
infectious diseases such as AIDS and hepatitis. Sperm donors require only 9
blood tests, including tests for infectious diseases such as hepatitis, by the
NYSDOH. The 40 men in question had 10 different hepatitis blood tests, rather
than the three recommended by the NYSDOH. Despite agreeing to classify future
individuals who were actually having their own children s directed donors, the
Company was charged with not testing donors and was deemed to be "beyond
rehabilitation" by an administrative court judge who is an employee of the
department. The department admitted that in Idant's 25-year history that in
which it has handled approximately 600,000 specimens, they are unaware of anyone
contracting infection from semen stored at Idant or that Idant had ever shipped
out anonymous donor semen that was not tested. This case which was also by
coincidence decided on August 21, 1995, is currently under separate appeal.
With respect to the blood bank, in its 10-year history, Idant has never shipped
- - -11-
<PAGE>
out a unit of infected donor blood. The Company has also formally reapplied for
its semen bank license and believes that the vigorous legal actions that it has
taken will result in a restoration of its licenses.
The Company was inspected by the FDA in May 1994, February 1995, and February
1996, and had no violations noted. The Company has applied for an FDA
interstate license for the shipment of blood. The Idant blood bank is subject
to inspection and regulation by the FDA. Idant has been inspected annually
since 1985, by the FDA and received the first FDA registration for a frozen
autologous blood bank in the United States. The FDA has two levels of
inspection and approval. A blood bank operating primarily within a state is
inspected, and if approved receives a "registration certificate". A blood bank
which ships blood interstate and is a manufacturere of blood components must
receive an interstate license. Interstate licensing inspections and
requirements are particularly intensive with respect to documentation
requirements. Members of the New York State Department of Health have claimed
that Daxor cannot ship autologous blood outside NYS without an interstate
license because it has only a FDA registration. The majority of NYS blood banks
have only a FDA registration and not a license. The FDA has specifically
informed Daxor that it can ship autologous blood interstate without a license
and that it can ship special directed donor blood (such as quarantined donor
blood) without an interstate license in the event of a docuemnted emergency.
The development, testing, production and marketing of medical devices are
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 status and regulations generally require
manufacturers to comply with regulatory requirements designed to assure the
safety and effectiveness of medical devices. The key factor behind the delay in
the Company's Blood Volume Analyzer has been the lack of availability of Albumin
I-131. The Company's BVA-100 will require separate FDA approval by its medical
device section. The Company's BVA-100 will be filed under a form 510(K), such
approval processing usually require less than six months for approval from date
of filing.
Employees
On March 20, 1996, the Company had 35 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 6,000 square feet, with
option provisions in the lease for up to 24,000 square feet. Future minimum
rental payments under this non-cancelable lease are as follows: 1996 - $168,832,
1997 - $168,832 and 1998 - 168,832. The lease also contains CPI escalation
clauses. The new facility was completed in July of 1992 and the Company moved
in that same month. In March 1994, the Company obtained an additional 1,000
square feet of space.
In February 1996, the Company incorporated Daxor Health Services, Inc. a wholly
owned subsidiary in Florida. Daxor acquired a 25% interest of Therapeutic
Rehabilitation Services, a privately held Florida company engaged in
rehabilatative services.
Item 3. Legal Proceedings
The Company, as a result of the Resimmo offer in July 1992, has had two class
action lawsuits initiated against it. One group of investors who purchased
stock allege, in essence, that Ressimo was non-existent, and that the offer was
concocted by the Company's president, Dr. Joseph Feldschuh, and Ex-Vice
President, Allen Gelb. Dr. Feldschuh had never sold any shares of Daxor in the
18 year period prior to the offer, including the period up to the time when the
offer was withdrawn by Resimmo. The second action is by a group of investors
who sold the stock short and also claim that Resimmo is non-existent, but names
all officers and a single director. The Company believes there is no merit to
these lawsuits.
In 1994, director Stephen Moss who was the only member of the board of directors
who sold any stock during the period in question, had the charges against him
dropped. All other members of the Board and executives named, neither bought
nor sold stocks.
The Company is considering instituting legal action to countersue the claimants
for frivolus claims. The Company feels that the above lawsuits are without
merit.
- - -12-
<PAGE>
The Company is involved in several proceedings with the New York State
Department of Health relating to its licenses to operate a laboratory and sperm
and blood bank. These actions are as follows:
1. Idant Laboratories, et al. v. State of New York Department of
Health, et al. (Supreme Court, New York County; Index No. 105052/94). Idant
commenced suit challenging the State Health Department's denial of Idant's
clinical laboratory and blood bank licensure operations for the periods
including 1991 - 1993. By decision and order dated April 13, 1995, Justice
Freeman denied Idant's petitions. A notice of appeal has been filed and motion
to expand the time to file the appeal has been filed.
