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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the
Securities Act of 1934
FOR QUARTER ENDED SEPTEMBER 30, 1997
Commission File Number 0-12248
DAXOR CORPORATION
(Exact Name as Specified in its Charter)
New York 13-2682108
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 Fifth Avenue
Suite 7120
New York, New York 10118
(Address of Principal Executive Offices & Zip Code)
Registrant's Telephone Number: (212) 244-0555
(Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT SEPTEMBER 30, 1997
------------------------- ---------------------------------
COMMON STOCK 4,690,709
PAR VALUE: $.O1 per share
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as at
SEPTEMBER 30, 1997 and December 31, 1996 2
Consolidated Statements of Operations for the
Three Months Ended SEPTEMBER 30, 1997 and 1996 3
Consolidated Statements of Cash Flows for the
Three Months ended SEPTEMBER 30, 1997 and 1996 4
Notes to Financial Statements 6
Legal Proceedings
Managements Discussion and anaylysis of financial
condition and results of operations 7
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DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
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ASSETS
Current Assets
Cash $ 34,346 $ 123,115
Marketable Securities at Fair Value
SEPTEMBER 30,1997 and
December 31,1996 (Notes 1 and 2) 35,301,150 35,574,526
Accounts Receivable 603,306 611,555
Accounts receivable-Related Parties 95,455 115,008
Other Current Assets 169,953 235,858
Tax Refunds Receivable 5,881 153,901
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TOTAL CURRENT ASSETS 36,210,091 36,813,963
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Equipment and Improvements
Storage Tanks 125,815 125,815
Leasehold Improvements, Furniture
and Equipment 714,574 714,142
Laboratory Equipment 274,418 274,418
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1,114,807 1,114,375
Less: Accumulated Depreciation and
Amortization (720,269) (671,519)
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Net Equipment and Improvements 384,538 442,856
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Other Assets 31,985 31,985
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TOTAL ASSETS $ 36,636,614 $ 37,288,804
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued
Liabilities $ 74,478 $ 136,551
Loans Payable (Notes 1 and 2) 32,588,168 1,636,067
Other Liabilities 17,920 14,834
Deferred Taxes 3,796,227 3,719,932
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TOTAL CURRENT LIABILITIES 6,476,793 5,507,384
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Shareholders' Equity
Common Stock, par value $.01 per Share:
Authorized 10,000,000 Shares: Issued
and Outstanding 4,690,709 shares at
SEPTEMBER 30, 1997 and 4,712,709 at
December 31, 1996 53,097 53,097
Additional Paid in Capital 8,579,803 8,579,803
Net Unrealized holding gains on
available-for-sale securities(Note 2) 7,369,147 7,194,158
Retained Earnings 17,633,556 19,226,044
Treasury Stock (3,475,782) (3,271,682)
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TOTAL SHAREHOLDERS' EQUITY 30,159,821 31,781,420
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 36,636,614 $ 37,288,804
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES
Operating Revenues $ 125,882 $ 200,851 $ 420,897 $ 632,416
Dividend Income 540,781 538,866 1,611,393 1,581,758
Gains (Losses) on Sale
of Securities 381,656 23,311 583,741 206,085
Gains (Losses) On Sale of
Options and Commodities 4,446 1,652 8,779 (196,723)
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TOTAL REVENUES 1,052,765 764,680 2,624,810 2,223,536
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COSTS AND EXPENSES
Operations of Laboratories 352,578 248,836 643,643 673,682
Selling, General, and
Administrative 145,020 485,230 1,014,702 1,608,616
Interest Expense, Net of
Interest Income 65,814 16,849 114,375 42,141
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TOTAL COSTS AND EXPENSES 563,412 750,915 1,772,720 2,322,439
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Net Income (Loss) Before
Income Taxes 489,353 13,765 852,090 (98,903)
Provision for Income Taxes 57,607 (564) 90,827 13,828
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NET INCOME (LOSS) $ 431,746 $ 14,329 $ 761,263 $ (112,731)
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Weighted Average Number
