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, 2002 0-12248
Daxor Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2682108
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
350 Fifth Avenue
Suite 7120
New York, New York 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 244-0555
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $.01 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. |_|
As of March 26, 2003, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $21,202,370. 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 $14.00.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of March 26, 2003: 4,657,784 shares.
Documents incorporated by reference: The information required by Part III is
incorporated by reference from the proxy statement for the 2003 Annual Meeting
of Shareholders.
1
PART I.
Item 1. Business
Daxor Corporation is a medical device manufacturing Company with additional
biotech services. Daxor was originally founded in 1970 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
instrument, called the BVA-100(TM), 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 obtained marketing clearance from the FDA for the
instrument. In 1998, the Company received clearance for it's specialized single
use injection kit known as Volumex(TM). 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 a small
scale manufacturing facility in Oak Ridge, Tennessee for research and
development purposes. The Blood Volume Analyzer is also manufactured for Daxor
by an Original Equipment Manufacturer (OEM). This combination 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
that required as much as four to eight hours of technician time with variable
degrees of accuracy. Due to 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.
The Company's patented injection and collection kit, Volumex(TM), utilizes
Albumin I-131 which is a classic tracer used for blood volume measurement. The
kit includes two matching standards along with the pre-measured volumetric flow
chamber. This kit has resulted in the elimination of the previous time consuming
steps whereby the institution needed to create their own standards.
Measurement of blood volume is achieved by the use of an indicator or tracer
that is injected into a patient, and 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. Due to 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, the hemoglobin and the hematocrit, used to diagnose anemia,
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
2
may result in serious complications, including the death of the patient. 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. President George W. Bush and former Attorney General Janet
Reno are among those 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(TM) Blood Volume Analyzer for their Syncope Section. Results on over one
thousand 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 is ranked number 3 overall out of more than 6,200
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. However, tilt-table testing 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 study by the Mayo Clinic estimated that there are 50 million Americans
who have hypertension (high blood pressure). It is reported that 70% of
hypertensive patients have their blood pressures inadequately controlled.
Hypertension is caused primarily by two variables. There is either a) excessive
blood (hypervolemia) or fluid retention within the circulation or b) excessive
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 are vasodilators. These
drugs relax the blood vessels and lower the blood pressure. Within each of these
two major categories are drugs that work by different mechanisms, but they all
fall into one of these two main therapeutic categories, diuretics or
vasodilators. Treatment is often a trial and error approach because neither
vasoconstriction nor 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 Caucasians for comparable levels of
elevated blood pressure. Diuretic therapy is expected to benefit patients whose
elevated blood pressure is caused by an expanded blood volume. It may however 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 treated with diuretics.
The kidney is particularly vulnerable to low blood volume. It is well known that
certain medications, such as diuretics, can cause blood volume to decrease, and
increase the possibility of kidney failure. The measurement of blood volume in
the treatment of hypertension may help prevent these types of complications.
3
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.
The New England Journal of Medicine recently published 2 large-scale studies
concerning the use of diuretics vs. vasodilators. One of the studies that
encompassed thousands of patients found that diuretics were better. The other
study which also encompassed thousands of patients came to the opposite
conclusion. Unfortunately, in neither of these studies was blood volume
measured. Physicians have been puzzled by these conflicting results. The Mayo
clinic, which recently purchased the BVA-100(TM), previously reported that blood
volume measurements can be helpful in defining therapy. If every patient with
hypertension had at least one blood volume performed in their lifetime to help
define optimum therapy, this would be expected to be a very cost-effective test.
This is because of the high degree of complications such as kidney failure which
hypertensive patient's experience.
