-----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, J0Clf7AYAQTB4hvou6GHvJwbkXTuY2Hv0cW/Jn0CzgjFhfI88qZ7egg73d0sP4wZ EfVIKVZv47bQv+16euRGDQ== 0000891554-02-001853.txt : 20020415 0000891554-02-001853.hdr.sgml : 20020415 ACCESSION NUMBER: 0000891554-02-001853 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 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: 1934 Act SEC FILE NUMBER: 001-09999 FILM NUMBER: 02597468 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 d50238_10-k.txt FORM 10-K 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, 2001 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 11, 2001, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $ 28,203,811. 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 $18.64. The number of shares outstanding of the Registrant's Common Stock, par value $.01 per share, as of March 11, 2001: 4,664,909 shares. Documents incorporated by reference: The information required by Part III is incorporated by reference from the proxy statement for the 2001 Annual Meeting of Shareholders. PART I. Item 1. Business Daxor Corporation is a medical device manufacturing Company with additional biotech services. Daxor was originally founded for cryobanking services. For the past 10 years, its major focus has been on the development of an instrument that rapidly and accurately measures human blood volume. The Company developed an instrument called the BVA-100 which is used in conjunction with a single use diagnostic injection and collection kit. The Company maintains a website, www.daxor.com which describes its operations. In 1997, the Company achieved marketing clearance from the FDA for the instrument. Then in 1998, the Company received clearance for it's specialized single use injection kit known as Volumex. In 1999, the Company initiated beta testing for the Blood Volume Analyzer at Hospitals in the New York Metropolitan region. In the year 2000, the Company initiated marketing efforts outside of the New York region. Test results from hospital sites indicated that the Blood Volume Analyzer was accurate and provided information that was important in a wide variety of acute and chronic medical and surgical situations. The Company manufactures its own injection kit components. The Company established its own small scale manufacturing facility in Oak Ridge, Tennessee for research and development purposes. The Blood Volume Analyzer is manufactured for the Company by an Original Equipment Manufacturer (OEM). This combination also provides flexibility to meet potential increased market demand. The injection kit filling is performed by an FDA licensed radiopharmaceutical manufacturer. The Company has received United States, European Common Market, and Japanese patents for its Blood Volume Analyzer. Blood volume measurement has been available for more than 60 years in formats which required as much as three to six hours of technician time with variable degrees of accuracy. Because of the time required, certain technical shortcuts were often used which reduced the accuracy of the measurement. An additional problem was the difficulty of calculating an accurate expected normal blood volume for a specific individual. Normal blood volume has been shown to vary in relation to the degree of deviation from ideal weight. A leaner individual has a higher blood volume percentage of body weight as compared to an obese individual. The computations for an individual's normal expected blood volume were complex and time consuming. The Blood Volume Analyzer automated these computations. The BVA-100 Blood Volume Analyzer calculates blood volume measurement to within an accuracy of approximately 98% while providing the precise measurement of the normal blood volume for that specific individual based on the height, weight and sex of the patient. In emergency situations, preliminary results can be available within 15 to 20 minutes, and final results within 25 to 35 minutes. Measurement of blood volume is achieved by the use of an indicator or tracer which is injected into a patient, which is then followed by the collection of timed blood samples. The volume of blood in a patient is inversely proportional to the dilution of the tracer. The measurement, while relatively simple in principle, has been difficult to perform accurately and rapidly because of the high degree of precision required in each step. The standard techniques require the hospital or user to prepare an exactly matching set of standards and tracer injectate with precise and complete injection of the tracer. Because of the difficulty in achieving this type of precision blood volume measurements are currently performed in only a small minority of hospitals in the United States. The standard tests used to diagnose anemia, the hemoglobin or the hematocrit, measure only the thickness (percentage of red cells to plasma within the blood) and not the volume of an individual's blood. These surrogate or proxy tests are well known to be misleading in many situations where blood volume is abnormal. In acute situations, such as during surgical blood loss or after trauma, it may take as long as 24 to 72 hours for the hematocrit to accurately or reasonably reflect the degree of blood loss. Patients may have delayed transfusions because the full degree of blood loss is not reflected by these proxy tests. Delayed transfusions or fluid replacement may result in serious complications, including the death of the patient. 2 The largest potential use for the Blood Volume Analyzer is for evaluation and treatment of outpatients' medical problems. Many disease conditions result in alterations of blood volume which may have serious consequences for the patient. Syncope, or sudden loss of consciousness, is a major cause for hospitalization in the United States. As many as one million individuals per year experience an episode of syncope. Recent news events focused on President George W. Bush and former Attorney General Janet Reno, who have experienced syncope. Patients who experience syncope may suffer severe injuries when they collapse. Some patients may experience light headedness without complete loss of consciousness. Evaluation of such patients includes neurological and cardiovascular testing, however, they do not usually include a blood volume measurement. Low blood volume can be a predisposition to syncope. Patients with this condition are frequently treated with different types of drugs without precise knowledge of the underlying cause of the syncope. In March 2000, the Cardiovascular Department of the Cleveland Clinic obtained a BVA-100 Blood Volume Analyzer for their Syncope Section. Results on over 1000 patients in the Cleveland Clinic have demonstrated that a significant percentage of such patients have moderate to severe hypovolemia (low blood volume) which would not have been diagnosed by the standard test. This scientific data is currently being prepared for submission for publication in a medical journal. The Cleveland Clinic Cardiovascular Department is ranked number one in the United States according