of Shares Outstanding 4,469,709 4,722,709 4,698,932 4,729,375
========== =========== ========== ===========
Net Income (Loss) Per Common
Equivalent Share $ 0.09 $ 0.01 $ 0.16 ($ 0.02)
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income or (Loss) $ 761,263 $ (112,731)
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Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation equipment and improvements 48,750 44,445
Amortization - goodwill -- --
(Gain) Loss on sale of investments (595,520) (9,362)
Change in assets and liabilities:
(increase) decrease in accounts receivable 8,249 (183,333)
(increase) decrease in accounts receivable-
Related Parties 19,553
(increase) decrease in other current assets 65,906 509,515
(increase) decrease in other assets -0- (169)
(increase) decrease in tax refunds receivable 148,020
increase (decrease) in accounts payable,
accrued and other liabilities net of "short
sales" (58,045) (182,825)
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Total adjustments (363,088) 178,271
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Net cash provided by or (used in) operating
activities 398,175 65,540
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchase of equipment and
improvements (432) (73,326)
Net cash provided or (used) in purchase and
sale of investments 1,114,657 426,659
Net proceeds (repayments) of loans from brokers
used to purchase investments 152,101 799,805
Proceeds from "short sales" not closed 4,585 3,144
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Net cash provided by or (used in) investing
activities 1,270,911 1,156,282
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CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,353,755) -0-
Receipt of/(repaymentof_-bank loan 800,000 (900,000)
Payment for purchase of treasury stock (204,100) (234,004)
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Net cash provided by or (used in) financing
activities (1,757,855) (1,134,004)
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Net increase (decrease) in cash and cash
equivalents (88,769) 87,818
Cash and cash equivalents at beginning of year 123,115 1,987
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Cash and cash equivalents at end of period $ 34,346 $ 89,805
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
September 30, 1997 and December 31, 1996, the results of operations for the
three and nine months ended September 30, 1997 and cash flows for the nine
months ended September 30, 1997 and 1996. The consolidated financial statements
include the accounts of the Company and its subsidiary. All significant
intercompany transactions and balances have been eliminated in consolidation.
1. MARKETABLE SECURITIES
Upon adoption of FASB No. 115, management has determined that the company's
portfolio is best characterized as "Available-For-Sale". This has resulted in
the balance sheet carrying value of the company's marketable securities
investments, as of September 30,1997, and December 31, 1996, being increased
approximately 46.26% and 44.26% 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 table summarizes the company's investments as of:
SEPTEMBER 30, 1997
TYPE OF UNREALIZED UNREALIZED
SECURITY COST FAIR VALUE HOLDING GAINS HOLDING LOSSES
-------- ---- ---------- ------------- --------------
Equity $24,110,776 $35,275,350 $13,941,284 $2,776,710
Debt 25,000 25,800 800 -0-
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Total $24,135,776 $35,301,150 $13,942,084 $2,776,710
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December 31, 1996
TYPE OF UNREALIZED UNREALIZED
SECURITY COST FAIR VALUE HOLDING GAINS HOLDING LOSSES
-------- ---- ---------- ------------- --------------
Equity $24,635,436 $35,548,401 $13,375,737 $2,462,772
Debt 25,000 26,125 1,125 -0-
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Total $24,660,436 $35,574,526 $13,376,862 $2,462,772
At September 30, 1997, the securities held by the Company had a market
value of $35,301,150 and a cost basis of $24,135,776 resulting in a net
unrealized gain of $11,165,374 or 46.26% of cost.
At December 31, 1996, the securities held by the Company had a market value
of $35,574,526 and a cost basis of $24,660,436 resulting in a net unrealized
gain of $10,914,090 or 44.26% of cost.
At September 30, 1997 and December 31, 1996, marketable securities,
primarily consisting of preferred and common stocks of utility companies, are
valued at fair value.