Surgical patients who lose blood are particularly at risk for blood volume
derangements. Standard tests such as the hemoglobin or hematocrit used to test
for blood loss only measure the concentration (or percentage) of red cells in
the plasma in the blood, they do not measure the volume of blood. It may take
hours or even days before a patients' blood can be thinned out to reflect the
true amount of blood loss. Sometimes the first indication that a patient with a
relatively lower hematocrit has lost a large quantity of blood is the collapse
of the circulation. 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 into the lung. This has frequently
been used as a surrogate technique to evaluate blood volume in critically ill
patients. However, PAC directly measures pressure, not volume. The Lutheran
Medical Center (New York) reported research on the first comparison of PAC with
direct blood volume measurements in patients. Their findings using the BVA-100
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 Lutheran Medical Center has also published 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 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 a new drug, Xigris. The cost of this drug is
approximately $7000 per dose. Recent reports from the V.A. Hospital in San Juan,
Puerto Rico, which purchased a Blood Volume Analyzer, are encouraging.
Preliminary reports from the Intensive Care Unit confirm that some patients
treated for severe low blood volume were able to recover without the use of
Xigris. Other institutions are currently investigating the use of blood volume
measurement in Intensive Care Units. If additional studies confirm that
correction of blood volume should be the primary focus on treating septic shock,
then blood volume measurement 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 septic shock drug which
only benefits a small percentage of patients.
4
Approximately 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 with low blood
volume and who 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, of which $23 billion is spent annually
on hospital treatment of congestive heart failure patients. Congestive heart
failure is the number one reason for admission to hospitals in the US for
patients over 65 years of age. Three thousand patients annually receive heart
transplants. The overwhelming majority of patients treated for heart failure
must be treated with a combination of drugs. Two major heart studies from the
New York Presbyterian Medical Center and Hospital were recently published in the
leading cardiac journal Circulation. One study involved the treatment of anemia
in heart failure patients using the BVA-100. The second study involved the
effects of Erythropoietin on exercise performance in anemic patients with
congestive heart failure. Senior authors were Ana-Silvia Androne, MD; Stuart D.
Katz, MD, et al; and Donna M. Mancini, MD; Stuart D. Katz, MD; et al.
respectively. Dr. Stuart Katz, currently Associate Professor of Internal
Medicine and Cardiology at Yale University Medical Center at New Haven is
preparing additional reports on blood volume measurement on heart failure
patients utilizing the BVA-100. These papers are expected to be submitted in the
near future. An important finding in these medical cases is that it is very
difficult for physicians to accurately evaluate congestive heart failure and
blood volume status without actually measuring the patient's blood volume.
Nevertheless physicians are forced to make major decisions to alter the
patient's blood volume without the correct knowledge of the patient's true blood
volume status. Preliminary reports on the use of the Blood Volume Analyzer have
confirmed that congestive heart failure patients may have serious blood volume
derangements that 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.
Results are expected to be available later this year.
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.
One in eight elderly Americans experience 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 that 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 with
low blood volume who are not optimally treated at the present time.
5
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. Several
manufacturers including Northfield Laboratories, Biopure, and Hemasol
Corporation 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 at 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 Hemasol 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 are 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 that 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 that 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.
The Company is currently exploring the development of 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 from 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
6
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, including Medicare 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 that can be avoided by
utilizing one's previously stored blood. There are approximately 15-18 million
blood transfusions administered annually to 4 million patients. Despite improved
testing, significant risks still remain from diseases such as West Nile Virus,
which can be transmitted by transfusion. Diseases such as Hepatitis and HIV can
also be transmitted by infected donors who may test negative for up to 6 months
after the initial infection. The FDA is particularly cautious and will not
permit an individual who received a transfusion to date blood to another person
for a period up to 1 year after receiving the transfusion. This regulation is
designed to exclude donors who may be infected but undetectable by the standard
tests used for screening donors.
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).
The Company believes that an educational process can establish the advantages of
autologous blood storage. Education can also 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, are 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.
7
The Company views personal blood storage as a supplement to and not as
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 is conceived via
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.
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. The 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.
