10-Q 1 d63879_10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Act of 1934 FOR QUARTER ENDED MARCH 31, 2005 Commission File Number 0-12248 DAXOR CORPORATION (Exact Name as Specified in its Charter) New York 13-2682108 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 350 Fifth Ave Suite 7120 New York, New York 10118 (Address of Principal Executive Offices & Zip Code) Registrant's Telephone Number: (212) 244-0555 (Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT MARCH 31, 2005 -------------------------------------------------------------------------------- COMMON STOCK PAR VALUE: $.O1 per share 4,636,326 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS (Unaudited) 2 Condensed Consolidated Balance Sheets as at March 31, 2005 and December 31, 2004 F-1 Condensed Consolidated Statements of Operations for the three months ended March 31,2005 and 2004 F-2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 F-3 Notes to Condensed Consolidated Financial Statements F-4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 3 Item 3. Controls and Procedures 4 PART II. OTHER INFORMATION Item 1.Legal Proceedings 4 Item 2.Exhibits and Reports on Form 8-k 4 Signatures Item 3.Exhibit Index Item 1. Financial Statements (Unaudited) Index to Financial Statements Condensed Consolidated Balance Sheets as at March 31, 2005 and December 31, 2004 F-1 Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004 F-2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 F-3 Notes to Condensed Consolidated Financial Statements F-4-5 2 DAXOR CORPORATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DAXOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS[UNAUDITED] March 31, December 31, 2005 2004 ------------ ------------ -------------------------------------------------------------------------------- ASSETS -------------------------------------------------------------------------------- CURRENT ASSETS Cash $ 13,730 $ 5,079 Available-for-sale securities 55,726,452 54,806,400 Accounts receivable 195,516 202,649 Inventory 139,338 139,338 Prepaid and other current assets 211,353 453,284 ------------ ------------ Total Current Assets 56,286,389 55,606,750 PROPERTY AND EQUIPMENT Machinery and equipment 767,824 755,237 Furniture and fixtures 329,341 329,050 Leasehold improvements 295,530 295,530 ------------ ------------ 1,392,696 1,379,817 Less: Accumulated depreciation and amortization (1,099,688) (1,089,245) ------------ ------------ Property and equipment, net 293,008 290,572 Other assets 32,158 32,158 ------------ ------------ Total Assets $ 56,611,555 $ 55,929,480 ============ ============ -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY -------------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued liabilities $ 71,225 $ 89,162 Loans payable 4,396,564 4,113,285 Other Liabilities 975,521 982,718 Deferred revenue 22,355 17,465 Deferred taxes 10,922,075 10,845,531 ------------ ------------ Total Current Liabilities 16,387,740 16,048,161 STOCKHOLDERS' EQUITY Common stock, $.01 par value Authorized - 10,000,000 shares Issued - 5,309,750 shares Outstanding - 4,636,326 and 4,610,826 shares, respectively 53,097 53,097 Additional paid in capital 10,281,586 9,821,563 Accumulated other comprehensive income 21,201,674 21,053,089 Retained earnings 14,249,659 14,589,699 Treasury stock, at cost, 673,424 and 698,924 shares, respectively (5,562,201) (5,636,129) ------------ ------------ Total Stockholders' Equity 40,223,815 39,881,319 ------------ ------------ Total Liabilities and Stockholders' Equity $ 56,611,555 $ 55,929,480 ============ ============ See accompanying notes to condensed consolidated financial statements F-1 DAXOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED] FOR THE THREE MONTHS ENDED MARCH 31, 2005 2004 ----------- ----------- Revenues: Operating revenues $ 296,583 $ 408,248 ----------- ----------- Costs and Expenses: Operations of laboratories & costs of production 454,389 381,162 Selling, general, and administrative 1,073,328 710,157 ----------- ----------- Total Costs and Expenses 1,527,717 1,091,319 ----------- ----------- Loss from operations (1,231,134) (683,071) Other income (expense): Dividend income 538,120 493,569 Gain on sale of securities 389,036 225,066 Other revenues 4,352 3,643 Interest expense, net (40,413) (19,443) ----------- ----------- Total other income 891,095 702,835 ----------- ----------- Net Income /(Loss) Before Income Taxes (340,039) 19,764 Provision for income taxes 0 0 ----------- ----------- Net Income /(Loss) $ (340,039) $ 19,764 =========== =========== Weighted Average Number of Shares Outstanding - Basic and Diluted 4,627,659 4,632,659 =========== =========== Net