-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EMMDY+wVX7h8YavrqZD9TOZ2u32P0DVFkX12gf2lMjw2R3X7sMkO3DHVZr7dGAav VssFMjPxgKsxzrg+z6W3rA== 0001019056-10-000373.txt : 20100329 0001019056-10-000373.hdr.sgml : 20100329 20100329161250 ACCESSION NUMBER: 0001019056-10-000373 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 71 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100329 DATE AS OF CHANGE: 20100329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAXOR CORP CENTRAL INDEX KEY: 0000027367 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 132682108 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09999 FILM NUMBER: 10710850 BUSINESS ADDRESS: STREET 1: 350 FIFTH AVENUE STREET 2: SUITE 7120 CITY: NEW YORK STATE: NY ZIP: 10118 BUSINESS PHONE: 2122440555 MAIL ADDRESS: STREET 1: 350 5TH AVENUE STREET 2: SUITE 7120 CITY: NEW YORK STATE: NY ZIP: 10118 FORMER COMPANY: FORMER CONFORMED NAME: IDANT CORP DATE OF NAME CHANGE: 19730823 10-K 1 daxor_k09.htm FORM 10-K Unassociated Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES Exchange Act of 1934
 
For the fiscal year ended: December 31, 2009
 
Or
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to _________
 
Commission file number 001-09999
 
Daxor Corporation
(Exact name of registrant as specified in its charter)
 
New York
 
13-2682108
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
350 5th Avenue, Suite 7120, New York, New York 10118
(Address of Principal Executive Offices)
 
Registrant’s telephone number, including area code: 212-244-0555
Name of each exchange on which registered: NYSE Amex
Securities registered pursuant to Section 12(b) of the Act: NONE
 
Securities registered pursuant to section 12(g) of the Act:
 
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of each class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o Yes   x No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
o Yes   x No
 
Indicate by check mark whether the 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 (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
x Yes   o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
o Yes   o No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.
o Yes   x No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
 
(Check one):
   
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
o Yes  x  No
 
 
 

 
 
The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on June 30, 2009, the last day of the registrant’s most recently completed second fiscal quarter was $12,020,909. As of March 18, 2010 there were 4,246,418 shares of the Registrant’s common stock, par value $.01 per share, outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference to the registrant’s proxy statement for its 2010 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of December 31, 2009.
 
 
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TABLE OF CONTENTS
 
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Introductory Note: Forward Looking Statements
 
This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include statements regarding our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon reasonable assumptions when made, but there can be no assurance that these expectations will be achieved or accomplished. Sentences in this document containing verbs such as “believe”, “plan”, “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future –tense or conditional constructions (“will”, “may,” “could,” “should,”, etc.) constitut e forward-looking statements that involve risks and uncertainties. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations and trends or operating results also constitute such forward-looking statements. These statements are only predictions and actual results could differ materially. Certain factors that might cause such a difference are discussed throughout this Annual Report on Form 10-K, including the section entitled “Risk Factors”. Any forward-looking statement speaks only as of the date we made the statement, and we do not undertake to update the disclosures contained in this document or reflect events or circumstances that occur subsequently or the occurrence of unanticipated events.
 
 
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PART I
 
Item 1. Business
 
Daxor Corporation is a medical device manufacturing company with additional biotechnology services. Daxor Corporation was originally incorporated in New York State as Iatric Corporation in May 1971 for cryobanking services and continues these services through its wholly-owned subsidiary, Scientific Medical Systems. In October 1971, the name Iatric Corporation was changed to Idant Corporation. In May 1973, the name Idant Corporation was changed to Daxor Corporation.
 
Our principal executive offices are located at 350 Fifth Avenue, Suite 7120, New York, NY 10118 and our telephone number is 212-330-8500. We make available on our website under “Investor relations”, free of charge our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, Forms 3, 4 and 5 filed by our directors and executive officers and various other SEC filings, including amendments to these reports, as soon as reasonably practicable after we electronically file or furnish such reports to the SEC.
 
For the past 15 years, the Company’s major focus has been on the development of the BVA-I00® Blood Volume Analyzer, an instrument that rapidly and accurately measures human blood volume. The instrument is used in conjunction with Volumex® , a single-use radiopharmaceutical diagnostic injection and collection kit. The Company also offers cryobanking services for blood through Scientific Medical Systems and of semen through Idant, a subsidiary of Scientific Medical Systems. The Company also owns the Daxor Oak Ridge Operations (DORO) facility in Oak Ridge, TN, which conducts Daxor’s equipment manufacturing, testing, and devel opment of next-generation models of the BVA-100®.
 
The Registrant maintains an internet website at www.daxor.com for Daxor Corporation. The website for the Scientific Medical Systems subsidiary is www.Idant.com. None of the information contained on these websites is incorporated by reference into this Form 10-K or into any other document filed by the Registrant with the Securities and Exchange Commission. The websites for Daxor and Scientific Medical Systems describe the operations of each company.
 
BVA-100 BLOOD VOLUME ANALYZER
 
Blood volume measurement has a large potential market. Blood volume derangements are associated with a variety of medical and surgical conditions, and it is well established that clinical assessments of blood volume using physical examination or simple blood tests such as hematocrit and hemoglobin testing are frequently inadequate to determine total blood volume. Previous methods of directly measuring blood volume have been extremely complex and time-consuming. The BVA-100 is a CLIA-rated medium complexity instrument that can measure blood volume with 98% accuracy within 60 to 90 minutes. Participating institutions utilize the BVA-100 for diagnosing and treating patients with heart failure, kidney failure, and syncope, and to aid in fluid and blood transfusion management in the critical care unit. The BVA-100 has also been used to aid in the diagnosis and treatment of polycythemia, hypertension, anemia, chronic fatigue, and to aid in pre-surgical evaluation. Additional possible uses include management of kidney dialysis, ultra filtration, and blood optimization for elective surgery.
 
History and Development of the BVA-100
 
Blood volume measurement has been available for more than 60 years, although previous methods required as much as 4 to 8 hours of technician time with variable degrees of accuracy. Measurement of blood volume is achieved by infusing a radioisotope indicator, or tracer, into a patient’s vein and then collecting timed blood samples after the tracer has distributed evenly throughout the circulatory system. The volume of blood in a patient is inversely proportional to the dilution of the tracer, which can be determined by measuring the level of radioactivity in the individual blood samples and applying the inverse proportion calculations. 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. Consequently, the technical co mplexity and significant time required for achieving an accurate blood volume result—before the introduction of Daxor’s BVA-100 Blood Volume Analyzer—limited the use of blood volume measurements in most hospitals in the United States.
 
An alternative method used for blood volume measurement involves taking a sample of the patient’s blood and incubating it with the radioisotope chromium-51 (Cr-51).. After a series of complex steps performed by a laboratory technician, the patient’s chromated red blood cells are then re-transfused into the patient. This test is used by nuclear medicine departments to evaluate the red cell volume in polycythemia vera, a condition in which the patient may have too many red cells, which can predispose to thrombosis and other complications. Daxor’s BVA-100 Blood Volume Analyzer system uses a kit which contains an injectable iodine-131 (I-131)-albumin tracer, which greatly simplifies this process, and eliminates the need to re-transfuse patient blood. Historically, it was thought that the chromated red blood cell method was a more accurate method to determine a patient’s red blood cell volume. However, a publication in the American Journal of Medical Sciences [Am J Med Sci 2007;334(1):37-40] compared the Cr-51 method to Daxor’s semi-automated method and found the two techniques to be equivalent, with significant time savings and ease of use benefits with Daxor’s Blood Volume Analyzer BVA-100.
 
Blood volume measurement is an infrequently performed test. Instead of directly and objectively measuring blood volume, physicians who needed to assess volume status commonly relied upon clinical assessment with physical examination or surrogate tests such as hemoglobin and hematocrit measurements. However, these methods have frequently been shown to give inaccurate determinations of total blood volume. An additional problem has been the difficulty of determining the ideal blood volume for a specific individual. Daxor’s Chief Scientific Officer, Dr. Joseph Feldschuh, and Dr. Yale Enson from Columbia University College of Physicians and Surgeons, published their research studies in Circulation in October 1977 and the American Journal of Medical Sciences in June 2007 which showed that normal blood volume varies as a function of the degree of deviation from ideal body weight. This research was conducted in the laboratory of Nobel Prize Winner Dr. Andre Cournand, and the results of that original and ongoing research have provided the basis for the proprietary calculation engine of the BVA-100 Blood Volume Analyzer’s software.
 