2. LOANS PAYABLE
As of September 30, 1997 and December 31, 1996, the Company had loans
outstanding aggregating $1,000,0000 and $200,000 borrowed on a short-term basis
from a bank, which are secured by certain marketable securities owned by the
Company. These loans bear interest at approximately 7.6%.
Short term margin debt due to brokers, secured by the Company's marketable
securities, totaled $1,578,970 at September 30, 1997 and $ 1,426,869 at December
31, 1996.
(3) DIVIDENDS
The Company paid a dividend of $.50/per share to stockholder's of record as
of April 30, 1997 on May 30, 1997 in the amount of $2,353,755.
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Part II OTHER INFORMATION
Legal Proceedings
As previously reported, Daxor Corporation, (through its separately licensed
divisions), has been involved in various proceedings with the New York State
Department of Health relating to its licenses to operate clinical laboratories,
its blood bank and semen bank. The following is a summary of recent activity in
these matters in the third quarter ended September 30, 1997 Litigation in which
there was no activity has been described in previous filings:
1. Daxor v. State (Court of Appeals)
The Court of Appeals reversed the decision of the Appellate Division, First
Department stating that Daxor had a property interest in its license as a
clinical laboratory and as a sperm bank. Daxor had made a motion to re-argue
this matter which was denied in the Court of Appeals. The Blood Bank and Sperm
Bank have not taken any new depositors since this decision. Daxor is now filing,
for permission to appeal the decision to the U.S Supreme Court.
2. State v. Idant and Daxor (Third Department)
In this matter asking the Third Department to review their decision of
Administrative Law Judge Brandes regarding certain alleged violations, the Sperm
Bank, the Third Department refused to make a decision stating that because of
the Court of Appeals' ruling this action would be moot.
3. Yaker v. Department of Health New York/ Supreme Court Justice Stuart
Cohen
This is a class action suit against the Department of Health. This action
is still pending. The action by Judge Cohen protects the stored frozen blood and
semen of Daxor's clients. A hearing is scheduled December 1, 1997 before Justice
Cohen.
4.Daxor Corp., et al. v. Linden, et al (United States District Court,
Southern District, Case No.95 Civ. 7847 (KTD). Daxor instituted a $100 million
anti trust, Racketeering Influenced Corrupt Organizations Act and an action
pursuant to 42 UDC 1983 for violations of its civil rights against the New York
Blood Center and New York Department of Helath employess. Based upon the
decision of the New York Court of Appeals, finding that Daxor does not have a
property interest in its licenses, the action pursuant to 42 USC 1983 will be
withdrawn. Judge Duffy has requested that the Parties address whether the Court
of Appeals decision has any other effect on this litigation.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2.
RESULTS OF OPERATIONS
Nine months ended September 30, 1997 as compared with nine months ended
September 30, 1996.
For the nine months ended September 30, 1997, total revenues were
$2,624,810 up from $2,223,536 in 1996. Operating revenues were $420,897 in 1997
and down from 632,416 in 1996. Dividend income was $1,611,393 with a net
interest expense of 114,375 as compared to dividend income of $1,581,758 with a
net interest expense of 42141 in 1996. In 1997, the Company had a net profit of
$852,090 before income taxes versus a net loss of $98,903 before taxes in 1996.
Operating revenues have been sharply decreased because of legal actions against
Idant Laboratory Semen and Blood Banking facilities here in New York State. The
Company has not yet received any income from the Blood Volume Analyzer which was
cleared for marketing September 30, 1997 by the FDA. Laboratory operating
revenues have fallen sharply since the licenses of Daxor's Idant Laboratories
division were revoked on August 21, 1995. The laboratories functioned on a
restricted basis, until May 30, 1996. The Company, on May 30, 1996, won a
unanimous 5 - 0 Appellate Court decision against the New York
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State Health Department ordering the restoration of Daxor's license. This
decision was reversed by the New York State Court of Appeals in June, 1997.