Income / (Loss)per Common Equivalent Share $ (0.07) $ 0.00 =========== =========== See accompanying notes to condensed consolidated financial statements. F-2 DAXOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED] FOR THE THREE MONTHS ENDED MARCH 31, 2005 2004 ----------- --------- Cash flows from operating activities: Net income or (loss) $ (340,039) 19,764 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation & amortization 10,443 11,940 Gain on sale of investments (389,036) (225,066) Change in assets and liabilities: (Increase) decrease in accounts receivable 7,133 (50,528) (Increase) decrease in other current assets 241,931 (68) Increase (decrease) in accounts payable, accrued and other liabilities net of "short sales" (17,912) 4,198 Increase in deferred revenue 4,890 -- ----------- --------- Total adjustments (142,551) (259,524) ----------- --------- Net cash used in operating activities (482,590) (239,760) ----------- --------- Cash flows from investing activities: Purchase of property and equipment (12,878) (7,570) Purchases of investments, net (1,280,049) (270,699) Net proceeds from (repayments of)loans from brokers used to purchase investments 283,279 (238,905) Proceeds from "short sales" not closed 966,939 362,375 ----------- --------- Net cash used in investing activities (42,709) (154,799) ----------- --------- Cash flows from financing activities: Proceeds from bank loan -- 600,000 Proceeds from sale (purchase of) treasury stock 533,950 (153,263) ----------- --------- Net cash provided by financing activities 533,950 446,737 ----------- --------- Net increase in cash and cash equivalents 8,651 52,178 Cash and cash equivalents at beginning of year 5,079 3,324 ----------- --------- Cash and cash equivalents at end of period $ 13,730 $ 55,502 =========== ========= See accompanying notes to condensed consolidated financial statements F-3 DAXOR CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods presented. The consolidated financial statements are unaudited and are subject to such year-end adjustments as may be considered appropriate and should be read in conjunction with the historical consolidated financial statements of Daxor Corporation years ended December 31, 2004, 2003 and 2002, included in Daxor Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Operating results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. These consolidated financial statements have been prepared in accordance with US GAAP and under the same accounting principles as the consolidated financial statements included in the Annual Report on Form 10-K. Certain information and footnote disclosures related thereto normally included in the financial statements prepared in accordance with US GAAP have been omitted in accordance with Rule 10-01 of Regulation S-X. (2) AVAILABLE-FOR-SALE SECURITIES Upon adoption of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, management has determined that the company's portfolio is best characterized as "Available-For-Sale". SFAS No. 115 requires these securities to be recorded at their fair market values, with the offsetting unrealized holding gains or losses being recorded as Comprehensive Income (Loss)in the Equity section of the Balance Sheet. The adoption of this pronouncement has resulted in an increase in the carrying value of the company's available-for-sale securities, as at March 31, 2005 and December 31, 2004, of approximately 136.10% and 139.25%,respectively, over its historical cost. In accordance with the provisions of SFAS No. 115, the adjustment in stockholders' equity has been made net of the tax effect had these gains been realized. The Company uses the historical cost method in the determination of its realized and unrealized gains and losses. The following tables summarize the Company's investments as of: March 31, 2005 -------------- Type of Unrealized Unrealized security Cost Fair Value Holding gains holding losses -------- ----------- ----------- ------------- -------------- Equity $23,524,650 $55,698,052 $32,844,902 $ 671,500 Debt 78,053 28,400 -- 49,653 ----------- ----------- ----------- ----------- Total $23,602,703 $55,726,452 $32,844,902 $ 721,153 =========== =========== =========== =========== December 31, 2004 ----------------- Type of Unrealized Unrealized security Cost Fair Value Holding gains holding losses -------- ----------- ----------- ------------- -------------- Equity $22,802,568 $54,741,650 $32,125,500 $ 186,417 Debt 105,212 64,750 7,792 48,255 ----------- ----------- ----------- ----------- Total $22,907,780 $54,806,400 $32,133,292 $ 234,672 =========== =========== =========== =========== At March 31, 2005 the