8
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 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. The Company expects
to file an additional patent for instrumentation to be used in conjunction with
the BVA-100 later this year. The Company also expects to file sometime in the
year 2004 a patent for equipment which will automate the measurement of
glomerular filtration rate of the kidney. This is a very important and sensitive
test of kidney function. At the present time this test is infrequently performed
because of the difficulty in the current methodology. The situation is analogous
to blood volume measurement which was automated with the development of the
BVA-100. The Company believes that it can automate this process which will make
it more feasible for regular medical use.
The Company is exploring the submission of a patent for methodology of improving
client identification. It is introducing additional patent protection for stored
donor semen which may be eligible for patent protection. In the 32 years of the
Bank's operations, it has never had a mix-up in any stored specimen.
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
recognized after the initial beta testing 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. The Mayo Clinic, and The
Cleveland Clinic, ranked respectively 2 and 3 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. As these studies become available, they
will be incorporated into the marketing program of the Company.
9
In September 2002, the Company hired Rick Prall as the National Sales Manager
and 3 other Regional Sales Managers with extensive experience in the medical
device and nuclear medicine field. A fifth manager specifically for the State of
Ohio was added to the staff. Working in conjunction with the existing staff,
they have begun to develop the foundations for an in depth marketing program
utilizing the results from major teaching hospitals. Current plans are to
develop 5 regional managers who will eventually supervise sales and technical
staffs as sales expand. The timing of additional staffing will be determined by
the rate at which the managers are able to implement new sales and marketing
programs. The Company believes that this is the appropriate time to expand
marketing and sales efforts. The Company is also exploring the hiring of a
separate staff to market the blood banking services.
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 that 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 frozen blood storage in the Northeastern United States. Multiple
companies which previously attempted to provide long-term personal blood storage
to members of the public were unsuccessful. To date, the Company has not made a
profit from its blood banking services. The Company believes however that
additional technology which enables longer use of frozen blood after it is
stored may enable such services to eventually becomes sustaining financially and
profitable.
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 8 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.
10
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 a subsidiary 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.
Employees
On March 26, 2003, the Company had 32 employees. None of the Company's employees
are covered by a collective bargaining agreement. The Company believes that its
employee relations are good.
Item 2. Properties
In December 2002, the Company signed a new thirteen-year lease for it's existing
facility at the Empire State Building. The Company has occupied this space since
January 1992. The company currently occupies approximately 7,500 square feet.
The lease has a two year option for renewal after thirteen years. There are
options for an additional 18,000 square feet of space. In 1998 the company
signed a lease for approximately 11,000 square feet of manufacturing and office
space in Rochester New York. The lease was signed when Daxor acquired the assets
of the Wellport Corporation. 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 2002 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 2002.
Part II.
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.
2002
High Low
---- ---
First Quarter 19.65 17.35
- --------------------------------------------------------------------------------
Second Quarter 19.00 16.50
- --------------------------------------------------------------------------------
Third Quarter 17.50 15.00
- --------------------------------------------------------------------------------
Fourth Quarter 16.10 14.00
- --------------------------------------------------------------------------------
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 February 28 2002, the Company had approximately 208 holders of record of the
Common Stock. The Company believes there are approximately 1700 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.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Idant Laboratories subsidiary contributed 58%, 54% and 59% of operating revenues
in 2002, 2001 and 2000 respectively. The Companies operations in semen banking
and blood banking (laboratories) have received limited promotion, however, the
Company has taken steps to increase awareness of these services. 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. As discussed in the marketing section, during fiscal year 2002
Daxor hired Rick Prall from Toshiba along with 3 other individuals who each have
over 15 years of medical device sales and marketing experience. The Company
intends to increase its marketing efforts to add to its operational income. Some
of the steps the Company had 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, 2002 AS COMPARED TO DECEMBER 31, 2001
Total revenues were $2,701,937 in 2002, down from $2,716,376 reported in 2001.