to the Annual US News & World Report Survey of US Hospitals. The Hospital itself is ranked number 4 overall out of more than 6200 hospitals in the country. At the present time most patients evaluated for syncope in hospitals have tilt-table testing which identifies patients who may be at risk for syncope. Tilt-table testing, however, does not differentiate patients who have low blood volume from those who have neurological dysfunction of their blood pressure. Only a blood volume measurement can provide this differential diagnosis. The treatment for low blood volume involves medication to expand the blood volume to normal. The treatment for neurological dysfunction involves different medical treatment to control the low blood pressure. Blood volume measurement provides a key test to facilitate correct treatment of patients. A recent Mayo Clinic study estimated that there are 50 million Americans who have hypertension (high blood pressure). Hypertension is caused primarily by two variables. There is either too much blood (hypervolemia) or fluid retention within the circulation or too much tightening of the blood vessels (vasoconstriction). Diuretics are one major category of drugs used to treat hypertension. Diuretics cause the kidney to excrete salt and water thereby decreasing the blood volume and lowering the blood pressure. A second major category of medications is vasodilators. These drugs relax the blood vessels and lower the blood pressure. Within each of these two major categories are drugs which work by different mechanisms but they all essentially fall into one of these two main therapeutic categories, diuretics or vasodilators. Treatment is often a trial and error approach because neither vasoconstriction or blood volume is actually measured in a patient (with rare exception). 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. Over the past year, the company has received reports on patients treated for hypertension with diuretics, who have a low blood volume. The physicians treating these patients reduced or removed the diuretic therapy. African-Americans have been reported to have significantly higher rates of strokes, and kidney failure as compared to whites for comparable levels of elevated blood pressure. Diuretic therapy would be expected to be beneficial for patients whose elevated blood pressure is caused by an expanded blood volume and would be expected to be harmful for patients whose high blood pressure is accompanied by low blood volume. At the present time, there is inadequate data to determine whether African Americans as a group are more likely to be individuals treated with diuretics. It is well known that diuretics can cause blood volume to decrease to the point of causing disruption of kidney function. The kidney is particularly vulnerable to low blood volume. Kidney failure is a common complication of severe low blood volume. 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. By measuring the blood volume within the patient, the physician can make a more rational or scientific choice in regard to the medical therapy to be administered. 3 Surgical patients who lose blood are obviously at risk for blood volume derangements. It is widely recognized that surrogate tests such as hemocratic or hemoglobin are inaccurate. Sometimes, physicians resort to the use of Pulmonary Artery Catheterization (PAC). PAC involves the insertion of a catheter into a vein through the right chambers of the heart and has frequently been used as a surrogate technique to evaluate blood volume in critically ill patients. However, PAC directly measures pressure, not volume. In 1999, the Lutheran Medical Center (New York) presented its research on the first comparison of PAC with direct blood volume measurements in patients. Their findings confirmed that PAC could be inaccurate and misleading in patients who had significant blood volume deficits. Hypovolemia, or low blood volume, can be particularly dangerous during surgery and may lead to sudden severe drops in blood pressure. Such a drop in blood pressure, also known as shock, is associated with strokes, heart attacks or even sudden death. The Company has received preliminary reports on the use of the Blood Volume Analyzer in septic or toxic shock. Septic shock has death rates as high as 40-70%. Using the BVA-100, Lutheran Medical Center reported preliminary results in 40 patients diagnosed with septic shock who were found to have unanticipated low blood volume. The patients who were treated with fluids and blood to restore their blood volume to normal levels had a markedly reduced death rate. These findings, if verified on a larger scale, would be very important for marketing the Blood Volume Analyzer. A primary goal of the Company is to have the Blood Volume Analyzer become a standard of care within hospitals as part of the decision-making process for administration of blood and intravenous therapy. If these preliminary findings in the treatment of septic shock are verified, it could be expected to have a significant impact on hospital demand for obtaining a Blood Volume Analyzer. Septic shock is a common daily occurrence in all hospitals. Major pharmaceutical companies have attempted to find pharmaceutical agents that will reverse shock. To date, these tests have been unsuccessful. A recent report on patients in septic shock indicated a slight improvement in patients who were treated with an experimental drug. It was reported that the anticipated cost of this drug would be $5,000 per treatment. If additional studies confirm that correction of blood volume should be the primary focus on treating septic shock, then blood volume would become an integral part of the therapy for septic shock. The cost of a diagnostic kit is approximately $279.00. The combined cost of blood volume measurement and fluid and/or blood replacement would be significantly lower than the anticipated cost of the experimental septic shock drug. It is estimated that 5 million individuals are treated annually for congestive heart failure. The January 2000 issue of the American College of Cardiology reported on a series of patients treated for congestive heart failure who had low blood volume and were decompensated. Over-treatment of congestive heart failure is very difficult to detect and symptoms of over-treatment can be confused with the primary disease itself. It is estimated that $38 billion is spent annually on treatment for congestive heart failure. Congestive heart failure is the number one reason for admission to hospitals in the US for patients over 65 years of age. $23 billion is spent annually on hospital treatment of congestive heart failure patients. Three thousand patients annually receive heart transplants. The overwhelming majority of patients treated for heart failure must be treated medically with a varied combination of drugs. The BVA-100 is currently undergoing testing for utilization in optimizing the treatment for congestive heart failure patients. Results of this testing from the Heart Failure Center of Columbia Presbyterian Medical Center has been submitted for publication. Preliminary reports on the use of the Blood Volume Analyzer have demonstrated that congestive heart failure patients may have serious blood volume derangements which cannot be correctly diagnosed without an actual blood volume measurement. Researchers at Columbia Presbyterian are beginning a new study on patients with so-called diastolic heart failure utilizing the BVA-100. Diastolic heart failure is a major category of difficult to treat heart failure patients where a blood volume measurement may provide essential information for optimum treatment. According to the Journal of Clinical Geriatrics, one out of every three elderly patients has a condition known as orthostatic hypotension. Orthostatic hypotension is a condition when a person rises from a sitting or reclining position, the blood pressure drops. This sudden drop in blood pressure may cause dizziness or even loss of consciousness. 