Daxors' revenues have been negatively impacted by this decision. The Court of
Appeals decided that Daxor was not entitled to due process such as a hearing.
Unless reversed this could result in Daxor being unable to provide Blood and
Semen banking in New York State. The Company has been unable to take new clients
but has been able to maintain its current clients. The Company lost a portion of
its client base as a result of the Health Department's actions as well as false
media stories. The Company, on April 26, 1997 received accreditation from the
American Association of Tissue Banks (AATB). The Company became the only sperm
bank organization in New York State to receive this accreditation, and the sixth
within the United States. The Company was preparing a marketing program to
restore its client base. The company has potential recovery of its damages from
a one hundred million dollar Federal RICO/Antitrust suit against members of the
New York Health Department and the New York Blood Center. Two managers of the
New York Blood Center were convicted in August by the Federal Court on charges
of conspiring to tamper with tests to screen blood for the AIDS virus and other
infectious diseases as a way of taking shortcuts.
Operations a Daxor Oak Ridge where the Blood Analyzer is being
manufactured, have not contributed to earnings. The Company has received FDA
clearence for the BVA and is now awaiting for clearence for the Kit which is
used in conjuction with the Blood Volume Analyzer
Three months ended September 30, 1997 as compared with three months ended
September 30, 1996.
For the three months ended September 30, 1997 total revenues increased to
$1,052,765 from $764,680 in the 1996 quarter. In 1997, dividend income was
$540,781 with an interest expense of $65,814 compared to dividend income of
$538,866 with an interest expense of $16,8496 in 1996. The Company had a net
profit of $489,353 , primarily from security sales.before income taxes in 1997
versus a net profit of $13,765 before taxes in the 1996 quarter.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997 the Company had total assets of $36,636,614 and total
liabilities of $6,476,793 with shareholders' equity of $30,159,821. The Company
has a net pre taxed unrealized gain of $10,914,090 and $ 7,369,147 of net after
tax unrealized capital gains on available-for-sale securities in its portfolio.
This amount is included in the calculation of Total Shareholders' Equity.
The Company has a 5 year agreement with Oxford N.M.G., of Oak Ridge
Tennessee to produce the Blood Volume Analyzer. The Company signed a preliminary
agreement with Wellport INC. of Rochester N.Y. to fabricate the blood volume
analyzer kit. The Company has the option of building its own kit dispensing
facility to dispense the radioisotope kits or to utilize the services of a
subcontractor. The Company is currently in negotiation with a radio
pharmacutical company to dispense the kit.
The Company has adequate resources for the marketing of its instrument (the
Blood Volume Analyzer BVA-100) and the liquid capital to sustain its blood bank.
If the Company were to expand its blood banking operations on a full scale,
nation-wide basis, it would require additional capital. The Company's financial
reserves have played an essential role in sustaining the company during its
legal battles to provide frozen blood banking services to the public. The
Company has sustained a large loss of revenues and profits as results of the
actions taken against it by members of the Health Department and the Antitrust
actions of the New York Blood Center. The Company cannot predict the outcome of
its Federal RICO Antitrust suit against the Health Department and the New York
Blood Center. A court victory has the potential for recouping the financial
damage that the Company has
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incurred.
ITEM 6(b) Reports on Form 8-K
The Company did not file any reports on form 8-K during the first six
months of 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAXOR CORPORATION
(Registrant)
DATE: August 14, 1997 /s/ Joseph Feldschuh
JOSEPH FELDSCHUH, M.D.
President
DATE: August 14, 1997 /s/ Robert Rosenthal
ROBERT ROSENTHAL, M.D.
Vice President
DATE: August 14, 1997 /s/ Octavia Atanasiu
OCTAVIA ATANASIU
Treasurer
DATE: August 14, 1997 /s/ Virginia Fitzpatrick
VIRGINIA FITZPATRICK
Secretary
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