Dividend income earned on the Company's securities portfolio was $ 1,858,025 a
decrease from the $1,860,289 reported in 2001. Gains on the sale of investments
were $40,610 in 2002 as compared to $97,719 in 2001. Operating revenues
increased to $767,608 in 2002 from $591,692 in 2001. Total cost and expenses
increased to $2,873,442 from $2,347,270 in 2001. This increase was partially
caused by increased hiring of personnel and additional marketing and selling
expenses. The net income before income taxes was a loss of ($171,505) in 2002
vs. $369,106 in 2001.
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
were $97,719 in 2001 as compared to $57,399 in 2000. Operating revenues for 2001
were $591,692 vs. $635,868 in 2000. Total expenses were $2,347,270 in 2001 vs.
$2,679,736 in 2000. Operating revenues were minimally changed and the company
had improved efficiencies when it centralized some of its procedures in Oak
Ridge,Tennessee. 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.
12
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, 2002, the Company had $734,046 in short-term debt vs. $1,000,000
in 2001. At year-end 2002, shareholders' equity was $33,546,897. At year-end
2001, the Company had shareholders' equity of $35,328,967. At December 31, 2002
the Company's security portfolio had a market value of $40,573,162 vs.
$42,271,902 in 2001.
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. In the Fall of 2002,
Daxor entered into a marketing agreement with Medika International. Medika is
the largest medical distributor in the Caribbean market. They will be
representing Daxor in this region in an effort to expand its presence while
utilizing the V.A. in Puerto Rico as a reference site. 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 established Daxor Capital with a
relationship through De Lage Landen from the Netherlands who is one of the
largest private banks in the world. De Lage Landen has extensive experience in
capital equipment leasing through its existing relationships with premier
corporations such as Toshiba and Abbott. The significance of this relationship
because 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. 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, recent technological advances have significant potential in proving the
blood banking safety. A major handicap for the use of frozen blood was the fact
that frozen blood, after it was thawed, had to be used within 24 hours. New
technology approved by the FDA and utilized by the U.S. military, enables blood
to be used for up to 2 weeks after it has been thawed. The company, in addition
to its regular frozen blood banking services, intends to implement this type of
program. Initially, this type of program will produce a net loss, but the
company believes that there is sufficient potential demand that such a program
will be self sustaining.
Year-end 2002 finds the Company in a satisfactory financial position with
adequate funds available for its immediate anticipated needs. The company plans
its budgetary outlays on the assumption that the raising of additional financial
capital may be difficult in the next 2 to 4 years.
13
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 Principal
Executive Officer
Chairman of the Board
Dated: March 26, 2003
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 26, 2003
- -------------------- (Principal Executive Officer)
Joseph Feldschuh, M.D
/s/ Stephen Feldschuh Vice President of Operations March 26,2003
- -------------------- & Principal Accounting Officer
Stephen Feldschuh
/s/ Gary Fischman PhD Vice President March 26, 2003
- --------------------
Gary Fischman, PhD
/s/Liliya Morgaylo Corporate Treasurer March 26, 2003
- --------------------
Liliya Morgaylo
/s/ Diane M. Meegan Corporate Secretary March 26, 2003
- --------------------
Diane M. Meegan
/s/ Stephen M. Moss PhD Director March 26, 2003
- --------------------
Stephen M. Moss, PhD
/s/ Robert Willens Director March 26, 2003
- --------------------
Robert Willens
/s/ James Lombard Director March 26, 2003
- --------------------
James Lombard
/s/ Martin Wolpoff Director March 26, 2003
- --------------------
Martin Wolpoff
/s/ Bruce Slovin Director March 26, 2003
- --------------------
Bruce Slovin
Board of Directors:
Name Title
Dr. Joseph Feldschuh Chairman, President, & CEO
Stephen Moss, PhD Director
James Lombard Director
Martin Wolpoff Director
Robert Willens Director
Bruce Slovin Director
14
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULE 13a-14
I, Joseph Feldschuh,M.D., certify that:
1) I have reviewed this annual report on Form 10-K of Daxor Corporation;
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all the
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of their annual report (the " Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee f registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
coercive actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003
/s/ Joseph Feldschuh, MD
------------------------
Joseph Feldschuh, MD
President, Principal Executive Officer and
Chairman of the Board
15
CERTIFICATION BY PRINCIPAL ACCOUNTING OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULE 13a-14
I, Stephen Feldschuh, certify that:
1) I have reviewed this annual report on Form 10-K of Daxor Corporation;
2)Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all the
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of their
annual report (the " Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee f registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
coercive actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003
/s/ Stephen Feldschuh
---------------------
Stephen Feldschuh
Vice President of Operations and
Principal Accounting Officer
16
Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes
Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes Oxley Act of 2002, I Joseph Feldschuh,
MD, certify that:
1. the annual report on Form 10-K for the year ended December 31, 2002 of
Daxor Corporation fully complies with the requirements of Sec 13a or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition, and results of operations of the
Company.