Daxor’s patented injection and collection kit (Volumex) utilizes Albumin I-131, a classic tracer used in blood volume measurement. This kit eliminates most of the previously time-consuming steps involved in preparation for a blood volume measurement. The BVA-100 software automatically calculates the blood volume, evaluates the statistical reliability of the measurement, and compares the results to the most accurate known predicted norm, which is a function of the patient’s height, weight and gender. Results are available within 60 to 90 minutes. In emergency situations, preliminary results can be available within just 20 to 25 minutes.
 
 
4

 
 
The Company obtained marketing clearance from the FDA for the BVA-100 Blood Volume Analyzer in 1997, and for its Volumex single use injection kit in 1998. The Company manufactures its own injection kit components and specialized collection kit, and injection kit filling is performed by an FDA-licensed radiopharmaceutical manufacturer. The Company can provide customized collection kits for customers with special needs. The Company has received United States, European Common Market, and Japanese patents for its Blood Volume Analyzer. In January 2007, the Company purchased two 10,000 square foot buildings in Oak Ridge, Tennessee to expand its research, development, and manufacturing capabilities
 
MARKET OPPORTUNITY
 
Utilization of the BVA-100
 
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 10,000-14,000 potential users of the BVA-100. This section describes some of the many widespread conditions in which blood volume measurement promises to improve diagnosis and treatment.
 
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 Blood Volume Analyzer. Reimbursement is particularly important for hospitals because revenue from patients who are admitted to the hospital is based upon set amounts from the insurance companies. However, out-patients provide an additional stream of cash flow with well defined costs and the ability for the hospital to be profitable by providing such services.
 
Scientific Studies Utilizing the BVA-100
 
Daxor has worked extensively with facilities that use the BVA-100 Blood Volume Analyzer in research studies, providing equipment, training, ongoing consultation, and assistance with interpretation and display of results. For some research projects, Daxor has also provided Volumex kits as well as direct financial support. This support has resulted in publication of twenty-three original research or review articles on blood volume analysis since 2002. One of these articles was cited in the American College of Cardiology/American Heart Association treatment guidelines for heart failure to support the recommendation that heart failure patients’ volume status be assessed at each visit. Presentations from a symposium held at Vanderbilt University were published in the American Journal of Medical Sciences in June 2007 and featured the results of significant research involving current and potential clinical applications of blood volume measurement. Several clinical studies are ongoing or are in the final approval phase to investigate the clinical application of blood volume measurements in critical care, heart failure, ultrafiltration, and pre- and post-surgical applications. Results from these studies have led to 14 presentations at major medical conferences in the past four years. In addition, several studies are in the early approval phase to investigate the clinical application of blood volume measurement in hemodialysis, hypertension, subarachnoid hemorrhage and hyponatremia.
 
The following is a list of publications, from 2002 until the present, which has resulted from Daxor’s support of blood volume studies in various therapeutic areas:
 
1.
Kalra P, Anagnostopoulos C, Bolger AP et al. The Regulation and Measurement of Plasma Volume in Heart Failure. JACC. 2002; 391: 1901-1908.
2.
Shevde K, Pagala M, Tyagaraj C et al. Preoperative Blood Volume Deficit Influences Blood Transfusion Requirements in Females and Males Undergoing Coronary Bypass Graft Surgery. J Clin Anesth. 2002; 14:512-517.
3.
Alrawi SJ, Miranda LS, Cunningham JN et al. Correlation of Blood Volume Values and Pulmonary Artery Catheter Measurements. Saudi Med J. 2002; 23:1367-1372.
4.
Fouad-Tarazi FM and Feldschuh, J. Cognitive Outcomes Following Cardiopulmonary Bypass. JAMA. 2002; 287:3077.
5.
Androne AS, Katz SD, Lund L et al. Hemodilution is Common in Patients with Advanced Heart Failure. Circulation. 2003; 107:226-229.
6.
James KB, Stelmach K, Armstrong R et al. Plasma Volume and Outcome in Pulmonary Hypertension. Tex Heart Inst J. 2003; 30:305-307.
7.
Mancini DM, Katz SD, Lang CC et al. Effect of Erythropoietin on Exercise Capacity in Patients with Moderate to Severe Chronic Heart Failure. Circulation. 2003; 107:294-299.
8.
Katz SD, Mancini D, Androne AS et al. Treatment of Anemia in Patients with Chronic Heart Failure. J Card Fail. 2004; 10 (Suppl 1): S13-S16.
9.
Androne AS, Hryniewicz K, Hudaihed A et al. Relation of Unrecognized Hypervolemia in Chronic Heart Failure to Clinical Status, Hemodynamics, and Patient Outcomes. Am J Cardiol. 2004; 93:1254-1259.
10.
James KB, Troughton RW, Feldschuh J et al. Blood Volume and Brain Natriuretic Peptide in Congestive Heart Failure: A Pilot Study. Am Heart J, 2005; 150:984.e1-984.e6.
 
 
5

 
 
11.
Katz, SD. Unrecognized Volume Overload in Congestive Heart Failure. US Cardiology, 2004; 141-144
12.
Jacob G, Raj S, Ketch T et al. Postural Pseudoanemia: Posture-Dependent Change in Hematocrit. Mayo Clin Proc. 2005; 80:611-614.
13.
Raj SR, Biaggioni I, Yamhure PC et al. Renin-Aldosterone Paradox and Perturbed Blood Volume Regulation Underlying Postural Tachycardia Syndrome. Circulation. 2005; 111:1574-1582.
14.
Dworkin HJ, Premo M, Dees S. Comparison of Red Cell and Whole Blood Volume as Performed Using Both Chromium-51 Tagged Red Cells and Iodine-125 Tagged Albumin and Using I-131 Tagged Albumin and Extrapolated Red Cell Volume. Am J Med Sci, 2007; 334:37-40.
15.
Feldschuh J and Katz S. The Importance of Correct Norms in Blood Volume Measurement. Am J Med Sci, 2007; 334:41-46.
16.
Fouad-Tarazi F, Calcatti J, Christian R et al. Blood Volume Measurement as a Tool in Diagnosing Syncope. Am J Med Sci. 2007; 334:53-56.
17.
Katz, SD. Blood Volume Assessment in the Diagnosis and Treatment of Chronic Heart Failure. Am J Med Sci, 2007; 334:47-52.
18.
Abramov D, Cohen RS, Katz SD et al. Comparison of Blood Volume Characteristics in Anemic Patients with Low Versus Preserved Left Ventricular Ejection Fractions. Am J Cardiol. 2008; 102:1069-1072.
19.
Yamauchi H, Buik-Aghai EN, Yu M et al. Circulating Blood Volume Measurements Correlate Poorly with Pulmonary Artery Catheter Measurements. Hawai’I Medical Journal. 2008; 67:8-11.
20.
Takanishi DM, Yu M, Lurie F et al. Peripheral Blood Hematocrit in Critically Ill Surgical Patients: An Imprecise Surrogate of True Red Blood Cell Volume. Anesth Analg. 2008; 106:1808-1812.
21.
Takanishi DM, Biuk-Aghai EN, Yu M et al. The Availability of Circulating Blood Volume Values Alters Fluid Management in Critically Ill Surgical Patients. Am J Surg. 2009; 197:232-237.
22.
Feldschuh J. (2009). Blood Volume Measurements in Critical Care. In Civetta, Taylor and Kirby (Eds.), Critical Care, Fourth Edition (pp.283-295). Philadelphia, PA: Lippincott Williams & Wilkins.
23.
Saltzberg, MT. Blood Volume Analysis Coupled with Ultrafiltration in the Management of Congestive Heart Failure – Guided Therapy to Achieve Euvolemia. US Cardiology. 2010: 7:72-75.
 
