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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 JUNE 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
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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 JUNE 30, 1997
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COMMON STOCK 4,703,043
PAR VALUE: $.O1 per share
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Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets
June 30, 1997, December 31, 1996 2
Consolidated Statements of Income 3
Consolidated Statements of Cash
Flows - six months ended
June 30, 1997 - June 30, 1996 4
Daxor Corporation - Notes to
Consolidate Financial Statements 5
Part II. OTHER INFORMATION
Legal Proceedings 6
ITEM 2. Managements Discussion and Analysis
Result of Operations and Financial
Conditions 7
Liquidity and Capital Resources 8
1
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DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
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ASSETS
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Current Assets
Cash $ 69,270 $ 123,115
Marketable Securities at Fair Value
March 31, 1996 and
December 31,1996 (Notes 1 and 2) 34,262,628 35,574,526
Accounts Receivable 624,591 611,555
Accounts Receivable-Related Parties 95,455 115,008
Other Current Assets 230,355 235,858
Tax Refunds Receivable 5,881 153,901
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TOTAL CURRENT ASSETS 35,288,180 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 (704,019) (671,519)
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Net Equipment and Improvements 410,788 442,856
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Other Assets 31,985 31,985
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TOTAL ASSETS $ 35,730,953 $ 37,288,804
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities
Accounts Payable and Accrued
Liabilities $ 88,612 $ 136,551
Loans Payable (Notes 1 and 2) 3,524,792 1,636,067
Other Liabilities 12,695 14,834
Deferred Taxes 3,313,615 3,719,932
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TOTAL CURRENT LIABILITIES 6,939,714 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
JUNE 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) 6,432,311 7,194,158
Retained Earnings 17,201,810 19,226,044
Treasury Stock (3,475,782) (3,271,682)
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TOTAL SHAREHOLDERS' EQUITY 28,791,239 31,781,420
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 35,730,953 $ 37,288,804
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
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DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES
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Operating Revenues $ 144,733 $ 253,889 $ 295,015 $ 431,565
Dividend Income 525,689 529,191 1,070,612 1,042,892
Gains (Losses) on Sale
of Securities 38,300 40,729 202,085 182,774
Gains (Losses) On Sale of
Options and Commodities (1,287) (949) 4,333 (198,375)
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TOTAL REVENUES 707,435 822,860 1,572,045 1,458,856
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COSTS AND EXPENSES
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Operations of Laboratories 151,308 294,719 291,065 424,846
Selling, General, and
Administrative 482,527 536,314 869,682 1,121,386
Interest Expense, Net of
Interest Income 30,079 6,011 48,561 25,292
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TOTAL COSTS AND EXPENSES 663,914 837,044 1,209,308 1,571,524
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Net Income (Loss) Before
Income Taxes 43,521 (14,184) 362,737 (112,668)
Provision for Income Taxes 5,980 1,081 33,220 14,392
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NET INCOME (LOSS) $ 37,541 $ (15,265) $ 329,517 $ (127,060)
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Weighted Average Number
of Shares Outstanding 4,696,376 4,722,709 4,703,043 4,789,375
=========== =========== =========== ===========
Net Income (Loss) Per Common
Equivalent Share $0.01 ($0.01) $0.07 ($.03)
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
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DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1996
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<S> <C> <C>
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net Income or (Loss) ............................... $ 329,517 $ (127,060)
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Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation equipment and improvements ............ 32,500 29,630
Amortization - goodwill ............................ -- --
(Gain) Loss on sale of investments ................. (206,418) 15,601
Change in assets and liabilities:
(increase) decrease in accounts receivable ....... (13,036) (130,134)
(increase) decrease in accounts receivable-
Related Parties ........... 19,553
(increase) decrease in other current assets ...... 5,503 595,293
(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" ........................................... (45,439) (183,476)
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Total adjustments ................................ (59,317) 326,745
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Net cash provided by or (used in) operating
activities ....................................... 270,200 199,685
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Payment for purchase of equipment and
improvements ..................................... (432) (7,503)
Net cash provided or (used) in purchase and
sale of investments .............................. 344,629 898,270
Net proceeds (repayments) of loans from brokers
used to purchase investments ..................... 1,088,725 80,688
Proceeds from "short sales" not closed ............. 888 20,172
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Net cash provided by or(used in)investing activities 1,433,810 991,627
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Dividends paid ................................... (2,353,755)
Receipt of/(repayment of bank loan ............... 800,000 (900,000)
Payment for purchase of treasury stock ........... (204,100) (133,500)