Date: March 26, 2003
/s/ Joseph Feldschuh, MD
------------------------
Joseph Feldschuh, MD
President, Principal Executive Officer, and
Chairman of the Board
Statement of Principal Accounting Officer Pursuant to Section 906 of the
Sarbanes Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes Oxley Act of 2002, I, Stephen Feldschuh,
certify that:
1. the annual report on Form 10-K for the year ended December 31, 2002 of
Daxor Corporation fully complies with the requirements of Sec 13a or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition, and results of operations of the
Company.
Date: March 26, 2003
/s/ Stephen Feldschuh
---------------------
Stephen Feldschuh
Vice President of Operations and
Principal Accounting Officer
17
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
Financial Statements
Consolidated Financial Statements as at December 31,2002 and 2001
and for the three years ended December 31, 2002
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
Financial Schedules
Schedule I - Marketable Securities - Other Investments - Year ended
December 31, 2002 F-6
Schedule IX - Short-term Borrowings - Years ended December 31, 2002
2001, and 2000 F-6
Schedule X - Supplementary Income Statement Information -
Years ended December 31, 2002, 2001, and 2000 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.
Exhibits 18
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, 2002 and 2001, the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2002. 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, 2002
and 2001, and the results of their operations and its cash flows for each of the
three years in the period ended December 31, 2002 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 24, 2003
F-1
DAXOR CORPORATION
FINANCIAL STATEMENTS
================================================================================
DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2002 2001
---- ----
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 13,035 $ 431,949
Marketable Securities at Fair Value
December 31,2002 and December 31,
2001. (Notes 1 and 2) 40,573,162 42,271,902
Accounts receivable 211,979 174,242
Other current assets 364,913 312,310
------------ ------------
Total Current Assets 41,163,089 43,190,403
EQUIPMENT AND IMPROVEMENTS
Storage tanks 125,815 125,815
Leasehold improvements, furniture
and equipment 928,581 837,807
Laboratory equipment 290,104 288,087
------------ ------------
1,344,500 1,251,709
Less: Accumulated depreciation and amortization 1,005,625 975,593
------------ ------------
Net equipment and improvements 338,875 276,116
Other Assets 71,601 73,634
Total Assets $ 41,573,565 $ 43,540,153
============ ============
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 112,481 $ 52,855
Loans payable (Note 2 ) 1,434,046 1,000,000
Other Liabilities 106,440 22,885
Deferred Taxes (Note 1) 6,373,701 7,135,446
------------ ------------
Total Liabilities 8,026,668 8,211,186
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 10,000,000 shares: issued and
outstanding shares 4,657,784 December 31,
2002 and 4,664,909 December 31, 2001 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) 12,372,477 13,851,161
Retained earnings 16,246,156 16,440,007
Treasury stock (4,923,065) (4,813,530)
------------ ------------
Total Shareholders' Equity 33,546,897 35,328,967
Total Liabilities and Shareholders' Equity $ 41,573,565 $ 43,540,153
============ ============
See accompanying notes to financial statements
(F-2)
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
-----------------------
2002 2001 2000
---- ---- ----
Revenues:
- --------------------------------------------------------------------------------------------
Operating revenues (Note 10) $ 767,608 $ 591,692 $ 635,868
Other revenues 35,694 166,676 109,920
Dividend income 1,858,025 1,860,289 1,842,583
Gains on sale of securities 40,610 97,719 57,399
----------- ---------- -----------
Total Revenues 2,701,937 2,716,376 2,645,770
- --------------------------------------------------------------------------------------------