2. Daxor Corp., et al. v. State of New York Department of Health, et
al. (Supreme Court, New York County; Index No. 131181/94). This matter was
instituted by Daxor challenging the constitutionality of the State Health
Department's semen bank regulations. By decision and order dated April 26,
1995, Justice Harold Tompkins denied the motion of the State Health Department
to dismiss the complaint and declined Daxor's request to convert the State
Health Department's motion to one for summary judgment. The proceeding remains
ongoing.
3. Daxor Corp., et al. v. State of New York Department of Health, et al.
(Supreme Court, New York County; Index No. 10754/95). This proceeding was
instituted by Daxor to challenge the detemination of the State Department of
Health to revoke all the determination of the State Department of Health to
revoke all licenses issued to, and to deny all licensure applications for,
Daxor's New York health care facilities. The Court (Tompkins, J.) heard
argument on the petition on June 23, 1995, and by decision and order dated July
17, 1995, denied Daxor's application. An appeal from that decision was filed on
November 6, 1995, with the Supreme Court, Appellate Division, First Department.
The appeal was argued before the February Term of the court. The matter is
pending a decision.
4. Daxor Corp., et al. v. Linden, New York Blood Center et al. (United States
District Court, Southern District, Case No 95 Civ. 7847 [KTD]). Daxor
instituted an anti trust, Racketeering Influenced Corrupt Organizations Act and
a $100 million action pursuant to 42 USC S 1983 for violations of its civil
rights. This action alleges that the New York Blood Center with the other
defendents engaged in predatory monopolistic actions to prevent the
implementation of Daxor's frozen blood programs. The lawsuit also alleges that
various members of the NYSDOH actively consipired with the New York Blood Center
and other members of the blood banking community to drive Daxor's blood bank out
of business. The defendants filed motions to dismiss the complaint. The matter
is pending a decision by the court.
5. Daxor, et al. v. Amy Clyde, et al. (Supreme Court, New York County; Index No.
122486/95). Daxor instituted an action for defamation against Amy Clyde, the
author of the article, and K-III Corp., the owner of the New York Magazine,
which published the defamatory article. This proceeding remains ongoing.
6. Daxor, et al. v. State of New York, (Court of Claims; Claim No 90213). Daxor
instituted a claim for defamation against the State of New York resulting from
the dissemination of false information regarding Daxor to the media. This claim
remains ongoing.
7. Daxor and Yaker, et al. v. DeBuono, (Supreme Court, New York County; Index
No. 122486/95). Justice Cohen. This is a class action instituted by tissue
depositors of Daxor against the Department of Health from mandating the removal
of the class' property from the Daxor/Idant blood and semen bank premises. A
hearing has been scheduled for May 3, 1996, before Justice Stuart Cohen.
8. Idant v. DeBuono, (Supreme Court, Albany County; Index No. 471/96). Justice
Canefield. This is a petition instituted pursuant to CPLR Article 78, appealing
the decision of the New York State Department of Health for revoking Idant's
Semen Bank license. The basis of this action is that the Department of Health
revoked the license in violation of Public Health Law section 4366. The matter
was argued and submitted to Justice Canefield and a decision is pending.
9. Idant v. The Department of Health of the City of New York, (Supreme Court,
Appellate Division, First Department; Index No. 123218/94). This action is an
appeal of the City Department of Health's decision to prohibit Daxor from
performing Semen Analysis. This matter was argued before the February Term of
the Appellate Division. A decision is pending.
10. Gregory Pollinger v. Joseph Feldschuh, Idant Laboratories and Daxor
Corporation, (Supreme Court, New York County; Index No. 122560/95). A Daxor
semen bank depositor brought suit, alleging that his semen stored at Daxor is no
- - -13-
<PAGE>
longer viable. The plaintiff complaint does not allege a dollar amount in the
ad adamnum clause. The standard Semen Depositor contract, that the Plaintiff
signed, specifically states that Daxor cannot guarantee the viability of the
semen and that there are no warranties, expressed or implied. Based upon the
clear language of the contract, the Company believes that Plaintiff's action is
without merit. Examination of the client's semen at an independent facility
documented that the specimen was still viable. The Company believes this suit
is without merit and may countersue for a fivoulous claim.
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 on 1995.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock is traded on the American Stack Exchange under the symbol DXR.
<TABLE>
<CAPTION>
1994
<C> <C>
High Low
------ -----
First Quarter....................... 8 1/8 5 3/4
Second Quarter...................... 7 1/2 6
Third Quarter....................... 6 5/8 5 7/8
Fourth Quarter...................... 6 5 1/2
</TABLE>
_____________________________________________________________________________
<TABLE>
<CAPTION>
1995
<C> <C>
High Low
------ -----
First Quarter....................... 8 7/8 5 5/8
Second Quarter...................... 7 1/8 5 7/8
Third Quarter....................... 7 1/4 6 1/4
Forth Quarter....................... 7 1/4 6
</TABLE>
On March 26, 1996, the Company had approximately 605 holders of record of the
Common Stock. The Company believes there are approximately 25000 beneficial
holders.