In addition, the following 14 presentations have been made at major medical conferences in the last few years. Some of these findings have also been published as abstracts. We anticipate that some of these studies will be published in the near future, including:
 
1.
2006 Heart Failure Society of America Poster Presentations - Columbia Presbyterian College of Surgeons and Physicians, New York, NY -The Administration of Subcutaneous Erythropoietin in Elderly Patients with Heart Failure and Normal Ejection Fraction Over Three Months is Safe and Effective
2.
2007 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – Do Blood Volume and Brain Natriuretic Peptide Correlate?
3.
2008 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – Right Ventricular End Diastolic Volume and Brain Natriuretic Peptide May Not Reflect Intravascular Volume Status in Critically Ill Patients.
4.
2008 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – Stroke Volume Variation as a Marker of Intravascular Volume Compared to Blood Volume Measurement
5.
2008 American Society of Nephrology – NYU School of Medicine, New York, NY – Accuracy of Anemia Evaluation is Improved in Acutely and Chronically Ill Patients by Accounting for Volume Status
6.
2009 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – A Comparison of Pulse Pressure Variation and Blood Volume Measurement
7.
2010 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – A Prospective Randomized Trial Using Blood Volume Analysis vs. Pulmonary Artery Catheter Measurements to Guide Fluid and Red Cell Management
8.
2010 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – Elevated Transcapillary Albumin Escape: A Marker of Increased Mortality
9.
2010 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – Activated Protein C and Corticosteroids Decrease the Rate of Albumin Transudation in Septic Shock
10.
2010 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – The Relationship Between Inferior Vena Cava Collapsibility Ratio and Measured Whole Blood Volume in Surgical Critical Care Patients
11.
2010 Society of Critical Care Medicine Poster Presentation – The Queen’s Medical Center, Honolulu, HI – A Comparison of Pulse Pressure and Blood Volume Measurement
12.
        2010 Western Trauma Association Annual Meeting Oral Presentation – Oregon Health and Science University, Portland, OR – Blood Volume Analysis can Distinguish True Anemia from Hemodilution in Critically Ill Trauma Patients
13.
2010 Society of Cardiovascular Anesthesiologists – The Virginia Commonwealth University, Richmond, VA – Red Cell Mass is Not Well Conserved Following Elective Cardiac Surgery Despite Use of Cell Salvage and Transfusion Guided by Peripheral Hematocrit
14.
2010 Society of Cardiovascular Anesthesiologists – The Virginia Commonwealth University, Richmond, VA – Patients are Not Normovolemic Following Cardiac Surgery Despite Concerted Efforts to Manage Fluid and Volume Status
 
 
6

 
 
Heart Failure
 
Approximately five million individuals are treated annually in the United States for heart failure. It is estimated that $38 billion is spent each year on heart failure treatment, of which $23 billion is spent on hospital treatment. Heart failure is the number one reason for admission to hospitals in the US for patients over 65 years of age. The overwhelming majority of patients treated for heart failure must be treated with a combination of powerful drugs that may drastically change the patients’ blood volume. Three thousand patients annually receive heart transplants, and an increasing number are receiving left ventricular assist devices (LVAD), which is a type of mechanical heart.
 
In the May 2004 issue of the American Journal of Cardiology, Dr. Ana-Silvia Androne, Dr. Stuart Katz and their colleagues at Columbia Presbyterian Medical Center published a landmark study utilizing the BVA-100 to measure blood volume in NYHA Class III and IV heart failure patients. In this observational study, cardiologists treated the patients according to standard clinical guidelines without incorporating blood volume measurement which was performed on the patients. Patients were categorized as hypovolemic, normovolemic, or hypervolemic, and their outcomes over time were recorded. At the end of one year, 39% of the hypervolemic patients had died or received an urgent heart transplant. In contrast, none of the normovolemic or hypovolemic patients died or received an urgent transplant. At the end of two years, 55% of hypervolemic patients had died or received an urgent heart transplant, while the normovolemic patients continued to have a 0% mortality rate. This study showed a remarkable correlation between blood volume and outcome and suggests that effectively treating patients to normovolemia may dramatically improve outcomes.
 
The study also reported on the accuracy of clinical assessment of volume status in these patients. Physicians who were trained in cardiology assessed patients’ blood volume statuses using standard laboratory tools and physical examination. When choosing between three possible choices—decreased, normal, or increased blood volume—specialists were correct only 51% of the time in evaluating these severely ill cardiac patients when compared to the direct measurement results provided by the BVA-100. This study was cited in the most recent revision of the American College of Cardiology/American Heart Association 2005 guidelines for the treatment of chronic heart failure. These guidelines are updated once every 3 to 5 years. This landmark study highlights the importance of correcting a heart failure patient’s expanded bloo d volume to normal and is the first to provide direct evidence that achievement of normovolemia is associated with improved outcomes, and that treating to normovolemia is a legitimate goal. As a result, the use of blood volume measurement in heart failure treatment may significantly prolong lives and reduce expensive and risky interventions.
 
Medicare has discussed the possibility of not reimbursing hospitals for any heart failure patients who are readmitted within 30 days of discharge. This has important financial implications for hospitals, as it effectively penalizes hospitals for not optimally treating patients at their initial visits. This highlights a real opportunity for the BVA-100, which Drs. Androne and Katz have shown can be used to identify patients at higher risk of mortality due to residual volume overload.
 
Critical Care (Intensive Care Unit)
 
One of the essential components of critical care is the optimal management of fluid status. Correct interpretation of clinical signs and symptoms is essential for fluid resuscitation and fluid management in the critical care setting. Blood volume measurement promises to take the guesswork out of volume assessment and to enable more precise and appropriate treatment. Dr. Feldschuh was the author of a chapter entitled “Blood Volume Measurements in Critical Care” in the 4th edition (2009) of the textbook Critical Care. The chapter reviews the importance of volume measurement in the critical care setting.
 
Dr. Mihae Yu and colleagues at The Queen’s Medical Center in Honolulu, Hawaii, have been studying the use of blood volume measurement in the critical care unit. They have performed blood volume measurement in the surgical intensive care unit and recorded how results have influenced treatment decisions. Their most recent results were published in the February 2009 issue of the American Journal of Surgery. The findings were based on 86 data points from 40 patients, and showed that blood volume measurement results led to a change in treatment plan 36% of the time. Among patients who received a pulmonary artery catheter (PAC) for hemodynamic measurements, treatment would have been changed 50% of the time if blood volume data were avai lable to treating physicians. Among patients who did not receive PAC measurement, treatment would have been changed 33% of the time if blood volume data had been available. In addition, Dr. Yu and her colleagues have presented their findings at the Society of Critical Care annual meetings from 2006-2010 and their studies were featured in the November 2005 issue of Anesthesiology News, the January 2008 Hawaii Medical Journal and the June 2008 Anesthesia and Analgesia. These preliminary studies are being followed up by additional studies evaluating how incorporating blood volume measurement into critical care treatment affects outcomes.
 
 
7

 
 
Dr. Yu is now engaged in a major study, partially funded by Daxor, involving blood volume measurement in the intensive care unit. The purpose of the study will be to determine specifically whether clinical outcomes and length of hospital stays can be improved by incorporating blood volume measurement as a routine clinical tool in the intensive care unit. Preliminary findings from these studies have shown that three surrogate measures for volume status – Pulse Pressure, Inferior Vena Cava Collapsibility and Pulmonary Artery Catheter measurements – do not provide accurate estimates of patients’ blood volumes. Physicians who rely on these imprecise surrogate measures of volume status may under- or overtransfuse their patients with fluids and red blood cells, thereby doing harm to the patients they are trying to help. Additi onal studies by Dr. Yu and colleagues explored the rate of loss of albumin from the intravascular system, which is very slow in normal individuals. In patients with sepsis, however, loss of vascular integrity results in loss of fluids and proteins and a corresponding decrease in blood volume. Therapy with either corticosteroids or corticosteroids in combination with Activated Protein C significantly decreased septic patients’ elevated transudation rates. Another study directly examined the relationship between albumin leak rate and mortality in 100 patients requiring catheterization in the ICU. Patients with a normal albumin leak rate 5-7 days after resuscitation showed markedly lower mortality (7.8%) than patients with elevated albumin leak rate (27.9%). This confirms that transcapillary albumin escape is, in fact, a marker for increased mortality. The BVA-100, which measures albumin transudation precisely, provides a test which can be used to judge the effectiveness of different forms of therapy.
 
Syncope
 
The Cleveland Clinic Cardiovascular Department was ranked first in the United States by the 2009 annual survey in U.S. News & World Report. This is the fifteenth consecutive year they have received the number one ranking in this category. The survey also ranked the Cleveland Clinic as the fourth best hospital on an overall basis. There has been more blood volumes performed at the Cleveland Clinic to date than at any other hospital in the United States.
 
Syncope, or sudden loss of consciousness, has been estimated to be responsible for 3-5% of emergency department visits and 1- 6% of hospital admissions. As many as one million individuals per year experience an episode of syncope.
 