Costs and expenses:
- --------------------------------------------------------------------------------------------
Operations of Laboratories & Costs of Production 805,985 814,657 1,052,000
Selling, General, and Administrative 2,028,200 1,412,687 1,429,395
Interest expense, net of interest income 39,257 119,926 198,341
----------- ---------- -----------
Total costs and expenses 2,873,442 2,347,270 2,679,736
----------- ---------- -----------
Net Income/( Loss) before Income Taxes (171,505) 369,106 (33,966)
Provision for income taxes (Note 9) 22,346 69,751 21,228
----------- ---------- -----------
Net Loss $ (193,851) $ 299,355 $ (55,194)
=========== ========== ===========
Weighted Average Number of Shares Outstanding 4,662,947 4,664,909 4,675,826
----------- ---------- -----------
Net Income per Common Equivalent Share $ (0.04) $ 0.06 $ (0.01)
=========== ========== ===========
See accompanying notes to financial statements
============================================================================================
DAXOR CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
Three Years Ended December 31, 2002
-----------------------------------
Common stock Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock
----------- ------ ------- -------- -----
- ---------------------------------------------------------------------------------------------------
Balance at January 1,2000 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)
- ---------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31,2002 $ (193,851)
Purchase of Treasury Stock (7,125) $ (109,535)
- ---------------------------------------------------------------------------------------------------
Balance December 31,2002 4,657,784 $ 53,097 $9,798,232 $16,246,156 $(4,923,065)
===================================================================================================
See accompanying notes to financial statements
F-3
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,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Operating revenues $ 767,608 $ 591,692 $ 635,868 $ 500,969 $ 324,192
Other revenues 35,694 166,676 109,920 74,407
Dividend income 1,858,025 1,860,289 1,842,583 1,856,119 1,942,759
Gains on sale of investments 40,610 97,719 57,399 469,595 362,487
----------- ---------- ----------- ----------- -----------
Total revenues 2,701,937 2,716,376 2,645,770 2,901,090 2,629,438
----------- ---------- ----------- ----------- -----------
Costs and expenses:
Operations of laboratories
& costs of production 805,985 814,657 1,052,000 833,751 961,031
Selling, general and
administrative 2,028,200 1,412,687 1,429,395 2,016,004 1,561,159
Interest expenses, net
of interest income 39,257 119,926 198,341 147,105 484,563
----------- ---------- ----------- ----------- -----------
Total costs and expenses 2,873,442 2,347,270 2,679,736 2,996,860 3,006,753
----------- ---------- ----------- ----------- -----------
Net loss before
income taxes (171,505) 369,106 (33,966) (95,770) (377,315)
Provision for income taxes 22,346 69,751 21,228 1,360 43,145
----------- ---------- ----------- ----------- -----------
Net income/(loss) $ (193,851) $ 299,355 $ (55,194) $ (97,130) $ (420,460)
=========== ========== =========== =========== ===========
Weighted average number of
shares outstanding 4,662,947 4,664,909 4,675,826 4,721,492 4,762,542
----------- ---------- ----------- ----------- -----------
Net income per common
equivalent share $ (0.04) $ 0.06 $ (0.01) $ (0.02) $ (0.09)
=========== ========== =========== =========== ===========
Selected Balance Sheet Data:
Year Ended December 31,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Working capital 33,136,421 34,979,217 38,309,247 28,869,309 34,837,930
Total assets 41,573,565 43,540,153 49,575,118 35,846,065 44,056,349
Total liabilities* 8,026,668 8,211,186 10,903,280 6,566,496 8,752,515
Shareholders' equity 33,546,897 35,328,967 38,671,838 29,279,569 35,303,834
Return on equity* 0.00% 0.77% 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 $6,373,701 for unrealized gains.