4 One in eight elderly Americans experiences a hip fracture. It is unknown how many of these hip fractures are caused by patients having a transient drop in blood pressure. A blood volume measurement can help differentiate the cause of orthostatic hypotension. Some patients with low blood volume caused by either low red cell volume or low plasma volume can be treated with medications. Patients who have a normal blood volume with orthostatic hypotension have a condition related to autonomic dysfunction or ineffective control of the constriction of small blood vessels. A medication is available for treating this condition. Low red cell volume, or Anemia, is a common occurrence in patient's undergoing chemotherapy for AIDS or cancer. Epogen and Procrit, which are manufactured by the Amgen Corporation, can provide therapy for such conditions. Procrit is distributed by the Ortho Division of Johnson & Johnson. The standard surrogate tests, hematocrit and hemoglobin, may not reflect the full degree of decreased red blood cell volume in such patients. A blood volume measurement can detect unrecognized low blood volume or "hidden anemia" in such patients which may be contributing to a profound feeling of weakness common in such conditions. Chronic fatigue syndrome is a condition said to affect approximately one million Americans, particularly patients with low blood pressure. Low blood volume has been reported to be a factor in such conditions. The ability to measure blood volume with a high degree of precision and accuracy may identify patients who have low blood volume and are not optimally treated at the present time. There are over 4 million patients who receive blood transfusions every year. The Company believes that if the BVA-100 were available in every 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. There are several manufacturers which include Northfield Laboratories, Biopure, and Hemosol Corporation which are testing blood substitutes. These substitutes can be used for surgical procedures instead of donor transfusions. These artificial blood substitutes have the advantage of a long shelf life and the ability to be sterilized. They have the disadvantage of a shortened half-life in the body after transfusion. There have been recent reports in the New England Journal of Medicine that as many as 60% of patients undergoing Cardiac Bypass Surgery (CABG) experience some degree of measurable permanent brain damage such as memory loss. Under current transfusion practices, patients may undergo major surgery with half the concentration of normal red cells. The practice of undertransfusion is widespread. In the Journal Transfusion, Dr. Robert Valeri, a senior researcher of the Boston Naval Hospital estimated that there may be as many as 40,000 heart attacks per one million operations due to undertransfusions. The Company is attempting to initiate a cooperative program which will involve the use of blood volume measurement combined with the use of blood substitutes during surgery. The Company believes that it can provide a significant advantage to companies currently testing blood substitutes on patients without a precise knowledge of the patients actual blood volume. Patients who have low blood volume at the start of surgery may respond very differently than a patient with a normal blood volume who is treated with a blood substitute. The Company has been involved in discussions with representatives of the Hemosol Corporation about the possible utilization of the BVA-100 for validation of their blood substitute products. The Company also has initiated discussions with representatives of both Johnson & Johnson and Amgen for sponsorship of studies utilizing blood volume measurements combined with products which stimulate increased red cell production. The current guidelines for the use of these products is based on hemoglobin and hematocrit measurements. These tests, however, may be very misleading in regard to the total amount of red cells a patient has in his/her body. A patient who has a low blood volume that is undetected may have an artificially elevated hematocrit. Such a patient may experience severe fatigue and other symptoms which could be improved by appropriate treatment. These patients have a form of "hidden anemia" and are not optimally treated. It is only with the use of a blood volume measurement that the lower red cell volume could be detected and treated. Blood volume measurement which could detect low blood volume in patients with cancer, kidney disease, or heart failure could significantly increase the justification and use of these blood stimulants. 5 The Company is currently helping develop low blood volume detection and treatment programs in conjunction with several hospitals. Blood volume measurement is a recognized test reimbursable by insurance companies, and Medicare approved. Many patients undergoing elective surgery donate blood to themselves prior to that surgery. Some patients have undetected low blood volume and should not be donating blood. Undetected "hidden anemia" can be corrected if diagnosed prior to surgery by the use of medications such as Epogen or Procrit. A woman has 20% less red cell volume than a man of equal height and weight. Women suffer a higher rate of complications and require more transfusion during Cardiac Bypass surgery (CABG). The use of low blood volume detection and treatment programs can result in a significant improvement in patients at the time they are undergoing surgery. Common complications from acute low blood volume are strokes, heart attacks, and kidney failure. Surgical patients who experience these complications require extended hospital stays for which the hospitals are often not reimbursed. Hospitals operate under a diagnostic regulatory guideline (DRG) system for reimbursement. The DRG system means that a hospital will be reimbursed according to a diagnosis, not according to the number of days that a patient spends in the hospital. Therefore, hospitals have a significant monetary incentive, aside from the desire to provide better patient care, to avoid having patients undergo surgery in a blood depleted state. A low blood volume detection and treatment program can significantly improve the opportunity for patients to avoid complications from hypovolemia as well as transfusions with donor blood. The Company believes that the most significant market for its blood volume measurement equipment consists of approximately 8,500 hospitals and Radiology Imaging Centers in the United States. The Company believes that there is an additional international market of 10 to 14,000 potential users of its BVA-100. 