Since March 2000, the Syncope Clinic in the Cardiovascular Department of the Cleveland Clinic has been utilizing the BVA-100 to aid in diagnosing over 4,300 syncope patients. These patients have presented with a wide range of blood volume derangements, including moderate to severe hypovolemia that would not have been detected without blood volume measurement. Results from blood volume measurement and tilt table testing (a standard test in syncope diagnosis) were published in June of 2007 in the American Journal of Medical Sciences by Dr. Fetnat Fouad-Tarazi, Head of the Hemodynamic and Neuroregulation Lab. Dr. Fouad-Tarazi’s study demonstrated that blood volume derangements are a frequent finding in syncope patients and that blood volume measurements should be incorporated into the diagnostic work-up of a syncope patient to guide therapy.
 
Postural Orthostatic Tachycardia Syndrome (POTS) is a condition in which patients, primarily women, develop a rapid heartbeat and symptoms suggesting impending fainting. POTS affects an estimated 500,000 people in the United States alone. POTS (an excessive increase in heart rate [>30 bpm] on standing, associated with orthostatic symptoms in the absence of orthostatic hypotension) can produce substantial disability among otherwise healthy people. Dr. Satish Raj and colleagues at the Vanderbilt University Medical School published a study in the April 2005 Circulation which utilized the blood volume analyzer. Patients with POTS - - particularly those with rapid heartbeats – are sometimes diagnosed as having panic attacks and treated inappropriately with psychiatric medications.
 
This study, using the BVA-100, demonstrated that many of these patients have a marked reduction in their plasma volume as well as a significant reduction in their red cell volume. This was the first study of its type to document that these patients have low blood volume as a cause of their condition and they could theoretically be treated with medications (such as epoietin alfa) to increase their blood volume and decrease these attacks. This is one of the first studies to provide clear evidence that low blood volume may play a major role in POTS and provides guidance for specific corrective therapy. The information from the BVA-100 allows the physician to quantify the degree of the blood volume abnormality and to select the appropriate treatment. There are two major classes of drugs which can be used to treat POTS: (1) mineralocorticoids, which increase the volume of blood, and (2) ProAmitine/midodrine, which is a vasoconstrictor. Use of the BVA-100 allows the physician to distinguish between the two potential etiologies of POTS so as to administer the appropriate therapy.
 
Another study examined postural pseudoanemia, which results from posture-dependent changes in hematocrit. The simple act of standing upright can increase hydrostatic pressure in some regions, such as the lower extremities, which leads to a net movement of fluid from the intravascular to interstitial spaces. The hemoconcentration resulting from this plasma loss was shown to alter hematocrit in a clinically significant manner in a study by Dr. Giris Jacob and colleagues that was published in The Mayo Clinic Proceedings in 2005. They reported that plasma volume decreases upon standing in normal individuals can range from 6-25%. This was accompanied by a mean change in hematocrit from 37.7%±2.8% while supine to 41.8%±3.2% within 3 0 minutes of standing.
 
Anemia in Chronic Heart Failure
 
Anemia is frequently found in patients with chronic heart failure (CHF) and is associated with poor prognosis. Low hematocrit in CHF patients can result from either increased plasma volume (hemodilution) or from reduced red cell volume (true anemia). It is difficult, if not impossible, to distinguish dilutional anemia (pseudoanemia) from true anemia without performing a blood volume measurement. A study conducted by Ana-Silvia Androne and colleagues at the Columbia Presbyterian Medical Center published in the January 2003 issue of Circulation used the BVA-100 to show that patients with hemodilution experienced worse outcomes than did patients with true anemia. This suggests that volume overload may be a key mechanism which contributes t o poor outcome in anemic CHF patients. The study also showed that anemic CHF patients experienced worse outcomes than did non-anemic CHF patients.
 
 
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In another study by Dr. Mancini and colleagues from Columbia Presbyterian Medical Center which was also published in the January 2003 issue of Circulation, 26 patients with anemia and CHF were randomized to receive either erythropoietin or placebo for 3 months. CHF patients who received erythropoietin showed significant increases in red cell volume as measured by the BVA-100 and corresponding significant improvements in exercise capacity. This is one of the first studies to prove that correct treatment of anemia in CHF patients can significantly improve their heart failure status.
 
One of these studies was sponsored by Amgen, Inc. Because these studies showed that use of the BVA-100 to correctly diagnosis and treat anemia led to improvements in heart failure status, Daxor contacted Amgen about the possibility of conducting follow-up studies with the BVA-100 in patients receiving erythropoietin therapy. These studies are all the more important given that black-box warnings have been added to the safety labeling of erythropoietin advising physicians to monitor patients to insure that patients’ hemoglobin levels do not exceed 12 g/dL. Despite the potential safety benefits of accurately determining RBCV in patients receiving erythropoietin, Amgen has chosen not to pursue these studies to date.
 
Transfusion Decisions in Surgery
 
Effective volume management in surgical situations requires accurate assessment of a patient’s need for transfusions. Knowing whether and when to transfuse blood depends on effectively balancing the benefits vs. risks of transfusion for each patient at any given time. Under current transfusion practices, patients may undergo major surgery with just half the concentration of normal red cells. This degree of anemia has its own inherent risks. There was a report in the February 2001 issue of the New England Journal of Medicine that as many as 40 - 50% of patients undergoing cardiac bypass graft surgery (CABG) experience some degree of measurable permanent brain damage such as memory loss. 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 under transfusion. Blood volume measurement, by quantifying a patient’s blood volume prior to surgery, can provide important information about how much blood loss a patient can safely sustain.
 
Dt. Ketan Shevde and colleagues at Maimonides Medical Center (Brooklyn, NY) published a study in the November 2002 issue of the Journal of Clinical Anesthesia which used the BVA-100 to show that there was a mean loss in red cell volume of 6.5% in females and 23.7% in males following coronary bypass graft (CABG) surgery. The mean number of intraoperative pRBC transfusions was 1.38 units for females and 0.39 units for males.
 
Daxor is currently sponsoring a study at the Virginia Commonwealth University which measures changes in blood volume before, during and after elective cardiac surgery (i.e. CABG or valve repair/replacement). Dr. Mark Nelson and colleagues have enrolled 46 patients in this study to date, which has demonstrated greater than anticipated loss of red cells and total blood volume during and after surgery. The standard use of the hematocrit in these studies significantly underestimates the blood loss and the need for transfusions in some of these patients, thereby exposing them to additional risks. Results of this major study are expected to be submitted for publication in the near future.
 
Clinical Validation of the BVA-100
 
In addition to examining the role of blood volume in relation to various medical conditions, some studies have examined how blood volume measurement with the BVA-100 compares to other measurement methods. These reports provide important validation for physicians to accept the use of the BVA-100 in clinical settings.
 
Dr. S. J. Alrawi and colleagues from the Lutheran Medical Center (New York) published an article in the November 2002 Saudi Medical Journal comparing the BVA-100 with pulmonary artery catheterization. The study found that pulmonary artery catheterization does not provide an accurate estimate of blood volume. Direct blood volume measurement is less invasive and more accurate.
 
Similarly, Dr. Yu and colleagues have given presentations at major medical conferences which compare the BVA-100 to a variety of surrogate volume measures including stroke volume variation, pulse pressure variation, right ventricular end diastolic volume, brain natriuretic peptide, PAC and peripheral hematocrit. Most of these surrogate volume measures showed poor correlation with intravascular volume status. Several publications which describe these findings in detail can be expected in the next two years.
 
Dr. Howard Dworkin and colleagues from William Beaumont Hospital compared blood volume measurement with the BVA-100 to the previous gold standard blood volume measurement method, which consists of simultaneous radioisotopic measurement of red cell and plasma volume. They found that results correlated very closely with each other, but measurement with the BVA-100 took 90 minutes as opposed to 3.5 hours required for the standard method. These results were published in the July 2007 issue of the American Journal of Medical Sciences.
 