The Company has never paid any cash dividends on the Common Stock. Any future
dividends will be dependent upon the Company's earnings, financial condition and
other relevant factors.
- - -14-
<PAGE>
Item 6. Selected Financial Data
The folllowing 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:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
<C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Operating revenues $1,863,552 $1,844,418 $1,926,415 $1,967,588 $1,970,325
Dividend income 2,209,962 2,157,735 2,164,691 3,035,478 1,967,930
Gains (losses) on
sale of investments 674,421 584,982 708,407 1,128,650 (3,394,562)
--------- ---------- ---------- ---------- ----------
Total revenues $4,748,935 $4,587,135 $4,799,513 $6,131,716 $ 543,693
- - --------------------------------------------------------------------------------
Costs and Expenses:
Operations of
laboratories 1,041,275 1,016,832 988,401 867,994 867,760
Selling, general
and administrative 2,369,660 1,585,533 1,309,105 1,137,647 920,932
Interest expenses, net
of interest income (113,973) 11,116 181,353 392,591 577,697
----------- ---------- ---------- ---------- ---------
Total costs and
expenses 3,296,962 2,613,481 2,488,859 2,398,232 2,366,389
- - --------------------------------------------------------------------------------
Net income or (loss)
before income taxes 1,451,973 1,973,654 2,310,654 3,733,484 (1,822,696)
Provision for
income taxes 164,858 165,519 160,309 302,424 36,431
----------- ---------- ---------- ---------- ----------
- - --------------------------------------------------------------------------------
Net income $1,287,115 $1,808,135 $2,150,345 $3,431,060 (1,859,127)
========== =========== ========== ========= ===========
- - --------------------------------------------------------------------------------
Weighted average of
shares outstanding 4,872,481 5,122,188 5,154,955 5,179,305 5,245,363
--------- --------- --------- --------- ---------
- - --------------------------------------------------------------------------------
Net income per common
equivalent share $ 0.26 $ 0.35 $ 0.42 $ 0.66 ($ 0.35)
========= ========= ========== ========= =========
</TABLE>
- - --------------------------------------------------------------------------------
Selected Balance
Sheet Data:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
<C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Working capital $31,598,345 $28,739,806 $23,966,425 $20,586,020 $18,976,739
- - --------------------------------------------------------------------------------
Total assets 37,744,621 35,012,638 29,112,282 32,634,921 29,205,570
- - --------------------------------------------------------------------------------
Total liabilities 5,691,790 5,813,458 4,681,643 10,339,973 10,107,865
- - --------------------------------------------------------------------------------
Shareholders
equity 32,052,831 29,199,180 24,430,639 22,294,948 19,097,705
- - --------------------------------------------------------------------------------
Return on equity* 4.41% 7.40% 9.64% 17.97% (8.85%)
</TABLE>
* 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.
- - -15-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
GENERAL
- - --------------------------------------------------------------------------------
Idant Laboratories contributed 85%, 82% and 82% of operating revenues in 1995,
1994, and 1993, respectively with the remainder coming from contract laboratory
work. The Company has been injured by false claims by New York State Health
Department Officials concerning its anonymous semen donor program. The August
21, 1995, closure order by the NYSDOH without a hearing on alleged violations
unrelated to Idant's semen or blood bank has had a negative impact on the
Company's revenues and earnings. The Company has continued to receive income
from its storage clients of semen and blood deposits, but has been limited in
its ability to ship donor semen. The Company also has received no revenue from
satellite laboratory, which contributed approximately 15% to revenues prior to
the closure order. The summary closure order is currently under appeal before
the Appellate Court. If the Company is successful on its appeals, it is
believed that the Company's laboratories will become fully functional. A number
of other legal actions, including a RICO/Anti trust suit have been initiated
against the New York Blood Center and a number of key NYSDOH officials. If the
Company prevails in its suit, the Company could receive recovery of legal fees
and monetary compensation for lost business. The Company in 1995, acquired a
29% interest in U.S. Cryobanks in Altamonte Springs, Florida, a suburb of
Orlando. In February 1996, the Company acquired a 25% interest in Therapeutic
Rehabilitation Services and incorporated Daxor Health Services, Inc. in Florida.
- - --------------------------------------------------------------------------------
YER ENDED DECEMBER 31, 1995 AS COMPARED TO DECEMBER 31, 1994
- - --------------------------------------------------------------------------------
Total revenues we $4,748,935 in 1995, up from the $4,587,135 reported in 1994.