securities held by the Company had a market value of $55,726,452 and a cost basis of $23,602,703 resulting in a net unrealized gain of $ 32,123,749 or 136.1% of cost. At December 31, 2004, the securities held by the Company had a market value of $54,806,400 and a cost basis of $22,907,780 resulting in a net unrealized gain of $31,898,620 or 139.25% of cost. At March 31, 2005 and December 31, 2004, marketable securities, primarily consisting of preferred and common stocks of utility companies, are valued at fair value. Debt securities consist of Corporate Bonds. As at March 31, 2005, one of these bonds, which has a cost of $29,798, is scheduled to mature in May 2008. The remaining two bonds, which have a combined cost of $48,255 are currently in default, with maturity dates prior to December 31, 2004. Management is awaiting final settlement of the bonds, and is not yet able to determine the amount of loss, if any, that may occur. Accordingly, the Company has valued these bonds at zero and recorded an unrealized loss of the entire cost of the bonds. F-4 (3) INVENTORY Inventory is stated at the lower of cost or market, using the first-in, first-out method (FIFO), and consists primarily of finished goods. (4) LOANS PAYABLE As at March 31, 2005 and December 31, 2004, the Company has a note payable of $1,500,000 with a bank with an option to renew, and is classified as short term. The note balance is an aggregate of borrowings (loans) that renews as one note each year, but is subject to different interest rates depending on the individual amount of each borrowing. The loan bears interest at approximately 3.0% is secured by certain marketable securities of the Company. Short term margin debt due to brokers, secured by the Company's marketable securities, totaled $2,896,564 at March 31, 2005 and $1,363,201 at December 31, 2004. (5) SELECTED FINANCIAL DATA (Unaudited) Selected Quarterly Financial Data Quarter Ended -------------------------------- March 31, 2005 March 31, 2004 Operating revenues $ 296,583 $ 408,248 Total revenue and other income 1,228,091 1,130,526 Gross loss (1,231,134) (683,071) Net income (loss) (340,039) 19,764 Net income (loss) per share (.07) .00 Total Assets 56,611,555 50,130,886 -------------------------------------------------------------------------------- Income: Operating revenues $ 296,583 $ 408,248 Other income (expenses): Dividend income 538,120 493,569 Gain on sale of securities 389,036 225,066 Other revenues 4,352 3,643 Interest expense, net (40,413) (19,443) ----------- ----------- Total Selected Net Income 1,187,678 1,111,083 ----------- ----------- Costs and Expenses: Operations of laboratories & costs of production 454,389 381,162 Selling, general & administrative 1,073,328 710,157 ----------- ----------- Total Selected Costs and Expenses 1,527,717 1,091,319 ----------- ----------- Net Income (Loss) Before Provision for Income Taxes (340,039) 19,764 Provision for Income Taxes -- -- ----------- ----------- Net Income (Loss) $ (340,039) $ 19,764 =========== =========== Weighted Average Number of Shares Outstanding - Basic and Diluted 4,627,659 4,632,659 =========== =========== Net Income(Loss)per Common Equivalent Share $ (0.07) $ 0.00 =========== =========== F-5 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS AND FINANCIAL CONDITION ITEM 2. RESULTS OF OPERATIONS Three months ended March 31, 2005 as compared with three months ended March 31, 2004 For the three months ended March 31, 2005 total revenue and other income increased by 8.6% to $1,228,091 from $1,130,526 in 2004. Operating revenues decreased by 27% to $296,583 in 2005 from $408,248 in 2004. In 2005 there was only a single sale of the BVA-100 blood volume analyzer, although a number of contracts were signed for instruments on a trial basis. There were capital gains in 2005 of $389,036 up from $225,066 in 2004. Dividend income was $538,120 with a net interest expense of $40,413 in 2005, as compared to dividend income of $493,569 with a net interest expense of $19,443 in 2004. In 2005, the Company had a net loss of ($340,039) versus a net income income of $19,764 in 2004. Total Costs and Expenses increased by 41% in 2005 to $1,568,130 vs. $1,110,762 in 2004. This was related to increased marketing efforts and research and development expenses. The Company has increased research expenses for additional features to the BVA-100. The Company has also expanded its manufacturing staff in Oak Ridge, Tennessee. The increase in kit sales can be attributable to these sales efforts. The sales cycles from initial contact to a sale can be 6 to 12 months, or occasionally longer. The Company anticipates that the sales of the BVA-100 Blood Volume Analyzers and kits will become the major source of income for the Company. The Company plans to continue expanding its sales and marketing force, which currently consists of 17 salesmen and 4 support personnel. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2005 the Company had total assets of $56,611,555 with stockholders' equity of $40,223,815 as compared to total assets of $50,130,886 with stockholders' equity of $37,537,441 at March 31,2004. Despite increasing its expenses, the Company has significantly increased its financial base as compared to one year ago. The Company has a net pre-taxed unrealized gain of $32,123,749 and $21,201,674 of net after tax unrealized capital gains on available-for-sale securities in its portfolio. This amount is included in the calculation of Total Stockholders' Equity. The Company's stock portfolio had a market value of $55,726,452 with short-term loans of $ 4,396,564 with 4,636,326 shares outstanding. The Company has current liabilities of $16,387,740. Included in these liabilities are deferred taxes of $10,922,075. These deferred taxes would occur if the Company chose to sell its entire portfolio. Current liabilities minus these deferred taxes is $5,465,665. The Company's investment portfolio has been a critical source of supplemental income to partially offset the continuing losses from operations. Without this income, the Company would have been in a precarious financial situation because of its operating losses over the past 10 years. The Company's portfolio has, historically, maintained a net value above cost for each of the past 15 years. The Company has adequate resources for the current marketing level of its Blood Volume Analyzer as well as capital to sustain its localized semen and blood banking services. The Company anticipates hiring additional regional managers to the existing sales/marketing team. It is the goal of the marketing team to develop an individual sales team for each regional manager. The Company is also expanding its support services personnel. The decision to develop the marketing team was partially based on the anticipation of new publications in peer reviewed medical journals by current users of the Blood Volume Analyzer. The Company's goal is to establish blood volume measurement as a standard of care in multiple areas of medicine and surgery. It is hoped that the publication of research studies from leading medical facilities will result in an increase in sales in both the Blood Volume Analyzer and its associated kits. The Company sells, as well as offers to lease or rent the BVA-100 as part of the overall marketing plan. The Company also loans the instrument for a limited time period, however facilities evaluating the instrument must pay for the kits. A financing arrangement for customers was established through a relationship with De Lage Landen (DLL). The significance of this relationship is as sales through leases increases, Daxor will not have to diminish its capital outlay for equipment as DLL will fund the net present value of the lease upon installation of the equipment. In an effort to obtain the best rates for our clients, the Company will also work with other independent leasing firms. 3 The Company is evaluating blood volume instrumentation management programs for hospitals. Under such a plan, the Company would provide equipment and personnel on a sub-contract basis. The Company will use its current financial reserves primarily for developing and marketing the Blood Volume Analyzer. The Company is evaluating various options to expand blood banking services in conjunction with the use of the Blood Volume Analyzer. Additional information on the Company is available on our website www.daxor.com. Item 3. Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as defined by the Securities and Exchange Commission (SEC),as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to information required to be included in our periodic Securities and Exchange Commission filings. There was no significant change in our internal control over financial reporting that occurred during the quarter ended March 31, 2005, that materially affected or is reasonably likely to materially affect, the Corporation's internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) There were no reports on Form 8-k filed. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: May 16, 2005 By: /s/ JOSEPH FELDSCHUH, M.D. -------------------------- JOSEPH FELDSCHUH, M.D., President and Chief Executive Officer DATE: May 16, 2005 By: /s/ STEPHEN FELDSCHUH --------------------- STEPHEN FELDSCHUH Vice President of Operations And Chief Financial Officer 4