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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, 1998 0-12248
Daxor Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2682108
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
350 Fifth Avenue
Suite 7120
New York, New York 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 244-0555
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $.01 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ ]
As of March 26, 1999, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $ 23,837,700. 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 $ 15.00.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of March 24, 1999: 4,752,709 shares.
Documents incorporated by reference: The information required by Part III is
incorporated by reference from the proxy statement for the 1998 Annual Meeting
of Shareholders.
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PART I.
Item 1. Business
The Daxor Corporation (the "Company") was formed 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, the Company 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). In 1985, Idant also
developed the first autologous blood bank in the United States where individuals
could store their own blood. The company in 1998 received marketing clearance
from the FDA to market its Blood Volume Analyzer. The Company began beta testing
of the Blood Volume Analyzer in hospitals in October 1998. Beta testing permits
hospitals to undergo an evaluation process in a multitude of clinical
situations. Measurement of human blood volume requires use of a patented kit
injection system, which required separate FDA clearance. In 1998 the company
acquired the assets of The Rochester New York Wellport Corporation for
manufacturing of the syringe kit. Beta-testing of the BVA-100 in hospitals began
in October 1998.
Measurement of Human Blood Volume
The Company received the first U.S. patent for a semi-automated instrument to
measure human blood volume in 1991. In March 1996, the Company received a patent
for a quantitative injection kit to be used in conjunction with the instrument.
The injection kit permits a quantitative injection with a precision of 99.8%.
Measurement of human blood volume has been available for forty years, but has
required four to eight hours of highly precise preparation and technician time
for a result to be obtained. Because of this, precise blood volume measurements
have been infrequently performed outside of research situations. The Company's
Blood Volume Analyzer permits accurate blood volumes to be obtained within
eighteen to thirty-five minutes. In September 1997, the Company received
clearance from the FDA to market its Blood Volume Analyzer, and in January 1998,
the Company received clearance from the FDA to market the associated injection
kit. The disposable injection kit is essential to the rapid performance of blood
volume analysis.
The ability to accurately measure the quantity 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 within an individual are
the hematocrit or hemoglobin. These tests actually measure the thickness, 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 the plasma are suspended 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.
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 quantities of blood in a short time. Despite infusion of saline
(salt water) and other blood substitutes, the hematocrit 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
of blood 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 estimated accuracy 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 or 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 instrument is also useful in a number of non-emergency medical situations
such as hypertension (high blood pressure). There is an estimated more than 30
million Americans who are treated for hypertension. Hypertension is caused by
two variables. This is either too much blood or fluid retention within the
circulation or too much vasoconstriction (tightening of the blood vessels).
There are two major categories of drugs used to treat hypertension. These are
diuretics, which cause the kidney to lose fluid and decrease blood volume, or
vasodilators, which relax the blood vessels. Treatment is often a trial and
error approach because neither vasoconstriction or blood volume is actually
measured in a patient (with
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rare exception). The blood volume analyzer permits rapid and more importantly an
accurate determination of the specific blood volume and normal blood volume for
a particular patient. By measuring the blood volume within the patient, the
physician can make a more rational or scientific choice in regard to the medical
choice of therapy administered. One of the most serious complications of
hypertension is loss of kidney function (renal failure) which may require a
patient to undergo permanent renal dialysis. Medications, which cause low blood
volume, may contribute to premature renal failure. The measurement of blood
volume in the treatment of hypertension may help prevent these types of
complications.
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, pediatrics and surgery. It identifies and
quantifies the amount of blood loss the patient has suffered, and helps
determine the need for continuing treatment. Every year, an estimate of 12
million blood transfusions is 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.
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 injection system received the first United States patent
ever issued for such a kit on March 20, 1996. The Company, in 1991, received a
U.S. patent on the instrument itself, a 12 European Common Market patent the
following year, and a Japanese patent on March 26, 1996.
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 since October 1998 has been conducting
beta testing of the BVA-100 in hospitals. Such testing has demonstrated that the
equipment provides rapid blood volume measurement. Research papers have been
submitted and abstracts accepted for the Annual Nuclear Medical Conference in
June 1999. Blood volume measurement is an approved test with six separate CPT
codes. Reimbursement has been received from a number of insurance companies for
measurement of blood volume using the BVA-100. Reimbursement is particularly
important for hospitals because hospitals may receive reimbursement and income
from non-hospitalized patients who undergo blood volume measurement. In 1998,
the medication Viagra, produced by Pfizer for erectile dysfunction was
associated with sudden death in a limited number of cases of inpatients who used
vasodilators. Unrecognized low blood volume was suspected as a possible factor
in some of these cases. The company is currently conducting a study on blood
volume measurements on potential Viagra users who might benefit from a blood
volume measurement prior to Viagra use.
