<PAGE>
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, 1998
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 Ave
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, 1998
- ---------------------------------------------------------------------
COMMON STOCK
PAR VALUE: $.O1 per share 4,760,709
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS PAGE
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Consolidated Balance Sheets as at
September 30, 1998 and December 31, 1997 F-1
Consolidated Statements of Operations for the
Three and Nine Months ended September 30, 1998
and 1997 F-2
Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1998 and 1997 F-3
Notes to Financial Statements F-4
<PAGE>
DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS [UNAUDITED]
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 89,686 $ 60,768
Marketable Securities at Fair Value
September 30, 1998 and December 31,
1997. (Notes 1 and 2) 42,184,210 40,347,085
Accounts receivable 158,710 173,098
Accounts receivable-Related parties 75,979 104,350
Other current assets 243,287 215,090
Tax refunds receivable 5,881 5,881
------------ -------------
Total Current Assets 42,757,753 40,906,272
EQUIPMENT AND IMPROVEMENTS
Storage tanks 125,815 125,815
Leasehold improvements, furniture
and equipment 767,191 714,774
Laboratory equipment 274,418 274,418
------------ -------------
1,167,424 1,115,007
Less: Accumulated depreciation and amortization 777,003 730,503
------------ --------------
Net equipment and improvements 390,421 384,504
Other Assets 31,816 31,816
------------ -------------
Total Assets $ 43,179,990 $ 41,322,592
============ =============
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LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 46,470 $ 188,572
Loans payable (Notes 1 and 2) 1,659,481 2,494,639
Other Liabilities 11,336 30,690
Deferred Taxes (Note 1) 6,337,503 5,690,967
------------ -------------
Total Liabilities 8,054,790 8,404,868
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 10,000,000 shares: issued and
outstanding shares 4,760,709 September 30,
1998 and 4,690,709 December 31, 1997 53,097 53,097
Additional Paid in capital 9,798,232 8,579,803
Net unrealized holding gains
on available-for-sale securities (Note 1) 12,302,210 11,047,170
Retained earnings 16,532,422 16,713,436
Treasury stock (3,560,761) (3,475,782)
------------ -------------
Total Shareholders' Equity 35,125,200 32,917,724
Total Liabilities and Shareholders' Equity $ 43,179,990 $ 41,322,592
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
F-1
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DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
- ---------------------------------------------------------------------------------------------------------------------
Operating revenues $ 74,161 $ 125,882 $ 259,303 $ 420,897
Dividend income 451,323 540,781 1,475,648 1,611,393
Gains (losses) on sale
of securities 3,505 381,656 353,369 583,741
Gains (losses) on sale
of options and commodities -- 4,446 -- 8,779
---------- ---------- ---------- ----------
Total Revenues 528,989 1,052,765 2,088,320 2,624,810
---------- ---------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Operations of Laboratories 203,347 352,578 616,823 643,643
Selling, General, and
Administrative 299,340 145,020 1,191,051 1,014,702
Interest expense, net of
interest income 26,709 65,814 447,464 114,375
---------- ---------- ---------- ----------
Total Costs and Expenses 529,396 563,412 2,255,338 1,772,720
---------- ---------- ---------- ----------
Net Income (Loss) Before Income
Taxes (407) 489,353 (167,018) 852,090
Provision for income taxes -- 57,607 14,000 90,827
---------- ---------- ---------- ----------
Net Income (Loss) $ (407) $ 431,746 $ (181,018) $ 761,263
========== ========== ========== ==========
Weighted Average Number of Shares
Outstanding 4,780,709 4,469,709 4,765,153 4,698,932
Net Income of (Loss) per Common Equivalent
Share $ -- $ 0.09 $ (0.04) $ 0.16
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-2
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<PAGE>
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
- ------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income or (loss) $ (181,018) $ 761,263
-------------- ---------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation equipment and improvements 46,500 48,750
(Gain) loss on sale of investments (353,369) (595,520)
Change in assets and liabilities:
(Increase) decrease in accounts receivable 14,388 8,249
(Increase) decrease in accounts receivable-
Related Parties 28,371 19,553
(Increase) decrease in other current assets (28,197) 65,905
(Increase) decrease in tax refunds receivable -- 148,020
Increase (decrease) in accounts payable, accrued
and other liabilities net of "short sales" (150,627) (58,045)
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Total adjustments (442,934) (363,088)
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Net cash provided by or (used in) operating activities (623,952) 398,175
-------------- ---------------