 
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Other Medical Conditions for Blood Volume Measurement Utilizing the BVA-100
 
There are several other major conditions for which blood volume measurement promises to improve diagnosis and treatment. While no research studies have been published yet which address the role of the BVA-100 in diagnosing and treating these conditions, some physicians have foundBVA-100 measurements useful for treating such patients, and the Company is currently exploring the potential for expanded use of blood volume measurement in the treatment protocols for these conditions at other facilities:
 
Ultrafiltration in Heart Failure
 
Alterations in blood volume are an intrinsic element of the pathophysiology and treatment of heart failure. Patients with decompensated heart failure typically experience volume overload, which can contribute to further morbidity and mortality. Ultrafiltration (UF) has been used in patients with decompensated heart failure with demonstrated diuretic resistance as an early alternative to diuresis with strong positive clinical results. Daxor is currently sponsoring a study led by Dr. Mitchell Saltzberg at the Christiana Care Medical Center (Wilmington, DE) to assess blood volumes before and after ultrafiltration, as well as at 30 and 90 day follow-ups. Study endpoints include mortality, all-cause rehospitalization rate, and need for long-term hemodialysis. To date, 14 out of a projected 50 patients with acute decompensated heart failure hav e been enrolled in this study.
 
In addition, Valley Hospital (Ridgewood, NJ) is currently conducting a retrospective study to examine whether blood volume analysis should become a standard of care in heart failure patients. B-type natriuretic peptide (BNP) is a hormone released from the ventricles in response to stretch of ventricular myocytes or an increase in wall tension. BNP is often used as a surrogate measure of volume status. Dr. John Strobeck has collected preliminary evidence suggesting that BNP does not, in fact, correlate with blood volume in heart failure patients. Their findings will be submitted for publication in the near future.
 
Hypertension
 
Hypertension can be induced by two primary, underlying physiological processes: an expansion of the blood volume or constriction of the blood vessels. As a result, anti-hypertensive therapy falls into two broad categories: (1) diuretic therapy which leads to reductions in plasma volume, or (2) vasodilator therapy which causes relaxation of the blood vessels. Daxor is currently in discussion with Dr. Elijah Saunders of the University of Maryland (Baltimore, MD) to develop a protocol to identify the presence of absence of blood volume expansion in hypertensive patients and to evaluate whether patients are being correctly treated with regard to the underlying etiology of their disease.
 
Hemodialysis
 
Hemodialysis (HD) removes excess intravascular and extravascular volume as well as solutes that accumulate during end-stage renal disease (ESRD). An understanding of the fluid changes that occur during HD with ultrafiltration (UF) is essential for determining the efficacy of HD, as well as for reducing any associated complications: If an excessive volume of fluid is removed during HD, patients are more likely to experience complications such as hypotension, cramping and/or lightheadedness. In contrast, if patients are not dialyzed to their target weights, they are at risk of remaining in a state of chronic volume overload, which may lead to hypertension, left ventricular hypertrophy, and/or congestive heart failure.
 
Daxor has worked with Dr. David Goldfarb of the Dialysis Center at the Department of Veterans Affairs New York Harbor Healthcare System to develop a rough draft of a protocol to compare blood volumes before and immediately after a single session of hemodialysis. Moreover, this study will explore how changes in blood volume in the course of a single hemodialysis session relate to patient outcomes – particularly the occurrence of hypotensive episodes.
 
Blood Substitutes
 
BioPure Corporation developed and manufactured two proprietary blood substitutes – one for human use and one for veterinary use. These hemoglobin-based products are administered intravenously to help transport oxygen to the body’s tissues; BioPure had sought FDA approval for its human blood substitute HemoPure. It was in the process of conducting a trial with the US Naval Medical Research Center to see whether HemoPure could be used to treat casualties when traditional blood transfusions are not available. However, the FDA put a clinical ‘hold’ on this trial due to high mortality rates in past trials with HemoPure. Dr. Feldschuh was invited to give a presentation to the FDA in June of 2008 about his belief that one of the main design problems with the blood substitute studies was that there was no way of knowing ho w much blood the patients who were being transfused with blood substitutes had lost. In fact, none of the companies conducting clinical trials with blood substitutes have performed blood volume measurements on their patients.
 
 
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Given the unmet medical need for blood substitutes, and the close fit between this research and our long-term interest in blood products, Daxor had explored the possibility of investing in BioPure to keep the company afloat until some of its ongoing clinical studies could be completed. However, after conducting extensive due diligence, the management of Daxor ultimately decided not to invest in BioPure. BioPure has recently gone bankrupt, and is in the process of being reorganized. Daxor has had preliminary discussions with the management about incorporating the BVA-100 into their future studies.
 
SCIENTIFIC MEDICAL SYSTEMS SUBSIDIARY (wholly owned by Daxor)
 
Scientific Medical Systems is a subsidiary wholly owned by Daxor that engages in cryobanking of human blood. Idant Laboratories, a division of Scientific Medical Systems, offers semen banking services.
 
Blood Banking
 
The blood banking industry is a group of for-profit and not-for-profit corporations whose total revenue is estimated to exceed $6 billion. Blood banking services are provided by a broad spectrum of organizations. Approximately one-half of the blood supply used for transfusions is supplied by the American Red Cross and its affiliates. The other portion is supplied by various other tax-exempt and for-profit organizations. Some hospitals operate their own donor services but require the services of outside vendors such as the Red Cross for adequate supplies of blood products.
 
There are approximately 15-18 million blood transfusions administered annually to 4 million patients. The present donor system of blood transfusions presents risks to individuals receiving blood, such as infectious disease transmission, under- or over-tranfusion, and pre- and post-surgical complications. Many risks from donor blood, such as the risks of infectious disease transmission, can be avoided by utilizing autologous (the patient’s own) blood. Additionally, physicians who fear the complications of transfusion with donor blood may be more likely to transfuse autologous blood as soon as it is needed, rather than withholding transfusion until a patient is extremely anemic and at higher risk from blood-loss-related complications.
 
Dr. Fouad-Tarazi and Dr. Feldschuh published a Letter to the Editor of the Journal of the American Medical Association (JAMA 2002 287: 3077) which offered a potential explanation for the high frequency of memory loss and dementia following coronary artery bypass grafting (CABG). They proposed that the extremely low hemoglobin levels which many CABG patients experience in the wake of surgery may put them at elevated risk for cognitive deficit.
 
In 1985, the Company established the first facility in the United States for frozen, long-term autologous blood banking and maintains the only blood bank in New York that allows people to store their own blood for up to 10 years. Currently, the Company is in the process of developing partnership programs whereby corporations can provide frozen long-term blood storage as a benefit to their employees. Taglich Brothers is a full-service brokerage firm in New York City which has offered each of its employees the opportunity to store two units of autologous blood at Idant Laboratories free-of-charge.
 
Recent Improvements and Innovations
 
In 2005, the Company began using a recently available FDA-approved technology (manufactured by another company) that extends the shelf-life of thawed frozen blood from 24 hours to 14 days. This development greatly increases the flexibility with which frozen blood can be used and greatly increases the number of situations in which thawed frozen blood can be provided to patients as needed. As part of this program the company has also purchased new freezers and equipment that incorporate this technology. It has also installed a back-up liquid nitrogen system at its headquarters so that in the event of electrical failure, the stored blood can be maintained in a frozen state for 2–3 weeks.
 
The Company has recently received a trademark for a proposed program of Quality Assured Blood (QAB). This concept is similar to existing safety protocols used to ensure the safety of frozen donor semen (see Idant Semen Banking below) and is only possible because of the unique advantages of frozen blood storage. Infectious diseases such as HIV and Hepatitis have a “window period” of 3-6 months during which a donor may be infected but has not yet produced the antibodies that are required for the diseases to be detected. With Quality Assured Blood, a donor can be tested for infectious disease, and can donate blood to be frozen and placed in quarantine. The blood will then be retested after six months has elapsed, and the blood will be removed from quarantine if it re-tests free of infectious agents. This blood can then be used as donor blood with markedly reduced risk of infectious disease transmission.
 
 
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The Company has also trademarked its Blood Optimization Program (BOP) for maximizing blood safety during surgery. The BOP uses a combination of blood volume measurement, pre-surgical treatment of blood volume deficits, and frozen autologous blood transfusion to maximize patient outcomes following surgery. The Company has applied for and received trademark protection for the BOP name, In February of 2007, The Company then filed for a methods patent for the Blood Optimization Concept, which was denied. The Company has decided not to appeal this rejection, as it can implement the BOP program without the need for patent protection.
 