BLOOD BANKING
The Company's frozen blood bank is the only blood bank in New York that allows
people to store their own blood for up to ten years. In 1985, the Company
established the first facility in the United States for long-term autologous
(self-storage) blood banking. The blood banking industry is a group of
for-profit and not-for-profit corporations whose total revenue is estimated to
exceed six billion dollars. These groups have a large financial stake in the
continuity of the current system and some have opposed the creation of
autologous (self-storage) 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 system of blood transfusions
presents risks to those individuals receiving blood. This is a risk which can be
avoided by utilizing one's previously stored blood. There are approximately
15-18 million blood transfusions administered annually. One third of the blood
utilized in New York City is imported from sources outside of NYS and overseas
because of severe shortages. 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.
In December 1985, Daxor received the first FDA registration in the U.S. for
long-term frozen autologous blood banking. The Company has had research
interests in the cryobanking of blood for over 20 years. The current donor
system of blood banking exposes a transfusion recipient to the dangers of
infections such as AIDS and hepatitis. There is a significant number of
hepatitis cases 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 donors; it only reduces
the risk of an AIDS carrier donating blood. Other viral diseases, such as the
cytomegalovirus, 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
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as hepatitis and AIDS my 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 concept to both sperm banking and
blood banking. Under the quarantine 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 contract 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 severely 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. Patients who have decreased blood
volume are termed 'Hypovolemic'. The Blood volume Analyzer has the potential to
detect such individuals before complications from under-transfusion occurs.
Physicians who fear the complications of transfusion with potentially
contaminated blood do not have these concerns when patients use autologous blood
(self-storage). The Company believes that an educational process will be
required to establish the desirability of autologous blood storage and to
overcome opposition to any change in the current blood banking system from
established tax-exempt (non-profit) and profit-making entities who have great
financial stakes in ensuring the continuity of the present donor system. The
Company views its entry into this field as a major long-term commitment. The
company believes that it can work with some voluntary blood banks to establish
joint marketing of long term frozen personal blood storage programs.
In the late 1980's, the use of autologous blood has been encouraged by
increasing 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
patient 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 generally acknowledged that the more blood-depleted an individual
is, the greater the risk of a complication. The decision to operate on
individuals in a blood-depleted state is a compromise between increasing the
risk of surgery in a blood-depleted state and the risks from donor transfusions.
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. Individuals who have stored their own
blood when they are healthy can avoid the risks from donor transfusions.
Idant (Division of Scientific Medical Systems, subsidiary of Daxor Corporation)
Semen (Sperm) Banking
Idant, in 1985, was the first semen bank to institute 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 recipient father can make the
child, who results from artificial 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.
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Storage of Sperm for Personal Use
In 1971, Idant pioneered both the technology and the commercial application of
long-term preservation of human sperm for use in artificial insemination. The
division has provided frozen semen services to physicians worldwide. 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 has the only semen
bank in the state of New York, out of more than 50 licensed banks, which is
accredited by the American Association of Tissue Banks. 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
impairment of their ability to father children and by men who have been found to
be marginally fertile. These men may now be able to have children by use of
techniques that increase their fertility by treating their sperm to artificially
inseminate their partners. The facilities are also used by men who plan to
undergo sterilization by vasectomy, but who believe that they might desire
children in the future. Artificial insemination using stored sperm is much more
effective and less expensive than present techniques of vasectomy reversal. In
addition, patients with a variety of diseases, including many types of cancer,
store semen prior to undergoing treatment by chemotherapy or radiation. By
utilizing cryogenic preservation facilities, these patients, who are frequently
in their teens or twenties, will be able to father their own children after
cancer treatment, despite the high risk of sterility and birth defects
associated with treatments. The Company receives referrals for these services
from multiple sources, primarily physicians.
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 of Toronto reported almost identical pregnancy rates with frozen
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 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 viability or change in condition.
The Company uses a customized carousel canister system in its sperm bank storage
system. This permits retrieval of specimens from lower levels without removal of
upper specimens. Only a few other sperm banks in the U.S. are known to have such
a system. Most other banks use a "rack and cane" pull-up system, which requires
removal of upper specimens from the tank to retrieve specimens at lower levels.
In such a bank, a specimen may be exposed to a temperature change of -321oF (the
temperature of the liquid nitrogen) to room temperature of 78oF more than 100
times during its storage lifetime. This will result in a gradual degradation of
the specimen. In the Idant system the specimen remains under liquid nitrogen
almost continuously while in storage. The Company is aware of only one other
semen bank, which uses the carousel system for long term storage of semen.