Dividend income earned on the Company's securities portfolio was $2,209,962, an
increase from the $2,157,735 reported in 1994. Gains on the sale of investments
were $607,163 in 1995 as compared to $435,198 in 1994. Net income before income
taxes was $1,451,973 in 1995 vs. $2,613,481 in 1994.
- - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO DECEMBER 31, 1993
- - --------------------------------------------------------------------------------
Total revenues were $4,587,135, down from the $4,799,513 reported in 1993.
Dividend income earned on the Company's securities portfolio was $2,157,735, a
decrease from the $2,164,619 reported in 1993. Gains on the sale of
investments of $435,198 in 1994, as compared to gains of $1,419,360 in 1993.
Net income before income taxes was $1,973,654 vs. $2,310,654 in 1993.
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 high-yielding electric utility preferred and common stocks. The
income derived from these investments has helped to offset increases in
operating, selling and gerneral and administrative expenses and thus to maintain
or fees at a competitive level. The portfolio also provides for the
availability of funds as needed for new projects and the expansion of existing
sources of revenue.
At December 31, 1995, the Company's short term debt was $1,536,609 vs.
$3,864,605 in 1994. At year end 1995, shareholders' equity was $32,052,831. At
year end 1995, shareholders' equity was $32,052,831. At year end 1994, the
Company had shareholders' equity of $29,199,180. At year end 1993,
shareholders' equity was $24,430,639. Shareholders' equity has thus increased
$7,622,192 over the two year period from year end 1993.
- - -16-
<PAGE>
The Company has been blocked from proceeding towards approval of its Blood
Volume Analyzer because of the lack of availability of an FDA approved supplier
of Albumin I-131. In early 1994, the Company acquired the rights of reference
to FDA-approved NDA's from two former manufacturers of Albumin I-131. The
Company could become a manufacturer of the isotope and subcontract part of the
process. The Company believes that Iso-Tex Diagnostics will soon receive FDA
approval for this isotope and the Company would therefore develop its own kit
production facility. The Company plans to offer to lease, as well as sell, its
Blood Volume Analyzer (BVA-100) and could use its internal funds to provide some
leases if an independent leasing agent were not available.
The Company plans to develop a comprehensive national network of autologous
blood banks. A victory in the anti trust action would be important in the
timing of such a decision. Should these plans proceed, the Company might
require additional financing to sustain such operations until they become
profitable, although present captial is sufficient for the initial pahses.
Year end 1995, finds the Company in a satisfactory financial position with
adequate funds available for its immediate anticipated needs. However, should
the opportunity arise for the Company to proceed with is planned expansion as a
nationwide network of blood banks, there would be a need for additional capital.
Legal fees and obstructive actions of the NYSDOH have caused a decline in both
revenues and profitability for the Company. A successful resolution of these
suits would result in recovery of these costs.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the schedules listed on the index to Financial
Statements and Schedules are filed with and as a part of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
Part III.
In connection with the 1995 Annual Meeting of Shareholders of Registrant,
Registrant intends to furnish sharehoders with proxy materials which set forth
the information required by Items 10, 11, 12, and 13 of Part III. Copies of
such material will be duly filed with the Securities and Exchange Commission
pursuant to rule 14a-6 promulgated under the Securities Exchange Act of 1934, as
ameded, not later than 120 days after the end of the fiscal year covered by this
Annual Report on Form 10-K.
Part IV.
Item 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND
REPORTS ON FORM 8-K
(a) Financial Statement, Financial Statement Schedules and Exhibits filed.
1. Financial statements and schedules shown by index on page 21.
(b) Daxor filed no current reports on Form 8-K during the last quarter of the
fiscal year ending December 31, 1995.
- - -17-
<PAGE>
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 Cheif
Executive Officer,
Chairman of the Board
Dated: March 30, 1996
----------------------------
Pursuant to the requirements of the Secutities 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 30, 1996
- - -------------------- (Principal Executive Officer)
Joseph Feldschuh, M.D.
/s/ Octavia Atanasui Corporate Treasurer March 30, 1996
- - -------------------- Accounting Supervisor
Octavia Atanasui (Principal Financial Officer)
/s/ Stephen M. Moss Director March 30, 1996
- - --------------------
Stephen M. Moss, PhD
- - -------------------- Director March 30, 1996
Veronica Schwendemann
____________________ Director March 30, 1996
James Lombard
/s/ Martin Wolpoff Director March 30, 1996
- - --------------------
Martin Wolpoff
Board of Directors:
Name Title
Dr. Joseph Feldschuh Chairman, President & CEO
Stephen Moss Director
James Lombard Director
Martin Wolpoff Director
Veronica Schwendemann Director
- - -18-
<PAGE>
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
Financial Statements as at December 31, 1995 and 1994
and for the three years ended December 1993
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, 1995.......................................... F-9
Schedule IX - Short-term Borrowings - Years ended December 31, 1995,
1994, and 1993............................................. F-9
Schedule X - Supplementary Income Statement Information -
Years ended December 31, 1995, 1994, and 1993................ F-9
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 informarion is set forth
in the financial statements filed herewith, including notes thereto, and
therefore have been omitted.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- - ----------------------------
To the Board of Directors and Shareholders of Daxor Corporation:
We have audited the accompanying balance sheets of Daxor Corporation as at
December 31, 1995 and 1994, the related statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedules listed in
the Index at Item 14 (a) (1).