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. SCIENTIFIC MEDICAL SYSTEMS SUBSIDIARY (wholly owned by Daxor) 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. Utilizing cryobiology technology, frozen blood has been shown to be capable of being stored for up to 20 years, however the current legal limit is 10 years for red cells. 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 to 4 million patients. The risks of infection and other complications are compounded by the frequent withholding of blood from severely anemic patients by their physicians because of the 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 their equivalent. This problem has not been brought to the public's attention, but it 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. 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). 6 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. The Company believes that it can work with some voluntary blood banks and hospitals to establish joint marketing of long term frozen personal blood storage programs. 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 affiliates. 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 in the Northeastern United States. 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 existing blood donor services. Idant (Division of Scientific Medical Systems, subsidiary of Daxor Corporation) Semen (Sperm) Banking In 1985, Idant was the first semen bank to institute an AIDS quarantine period for frozen semen. Viruses such as HIV and Hepatitis B or C may be undetectable for up to six months in infected individuals. By freezing the semen of donors and re-testing the donor six months later, the risk of Hepatitis or AIDS can be virtually eliminated. 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. The donors are tested at the beginning and at the end of the six-month period. By storing semen from a large cross-section of donors, Idant is able to offer anonymous donor semen with varying physical characteristics that meet our client's needs. 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. Storage of Sperm for Personal Use 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. Idant holds approximately 50,000 human semen units in long-term storage at its central New York City facility. The Company was the first semen bank in the state of New York, out of more than 50 licensed banks, to be accredited by the American Association of Tissue Banks. Idant provides semen storage services for clients which remains viable for many years. Semen stored for 23 years, at minus 321 degrees, has shown minimal change. Idant has received confirmation of normal births from semen stored as long as 16 years. The Company's facility is 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 facility is 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. 7 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 72oF 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. 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. Patent and Copyright Protection The Company has received separate United States patents on its Blood Volume Analyzer (BVA-100) and for its Volumex injection kit. These are the only US patents 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. The Company received 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 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. 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. The Company is currently investigating the filing of additional patents involving the BVA-100 system. Marketing The Company is marketing its Blood Volume Analyzer either on a direct sale, lease, or an instrument loaner basis to potential users. Primarily, users are expected to be hospitals, surgi-centers, and imaging centers (radiology). The Company also has been demonstrating its equipment at major trade shows such as Nuclear Medicine, Surgical Anesthesiology, and trauma conferences. The Company is also in the process of developing a network of dealers as well as its own internal sales force. The Company recognized after the initial beta testing in 1999, that it was important to have the Blood Volume Analyzer at leading medical institutions. Publications and reports from such institutions are particularly important for acceptance by the general medical community. During the past 2 years, a number of leading facilities acquired a Blood Volume Analyzer. The US News and World Report provides an annual ranking of 6200 Hospitals in the United States. Johns Hopkins Medical Center, the Mayo Clinic, and The Cleveland Clinic, ranked respectively 1,2, and 4 in the annual ranking of hospitals have a BVA-100. The Cleveland Clinic Cardiovascular Department ranked number 1 in the US will soon be reporting on over 1000 patients on who blood volume testing was performed. In addition to these facilities, Vanderbilt Medical Center, and the New York Hospital Presbyterian Medical Center ranked in the top 20 in the Annual Survey of Hospitals also have a Blood Volume analyzer. The National Institutes of Health, the leading US government research agency, has acquired a Blood Volume Analyzer. Hospitals and health facilities are exceedingly cost conscientious in regard to acquiring additional medical technology. Blood volume measurement is an approved and reimbursable Medicare test. The Company's marketing efforts are focused on documenting the beneficial effects of blood volume measurement as well as developing cost benefit analysis studies. Such studies are particularly important to HMO's which focus on avoiding hospitalization when possible. Congestive heart failure for example, affects over 5 million Americans and is the number one cause of hospitalization in the US. Blood volume derangements are an integral part of the disease process. 