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CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Payment for purchase of equipment and
improvements (52,417) (432)
Net cash provided or (used) in purchase
and sale of investments 399,813 1,114,657
Net proceeds (repayments) of loans from
brokers used to purchase investments (835,158) 152,101
Proceeds from "short sales" not closed 7,179 4,585
-------------- ---------------
Net cash provided by or (used in) investing activities (480,583) 1,270,911
---------------
- -------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Dividends paid -- (2,353,755)
Receipt of/(repayment of)- bank loan -- 800,000
Payment for purchase of treasury stock (361,500) (204,100)
Receipt from reissuance of treasury stock 1,494,950
-------------- ---------------
Net cash provided by or (used in) financing activities 1,133,450 (1,757,855)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 28,915 (88,769)
Cash and cash equivalents at beginning of year 60,768 123,115
-------------- ---------------
Cash and cash equivalents at end of period $ 89,683 $ 34,346
============== ===============
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
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 30,1998, and December 31, 1997, the results of operations for the
three and nine months ended September 30,1998 and 1997 and cash flows for the
nine months ended September 30,1998 and 1997. 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, 1998 and December 31, 1997 being
increased approximately 79.17 % and 70.90 % 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>
September 30, 1998
-------------------
Unrealized Unrealized
Type of security Cost Fair Value holding gains holding losses
- ---------------- ---- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Equity $23,519,497 $42,158,735 $19,528,209 $ 888,971
Debt 25,000 25,475 475 0
----------- ----------- ----------- -----------
Total $23,544,497 $42,184,210 $19,528,684 $ 888,971
=========== =========== =========== ===========
<CAPTION>
December 31, 1997
-----------------
Unrealized Unrealized
Type of security Cost Fair Value holding gains holding losses
- ---------------- ---- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Equity $23,583,948 $40,320,610 $18,450,502 $ 1,713,840
Debt 25,000 26,475 1,475 0
----------- ----------- ----------- -----------
Total $23,608,948 $40,347,085 $18,451,977 $1,713,840
=========== =========== =========== ===========
</TABLE>
F-4
<PAGE>
At September 30, 1998 the securities held by the Company had a market
value of $42,184,210 and a cost basis of $23,544,497 resulting in a net
unrealized gain of $ 18,639,713 or 79.17% of cost.
At December 31, 1997 the securities held by the Company had a market
value of $40,347,085 and a cost basis of $23,608,948 resulting in a net
unrealized gain of $16,738,137 or 70.90% 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 at September 30, 1998 and December 31, 1997, the Company had loans
outstanding aggregating $1,000,000 borrowed on a short term basis from a bank,
which are secured by certain marketable securities of the Company. The loans
bear interest at approximately 7.5%.
Short term margin debt due to brokers ,secured by the Companies
marketable securities, totaled $659,481 at September 30, 1998 and $1,494,639 at
December 31, 1997
F-4
<PAGE>
Part II OTHER INFORMATION
- -------------------------
Item 1.
- -------
Legal Proceedings
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As reported in previous filings, 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. During the past 15 months
the Company has engaged in negotiations to end these legal proceedings and to
re-open Daxor's Idant semen and blood banking facilities, which have operated
in a limited capacity and were unable to take new clients. An agreement was
signed on November 3, 1998 to end all current litigation between Daxor
Corporation and the New York State Department of Health. The agreement calls
for the establishment of a separate wholly-owned subsidiary, Scientific Medical
Systems, with a separate Board of Directors, for the operation of Daxor's New
York semen bank and long term frozen storage blood bank. The Board of Directors
of the subsidiary were appointed by Daxor's Board of Directors and approved by
the New York State Department of Health. New Directors were appointed by the
subsidiary Board to direct the semen bank and blood bank. The subsidiary will
function only within New York State. Daxor's Idant Laboratories semen bank is
the only semen bank in the State of New York accredited by the American
Association of Tissue Banks (AATB). The agreement also includes the dropping of
anti-trust litigation against the New York Blood Center, which was included as
part of the legal actions against the New York State Department of Health.
Daxor retains the right to file a separate suit against the New York Blood
Center. The Company also expects to enter an agreement to end its lawsuit
against the K-III Corporation.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2.