These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsiblity 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, 1995,
and 1994, and the results of their operations and its cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statements
taken as a whole, present fairly in all material respects the information set
forth herein.
Frederick A. Kaden & Co.
Franklin Square, New York
March 30, 1996
- - -F-1-
<PAGE>
FINANCIAL STATEMENTS
DAXOR CORPORATION
================================================================================
- - --------------------------------------------------------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------------
<C> <C>
1995 1994
---- ----
ASSETS
- - --------------------------------------------------------------------------------
Current Assets:
- - --------------------------------------------------------------------------------
Cash.................................... $ 1,987 $ 59,962
Marketable securities at Fair Value
December 31, 1995 and December 31,
1994 (Notes 1 and 2).................. 35,735,073 33,598,931
Accounts receivable (Note 3)............ 409,196 215,831
Accounts receibable - Related Parties
(Note 12)............................. 172,951
Other current assets.................... 764,695 472,307
Tax refunds receivable.................. 206,233 206,233
----------- ----------
Total current assets.................... 37,290,135 34,553,264
----------- ----------
- - --------------------------------------------------------------------------------
Equipment and Improvements: (Note 4)
- - --------------------------------------------------------------------------------
Storage tanks.......................... 125,815 125,815
Leasehold improvements, furniture
and equipment........................ 628,617 592,240
Laboratory equipment................... 274,418 279,964
----------- ---------
1,028,850 998,019
Less accumulated depreciation and
amortization......................... (606,180) (579,805)
--------- ---------
Net equipment and improvements........ 422,670 418,214
--------- ---------
Other assets........................... 31,816 41,160
--------- ---------
Total assets........................... $ 37,744,621 $ 35,012,638
LIABILITIES AND SHAREHOLDERS' EQUITY
================================================================================
Current Liabilities:
================================================================================
Accounts payable and accrued liabilities $ 323,815 $ 15,682
Loans payable (Notes 1 and 2)............. 1,536,609 3,864,605
Other liabilities (Note 5).............. 93,056 110,406
Defered Taxes (Note 1)................... 3,738,310 1,822,765
--------- ---------
Total current liabilities................. $ 5,691,790 $ 5,813,458
Commitments and contingencies (Note 6)
Shareholders' equity:
Common Stock par value $.01 per share:
authorized 10,000,000 shares: issued and
outstanding 4,742,709 shares December 31,
1995 and 5,067,630 shares December 31, 1994 53,097 53,097
Additional paid-in capital................. 8,579,803 8,579,803
Net unrealized holding gains on available-for-
sale securities (Note 1)................... 7,119,401 3,470,428
Retained earnings............................ 19,338,209 18,051,094
Treasury Stock............................... (3,037,679) (955,242)
----------- -----------
Total shareholders' equity................... 32,052,831 29,199,180
Total liabilities and shareholders' equity...$37,744,621 $35,012,638
============ ============
</TABLE>
See accompanying notes to financial statements.