Under the Blood Optimization Program, a patient can donate blood well in advance of surgery and store it in a frozen state, leaving sufficient time to restore of the depleted blood before entering surgery. Frozen red blood cells can be stored for 10 years, and frozen plasma can be stored for 7 years. This lengthy storage time contrasts with the 42 day storage period for red blood cells that have been refrigerated. Recent studies (Koch et al, NEJM, 2008; 358:1229) have shown that refrigerated red blood cells undergo progressive functional and structural changes. These reversible and irreversible changes begin after 2-3 weeks of storage. This reduces the function and viability of red cells after transfusion. Once it is thawed, frozen blood remains fresh and highly oxygenated for 2 weeks, rather than just 24 hours. Additionally, blood volume measurement prior to surgery can identify patients with existing blood volume deficits such as reduced red cell volume, which can be treated with the medication erythropoietin.
 
The main elements of the Blood Optimization Program are (a) blood volume measurement to determine the current blood volume status of the patient and suitability for blood donation; (b) if the patient is anemic or red cell volume deficient, treatment with epoietin alfa (Procrit® and Epogen® manufactured by Amgen) to stimulate rapid red cell replacement; (c) if the patient is suitable for blood donation, remove one unit of blood and process for freezing of both red cells and plasma. Frozen blood requires special processing with a sterile cryopreservative agent to prevent destruction of the red cells during freezing; (d) treat the patient with epoietin alfa where appropriate t o stimulate more rapid replacement of red cells; (e) repeat blood donation to provide enough blood availability at the time of surgery so the patient will not need to receive any blood but their own; and (f) quantify the amount of blood donated, where time permits, so that patients will have no more than a 20% red cell deficit at the end of the post operative period. At the present time, elderly patients are sometimes permitted to remain with red cell volume deficits as great as 50% without receiving replacement transfusions.
 
In addition to the desire to provide improved patient care, hospitals may have a significant monetary incentive to participate in the Blood Optimization Program. Surgical patients who experience complications from being under transfused or adverse donor transfusion reactions require extended hospital stays, for which the hospitals are often not reimbursed. Hospitals operate under a Diagnostic Regulatory Guideline (DRG) system for reimbursement, which 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. A low blood volume detection and treatment program could significantly reduce complications and enable shorter hospital stays, with corresponding financial rewards for the host hospital.
 
In 2005 the Company hired an individual with marketing experience to promote the Blood Optimization Program (BOP). This program is intended to incorporate Daxor’s BVA-100 Blood Volume Analyzer and its subsidiary’s frozen autologous blood banking, increasing awareness and utilization of both of these technologies. This marketing specialist has met with a variety of blood bank representatives to discuss strategies that would enable hospitals to utilize these technologies to optimize blood volumes in patients undergoing surgery. The combination of blood volume measurement and frozen blood banking provides the unique opportunity to simultaneously minimize the consequences of blood loss by optimizing a patient’s blood volume before surgery, and maximize transfusion safety by making sure that a patient’s own blood is ava ilable if transfusion is required. While response to this program has been limited so far, the Company has signed agreements with the following nine hospitals to participate in this program: NYU Medical Center, the Hospital for Special Surgery, the Hospital for Joint Diseases, Stony Brook University Hospital, the White Plains Hospital Center, Brookhaven Memorial Hospital Medical Center, Mercy Medical Center, Brookdale University Hospital and Medical Center, and Cooley Dickinson Hospital in Northampton, MA. The Company has recently begun to focus its marketing efforts on corporate programs in addition to individual hospitals, as described above.
 
Idant Semen (Sperm) Banking
 
Idant, a subdivision of the wholly owned subsidiary Scientific Medical Systems, has been a pioneer in the technology and commercial application of long-term cryopreservation of human sperm. The division provides 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 a founding member of the American Association of Tissue Banks. The company stores semen from a large cross-section of anonymous donors and is able to offer semen from donors with varying physical characteristics that meet our clients’ needs. The Company maintains a complete physical description of each donor on file and, when needed, can match multiple physical characteristics and other desired special characteristics to those of the sterile father. The increased likelihood of a child who resembles his recipient father can make a child conceived via artificial insemination much more psychologically acceptable to the father.
 
 
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The Company also provides cryostorage for later personal use. Semen storage may be desirable for men who have been found to be marginally fertile and who may therefore attain improved fertility with artificial insemination, who anticipate impaired fertility or sterility such as may occur with chemotherapy or radiation for cancer treatment, or who are undergoing a vasectomy but may nevertheless wish to father children in the future. Cancer patients who store semen are frequently in their teens or twenties; by utilizing cryopreservation they will be able to father their own children in later years, despite the high risk of sterility and birth defects associated with anti-cancer treatments.
 
The Company was recently selected as a potential service provider for the Memorial Sloan-Kettering Cancer Center to provide semen collection and storage services for their hospitalized cancer patients who wish to cryopreserve sperm prior to initiating cancer treatment. In addition, The Company has sent representatives to collect bedside semen samples for storage from Columbia-Presbyterian Hospital, St. Luke’s-Roosevelt Hospital, and Bellevue Hospital. The Company receives referrals for these services from multiple sources, primarily physicians.
 
Idant has been a pioneer in the safety of anonymous semen donation. 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 testing the donor prior to and then again six months after donation, the risk of Hepatitis and HIV transmission can be virtually eliminated. Four years after Idant Laboratories pioneered this approach (in 1989), New York and a number of other states enacted laws requiring semen banks to quarantine frozen sperm for a minimum of six months.
 
In 2004 Idant received confirmation of two successful conceptions utilizing sperm stored at Idant for, respectively, 21 and 28 years. This was the longest successful cryopreservation of sperm in medical history, and these achievements were published in an October 2005 publication in Fertility and Sterility. The Company believes that its unique storage system for human sperm is responsible for this extraordinary success.
 
RESEARCH AND DEVELOPMENT
 
As detailed in “Item 2 Properties”, in January of 2007 Daxor acquired additional space with the intention of being able to further expand our research and development and to be prepared, in the future, for increased demand for our products.
 
For the years ended December 31, 2009 and 2008, the Company spent $2,825,151 and $2,438,423 respectively, on Research and Development.
 
When Daxor Corporation developed the first semi-automated blood volume measurement system approved by the FDA, it encountered a generation of physicians who had little or no direct experience with blood volume measurements. The one exception was hematologists who used the test to diagnose a single condition, polycythemia vera (elevated red cell volume) and who preferred to use another method (Chromium 51) to measure red cell volume.
 
Daxor presumed that the benefits of an automated system which involved no transfusion risks and which measured both red cell count and plasma volume would be readily and widely accepted. However, key personnel at the first facilities to use the BVA-100 (Lutheran Medical Center, Maimonides Hospital, Englewood Hospital, Brooklyn Hospital, Coney Island Hospital, and Long Island Jewish Hospital) returned the system after performing beta testing because they could not convince their administrators that the test was cost-effective. A blood volume measurement can cost the hospital $450 - $600 to perform. In contrast, a surrogate test such as a hemoglobin or hematocrit, although it may be quite inaccurate, can be performed for just $5 - $10. The company therefore has to demonstrate that the savings obtained through increased lifespans and shorten ed hospital stays makes the test cost-effective.
 
Until mid-2002 the company employed a limited sales staff with heavy emphasis on scientific training. Management then began to recruit a professional sales and marketing team. By mid-2003, it became apparent from feedback acquired by the new sales team that in addition to cost concerns associated with the instrument, there were additional technical problems that needed to be overcome.
 
Among the major problems was that the blood volume analyzer was functioning on a DOS operating platform that dated from the mid-1980s. This placed a number of restrictions on the flexibility of the system. Another major problem was that all gamma counters in use at that time for clinical measurement were considered high complexity instruments under the Clinical Laboratory Improvement Act (CLIA). This meant that the instrument had to be used by a facility headed by an individual with advanced specialized background training.
 
By 2003 the company sold only five instruments despite the fact that it instituted trial agreements with a number of hospitals. It had become clear that major changes were needed. By early 2004 the company decided to expand its research and development facilities in Oak Ridge, Tennessee, to develop a more advanced version of the system which would run on a Windows operating platform. The Company developed a new network of subcontractors, including a group of specialized computer programmers, who were absorbed into the Company as full-time employees in January 2005. The Company also contracted with an original equipment manufacturer (OEM) to build the instrument and to retain for itself the final quality assurance testing operations.
 
 
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A significant number of engineering changes were included in converting the BVA-100 DOS version into the BVA-100 Windows version. As a result of these improvements, the new BVA-100 system was categorized by CLIA as a medium complexity instrument, which made it accessible to a wider group of potential users. In addition, the many improvements allowed the system to better meet users’ needs. To the best of our knowledge, this is the only radioisotope nuclear medical instrument which has been designated as a medium complexity instrument because of the quality assurance controls that have been built into the instrument.
 