Patent and Copyright Protection
The Company has 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 total human blood volume for a specific individual. The
Company received a European patent covering 12 countries. The Company has
received a Japanese patent for the BVA-100. This is the first patent ever issued
for an instrument in Japan to measure human blood volume. The instrument is
designed to work with an injection kit 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 purchaser of the
instrument would use it without purchasing the reagent kit. On March 20, 1996,
the Company received approval for its U.S. patent application for the injection
kit, which is specifically designed to be used with the instrument. This is the
first U.S. patent ever issued for a system, which permits a fixed quantitative
amount of isotope to be injected for diagnostic purposes. The injection system
was specifically designed for use with the BVA-100. However, it can be used for
other diagnostic test purposes where a precise complete quantitative injection
of a diagnostic reagent is required.
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Marketing
The Company intends to market its Blood Volume Analyzer on both a sale and
loaner basis to potential users, which are expected to be primarily hospitals,
surgi-centers, and imaging centers (radiology). The Company anticipates
utilizing a loaner plan coupled with utilization of a specific number of blood
volume measurement kits per week. This type of marketing approach is common in
the laboratory equipment industry and will permit hospitals to test the Blood
Volume Analyzer without first making a commitment to purchase an instrument. The
Company plans to provide its instruments and kits initially to teaching
hospitals for testing purposes. The Company will supply technicians to each user
for educational and training purposes. The Company has also received indications
of interest from some medical device distributors to market the BVA-100. The
Company will evaluate whether it is optimal for Daxor to do its own marketing,
or market with a major distributor to facilitate rapid market penetration. One
of the objectives of the Company in the marketing program will be to document
the accurate measurement of blood volume as cost-effective in situations where
blood transfusions are required. The current medical environment is highly
oriented towards the concept of cost-effectiveness. The Company believes that
accurate measurement of blood volume will prevent catastrophic complications,
such as strokes or heart attacks, in patients who have been under-transfused.
Surgical patients who have suffered strokes or heart attacks due to under
- -transfusion may require increased days of hospitalization. There are
approximately 4 million Americans who receive blood transfusions annually. One
focus of The Company's marking theme will be the concept that if a patient is
being considered for a blood transfusion, which could be potentially lethal,
then that patient should have an accurate blood volume measurement taken.
Another focus of marketing will be for non hospitalized patients. The Company
believes the need for blood volume analysis is even larger for non-hospitalized
patients. For example, patients with hypertension, heart failure, kidney
disease, chronic anemia would benefit from a precise blood volume measurement to
assist in therapeutic choices by their physicians. Blood volume measurement is a
recognized test and has six separate CPT codes that can be used for billing
purposes to insurance companies. The Company in addition in marketing to
hospitals and surgi centers will market to imaging centers as well as large
physicians groups. The Company is also in the process of exploring marketing
links with established medical distributors with overseas markets.
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 Japanese patent for its Blood Volume
Analyzer provides significant protection against any future potential
competition in the blood volume analysis field. The receipt of the U.S. patent
for the injection kit system provides significant additional protection as the
Company believes that the kits will be a major source of revenue. The Company
believes that its main hindrance to market acceptability will be the need to
demonstrate that its blood volume measurement equipment is capable of producing
accurate data on a cost effective basis. Test kit costs will be modest relative
to the cost of the transfusion and the critical information derived from the
test. Daxor has developed a web site (http://
www.daxor._Hlt447451989c_Hlt447451989om), which will be helpful for marketing
purposes.
There are at least 300 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 for careful
screening of donors for artificial insemination will result in an increasing use
of frozen semen for this purpose. The Idant semen bank is the only semen bank in
the State of New York out of more than fifty that is accredited by the American
Association of Tissue Banks. The Company has developed a web site (http: //
www.Idant.com), which will be helpful for marketing purposes.
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. At the present time there
are no other organizations providing long-term personal frozen blood storage. It
is the company's intentions to form alliances with other short-term donor blood
banks to expand frozen personal blood storage services. The Company views
personal blood storage as a supplement to and not as a competition to other
blood donor services.
Regulation
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 statutes and regulations generally require
manufacturers to comply with regulatory requirements designed to assure the
safety and effectiveness of medical devices. The FDA clearance for marketing of
the Blood
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Volume Analyzer, BVA-100, and the associated quantitative injection kit marks
one of the most important milestones in the history of Daxor.
The New York State Department of Health regulates the Company's Idant semen and
blood bank within New York State. The Company has had a number of legal actions
described in previous reports regarding its semen and blood bank. These actions
resulted in the respective services having only limited operations while their
licenses were withheld. Daxor initiated lawsuits on November 4, 1998 an
agreement was reached ending these various lawsuits. As part of the agreement
the Idant Semen Bank became a subsidiary of Scientific Medical Systems, which is
wholly owned by the Daxor Corporation. New directors were named for the
respective facilities. Scientific Medial Systems has its own separate board of
directors. As a result of the agreement the facilities were reinspected and on
February 1999 new licenses were issued for the semen bank blood bank and
laboratory. Throughout the litigation the Companies facilities maintained
operations for their storage clients but were unable to take new clients. Full
scale laboratory operations resumed in February 1999.