- - -F-2-
<PAGE>
DAXOR CORPORTATION
- - --------------------------------------------------------------------------------
STATMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
<C> <C> <C>
1995 1994 1993
---- ---- ----
Revenues:
- - --------------------------------------------------------------------------------
Operating revenues (Note 12)..... $ 1,864,552 $1,844,418 $ 1,926,415
Dividend income.................. 2,209,962 2,157,735 2,164,691
Gains (losses) on sale of securities 607,163 435,198 1,419,360
Gains (losses) on sale of options
and commodities................. 67,258 149,784 (710,953)
---------- ---------- ------------
Total revenues $ 4,748,935 $4,587,135 $ 4,799,513
- - --------------------------------------------------------------------------------
Costs and expenses:
- - --------------------------------------------------------------------------------
Operations of laboratories (Note 7) 1,041,275 1,016,832 988,401
Selling, general and administrative 2,369,660 1,585,533 1,309,105
Interest expense net of interest
income (Note 8).................. (113,973) 11,116 181,353
---------- --------- ---------
Total costs and expenses........... 3,296,962 2,613,481 2,488,859
---------- --------- ---------
- - --------------------------------------------------------------------------------
Net income or (loss) before income
taxes............................ 1,451,973 1,973,654 2,310,654
- - --------------------------------------------------------------------------------
Provision for income taxes (Note 9) 164,858 165,519 160,309
---------- --------- ---------
- - --------------------------------------------------------------------------------
Net income or (loss)...............$1,287,115 $ 1,808,135 $2,150,350
========== =========== ===========
- - --------------------------------------------------------------------------------
Weighted average number of shares
outstanding..................... 4,872,481 5,122,188 5,154,955
========== ========== ==========
- - --------------------------------------------------------------------------------
Net income or (loss) per common
equivalent share................ $ 0.26 $ 0.35 $ 0.42
========= ======== =========
See accompanying notes to financial statements
================================================================================
</TABLE>
Statement of Common Stock Issued and Outstanding
Shareholders' Equity
<TABLE>
<CAPTION>
Three Years Ended December 31, 1995
------------------------------------------------
<C> <C> <C> <C> <C>
Common Stock Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock
------------ ------ ---------- -------- --------
Balance at Jan 1,1993 5,156,530 53,097 8,579,803 14,092,614 (430,566)
Net Income for the
year ended Dec 31, 1993 2,150,345
Purchase of treasury
stock.............. (2,700) (14,654)
----------------------------------------------------------
- - --------------------------------------------------------------------------------
Balance at Dec 31,1993 5,153,830 53,097 8,579,803 16,242,959 (445,220)
Net Income for the
year ended Dec 31, 1994 1,808,135
Purchase of Treasury
stock.............. (86,200) (510,022)
---------------------------------------------------------
- - --------------------------------------------------------------------------------
Balance at Dec 31, 1994 5,067,630 53,097 8,579,803 18,051,094 (955,242)
Net Income for the
year ended Dec 31, 1995 1,287,115
Purchase of Treasury
Stock.............. (324,921) (2,082,437)
--------------------------------------------------------
- - --------------------------------------------------------------------------------
Balance at Dec 31, 1995 4,742,709 53,097 8,579,803 19,338,209(3,037,679)
========= ====== ========== ========== ==========
- - --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
- - -F-3-
<PAGE>
DAXOR CORPORATION
- - -----------------
STATEMENTS OF CASH FLOW
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
<C> <C> <C>
1995 1994 1993
---- ---- ----
Cash flows from operting activities:
- - ------------------------------------
Net income or (loss)........... $ 1,287,115 $ 1,808,135 $ 2,150,345
---------- ---------- ----------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation & Amortization.... 59,304 59,987 52,347
(Gain) loss on sale of investments (674,421) (584,982) (708,407)
Change in assets and liabilities:
(Increase) decrease in accounts
receivable................... (193,365) (1,966) (38,357)
(Increase) decrease in accounts
receivable-Related Parties... (172,951)
(Increase) decease in other
current assets............... (292,388) (169,488) (147,579)
(Increase) decrease in tax
refunds available............ 0 25,000 (32,228)
(Increase) decrease in other assets
net of goodwill amortization. 9,344 (5,152) 1,995
Increase (decrease) in accounts
payable, accdrued expenses and
other liabilities net of "short
sales"....................... 312,777 (101,519) 49,586
Total adjustments (951,700) (778,120) (822,593)
---------- ---------- ----------
Net cash provided by operating
activities................... 335,415 1,030,015 1,327,752
---------- ---------- ----------
- - --------------------------------------------------------------------------------
Cash flows from investing activities:
- - -------------------------------------
Payment for puchase of equipment
and improvements............ (63,760) (49,995) (112,762)
Net cash provided or (used) in
purchase and sale of investments 3,997,024 (135,557) 2,718,274
Net proceeds (repayments) of
loans from brokers used to
purchase investments....... (827,996) 62,966 (3,101,725)
Proceeds from "short sales"
not closed................. 83,779 100,256 62,653
----------- ---------- ------------
Net cash used in investing
activities................. 3,189,047 (22,330) (433,560)
----------- ---------- ------------
- - --------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of Loan to Officer.. 0 0 (1,303,804)
Repayment of bank loan........ (1,500,000) (700,000) (210,000)
Payment for purchase of treasury
stock........................ (2,082,437) (510,022) (14,654)
Net cash used in financing
activities................... (3,582,437) (1,210,022) (810,850)
Cash and cash equivalents at
beginning of year............ (57,975) (202,337) 72,622
----------- ----------- ----------
Cash and cash equivalents at
the end of year.............. $ 1,987 $ 59,962 $ 262,299
=========== =========== ==========
</TABLE>
See accompanying financial statements.