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Net income or (loss) $ (193,851) $ 299,355 $ (55,194)
----------- ---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 54,453 57,735 58,258
(Gain) loss on sale of investments (40,610) (97,719) (57,399)
(Gain) loss on sale of equipment (2,750)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (37,737) (66,315) (101,182)
(Increase) decrease in other current assets (52,603) 51,448 130,233
(Increase) decrease in other assets
net of amortization (300) (33,900) 2,700
Increase (decrease) in accounts payable,accrued
expenses and other liabilities net of "short sales" 60,626 11,024 (83,910)
Total adjustments (18,921) (77,727) (51,300)
----------- ---------- ----------
Net cash provided by operating activities (212,772) 221,628 (106,494)
----------- ---------- ----------
Cah flows from investing activities:
Payment for purchase of equipment and
improvements (114,879) (10,994) (13,289)
Proceeds from sale of equipment 2,750 -- --
Net cash provided or (used) in purchase
and sale of investments (517,207) 962,111 1,027,001
Net proceeds (repayments) of loans from
brokers used to purchase investments 734,046 (775,363) (668,431)
Proceeds from "short sales" not closed 98,683 16,128 67,584
----------- ---------- ----------
Net cash provided by/(used in) investing activities 203,393 191,882 412,865
----------- ---------- ----------
Cash flows from financing activities
Repayment of bank loan (300,000)
Payment for purchase of treasury stock (109,535) -- (355,715)
----------- ---------- ----------
Net cash used in financing activities (409,535) -- (355,715)
----------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (418,914) 413,510 (49,344)
Cash and cash equivalents at beginning of year 431,949 18,439 67,783
----------- ---------- ----------
Cash and cash equivalents at end of year $ 13,035 $ 431,949 $ 18,439
=========== ========== ==========
See accompanying notes to financial statements
F-4
DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements as at December 31, 2002
and 2001 and for the three years ended December 31, 2002 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, 2002 and December 31, 2001 being
increased approximately 85.89% and 98.60% 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, 2002
Type of Unrealized Unrealized
security Cost Fair Value holding gains holding losses
- --------- ---- ---------- ------------- --------------
Equity $21,796,315 $40,547,587 $19,960,514 $1,209,242
Debt 30,669 25,575 8,865 13,959
------------------------------------------------------------------------------------
Total $21,826,984 $40,573,162 $19,969,379 $1,223,201
=========== =========== =========== ==========
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
=========== =========== =========== ========
At December 31, 2002, the securities held by the Company had a market
value of $40,573,162 and a cost basis of $21,826,984 resulting in a net
unrealized gain of $18,746,178 or 85.89% of cost.
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, 2002 and
December 31, 2001, marketable securities, primarily consisting of preferred and
common stocks of utility companies, are valued at fair value.
F-5
(2) Loans Payable
As at December 31, 2002 and December 31, 2001, the Company had loans
outstanding aggregating $700,000 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 4.0%.
Short term margin debt due to brokers, secured by the Companies marketable
securities, totaled $734,046 at December 31, 2002.
(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 2002, 2001 and 2000 the charges to income for depreciation
using this method were $54,453, $57,735 and $58,258 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, 2002 and December 31, 2001, the Company also maintained a
short position in certain marketable securities. These positions were sold for
$98,683 at December 31, 2002, and $16,128 at December 31, 2001, and had
respective market values of $71,775 and $14,337 resulting in unrealized gains of
$26,908 at December 31, 2002 and $1,791 at December 31, 2001.