8 The Company believes that patients whose blood volume is known can be more precisely and scientifically treated and have fewer hospitalizations. As these studies become available, they will be incorporated into the marketing program of the Company. The Company's website (http://www.daxor.com) contains extensive detail about the BVA-100 Blood Volume Analyzer as well as examples of actual cases (with patient identities removed). The website permits rapid communication between marketing personnel and potential users prior to an onsite visit. Competition Blood Volume Analyzer The medical technology market is intensely competitive. However, there are no direct competing instruments manufactured or marketed which perform rapid semi-automated 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 critical information derived from the test. The Company is evaluating the filing of additional patents in regards to its injection collection kit system for blood volume analysis. Blood Banking The Idant frozen blood bank is the only facility that provides long term personal blood storage in the Northeastern United States. Semen Banking There are at least 300 sperm banks in the United States operated by either commercial entities or by academic institutions. The Idant semen bank was the first semen bank in the State of New York that was accredited by the American Association of Tissue Banks. There are less than 10 semen banking organizations in the United States that have achieved this accreditation. The Company has developed a web site (http://www.Idant.com), which will be helpful for marketing purposes. Regulation The development, testing, production and marketing of medical devices is 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 Volume Analyzer, BVA-100, and the associated quantitative injection kit marks one of the most important milestones in the history of Daxor. The products manufactured by and for the Company in regard to the BVA-100 are subject to continuing FDA regulations and inspections. The New York State Department of Health regulates the Company's Idant semen and blood bank within New York State. The Idant Semen Bank and Blood Bank are divisions of Scientific Medical Systems, which is wholly owned by the Daxor Corporation. Scientific Medical Systems has its own separate Directors. These facilities are licensed and annually inspected by the New York State Department of Health. 9 Employees On March 11, 2001, the Company had 30 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 6,500 square feet, with option provisions in the lease for up to 24,000 square feet. The company currently occupies approximately 8,000 square feet. 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. Both leases contain CPI escalation clauses. The Rochester lease was subject to renewal in October 2001. The company elected not to renew its lease and sold some of its assets to the original principles of the Wellport Corporation. The Company established a manufacturing facility in Oak Ridge, Tennessee which is currently manufacturing the BVA-100 Blood Volume Analyzers. The Company also signed a contract with an Original Equipment Manufacturer (OEM) for manufacturing the BVA-100. Item 3. Legal Proceedings The Company had no litigation in 2001 and no pending lawsuits. 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 2001. 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. 2000 High Low ---- --- First Quarter 30.63 13.88 - -------------------------------------------------------------------------------- Second Quarter 20.75 10.25 - -------------------------------------------------------------------------------- Third Quarter 16.25 10.25 - -------------------------------------------------------------------------------- Fourth Quarter 13.37 10.00 - -------------------------------------------------------------------------------- 2001 High Low ---- --- First Quarter 15.00 10.06 - -------------------------------------------------------------------------------- Second Quarter 18.24 12.75 - -------------------------------------------------------------------------------- Third Quarter 17.50 15.00 - -------------------------------------------------------------------------------- Fourth Quarter 19.74 16.30 - -------------------------------------------------------------------------------- On March 11,2001, the Company had approximately 208 holders of record of the Common Stock. The Company believes there are approximately 1800 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. 10 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, ------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 ----------- ------------ ------------ ------------ ------------ Operating revenues $ 591,692 $ 635,868 $ 500,969 $ 324,192 $ 529,737 Other revenues 166,676 109,920 74,407 Dividend income 1,860,289 1,842,583 1,856,119 1,942,759 2,138,755 Gains on sale of investments 97,719 57,399 469,595 362,487 144,681 ----------- ------------ ------------ ------------ ------------ Total revenues 2,716,376 2,645,770 2,901,090 2,629,438 2,813,173 ----------- ------------ ------------ ------------ ------------ Costs and expenses: Operations of laboratories & costs of production 814,657 1,052,000 833,751 961,031 628,729 Selling, general and administrative 1,412,687 1,429,395 2,016,004 1,561,159 2,161,626 Interest expenses, net of interest income 119,926 198,341 147,105 484,563 167,452 ----------- ------------ ------------ ------------ ------------ Total costs and expenses 2,347,270 2,679,736 2,996,860 3,006,753 2,957,807 ----------- ------------ ------------ ------------ ------------ Net loss before income taxes 369,106 (33,966) (95,770) (377,315) (144,634) Provision for income taxes 69,751 21,228 1,360 43,145 14,219 ----------- ------------ ------------ ------------ ------------ Net income/(loss) $ 299,355 $ (55,194) $ (97,130) $ (420,460) $ (158,853) =========== ============ ============ ============ ============ Weighted average number of shares outstanding 4,664,909 4,675,826 4,721,492 4,762,542 4,696,876 ----------- ------------ ------------ ------------ ------------ Net income per common equivalent share $ 0.06 $ (0.01) $ (0.02) $ (0.09) $ (0.03) =========== ============ ============ ============ ============ Selected Balance Sheet Data: Year Ended December 31, ------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 ----------- ------------ ------------ ------------ ------------ Working capital 34,979,217 38,309,247 28,869,309 34,837,930 32,501,404 Total assets 43,540,153 49,575,118 35,846,065 44,056,349 41,322,592 Total liabilities* 8,211,186 10,903,280 6,566,496 8,752,515 8,404,868 Shareholders' equity 35,328,967 38,671,838 29,279,569 35,303,834 32,917,724 Return on equity* 0.77% 0.00% 0.00% 0.00% 0.00%
* 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 $7,135,446 for unrealized gains. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Idant Laboratories subsidiary contributed 54%, 59% and 99% of operating revenues in 2001, 2000 and 1999 respectively. The Companies operations in semen banking and blood banking (laboratories) have received limited promotion. The Company has taken steps to increase awareness of these services. The Company in the year 2000 received its first revenue from the Blood Volume analyzer. The potential market for the Blood Volume Analyzer is significantly larger than the Company's current operations. The Company anticipates that proceeds from Daxor's Blood Volume Analyzer will be the primary source of revenue in the immediate future. The Company believes that the potential market for blood volume measurement and analysis is between 15-20 million tests per year. Successful penetration of even a small fraction of the market would significantly change the company's structure. The Company intends to focus its major marketing efforts on the Blood Volume Analyzer. The Company intends to increase its marketing efforts to add to its operational income. Some of the steps the Company has undertaken, such as consolidating certain manufacturing facilities at Oak Ridge, Tennessee and simultaneously contracting with an Original Equipment Manufacturer (OEM) will permit greater economies of scale. The Company's primary focus will be to increase operating revenues even if this initially results in lower profits. YEAR ENDED DECEMBER 31, 2001 AS COMPARED TO DECEMBER 31, 2000 Total revenues were $ 2,716,376 in 2001, up from $2,645,770 reported in 2000. Dividend income earned on the Company's securities portfolio was $, 1,860,289 an increase from the $1,842,583 reported in 2000. Gains on the sale of investments was $97,719 in 2001 as compared to $ 57,399 in 2000. Net income before income taxes was $ 369,106 in 2001 vs. a loss of ($33,966) in 2000. This is the first reported profit in 6 years. YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO DECEMBER 31, 1999 Total revenues were $2,645,770 in 2000, down from $2,901,090 reported in 1999. Dividend income earned on the Company's securities portfolio was $ 1,842,583 a decrease from the $1,856,119 reported in 1999. Gains on the sale of investments was $ 57,399 in 2000 as compared to $469,595 in 1999. Net income before income taxes was a loss of ($ 33,966) in 2000 vs. a loss of ($ 95,770) in 1999. 11 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 electric utility preferred and common stocks. The income derived from these investments has helped to offset the operating and marketing expenses of developing the Blood Volume Analyzer. The Company has followed a conservative policy of assuring adequate liquidity so that it can expand its marketing and research development without the sudden necessity of raising additional capital. The securities in the company's portfolio were selected to provide stability of both income and capital. At December 31, 2001, the Company had $1,000,000 in short-term debt vs. $1,775,363 in 2000. At year-end 2001, shareholders' equity was $35,328,967. At year-end 2000, the Company had shareholders' equity of $38,671,838. At December 31, 2001 the Company's security portfolio had a market value of $42,271,902 vs. $48,722,403 in 2000. In 1998 The Company purchased the assets of the Wellport Manufacturing Company. This Company had previously manufactured the injection kit. The Company now manufactures its own injection kit. The final filling and shipping of the kit is performed by an FDA licensed radiopharmaceutical manufacturer. In the year 2000, the Company leased additional space in Oak Ridge, Tennessee to manufacture its own BVA-100 Blood Volume Analyzers. The Company has a separate contract with an Original Equipment Manufacturer to manufacture additional Blood Volume Analyzers. The Company is considering developing additional manufacturing facilities for its kit system in Oak Ridge and transferred its Rochester operations to Oak Ridge. The Company is reviewing options to purchase some of the original equipment manufacturers who provide various parts of the BVA-100 Blood Volume Analyzer system. The Company is also involved in discussions with independent medical distributors to market the BVA-100. The Company offers to lease or rent, as well as sell its Blood Volume Analyzer (BVA-100) as part of an overall marketing plan. The Company will also loan an instrument for evaluation purposes. The Company is also developing with one of its clients, a blood volume laboratory staffing program. Under such program, the Company may provide management services as well as equipment services. With respect to blood banking, the Company believes that it may be a valuable partner to companies which produce blood substitutes as well as companies that produce blood stimulants such as Epoetin Alfa. Blood volume measurement would enhance the validation of these products. The Company will actively look to form such marketing alliances. Year-end 2001 finds the Company in a satisfactory financial position with adequate funds available for its immediate anticipated needs. 12 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 22, 2001 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 22, 2001 - ------------------------ (Principal Executive Officer) Joseph Feldschuh, M.D. /s/ Gary Fischman Vice President March 22, 2001 - ------------------------ Gary Fischman /s/ Octavia Atanasiu Corporate Treasurer March 22, 2001 - ------------------------ Accounting Supervisor Octavia Atanasiu (Principal Financial Officer) /s/ Virginia Fitzpatrick Corporate Secretary March 22, 2001 - ------------------------ Virginia Fitzpatrick /s/ Stephen M. Moss Director March 22, 2001 - ------------------------ Stephen M. Moss, PhD /s/ Bruce Hack Director March 22, 2001 - ------------------------ Bruce Hack /s/ James Lombard Director March 22, 2001 - ------------------------ James Lombard /s/ Martin Wolpoff Director March 22, 2001 - ------------------------ 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 13 DAXOR CORPORATION 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 Consolidated Financial Statements as at December 31, 2001 and 2000 and for the three years ended December 31, 2001 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, 2001 F-6 Schedule IX - Short-term Borrowings - Years ended December 31, 2001 2000, and 1999 F-6 Schedule X - Supplementary Income Statement Information - Years ended December 31, 2001, 2000, and 1999 F-7 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. INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Shareholders of Daxor Corporation: We have audited the accompanying consolidated balance sheets of Daxor Corporation as at December 31, 2001 and 2000, the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the results of their operations and its cash flows for each of the three years in the period ended December 31, 2001 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. Brentwood, New York March 22, 2002 F-1 DAXOR CORPORATION FINANCIAL STATEMENTS ================================================================================ DAXOR CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, December 31, 2001 2000 ---- ---- - ------------------------------------------------------------------------------- ASSETS - ------------------------------------------------------------------------------- CURRENT ASSETS Cash $ 431,949 $ 18,439 Marketable Securities at Fair Value December 31,2001 and December 31, 2000. (Notes 1 and 2) 42,271,902 48,722,403 Accounts receivable 174,242 107,927 Other current assets 312,310 363,758 ------------ ------------ Total Current Assets 43,190,403 49,212,527 EQUIPMENT AND IMPROVEMENTS Storage tanks 125,815 125,815 Leasehold improvements, furniture and equipment 837,807 836,813 Laboratory equipment 288,087 278,087 ------------ ------------ 1,251,709 1,240,715 Less: Accumulated depreciation and amortization 975,593 919,414 ------------ ------------ Net equipment and improvements 276,116 321,301 Other Assets 73,634 41,290 Total Assets $ 43,540,153 $ 49,575,118 ------------ ------------ - ------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued liabilities $ 52,855 $ 42,431 Loans payable (Notes 1 and 2) 1,000,000 1,775,363 Other Liabilities 22,885 73,741 Deferred Taxes (Note 1) 7,135,446 9,011,745 ------------ ------------ Total Liabilities 8,211,186 10,903,280 SHAREHOLDERS' EQUITY Common stock, par value $.01 per share: Authorized 10,000,000 shares: issued and outstanding shares 4,664,909 December 31, 2001 and 4,664,909 December 31, 2000 53,097 53,097 Additional Paid in capital 9,798,232 9,798,232 Net unrealized holding gains on available-for-sale securities (Note 1) 13,851,161 17,493,387 Retained earnings 16,440,007 16,140,652 Treasury stock (4,813,530) (4,813,530) ------------ ------------ Total Shareholders' Equity 35,328,967 38,671,838 Total Liabilities and Shareholders' Equity $ 43,540,153 $ 49,575,118 ------------ ------------ See accompanying notes to financial statements