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Net cash provided by or (used in) financing
activities ....................................... (1,757,855) (1,033,500)
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Net increase (decrease) in cash and cash
equivalents ...................................... (53,845) 157,812
Cash and cash equivalents at beginning of year ... 123,115 1,987
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Cash and cash equivalents at end of period ....... $ 69,270 $ 159,799
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
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DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 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
June 30, 1997 and December 31, 1996, the results of operations for the three
and six months ended June 30, 1997 and 1996 and cash flows for the six months
ended June 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 June 30,1997, and December 31, 1996, being
increased approximately 39.75% 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:
June 30, 1997
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TYPE OF COST FAIR VALUE UNREALIZED UNREALIZED
- ------- ---- ---------- ---------- ----------
SECURITY HOLDING GAINS HOLDING LOSSES
- -------- ------------- --------------
Equity $24,491,702 $34,236,628 $12,701,005 $2,956,079
Debt 25,000 26,000 1,000 -0-
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Total $24,516,702 $34,262,628 $12,702,005 $2,956,079
=========== =========== =========== ==========
December 31, 1996
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TYPE OF COST FAIR VALUE UNREALIZED UNREALIZED
- -------- ---- ---------- ---------- ----------
SECURITY HOLDING GAINS HOLDING LOSSES
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Equity $24,635,436 $35,548,401 $13,375,737 $2,462,772
Debt 25,000 26,125 1,125 -0-
----------- ----------- ----------- ----------
Total $24,660,436 $35,574,526 $13,376,862 $2,462,772
5
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At June 30, 1997, the securities held by the Company had a market
value of $34,262,628 and a cost basis of $24,516,702 resulting in a net
unrealized gain of $9,745,926 or 39.75% 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 June 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 June 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 7.35%.
Short term margin debt due to brokers, secured by the Company's
marketable securities, totaled $ 2,515,594 at June 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.
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 second quarter ended June 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 has made a motion
to re-argue this matter which is presently tended before the Court of Appeals.
The Blood Bank and Sperm Bank have not taken any new depositors since this
decision.
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. A motion for
reconsideration is presently before the Third Department stating the various
reasons why this action is not moot.
3. Daxor v. State
In this declaratory judgement action in which Daxor requested the
New York State Supreme Court to find the sperm banking regulation
unconstitutional. Justice Abdu-Salaam has decided that this action be more
properly decided by the Third Department. No action has yet been taken because
no Order with Notice of Entry had been served upon the parties.
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4. Pollinger v. Daxor
This action which arises out of the alleged negligence of Daxor,
apparently has been abandoned by the Plaintiffs. Daxor has a counteraction for
attempted extortion.
5. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2.
RESULTS OF OPERATIONS
Six months ended June 30, 1997 as compared with six months ended June 30, 1996.
For the six months ended June 30, 1997, total revenues were $1,572,045
up slightly from $1,458,856 in 1996. Operating revenues were $295,015 in 1997
and down from 431,565 in 1996. Dividend income was $1,070,612 with a net
interest expense of (48,561) as compared to dividend income of $1,042,892 with
a net interest income of ($25,292) in 1996. In 1997, the Company had a net
profit of $362,737 before income taxes versus a net loss of $112,668 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 is currently undergoing an FDA approval process. 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 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. Daxor is attempting
to expidite the taking of depositions from members of the New York Blood Center
for its Antitrust suit against the Center.
Operations a Daxor Oak Ridge where the Blood Analyzer is being
manufactured, have not contributed to earnings. The Company is awaiting FDA
approval for the Blood Volume Analyzer from the FDA.
Three months ended June 30, 1997 as compared with three months ended June 30,
1996.
For the three months ended June 30, 1997 total revenues declined to
$707,435 from $822,860 in the 1996 quarter. In 1997, dividend income was
$525,689 with an interest expense of ($30,079) compared to dividend income of
$529,191 with an interest expense of $6,011 in 1996. The Company had a net
profit of $43,521 before income taxes in 1997 versus a net loss of $14,184
before taxes in the 1996 quarter.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 the Company had total assets of $35,730,953
and total liabilities of $6,939,741 with shareholders' equity of $28,791,239.
The Company has $ 6,432,311 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 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 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
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JOSEPH FELDSCHUH, M.D.
President
DATE: August 14, 1997 /s/Robert Rosenthal
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ROBERT ROSENTHAL, M.D.
Vice President
DATE: August 14, 1997 /s/Octavia Atanasiu
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OCTAVIA ATANASIU
Treasurer
DATE: August 14, 1997 /s/ Virginia Fitzpatrick
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VIRGINIA FITZPATRICK
Secretary
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