- -------
RESULTS OF OPERATIONS
- ---------------------
Nine months ended September 30, 1998 as compared with nine months ended
- -----------------------------------------------------------------------
September 30, 1997.
- -------------------
For the nine months ended September 30, 1998, total revenues were
$2,088,320 down from $2,624,810 in 1997. Operating revenues were $259,303 in
1998 down from $420,897 in 1997. Dividend income was $1,475,648 with a net
interest expense of $447,464, as compared to dividend income of $1,611,393 with
a net interest expense of $114,375 in 1997. In 1998, the Company had a net loss
of $167,018 before income taxes versus a gain of $852,090 before income taxes
in 1997. Operating revenues have been sharply decreased because of legal
actions against Idant Laboratory's semen and blood banking facilities here in
New York State. Some of these actions date back almost ten years. During the
past three years the Company's revenues from laboratory and blood banking
operations have been severely reduced because of these actions. The Company
filed various suits in both State and Federal court against Department of
Health officials. On November 3, 1998 Daxor and the Department of Health signed
an agreement which will lead to the re-opening of the Daxor facilities under a
separate subsidiary. The Company anticipates that this will increase revenue
from these sources. The Company has not yet received any income from the Blood
Volume Analyzer, which is in the process of being introduced to hospitals. The
Company currently has Letters of Intent from ten major teaching hospitals to
test the Blood Volume Analyzer. The Company expects that as the Blood Volume
Analyzer sales increase, the relative significance from semen banking services
will diminish. The company may expand its blood banking operations into states
outside of New York.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1998 the Company had total assets of
$43,179,990 and total liabilities of $8,054,790 with shareholders' equity of
$35,125,200. The Company has a net pre-taxed gain of $18,639,713 and
$12,302,210 of net after tax unrealized capital losses on available-for-sale
securities in its portfolio. This amount is included in the calculation of
Total Shareholders' Equity. The Company's stock portfolio had a market value of
$42,184,210 with short-term loans of $1,659,481 with 4,760,709 shares
outstanding.
The Company acquired the assets of Wellport, Inc. of
Rochester, NY. Wellport has been the manufacturer which has fabricated the
patented Blood Volume Analyzer injection syringe. Mr. Daniel Wellington,
President of Wellport, was appointed a Vice-President of Daxor Corporation. The
Company is currently in negotiation with a radio-pharmaceutical company to
dispense the kit.
The Company has adequate resources for the marketing of its
Blood Volume Analyzer 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 a result of its
conflicts with the New York State Department of Health. The Company's immediate
main focus will be on developing and marketing the Blood Volume Analyzer. The
Company is considering expanding its blood banking operations outside of New
York State.
The Company did not file any reports on form 8-K during the
first nine months of 1998.
The Company has initiated a contract for a new computer system to be installed
in the next 90 days to avoid any year 2000 computer problems.
<PAGE>
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: November 12, 1998 /s/
- ----------------------- ------------------------------
JOSEPH FELDSCHUH, M.D.
President
DATE: November 12, 1998 /s/
- ----------------------- ------------------------------
ROBERT ROSENTHAL, M.D.
Vice President
DATE: November 12, 1998 /s/
- ----------------------- ------------------------------
OCTAVIA ATANASIU
Treasurer
DATE: November 12, 1998 /s/
- ----------------------- ------------------------------
VIRGINIA FITZPATRICK
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 89,686
<SECURITIES> 42,184,210
<RECEIVABLES> 234,689
<ALLOWANCES> 0
<INVENTORY> 25,960
<CURRENT-ASSETS> 42,757,753
<PP&E> 1,167,424
<DEPRECIATION> 777,003
<TOTAL-ASSETS> 43,179,990
<CURRENT-LIABILITIES> 8,054,790
<BONDS> 0
0
0
<COMMON> 53,097
<OTHER-SE> 35,072,103
<TOTAL-LIABILITY-AND-EQUITY> 43,179,990
<SALES> 259,303
<TOTAL-REVENUES> 2,088,320
<CGS> 0
<TOTAL-COSTS> 616,823
<OTHER-EXPENSES> 1,191,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 447,464
<INCOME-PRETAX> (167,018)
<INCOME-TAX> 14,000
<INCOME-CONTINUING> (181,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181,018)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