F-2 DAXOR CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, --------------------------------------- 2001 2000 1999 ---------- ----------- ----------- Revenues: - ------------------------------------------------------------------------------------------ Operating revenues $ 591,692 $ 635,868 $ 500,969 Other revenues 166,676 109,920 74,407 Dividend income 1,860,289 1,842,583 1,856,119 Gains on sale of securities 97,719 57,399 469,595 ---------- ----------- ----------- Total Revenues 2,716,376 2,645,770 2,901,090 ---------- ----------- ----------- - ------------------------------------------------------------------------------------------ Costs and expenses: - ------------------------------------------------------------------------------------------ Operations of Laboratories & Costs of Production 814,657 1,052,000 833,751 Selling, General, and Administrative 1,412,687 1,429,395 2,016,004 Interest expense, net of interest income 119,926 198,341 147,105 ---------- ----------- ----------- Total costs and expenses 2,347,270 2,679,736 2,996,860 ---------- ----------- ----------- Net Income/( Loss) before Income Taxes 369,106 (33,966) (95,770) Provision for income taxes (Note 9) 69,751 21,228 1,360 ---------- ----------- ----------- Net Loss $ 299,355 $ (55,194) $ (97,130) ========== =========== =========== Weighted Average Number of Shares Outstanding 4,664,909 4,675,826 4,721,492 ========== =========== =========== Net Income per Common Equivalent Share $ 0.06 $ (0.01) $ (0.02) ========== =========== ===========
See accompanying notes to financial statements ================================================================================ DAXOR CORPORATION STATEMENTS OF SHAREHOLDER'S EQUITY
Three Years Ended December 31, 2001 ----------------------------------------------------------------- Common stock Additional Number Paid-in Retained Treasury of Shares Amount Capital Earnings Stock ------------ ------- ---------- ----------- ---------- - -------------------------------------------------------------------------------------------------- Balance at January 1,1999 4,752,709 53,097 9,798,232 16,292,976 (3,658,036) - -------------------------------------------------------------------------------------------------- Net loss for the year ended December 31,1999 (97,130) Purchase of Treasury Stock (59,800) (799,779) - -------------------------------------------------------------------------------------------------- Balance December 31,1999 4,692,909 53,097 9,798,232 16,195,846 (4,457,815) - -------------------------------------------------------------------------------------------------- Net loss for the year ended December 31,2000 (55,194) Purchase of Treasury Stock (28,000) (355,715) - -------------------------------------------------------------------------------------------------- Balance December 31,2000 4,664,909 53,097 9,798,232 16,140,652 4,813,530 - -------------------------------------------------------------------------------------------------- Net income for the year ended December 31,2001 299,355 - -------------------------------------------------------------------------------------------------- Balance December 31,2001 4,664,909 $ 53,097 $9,798,232 $16,440,007 $ 4,813,530 ==================================================================================================
See accompanying notes to financial statements F-3 DAXOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, --------------------------------------- 2001 2000 1999 --------- ----------- ----------- Cash flows from operating activities: Net income or (loss) $ 299,355 $ (55,194) $ (97,130) --------- ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & Amortization 57,735 58,258 72,395 (Gain) loss on sale of investments (97,719) (57,399) (469,595) (Gain) loss on sale of equipment (4,554) Change in assets and liabilities: (Increase) decrease in accounts receivable (66,315) (101,182) 144,489 (Increase) decrease in accounts receivable- Related Parties -- -- 75,979 (Increase) decrease in other current assets 51,448 130,233 (232,394) (Increase) decrease in tax refunds receivable -- -- 5,881 (Increase) decrease in other assets net of amortization (33,900) 2,700 (6,019) Increase (decrease) in accounts payable,accrued expenses and other liabilities net of "short sales" 11,024 (83,910) 39,747 Total adjustments (77,727) (51,300) (374,071) --------- ----------- ----------- Net cash provided by operating activities 221,628 (106,494) (471,201) --------- ----------- ----------- Csah flows from investing activities: Payment for purchase of equipment and improvements (10,994) (13,289) (55,114) Proceeds from sale of equipment -- -- 48,936 Net cash provided or (used) in purchase and sale of investments 962,111 1,027,001 843,604 Net proceeds (repayments) of loans from brokers used to purchase investments (775,363) (668,431) 393,245 Proceeds from "short sales" not closed 16,128 67,584 28,581 --------- ----------- ----------- Net cash provided by/(used in) investing activities 191,882 412,865 1,259,252 --------- ----------- ----------- Cash flows from financing activities Payment for purchase of treasury stock -- (355,715) (799,779) --------- ----------- ----------- Net cash used in financing activities -- (355,715) (799,779) --------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 413,510 (49,344) (11,728) Cash and cash equivalents at beginning of year 18,439 67,783 79,511 --------- ----------- ----------- Cash and cash equivalents at end of year $ 431,949 $ 18,439 $ 67,783 ========= =========== ===========