Employees
On March 26, 1999, the Company had 32 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. The company
currently occupies approximately 7,500 square feet with an annual rent cost of
$273, 433.49. In 1998 the company signed a lease for approximately 11,000 of
manufacturing and office space in Rochester New York. The lease was signed when
Daxor acquired the assets of the Wellport Corporation. 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 space. In January 1999 the company replaced its
entire computer network and is now fully Y2K compliant.
Item 3. Legal Proceedings
The companies' licenses for its Semen and blood bank had been withheld. This
resulted in lawsuits by Daxor at both the State and Federal level, which have
been described in previous filings. On November 3, 1998 an agreement was
reached. As part of this agreement a new wholly owned Daxor subsidiary,
Scientific Medical Systems, with its own Board of Directors was formed. New
licenses had been received. (See also previous section Regulation). The company
also reached a settlement with the 3-K corporation against whom it had filed a
libel suit. These settlements have ended all litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 1997.
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock is traded on the American Stock Exchange
under the symbol DXR.
1997
High Low
First Quarter...................... 13 3/4 9 3/8
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Second Quarter..................... 11 3/4 7 1/2
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Third Quarter...................... 13 3/4 8 1/2
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Fourth Quarter..................... 14 1/2 10 3/4
1998
High Low
First Quarter...................... 16 3/8 12 3/8
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Second Quarter..................... 15 12 5/16
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Third Quarter...................... 14 1/8 11 5/8
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Fourth Quarter..................... 14 7/8 11 1/2
On March 27, 1997, the Company had approximately 329 holders of record of the
Common Stock. The Company believes there are approximately 2500 beneficial
holders.
The Company paid a single cash dividend, $.50, on the Common Stock in 1997. Any
future dividends will be dependent upon the Company's earnings, financial
condition and other relevant factors.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data with respect
to the Company and is qualified in its entirety by reference to the
financial statements and notes thereto, from which these data were derived,
included elsewhere in the report.
Selected Operations
Statement Data:
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Year Ended December 31,
1998 1997 1996 1995 1994
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Operating revenues $ 324,192 $ 529,737 $ 717,308 $ 1,864,552 $ 1,844,418
Dividend income 1,942,759 2,138,755 2,132,173 2,209,962 2,157,735
Gains (losses) on sale
investments 362,487 144,681 16,354 674,421 584,982
----------- --------- ---------- ---------- ---------
Total revenues 2,629,438 2,813,173 2,865,835 4,748,935 4,587,135
----------- --------- ---------- ---------- ---------
Costs and expenses:
Operations of laboratories 961,031 628,729 819,722 1,041,275 1,016,832
Selling, general and
administrative 1,561,159 2,161,626 2,080,969 2,369,660 1,585,533
Interest expenses, net
of interest income 484,563 167,452 74,175 (113,973) 11,116
--------- --------- --------- --------- ---------
Total costs and expenses 3,006,753 2,957,807 2,974,866 3,296,962 2,613,481
--------- --------- --------- --------- ---------
Net income or (loss) before
income taxes (377,315) (144,634) (109,031) 1,451,973 1,973,654
Provision for income taxes 43,145 14,219 3,134 164,858 165,519
---------- ---------- ---------- ----------- -----------
Net income or (loss) $ (420,460) $ (158,853) $ (112,165) $ 1,287,115 $ 1,808,135
========== ========== ========== =========== ===========
Weighted average number of
shares outstanding 4,762,542 4,696,876 4,722,709 4,872,481 5,122,188
---------- ---------- ---------- ----------- ----------
Net income per common
equivalent share $ (0.09) $ (0.03) $ (0.02) $ 0.26 $ 0.35
========== ========== ========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Selected Balance Sheet Data:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital 34,837,930 32,501,404 31,306,579 31,598,345 28,739,806
Total assets 44,056,349 41,322,592 37,288,804 37,744,621 35,012,638
Total liabilities* 8,752,515 8,404,868 5,507,384 5,691,790 5,813,458
Shareholders' equity 35,303,834 32,917,724 31,781,420 32,052,831 29,199,180
Return on equity* 0.00% 0.00% 0.00% 4.41% 7.40%
* Return on equity is calculated by dividing the Company's net income for the
period by the shareholders' equity at the beginning of the period.
* Total liabilities include deferred taxes of $6,602,988 for unrealized gains.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Idant Laboratories contributed 100%, 100% and 65% of operating revenues in
1998, 1997 and 1996 respectively. The Companies operations in semen banking
and blood banking (laboratories) were restricted throughout 1998. These
operations were restored to full functioning in February 1999 as part of a
negotiated settlement in 1998. (See legal and regulation). The restoration of
these licenses will permit the company to reestablish its position in these
fields. The Company in 1998 increased its research and development on its
Blood Volume Analyzer. The FDA has cleared the Blood Volume Analyzer and its
quantitative injection syringe kit for marketing. The potential market for the
Blood Volume Analyzer is significantly larger than the Company's current
operations, and is believed to exceed $100 million per year. The Company
intends to focus its marketing efforts on the Blood Volume Analyzer.