- - -F-4-
<PAGE>
DAXOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
The accompanying financial statements as at December 31, 1995 and 1994 and for
the three years ended December 31, 1995 have been prepared in conformity with
principles of accounting applicable to a going concern. Daxor Corporation
operates in the medical services and technology industry.
- - --------------------------------------------------------------------------------
(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, 1995 and Decembe3r 31, 1994, being increased
approximately 30.77% and 18.70% 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:
<TABLE>
<CAPTION>
December 31,1995
----------------
<C> <C> <C> <C>
Type of Cost Fair Value Unrealized Unrealized
security ---- ---------- Holding gains Holding losses
- - -------- ------------- --------------
Equity $ 24,851,151 $ 35,673,901 $ 13,470,588 $ 2,647,838
Debt 26,212 61,172 34,960 0
---------- ---------- ---------- -----------
Total $ 24,877,363 $ 35,735,073 $ 10,338,481 $ 2,647,838
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------
<C> <C> <C> <C>
Type of Cost Fair Value Unrealized Unrealized
security ---- ---------- Holding gains Holding losses
- - -------- ------------- --------------
Equity $ 16,555,721 $ 31,892,894 $ 7,991,063 $ 2,653,890
Debt 1,750,016 1,706,037 22,544 66,523
---------- ---------- ---------- ---------
Totals $ 28,305,737 $ 33,598,931 $ 8,013,607 $ 2,720,413
</TABLE>
At December 31, 1995, the securities held by the Company had market value of
$35,735,073 and a cost basis of $24,877,363 resulting in a net unrealized gain
of $10,857,710 or 43.64% of cost.
At December 31, 1994, the securities held by the Company had a market value of
$33,598,931 and a cost basis of $28,305,737 resulting in a net unrealized gain
of $5,293,194 or 18.70% of cost. At December 31, 1994, marketable securities,
primarily consisting of preferred and common stocks of utility companies, are
valued at fair value.
- - --------------------------------------------------------------------------------
- - -F-5-
<PAGE>
DAXOR CORPORATION
NOTES TO STATEMENTS - CONTINUED
(2) Loans Payable
As at December 31, 1995, and December 31, 1994, the Company had loans
outstanding aggregating $ 1,000,000 and $2,600,000 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 7.8%.
Short-term margin debt due to brokers, secured by the Company's marketable
securities, totalled $436,609 at December 31, 1995, and $1,264,605 at December
31, 1994.
- - --------------------------------------------------------------------------------
(3) Accounts Receivable
Accounts receibable are deemed to be fully collectible.
- - --------------------------------------------------------------------------------
(4) Equipment and Improvements
Depreciation of equipment and improvements is taken using the straight line
method. For 1995, 1994, and 1993, the charge to income for depreciation under
this method were $59,304, $54,380, and $46,790 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 desposed of or determined to be non-revenue
producing, together with the related accumulated depreciation applicable therto,
is eliminated from the accounts, and any gain or loss is recognized.
- - --------------------------------------------------------------------------------
(5) Other Liabilities
At December 31, 1995, and December 31, 1994, the Company also maintained a short
position in certain marketable securities. These positions were sold for
$83,779 at December 31, 1995, and $100,256 at Ddecember 31, 1994, and had
respective market values of $71,589 and $106,267 resulting in an unrealized gain
of $12,190 at December 31, 1995 and an unrealized loss of (13,186) at December
31, 1994.
- - --------------------------------------------------------------------------------
(6) Commitments and Contingencies
(A) Operating Leases
Future minimum rentral payments under this non-cncelable operating lease are as
follows:
1996 $168,832
1997 $168,832
1998 $168,832
1999 $168,832
2000 $168,832
Rent expense for all non-cancelable operating leases was $233,187, $205,036, and
$176,352 for the yers ended December 31, 1995, 1994, and 1993, respectively.
(B) Contingent Liabilities
The Company has pending several claims incurred in the normal course of business
whicfh, in the opinion of management, based on the advice of outside legal
counsel, will not have a material effect on the financial statements.
The Company is also involved in several legal procedings with the State of New
York Department of Health over licenses to opetate its facilities.
Effective at the close of business on August 21, 1995, New York State Department
of Health has ordered the Company to cease operations of its clinical
laboratories, blood bank and tissue bank. They also ordered that the Company
dispose of all client autologous blood and semen stored on the Company's premise
within 30 days.
- - -F-5-
<PAGE>
DAXOR CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
In a hearing before the New York State Supreme CDourt the order to dispose of
all client stored blood and semen has been enjoined pending a review of the
Company's facilities by an independent outside expert. The Court will then rule
on this matter.
The Company is vigorously pursuing all legal remedies to have its operations
licensed by New York State. It is management's belief that these licenses are
being arbitraily withheld and will eventually be obtained. However, at the
present time, the Company's inability to operate other than ongoing storage is
having a negative effect on current earnings and cash flow.