See accompanying notes to financial statements F-4 DAXOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements as at December 31, 2001 and 2000 and for the three years ended December 31, 2001 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 inter-company 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, 2001 and December 31, 2000 being increased approximately 98.60% and 119.30% 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, 2001 ----------------- Unrealized Unrealized holding holding Type of security Cost Fair Value gains losses - ---------------- ----------- ----------- ----------- ----------- Equity $21,270,436 $42,271,002 $21,182,144 $ 181,578 Debt 14,859 900 0 13,959 ----------- ----------- ----------- ----------- Total $21,285,295 $42,271,902 $21,182,144 $ 195,537 =========== =========== =========== =========== December 31, 2000 ----------------- Unrealized Unrealized holding holding Type of security Cost Fair Value gains losses - ---------------- ----------- ----------- ----------- ----------- Equity $22,202,412 $48,721,503 $27,425,484 $ 906,393 Debt 14,859 900 0 13,959 ----------- ----------- ----------- ----------- Total $22,217,271 $48,722,403 $27,425,484 $ 920,352 =========== =========== =========== =========== At December 31, 2001, the securities held by the Company had a market value of $42,271,902 and a cost basis of $21,285,295 resulting in a net unrealized gain of $20,986,607 or 98.60% of cost. At December 31, 2000, the securities held by the Company had a market value of $48,722,403 and a cost basis of $22,217,271 resulting in a net unrealized gain of $26,505,132 or 119.30% of cost. F-5 At December 31, 2001 and December 31, 2000, marketable securities, primarily consisting of preferred and common stocks of utility companies, are valued at fair value. (2) Loans Payable As at December 31, 2001 and December 31, 2000, 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 5.7%. Short term margin debt due to brokers, secured by the Companies marketable securities, was $775,363 at December 31,2000. There was zero margin debt at December 31,2001. (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 2001, 2000 and 1999 the charges to income for depreciation using this method were $56,179, $58,258 and $72,395 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, 2001 and December 31, 2000, the Company also maintained a short position in certain marketable securities. These positions were sold for $16,128 at December 31, 2001, and $67,584 at December 31, 2000, and had respective market values of $14,337 and $43,287 resulting in unrealized gains of $1,791 at December 31, 2001 and $24,297 at December 31, 2000. (6) Commitments and Contingencies (A) Operating Leases Future minimum rental payments under non-cancelable operating lease are as follows: 2002 $184,482 2003 $184,482 2004 $184,482 2005 $184,482 Rent expense for all non-cancelable operating leases was $386,248, $406,768, and $378,372 for the years ended December 31, 2001, 2000 and 1999 respectively. B) Contingent Liabilities The Company is not aware of any contingent liabilities at year end. (7) Research and Development Expenses Research and development expenses were $325,745, $15,000, and $15,000 for 2001, 2000, and 1999 respectively. All research and development costs are expensed in the year they occur. (8) Interest Expense and Income Interest expense was $200,741, $200,741, and $150,617 and interest income was $2,400, $2,000, and $3,512 in 2001, 2000 and 1999 respectively. F-5 (9) Income Taxes The following is a reconciliation of the federal statutory tax rate of 35% for 2001,2000 and 1999, with the provision for income taxes: 2001 2000 1999 ---------- ---------- ---------- Statutory tax rate 107,774 0 0 TAX Benefit of NOL -107,774 State and city taxes 21,228 21,228 1,360 ---------- ---------- ---------- Provision for income taxes 21,228 21,228 1,360 ---------- ---------- ---------- Effective federal tax rate 0% 0% 0% ---------- ---------- ---------- (10) Subsidiaries In 1988, Daxor Corporation formed a wholly owned subsidiary, Scientific Medical Systems, Inc., which has taken over the operations of the sperm bank, blood bank and laboratory. The results of operations have been consolidated in these financial statements. F-5 SCHEDULE I MARKETABLE SECURITIES -- OTHER INVESTMENTS The following tables summarize the company's investments as of: December 31, 2001 Type of Unrealized Unrealized Security Cost Fair Value Holding gains holding losses - ---------------- ----------- ----------- ------------- -------------- Equity $21,270,436 $42,271,002 $21,182,144 $ 181,578 Debt 14,859 900 0 13,959 ----------- ----------- ----------- ----------- Total $21,285,295 $42,271,902 $21,182,144 $ 195,537 =========== =========== =========== ===========
SCHEDULE IX SHORT-TERM BORROWINGS Years Ended December 31, 2001, 2000, 1999 - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Column A Column B Column C Column D Column E Column F - -------- -------- -------- -------- -------- -------- - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Category of aggregate Balance at the end Weighted average Maximum amount Average amount Weighted average short-term borrowings of period interest rate at outstanding during outstanding during interest rates end of the period this period the period during the period - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- 2001 - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Banks 1,000,000 5.7% 1,000,000 1,000,000 6.95% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Brokers 0 6.12% 1,054,607 678,343 6.01% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- All Categories 1,000,000 5.91% 2,054,607 1,678,343 6.54% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- 2000 - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Banks 1,000,000 8.16% 1,000,000 1,000,000 8.05% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Brokers 775,363 8.12% 1,443,794 1,089,312 7.71% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- All Categories 1,775,000 8.14% 2,443,794 2,089,312 7.93% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- 1999 - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Banks 1,000,000 7.65% 1,000,000 1,000,000 7.65% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- Brokers 1,443,794 7.47% 1,443,794 1,312,442 7.43% - ----------------------- --------------------- --------------------- ---------------------- --------------------- ------------------- All Categories 2,443,794 7.54% 2,443,794 2,312,442 7.51% - ----------------------- --------------------- --------------------- ---------------------- --------------------- -------------------
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-6 SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION
- ----------------------------------------------------------------------------------------------------------------- COLUMN A COLUMB B - ----------------------------------------------------------------------------------------------------------------- Item Charged to costs and expenses Year ended December 31, 2001 2000 1999 ---- ---- ---- Maintenance and repairs $ * $ * $ * Depreciation and amortization of intangible assets pre-operating costs and similar deferrals 57,735 58,258 72,395 Taxes, other than payroll and income taxes * * * Royalties --- --- --- Advertising costs * * * - ----------------------------------------------------------------------------------------------------------------- * less than 1% of total revenues for the year. - -----------------------------------------------------------------------------------------------------------------
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