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO DECEMBER 31, 1997
Total revenues were $2,629,438 in 1998, down from the $2,813,173 reported in
1997. Dividend income earned on the Company's securities portfolio was
$1,942,759, a decrease from the $2,138,755 reported in 1997. Gains on the sale
of investments was $362,487 in 1998 as compared to $144,681 in 1997. Net income
before income taxes was a loss of $420,460 in 1998 vs. $158,853 in 1997.
YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO DECEMBER 31, 1996
Total revenues were $2,813,173 in 1997, down from the $2,865,835 reported in
1996. Dividend income earned on the Company's securities portfolio was
$2,138,755, an increase from the $2,132,173 reported in 1996. Gains on the sale
of investments was $144,681 in 1997 as compared to $16,354 in 1996. Net income
before income taxes was a loss of $158,853 in 1997 vs. $109,031 in 1996.
10
<PAGE>
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 general and administrative expenses and
thus to maintain our 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, 1998, the Company's short-term debt was $2,050,549 vs.
$2,494,639 in 1997. At year-end 1998, shareholders' equity was $35,303,834. At
year-end 1997, the Company had shareholders' equity of $32,917,724. At
December 31, 1998 the Company's security portfolio had a market value of
$43,016,243 vs. $40,347,085 in 1997.
During 1998, the Company obtained FDA clearance for marketing the Blood Volume
Analyzer, BVA-100. In 1998 The Company purchased the assets of the Wellport
Manufacturing Company. This Company had previously manufactured the injection
kit. In the initial phase of marketing, the Company will lend the instrument
and supplies to a limited number of teaching hospitals for beta-testing
purposes. The Company is also involved in discussions with independent
marketing organizations to market the BVA-100. 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 cryo-centers
(freezing facilities). Such centers will include frozen autologous blood
banking, sperm banking, and possibly cord blood banking. The Company's primary
focus, however, will be the marketing of the Blood Volume Analyzer.
Year-end 1998, 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 its planned expansion as
a nationwide network of cryo-centers, there might be a need for additional
capital.
DAXOR CORPORATION
<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 Chief
Executive Officer
Chairman of the Board
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
- --------- ------- -------
/s/ Joseph Feldschuh President and Director March 30, 1999
- -------------------------
Joseph Feldschuh, M.D. (Principal Executive Officer)
/s/ Robert Rosenthal Vice President March 30, 1999
- -------------------------
Robert Rosenthal
/s/ Octavia Atanasiu Corporate Treasurer March 30, 1999
- -------------------------
Octavia Atanasiu Accounting Supervisor
(Principal Financial Officer)
/s/ Virginia Fitzpatrick Corporate Secretary March 30, 1999
- -------------------------
Virginia Fitzpatrick
/s/ Stephen M. Moss Director March 30, 1999
- -------------------------
Stephen M. Moss, PhD
/s/ Bruce Hack Director March 30, 1999
- -------------------------
Bruce Hack
/s/ James Lombard Director March 30, 1999
- -------------------------
James Lombard
/s/ Martin Wolpoff Director March 30, 1999
- -------------------------
Martin Wolpoff
Board of Directors:
Name Title
Dr. Joseph Feldschuh Chairman, President, & CEO
Stephen Moss Director
James Lombard Director
Martin Wolpoff Director
Bruce Hack Director
12
<PAGE>
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, 1998 and 1997
and for the three years ended December 31, 1998
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, 1998 F-9
Schedule IX - Short-term Borrowings - Years ended
December 31, 1998 1997, and 1996 F-9
Schedule X - Supplementary Income Statement Information -
Years ended December 31, 1998, 1997, and 1996 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 information is set
forth in the financial statements filed herewith, including notes thereto, and
therefore have been omitted.
13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of Daxor Corporation:
We have audited the accompanying balance sheet and consolidated balance sheet
of Daxor Corporation as at December 31, 1998 and 1997, the related statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. Our audits also included the financial
statement schedules listed in the Index at Item F-9.
These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Daxor Corporation as at December 31, 1998
and 1997, and the results of their operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth herein.
Frederick A. Kaden & Co.