In addition to improving the BVA-100, the Company has dedicated considerable time and effort to physician education. A limited number of account representatives work primarily to educate physicians (clinicians) on how best to utilize the instrument. The company also offers unlimited clinical assistance through the services of its Chief Scientist and CEO, Joseph Feldschuh, M.D., as well as Gary Fischman, PhD, Dpm, Director of Research and Sandra Gilbert, PhD, the Clinical Research Coordinator. Each of these individuals devotes part or all of their time to supporting the development, completion, and publication of clinical studies. In addition, the Company has four Medical Directors on staff: (1) Donald Margouleff, M.D., former Professor of Medicine at NYU School of Medicine and former Chief of the Division of Nuclear Medicine at North Shor e University Hospital; (2) Ariel Distenfeld, M.D., former Director of the Blood Bank at Cabrini Medical Center, who established the second autologous blood bank in New York; (3) Robert Rosenthal, M.D., former hematologist and former Director of the Blood Bank for the Hospital for Joint Diseases; (4) Elena Agranovsky, Medical Director at Bayside Diagnostics Laboratory and former Chief of the Hematology Laboratory at Elmhurst General Medical Center. The Company also continues to provide financial and clinical support for studies at various institutions.
 
MARKETING
 
The Company’s marketing of the blood volume analyzer can be divided roughly into three phases: initial beta testing at local facilities, late-stage beta testing at nationally recognized institutions – with an emphasis on developing studies for publication, and marketing of the instrument for clinical use. During late-stage beta testing and the marketing phase, the instrument continued to experience a number of major technical improvements and alternations.
 
Initial Beta Testing (1999-2000)
 
After obtaining FDA approval for the instrument and the accompanying Volumex kit, the Company began beta testing the BVA-100 at local hospitals in 1999. The Company had no prior experience in marketing a medical instrument or device and relied on a limited number of sales staff who had specialized technical knowledge and a background in physiology. From 1999 to 2000, the Company loaned the instrument and provided associated kits to a number of local hospitals free of charge. In some cases, these hospitals also received direct financial support for performing research studies. The participating facilities at that time included Lutheran Medical Center, Maimonides Hospital, Brooklyn Hospital, Coney Island Hospital, and Long Island Jewish Hospital.
 
Some hospitals, such as Lutheran Medical Center, were able to publish their findings in peer-reviewed clinical journals. Some of these early studies clearly demonstrated that invasive techniques such as pulmonary artery catheterization (PAC) were not nearly as accurate as direct measurement of blood volume in assessing a patient’s volume status. In some cases, the hospitals performed studies but were unsuccessful in publishing their results.
 
After these facilities completed their studies, they returned the BVA-100 instruments to the Company because they could not convince their respective administrators that the test was cost-effective. During this time, the Company sold only a single Blood Volume Analyzer.
 
Late Stage Beta Testing (2000-2002)
 
As a result of feedback from the initial beta testing, the Company recognized that it was essential for the instrument to be placed in nationally recognized facilities. These facilities, because they worked with more complex medical conditions and had wider name recognition, were more likely to recognize the benefits of blood volume measurement and to publish their results. Additionally, studies from these prestigious institutions were more likely to be highly regarded by other facilities. The Company arranged for loans of instruments to the Cleveland Clinic, the Mayo Clinic, and the NYU Medical Center. US News & World Report publishes an annual ranking of 6,200 hospitals in the United States. At the time, the Mayo Clinic and The Cl eveland Clinic ranked respectively #2 and #3 in the annual ranking of hospitals, while the Cleveland Clinic Cardiovascular Department ranked # 1 in the U.S. After trial agreements lasting more than 1 year, each of these facilities purchased their instruments and paid for Volumex kits as they continued to utilize the Blood Volume Analyzer. The Cleveland Clinic now performs over 500 Blood Volume tests per year.
 
 
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Despite the positive response from these facilities, it became increasingly apparent that the Company needed significantly more clinical studies to support the reliability, utility, and cost-effectiveness of blood volume measurement with the BVA-100. It also became clear that the original version of the BVA-100, which was based on a DOS platform, needed to be changed in order to provide adequate features and flexibility to meet users’ needs (see Research and Development section above).
 
It has been an ongoing goal of the Company to partner with medical facilities to develop studies that will result in publications in peer-reviewed journals, with the intent of increasing awareness and acceptance of the need for accurate, rapid blood volume measurement. A number of studies initiated between 2000 and 2002 were eventually published in 2004 and later. This time lag in publishing clinical study results reflects both the time needed to complete the study itself, as well as the fact that it can take a year or more from submission of a manuscript to its final publication.
 
Marketing Phase (2002-present)
 
By 2002, the Company recognized that it needed to recruit an experienced medical device marketing staff. In September 2002 the Company hired a National Sales Manager and three Regional Sales Managers with extensive experience in the medical device and nuclear medicine field. Subsequently, several different sales programs were tested. It was believed that the best program format consisted of a National Sales Manager supported by regional sales representatives. John Reyes-Guerra, one of the original regional vice presidents, was made Vice President of Sales and Marketing.
 
The marketing team has made great progress in identifying which facilities and departments are most able to utilize the BVA-100 in a cost-effective manner and has developed a repertoire of educational and marketing material. Depending on a facility’s needs and its ability to perform studies that are likely to increase widespread acceptance of the BVA-100, the Company offers the Blood Volume Analyzer to potential users on a sale, lease, or loan basis. Facilities that receive a loan of the instrument for research pay for the Volumex kits that are not used purely for research purposes, which can provide a source of ongoing revenue for the Company. These users include hospitals, surgery centers, intensive care units, and imaging centers (radiology). The Company also has been demonstrating its equipment at major trade shows such as nucle ar medicine, surgical anesthesiology, and trauma conferences. In 2008 the Company exhibited at a total of 31 national, local and regional trade shows, and in 2009 it exhibited at 20 national and regional trade shows.
 
Challenges in the Marketplace
 
The major challenge facing the Company is achieving acceptance of the technology. To date, there have been 18 articles published in peer review journals and 10 published abstracts presented at major medical conferences regarding the Blood Volume Analyzer. Although management believes there is strong evidence for the benefits of blood volume measurement the technology has not yet achieved acceptance as a standard of care.
 
In order to place a Blood Volume Analyzer at a client site, our sales staff must generally get three levels of acceptance from hospital personnel which are as follows:
 
 
Level 1 – Acceptance by the Director of Nuclear Medicine and laboratory technicians so that they will agree to perform the test.
 
Level 2 – Convince physicians to order and utilize the test.
 
Level 3 – Administrative acceptance of the test.
 
It has been extremely difficult for the Company to obtain significant administrative acceptance of the technology. There have been hospitals where physicians have strongly endorsed the test and the nuclear medicine technicians have been willing to perform the test. However, administrators have decided that the hospital will not be able to generate adequate profits by utilizing the test or, even worse, lose money administering the test even if it has been shown to be medically beneficial to patients.
 
A study from Columbia Presbyterian Hospital entitled study “Relation of Unrecognized Hypervolemia in Chronic Heart Failure to Clinical Status, Hemodyanmics, and Patient Outcomes” by Drs. Stuart D. Katz, Donna Mancini, et al, demonstrated the clear ability of these norms to differentiate hypervolemia, normo volemic, and hypovolemic patients and to document, for the first time, that the guidelines of the American College of Cardiology/American Heart Association (ACC-AHA) that the goal of achieving normo volemia is the correct goal.
 
This study demonstrated that after one year of observation utilizing various standard therapies based on clinical observation and other parameters, but not utilizing measured blood volume except as part of an observation study, that 39% of the patients who were hypervolemic died, while 0% of the patients who where normo or slightly hypovolemic, died. After 2 years 55% of the hypervolemic patients died, while there were no deaths in the normo volemic group.
 
 
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These were all Class III and Class IV cardiac patients who are considered candidates for cardiac transplants and assisted ventricular device surgery. These death rates, therefore, were not unexpected in this group of terminally ill cardiac patients. What was remarkable, however, was that maintaining patients in a normo volemic status resulted in survival. This is the first study not only to document that the goals of establishing normal volume in Class III and Class IV cardiac patients are appropriate, but there is a remarkable difference in survival rates.
 