(6) Commitments and Contingencies
(A) Operating Leases
Future minimum rental payments under non-cancelable operating lease are as
follows:
2003 $183,482
2004 $183,482
2005 $183,482
2006 $183,482
2007 $183,482
Rent expense for all non-cancelable operating leases was $239,543,
$386,248, and $406,768 for the years ended December 31, 2002, 2001 and 2000
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 $330,000, $325,745 and $15,000 for
2002, 2001, and 2000 respectively. All research and development costs are
expensed in the year they occur.
(8) Interest Expense and Income
Interest expense was $40,532, $120,373, and $200,741 and interest income
was $1,275, $447 and $2,400 in 2002, 2001 and 2000 respectively.
F-5
(9) Income Taxes
The following is a reconciliation of the federal statutory tax rate of 35%
for 2002, 2001 and 2000, with the provision for income taxes:
2002 2001 2000
---- ---- ----
Statutory tax rate 0 107,774 0
Tax benefit of NOL -107,774
State and city taxes 22,346 69,751 21,228
------ ------ ------
Provision for income taxes 22,346 69,751 21,228
------------ ----------- ----------
Effective federal tax rate 0% 0% 0%
------------ ----------- ----------
(10) Subsidiaries
Daxor Corporation has formed a wholly owned subsidiary, Scientific Medical
Systems, Inc., which has the operations of the sperm bank, blood bank and
laboratory. The results of operations have been consolidated in these financial
statements.
(11) Stock Options
As of March 26,2003, Daxor Corporation has granted 144,800 stock options
with strike prices ranging from $10.00 to $21.00 per share. Of the 144,800
options only 44,800 are fully vested. The additional 100,000 shares vest 25% per
year over the next 4 years. Utilizing the Black-Scholes option valuation model
(American) the net additional expense of the 144,800 stock options with a
current stock price of $14.00 per share would be $21,936. This amount represents
less than 1/10th of $0.01 to the Company's EPS.
F-5
SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
The following tables summarize the company's investments as of:
December 31, 2002
Type of Unrealized Unrealized
Security Cost Fair Value Holding gains holding losses
- -------- ---- ---------- ------------- --------------
Equity $21,796,315 $40,547,587 $19,960,514 $1,209,242
- ------
Debt 30,669 25,575 8,865 13,959
- ---- -----------------------------------------------------------------------------------------------
Total $21,826,984 $40,573,162 $19,969,379 $1,223,201
- ----- =========== =========== =========== ==========
SCHEDULE IX
SHORT-TERM BORROWINGS
Years Ended December 31, 2002, 2001, 2000
- ----------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------
Category of Balance at Weighted Maximum Average Weighted
aggregate the end of average amount amount average
short-term period interest outstanding outstanding interest
borrowings rate at end during this during the rates during
of the period period the period
period
- ----------------------------------------------------------------------------------------------------------
2002
- ----------------------------------------------------------------------------------------------------------
Banks 700,00 4.12% 1,000,000 725,000 4.07%
- ----------------------------------------------------------------------------------------------------------
Brokers 734,046 4.05% 734,000 568,725 4.15%
- ----------------------------------------------------------------------------------------------------------
All Categories 1,434,046 4.08% 1,434,046 1,293,725 4.13%
- ----------------------------------------------------------------------------------------------------------
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 1,775,363 8.14% 2,443,794 2,089,312 7.93%
- ----------------------------------------------------------------------------------------------------------
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,
-----------------------
2002 2001 2000
---- ---- ----
Maintenance and repairs $ * $ * $ *
Depreciation and amortization
of intangible assets pre-
operating costs and
similar deferrals 54,453 57,735 58,258
Taxes, other than payroll and
income taxes * * *
Royalties --- --- ---
Advertising costs * * *
- --------------------------------------------------------------------------------
* less than 1% of total revenues for the year.
- --------------------------------------------------------------------------------
F-7
Exhibit Index
Exhibit No. Description of Exhibit
- ----------- ----------------------
99.1 Certification by Joseph Feldschuh, MD pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Stephen Feldschuh pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 the
Sarbanes-Oxley Act of 2002
18