Franklin Square, New York
March 23, 1998
<PAGE>
DAXOR CORPORATION
BALANCE SHEETS
December 31,
--------------------
1998 1997
---- ----
(Consolidated)
ASSETS
- ------
CURRENT ASSETS
Cash $ 79,511 $ 60,768
Marketable Securities at Fair Value
December 31, 1998 and December 31, 1997
(Notes 1 and 2) 43,016,243 40,347,085
Accounts receivable (Note 3) 151,234 173,098
Accounts receivable--Related parties (Note 12) 75,979 104,350
Other current assets 261,597 215,090
Tax refunds receivable 5,881 5,881
------------ ------------
Total Current Assets 43,590,445 40,906,272
EQUIPMENT AND IMPROVEMENTS (Note 4)
Storage tanks 125,815 125,815
Leasehold improvements, furniture and equipment 823,859 714,774
Laboratory equipment 274,418 274,418
------------ ------------
1,224,092 1,115,007
Less: Accumulated depreciation and amortization 796,159 730,503
------------ ------------
Net equipment and improvements 427,933 384,504
Other Assets 37,971 31,816
Total Assets $44,056,349 $41,322,592
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 88,594 $ 188,572
Loans payable (Notes 1 and 2) 2,050,549 2,494,639
Other Liabilities (Note 5) 10,384 30,690
Deferred Taxes (Note 1) 6,602,988 5,690,967
------------ ------------
Total Liabilities 8,752,515 8,404,868
Commitments and contingencies (Note 6)
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 10,000,000 shares: issued and
outstanding shares 4,752,709 December 31,
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) 12,817,565 11,047,170
Retained earnings 16,292,976 16,713,436
Treasury stock (3,658,036) (3,475,782)
------------ ------------
Total Shareholders' Equity 35,303,834 32,917,724
Total Liabilities and Shareholders' Equity $44,056,349 $41,322,592
============ ============
See accompanying notes to financial statements
F-2
<PAGE>
DAXOR CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
(Consolidated)
1998 1997 1996
---- ---- ----
Revenues:
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Operating revenues (Note 12) $ 324,192 $ 529,737 $ 717,308
Dividend income 1,942,759 2,138,755 2,132,173
Gains on sale of securities 362,487 131,618 214,607
Gains (losses) on sale of options and commodities - 13,063 (198,253)
----------- ---------- ----------
Total Revenues 2,629,438 2,813,173 2,865,835
----------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
- --------------------------------------------------------------------------------------------------------------------------
Operations of Laboratories 961,031 628,729 819,722
Selling, General, and Administrative 1,561,159 2,161,626 2,080,969
Interest expense, net of interest income 484,563 167,452 74,175
----------- ---------- ----------
Total costs and expenses 3,006,753 2,957,807 2,974,866
----------- ---------- ----------
Net Income Before Income Taxes (377,315) (144,634) (109,031)
Provision for income taxes (Note 9) 43,145 14,219 3,134
----------- ---------- ----------
Net Income $ (420,460) $ (158,853) $ (112,165)
=========== ========== ==========
Weighted Average Number of Shares Outstanding 4,762,542 4,696,876 4,722,709
=========== ========== ==========
Net Income per Common Equivalent Share $ (0.09) $ (0.03) $ (0.02)
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements
================================================================================
DAXOR CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Three Years Ended December 31, 1998
Common stock Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1996 4,742,709 $ 53,097 $ 8,579,803 $ 19,338,209 $ (3,037,679)
- --------------------------------------------------------------------------------------------------------------------------
Net income for the year ended
December 31, 1996 (112,165)
Purchase of Treasury Stock (30,000) (234,003)
-------- --- --- ------------ ------------
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 4,712,709 53,097 8,579,803 19,226,044 (3,271,682)
- --------------------------------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31, 1997 (158,853)
Purchase of Treasury Stock (22,000) (204,100)
Dividends (2,353,755)
--- --- --- -----------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 4,690,709 53,097 8,579,803 16,713,436 (3,475,782)
---------- ------- ------------ ------------ --------------
- --------------------------------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31, 1998 (420,460)
Purchase of Treasury Stock (38,000) (458,775)
Sale of Treasury Stock 100,000 1,218,429 276,521
---------- ------------ -------------
- -------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
4,752,709 $ 53,097 $ 9,798,232 $ 16,292,976 $ (3,658,036)
========== ========= ============ ============= =============
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
DAXOR CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
(Consolidated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income or (loss) $ (420,460) $ (158,853) $ (112,165)
----------- ----------- -----------
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation & Amortization 66,406 58,985 65,339
(Gain) loss on sale of investments (362,487) (144,681) (16,354)
Change in assets and liabilities:
(Increase) decrease in accounts receivable 21,864 438,457 (202,359)
(Increase) decrease in accounts receivable-
Related Parties 28,371 10,658 57,943
(Increase) decrease in other current assets (46,507) 20,768 528,837
(Increase) decrease in tax refunds receivable - 148,020 52,332
(Increase) decrease in other assets
net of goodwill amortization (6,155) 169 (169)
Increase (decrease) in accounts payable,accrued