- - --------------------------------------------------------------------------------
(8) Interest Expense and Income
Interest expense was $205,413, $231,349, and $413,319 and interest income was
$319,386, $220,233, and $232,966 in 1995, 1994, ans 1993, respectively.
- - --------------------------------------------------------------------------------
(9) Income Taxes
The following is a reconciliation of the federal statutory tax rate of 34% for
1995, 1994, and 1993, with the provision for income taxes:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
<C> <C> <C>
1995 1994 1993
---- ---- ----
Statutory tax rate $ 493,671 $ 671,042 $ 785,622
Dividend exclusion (344,454) (324,447) (383,849)
Miscellaneous non-deductible
expenses 218 347 1,906
Tax benefit of capital loss
carryback/carryover (198,894) (240,858)
State and city taxes 15,150 17,471 2,512
---------- ---------- ----------
Provision for income taxes $ 164,585 $ 165,519 $ 160,309
---------- ---------- ---------
11.34% 8.39% 7.46%
------ ----- -----
</TABLE>
- - --------------------------------------------------------------------------------
(10) Shareholders' Equity
During 1995, the Company purchased 324,921 shares of its own stock at a cost of
$2,082,437.
________________________________________________________________________________
(11) Subsidiaries
In August 1986, the Company purchased all of the outstanding shares of National
Frozen Blood Repository Corporation. The results of opertions since acqusition
have been in these statements. In 1995, National Frozen Blood Repository
Corporation was dissolved and its operations combined with those of the parent
resulting in a current charge against income of ($8,007).
- - --------------------------------------------------------------------------------
(12) Related Parties
In March of 1995, the Company entered into an agreement with US Cryobanks of
Florida to provide its semen and blood banking technologies for a 35.2% interest
in the company as well as other fees. At year end the Company's interests in US
Cryobanks had been diluted to 39.1%. The following is a summary of these
transactions which are included in the current years financial statements.
Gross Revenues $ 295,780
Related Costs and Expenses (approximately) 262,000
- - -F-5-
<PAGE>
DAXOR CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
The following tables summarize the Company's investments as of:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<C> <C> <C> <C>
Type of Cost Fair Value Unrealized Unrealized
Security ---- ---------- Holding gains Holding losses
- - -------- ------------- --------------
Equity $ 24,851,151 $ 35,673,901 $ 13,470,588 $ 2,647,838
Debt 26,212 61,172 34,960 0
----------- ----------- ---------- ----------
Total $ 24,877,363 $ 35,735,073 $ 10,338,481 $ 2,647,838
----------- ----------- ---------- ----------
</TABLE>
================================================================================
SCHEDULE IX
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994, 1993
- - --------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- - --------------------------------------------------------------------------------
Category of Balance at Weighted Maximum Average Weighted
aggregate the end of average amount amount average
short-term period interest rate outstanding outstanding interest
at end of during this during the rates during
the period period period the period
- - --------------------------------------------------------------------------------
1995
- - --------------------------------------------------------------------------------
Banks $1,100,000 6.89% $2,600,000 $1,702,000 6.67%
Brokers $436,609 7.64% $534,638 $232,654 7.61%
- - --------------------------------------------------------------------------------
All
Categories $1,536,609 7.28% $3,134,628 $1,952,654 7.02%
- - --------------------------------------------------------------------------------
1994
- - --------------------------------------------------------------------------------
Banks $2,600,000 6.61% $3,300,000 $2,970,000 6.32%
Brokers $1,264,605 6.05% $1,304,584 $587,000 7.56%
- - --------------------------------------------------------------------------------
All
Categories $3,864,605 7.18% $4,604,584 $3,457,000 6.94%
- - --------------------------------------------------------------------------------
1993
- - --------------------------------------------------------------------------------
Banks $3,300,000 5.67% $5,400,000 $4,350,000 5.65%
Brokers $1,201,639 5.12% $4,222,674 $2,173,676 5.43%
- - --------------------------------------------------------------------------------
All
Categories $4,501,629 5.48% $9,621,674 $6,523,876 5.56%
- - --------------------------------------------------------------------------------
</TABLE>
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-9-
<PAGE>
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
COLUMN A COLUMN B
ITEM --------------------
- - --------------------------
<CAPTION>
Charged to costs and expenses
Year ended December 31,
--------------------------------
<C> <C> <C>
1995 1994 1993
---- ---- ----
Maintanence and repairs...... $ * $ * $ *
Depreciation and amortization
of intangible assets, pre-
opeating costs and similar
deferral.................... 59,304 59,587 52,397
Taxes, other than payroll and
income taxes................ * * *
Royalties.................... --- --- ---
Advertising costs............ * * *
</TABLE>
- - --------------------
*less than 1% of total revenues for the year.
<PAGE>
