-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OyYO4qXQNXZoQJMnvb/k/IgvtH7scHRyjSDC+9BfaXU8InX2crQTgiYJJM8pB1vW aBItMxjFCYlgsjAu3NhQ3g== 0000889812-99-001048.txt : 19990402 0000889812-99-001048.hdr.sgml : 19990402 ACCESSION NUMBER: 0000889812-99-001048 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAXOR CORP CENTRAL INDEX KEY: 0000027367 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 132682108 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09999 FILM NUMBER: 99582306 BUSINESS ADDRESS: STREET 1: 350 FIFTH AVENUE STREET 2: SUITE 7120 CITY: NEW YORK STATE: NY ZIP: 10118 BUSINESS PHONE: 2122440555 MAIL ADDRESS: STREET 1: 350 5TH AVENUE STREET 2: SUITE 7120 CITY: NEW YORK STATE: NY ZIP: 10118 FORMER COMPANY: FORMER CONFORMED NAME: IDANT CORP DATE OF NAME CHANGE: 19730823 10-K 1 ANNUAL REPORT 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. 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 2 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 3 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. 4 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. 5 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 6 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. 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 - -------------------------------------------------------------------- Second Quarter..................... 11 3/4 7 1/2 - -------------------------------------------------------------------- Third Quarter...................... 13 3/4 8 1/2 - -------------------------------------------------------------------- Fourth Quarter..................... 14 1/2 10 3/4 1998 High Low First Quarter...................... 16 3/8 12 3/8 - -------------------------------------------------------------------- Second Quarter..................... 15 12 5/16 - -------------------------------------------------------------------- Third Quarter...................... 14 1/8 11 5/8 - -------------------------------------------------------------------- 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. 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:
Year Ended December 31, 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- 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 ========== ========== ========== =========== ===========
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Selected Balance Sheet Data:
Year Ended December 31, 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- 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.
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 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 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 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 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 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 DAXOR CORPORATION STATEMENTS OF INCOME
Year Ended December 31, (Consolidated) 1998 1997 1996 ---- ---- ---- Revenues: - -------------------------------------------------------------------------------------------------------------------------- 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) =========== ========== ==========
See accompanying notes to financial statements ================================================================================ DAXOR CORPORATION STATEMENTS OF SHAREHOLDER'S EQUITY
Three Years Ended December 31, 1998 Common stock Additional Number Paid-in Retained Treasury of Shares Amount Capital Earnings Stock - -------------------------------------------------------------------------------------------------------------------------- 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) ========== ========= ============ ============= =============
See accompanying notes to financial statements F-3 DAXOR CORPORATION STATEMENTS OF CASH FLOWS
Year ended December 31, 1998 1997 1996 (Consolidated) 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 ========= ========== ==========
See accompanying notes to financial statements F-4 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 -----------------
Type of security Cost Fair Value Unrealized Unrealized ------ ------------ holding gains holding losses ------------------- ---------------------- 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 =========== =========== =========== ========== December 31, 1997 - --------------------------------------------------------------------------------------------------------------------------- Type of security Cost Fair Value Unrealized Unrealized - ---------------- ------ ------------ holding gains holding losses --------------------- ------------------- 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 =========== =========== =========== ==========
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 (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 (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:
1998 1997 1996 ---- ---- ---- 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.% ----------------- --------------- ----------------
(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 SCHEDULE I MARKETABLE SECURITIES -- OTHER INVESTMENTS The following tables summarize the company's investments as of: December 31, 1998
Type of Unrealized Unrealized security Cost Fair Value Holding gains holding losses 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 - ----- =========== =========== =========== ==========
SCHEDULE IX SHORT-TERM BORROWINGS Years Ended December 31, 1998, 1997, 1996 ---------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- 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% ---------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
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 SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION
- ----------------------------------------------------------- --------------------------------------------------------- COLUMN A COLUMB B - ----------------------------------------------------------- --------------------------------------------------------- Item Charged to costs and expenses Year ended December 31, 1998 1997 1996 ---- ---- ---- 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.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EX-27 2 FINANCIAL DATA SCHEDULE FOR 1998 10-K WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 YEAR DEC-31-1998 DEC-31-1998 79511 43,016,243 227,213 0 0 43,590,445 1,224,092 (796,159) 44,056,349 [CURRENT-ASSETS] 8,752,515 0 53,097 0 35,250,737 44,056,349 324,192 2,629,438 0 961,031 1,561,159 0 484,563 (377,315) 43,145 (420,460) 0 0 0 (420,460) (.09) (.09)
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