expenses and other liabilities net of "short sales" (108,503) 55,396 (187,234)
Total adjustments (407,011) 587,772 298,335
----------- ---------- ----------
Net cash provided by operating activities (827,471) 428,919 186,170
----------- ---------- ---------
Cash flows from investing activities:
Payment for purchase of equipment and
improvements (109,835) (632) (85,525)
Net cash provided or (used) in purchase
and sale of investments 357,737 1,190,641 149,502
Net proceeds (repayments) of loans from
brokers used to purchase investments (444,090) 67,770 990,259
Proceeds from "short sales" not closed 6,227 18,008 5,527
----------- ---------- ----------
Net cash provided by/(used in) investing activities (189,961) 1,275,787 1,059,763
----------- ---------- ----------
Cash flows from financing activities
Receipt of/(repayment of)- bank loan - 800,000 (900,000)
Loans received/repaid - (9,198) 9,198
Dividends paid - (2,353,755)
Proceeds from sale of treasury stock 1,494,950
Payment for purchase of treasury stock (458,775) (204,100) (234,003)
--------- ---------- ----------
Net cash used in financing activities 1,036,175 (1,767,053) (1,124,805)
--------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents 18,743 (62,347) 121,128
Cash and cash equivalents at beginning of year 60,768 123,115 1,987
--------- ---------- ----------
Cash and cash equivalents at end of year $ 79,511 $ 60,768 $ 123,115
========= ========== ==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements as at December 31,
1998 and 1997 and for the three years ended December 31, 1998 have been
prepared in conformity with principles of accounting applicable to a going
concern. Daxor Corporation operates in the medical services and technology
industry.
The consolidated financial statements include the accounts of the
Company and its subsidiary. All significant 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 December 31, 1998 and December 31,
1997 being increased approximately 82.30 % 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:
December 31, 1998
-----------------
<TABLE>
<CAPTION>
Type of security Cost Fair Value Unrealized Unrealized
------ ------------ holding gains holding losses
------------------- ----------------------
<S> <C> <C> <C> <C>
Equity $23,595,690 $43,016,243 $20,441,847 $1,021,294
Debt 0 0 0 0
--------------------------------------------------------------------------------------------------
Total $23,595,690 $43,016,243 $20,441,847 $1,021,294
=========== =========== =========== ==========
<CAPTION>
December 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Type of security Cost Fair Value Unrealized Unrealized
- ---------------- ------ ------------ 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>
At December 31, 1998, the securities held by the Company had a market
value of $43,016,243 and a cost basis of $23,595,690 resulting in a net
unrealized gain of $19,420,553 or 82.30% 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 December 31, 1998 and December 31, 1997, marketable securities,
primarily consisting of preferred and common stocks of utility companies, are
valued at fair value.
F-5
<PAGE>
(2) Loans Payable
As at December 31, 1998 and December 31, 1997, the Company had loans
outstanding aggregating $1,000,000 and $1,000,000 borrowed on a short term
basis from a bank, which are secured by certain marketable securities of the
Company. The loans bear interest at approximately 8.25%.
Short-term margin debt due to brokers, secured by the Companies
marketable securities, totaled $1,358,056 at December 31, 1998 and $1,494,639
at December 31, 1997.
(3) Accounts receivable
Accounts receivable are deemed to be fully collectible.
(4) Equipment and Improvements
Depreciation of equipment and improvements is taken using the
straight-line method. For 1998, 1997 and 1996 the charges to income for
depreciation using this method were $66,406, $58,985 and $65,339 respectively.
The cost of maintenance and repairs is charged to expense as
incurred. The cost of betterments and additions are capitalized and
depreciated over the life of the asset. The cost of assets disposed of or
determined to be non-revenue producing, together with the related accumulated
depreciation applicable thereto,are eliminated from the accounts, and any gain
or loss is recognized.
(5) Other Liabilities
At December 31, 1998 and December 31, 1997, the Company also
maintained a short position in certain marketable securities. These positions
were sold for $6,227 at December 31, 1998, and $18,008 at December 31, 1997,
and had respective market values of $2,990 and $21,730 resulting in an
unrealized gain of $3,237 at December 31, 1998 and an unrealized gain of
$3,722 at December 31, 1997
(6) Commitments and Contingencies
(A) Operating Leases
Future minimum rental payments under these non-cancelable operating
leases are as follows:
1999 $237,868
2000 $246,012
2001 $248,839
2002 $164,014
2003 $164,014
Rent expense for all non-cancelable operating leases was
$273,433, $232,357 and $257,477 for the years ended December 31, 1998, 1997 and
1996 respectively.
B) Contingent Liabilities
The Company has pending several claims incurred in the normal course
of business, which, 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 has settled all lawsuits with the State of NY. As a
result of this settlement Daxor has formed a new wholly owned subsidiary,
Scientific Medical Systems, Corp., which will operate the Blood Bank, Sperm
Bank and Laboratory Services. This new company has been reviewed and licensed
by the State of NY as of February 8, 1999.
(7) Research and Development Expenses
Research and development expenses were $564,275, $182,294 and
$213,266 for 1998, 1997, and 1996 respectively. All research and development
costs are expensed in the year they occur.
F-6
<PAGE>
(8) Interest Expense and Income
Interest expense was $485,043,$168,073, and $78,212 and interest
income was $480, $621, and $4,037 in 1998, 1997 and 1996 respectively.
(9) Income Taxes
The following is a reconciliation of the federal statutory tax rate
of 34% for 1998,1997 and 1996, with the provision for income taxes:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate $0 $0 $0
Dividend exclusion
Miscellaneous non-deductible expenses
State and city taxes 43,145 14,219 3,134
Provision for income taxes
Effective tax rate ----------------- --------------- ----------------
0.% 0.% 0.%
----------------- --------------- ----------------
</TABLE>
(10) Shareholders' Equity
During 1998, the Company purchased 38,000 shares of its own stock at
a cost of $458,775.
The Company reissued 100,000 shares of Treasury Stock resulting in an
increase in Additional Paid In Capital of $1,218,429 after deducting the cost
of these shares.
(11) Subsidiaries
On January 9, 1996 Daxor Health Services, Inc. was formed as a wholly
owned subsidiary for the purpose of providing various forms of therapy for
individuals in nursing homes and assisted care facilities. Results of
operations have been consolidated in the financial statements of Daxor
Corporation for the years of 1996 and 1997.At the end of 1997 it was
determined that Daxor Health Services, Inc. could no longer operate profitably
and it's operations have been discontinued. All costs related to this
cessation of operations are included in these financial statements.
(12) Related Party Transactions
At December 31, 1998 Daxor Corporation maintains an accounts
receivable from a related corporation in the amount of $75,979.This amount is
presently past due.
F-7
<PAGE>
SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
The following tables summarize the company's investments as of:
December 31, 1998
<TABLE>
<CAPTION>
Type of Unrealized Unrealized
security Cost Fair Value Holding gains holding losses
<S> <C> <C> <C> <C>
Equity $23,595,690 $43,016,243 $20,441,847 $1,021,294
- ------
Debt 0 0 0 0
- ----
--------------------- ----------------------- --------------------------- -----------------------------
Total $23,595,690 $43,016,243 $20,441,847 $1,021,294
- ----- =========== =========== =========== ==========
</TABLE>
SCHEDULE IX
SHORT-TERM BORROWINGS
Years Ended December 31, 1998, 1997, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Category of Balance at the end Weighted average Maximum amount Average amount Weighted average
aggregate short-term of period interest rate at outstanding during outstanding during interest rates
borrowings end of the period this period the period during the period
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
1998
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 1,000,000 7.75% 1,000,000 1,000,000 7.65%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 1,050,549 7.32% 1,267,365 1,262,341 7.29%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 2,050,549 7.47% 2,267,365 2,262,341 7.36%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
1997
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 1,000,000 7.41% 1,000,000 800,000 7.42%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 1,494,639 7.14% 2,515,594 1,427,050 7.17%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 2,494,639 7.19% 3,515,594 2,227,050 7.22%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
1996
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Banks 200,000 7.23% $1,100,000 $625,000 7.21%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
Brokers 1,426,869 6.94% $482,613 $1,426,869 6.97%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
All Categories 1,626,869 7.03% $1,582,613 $2,051,869 7.06%
---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
</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>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
COLUMN A COLUMB B
- ----------------------------------------------------------- ---------------------------------------------------------
Item Charged to costs and expenses
Year ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $ * $ * $ *
Depreciation and amortization
of intangible assets pre-operating
costs and similar deferrals 66,406 65,335 59,304
Taxes, other than payroll and
income taxes * * *
Royalties --- --- ---
Advertising costs * * *
* less than 1% of total revenues for the year.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 79511
<SECURITIES> 43,016,243
<RECEIVABLES> 227,213
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,590,445
<PP&E> 1,224,092
<DEPRECIATION> (796,159)
<TOTAL-ASSETS> 44,056,349
[CURRENT-ASSETS] 8,752,515
<BONDS> 0
<COMMON> 53,097
0
35,250,737
<TOTAL-LIABILITY-AND-EQUITY> 44,056,349
<SALES> 324,192
<TOTAL-REVENUES> 2,629,438
<CGS> 0
<TOTAL-COSTS> 961,031
<OTHER-EXPENSES> 1,561,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 484,563
<INCOME-PRETAX> (377,315)
<INCOME-TAX> 43,145
<INCOME-CONTINUING> (420,460)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (420,460)
<EPS-INCOME> (.09)
<EPS-DILUTED> (.09)
</TABLE>