It also raises major questions about which Class III and Class IV cardiac patients are appropriate candidates for cardiac transplantation and/or ventricular assist device surgery if their cardiac volume status has not been established. Some patients who may be considered intractable Class IV cardiac patients may, in fact, be patients who if they had their red cell volume status corrected and their whole blood volume status corrected to normal, might no longer be Class IV cardiac patients in need of a ventricular assist device (VAD.) The study “Hemodilution is Common in Patients with Advanced Heart Failure” 1by Stuart D. Katz, MD, et al, demonstrated the benefit of correctly analyzing the red cell status of the patient and differentiating hemodilution from true red cell deficits as cited in the ACC/AHA Heart Failure Guidelines for 2005.
 
Despite what the Company considers strong evidence of the medical benefits, physicians at this hospital still do not routinely perform blood volume measurements.
 
There are an increasing number of specialized heart failure departments being set up in hospitals. These hospitals earn significant income from cardiac surgery and related services. The use of the blood volume analyzer, which may enable more cost effective treatment from a governmental point of view, may significantly cut into the hospital’s revenue. The company is slowly overcoming some of these objections. It is unfortunate that cost considerations are such a powerful influence in the choice of treatment for cardiac disease.
 
The role of the federal government is an important factor influencing acceptance of our technology. Medicare reimbursement formulae are essential in determining which procedures will be reimbursed, and the level of reimbursement.
 
Congestive heart failure is the leading reason for hospital admission in patients over 65. A single day in an intensive care unit may cost $1,500 to $3,500. Medicare has begun to recognize that patients are sometimes prematurely discharged because of the institution of Diagnostic Related Guidelines (DRG). Medicare currently bases reimbursement on the basis of a diagnosis regardless of how many days a patient spends in a hospital which creates a strong incentive for hospitals to discharge patients as early as possible for a specific diagnosis. Medicare has become aware of hospitals discharging patients early and then readmitting them in less than 30 days where the hospital receives another full course of payment reimbursement.
 
Guidelines are currently being implemented in which a hospital does not get reimbursed if a congestive heart failure patient is readmitted within less than 30 days of being discharged. One hospital which just purchased the blood volume analyzer has recognized this problem and has implemented a policy that every patient admitted for congestive heart failure must be diagnosed and treated on the basis of a blood volume measurement and followed with a subsequent blood volume measurement prior to discharge to ensure that patients are not prematurely discharged.
 
Out of the hospitals that have the Blood Volume Analyzer, only one has implemented this type of a protocol. The company is working with hospital administrators to educate them about the cost and patient benefits of utilizing blood volume measurement in their diagnosis and treatment of congestive heart failure patients.
 
The CMS (Centers for Medicare and Medicaid Services) has changed reimbursement rules which have had the effect of reducing reimbursement for blood volume measurement by approximately 33%. The new CMS policy combined the cost of performing a test with the cost of the reagent for the test and reduced the combined payment by 33%. This type of arbitrary change markedly reduced the incentive for a hospital to perform blood volume measurements. Daxor was not the only company affected by this administrative change. Many other tests involving radioisotopes were similarly affected by this change. Despite efforts by the Society of Nuclear Medicine and other interested parties, to date there has been no changes in this policy.
 
A major threat is the potential for government mandated changes to our medical care system. If there are drastic cuts in reimbursement similar to what was enacted for whole blood volume measurement payment, this is likely to be a formidable challenge for implementation of blood volume measurements. The company continues to sponsor ongoing medical studies demonstrating the clinical advantages of blood volume measurement. There can be no assurance that even with existing evidence of the life saving benefits of blood volume measurement, that this test will be implemented as a standard of care”
 

1 Circulation 2003;107:226-229
 
 
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PATENT AND COPYRIGHT PROTECTION
 
Existing Patents
 
The Company owns separate United States patents on its Blood Volume Analyzer BVA-100 and on its Volumex injection kit. These are the only U.S. patents ever issued for an automated instrument dedicated to the measurement of total human blood volume for a specific individual. The Company also received a European patent covering 12 countries and received the first patent ever issued in Japan for an instrument to measure human blood volume.
 
The instrument is designed to work with the Volumex injection kit, which is 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 non economical 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 that permits a fixed quantified 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 blood bank has received two recent trademarks: one is for Quality Assured Blood and the other is for the Blood Optimization Program (BOP). The Company has applied for and received trademark protection for the BOP name.
 
In February, 2007 the company’s patent attorneys filed a methods patent for the Company’s Blood Optimization Program (BOP). The program is designed to ensure, where possible, that patients undergoing surgery enter surgery with a normal amount of blood, both plasma volume and red cell volume. It is also designed to enable patients to have their own autologous blood available to them to replace blood lost during surgery and in the post-operative period.
 
The Blood Optimization Methods Program Patent is designed to eliminate, where possible, the types of medical and surgical situations which can result in stroke, heart attack, or even death. The use of frozen blood as opposed to refrigerated blood eliminates many of the aging effects which have been demonstrated in refrigerated blood.
 
Future Projects and Potential Patents
 
The Company expects to file additional patents for tests associated with the BVA-100 in the near future to provide additional applications, as outlined below:
 
Glomerular Filtration Rate
 
The Company is working on an instrument that will automate the measurement of glomerular filtration rate (GFR), which is a very important and sensitive test of kidney function. At present, this test is performed infrequently because of the difficulty in the current methodology. The Company believes that it can automate the glomerular filtration rate test, which will make it more feasible for regular medical use.
 
Measurement of Total Body Albumin
 
The Company is planning to file a patent for the measurement of total body albumin using measurements from the Blood Volume Analyzer. Albumin is a major carrier of hundreds of vital components within the circulatory system and is a key molecule responsible for maintaining oncotic pressure. Abnormal total body albumin is common in many disease states, such as heart failure, cancer, and diabetes. Burn patients in particular experience serious loss of albumin, and replacement quantities may be difficult to calculate. The ability to measure total body albumin accurately would be expected to facilitate more precise albumin replacement therapy.
 
Needleless Injection System
 
The Company is reviewing an alternative injection kit system that can be used without a needle. Some intensive care units emphasize an elimination of needles wherever possible. The Volumex kit is injected into an intravenous system flowing into the patient’s vein, rather than through a direct needle stick. Thus, a person using a kit who accidentally stuck himself would not be exposed to the patient’s blood. Nevertheless, we think it would be an advantage if we can develop a needleless system.
 
UL and CE Mark
 
In March, 2007, Daxor finished the final phase, inspection, to receive U.L. (Underwriters Laboratory) approval. The process consisted of Daxor submitting the complete BVA-100 and associated panel P.C. for physical inspection and testing, including the strenuous electrical inspection safety examination. Blood volume analyzers shipped after April 2007 bear the U.L. mark.
 
Daxor has obtained the CE mark. CE is a self-certification mark for which the manufacturer must possess proof of compliance with the standards. Daxor has satisfied the U.S. and Canadian standards for CE. As part of the UL testing, Daxor has passed the electrical safety part and possesses its verification from the UL for this component. The second component is EMC (electromagnetic compatibility). For Daxor to be able to market and distribute the instrument in countries other than the U.S. and Canada, it would need to pass those country’s specific requirements, which may or may not have been met by the EMC and electrical testing, and would be required in many countries to translate existing documentation into that country’s primary language.
 
 
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Idant Semen Storage Client Identification
 
The Company is also exploring the submission of a patent for methodology of improving client identification in its semen bank. It is introducing additional patient protection for stored donor semen, which may be eligible for patent protection. In the 34 years of Idant Semen Bank operations, there has never been a mix-up in any stored specimen.
 
COMPETITION
 
BVA-100 Blood Volume Analyzer
 
Our patents for the BVA 100 expire in May 2010. We are in the process of developing an automated system for measuring total body albumin, which we will incorporate into the next generation of Blood Volume Analyzers when we apply for a new patent.
 
Daxor is the only company able to provide a true automated direct measurement of a patient’s total blood volume, red cell volume and plasma volume. There are no other technologies that have been brought into commercial use that we consider as a threat to our current system. The BVA 100 is the only method available which provides the optimum norm for a specific patient. The BVA-100 contains an algorithm which automates the blood volume calculation and provides a much more accurate prediction for a specific norm for a specific patient.
 
At the present time we are unaware of any other technology or methodology which is competitive with the BVA-100 or which measures total body albumin. It is possible; however, that someone might develop a blood volume analyzer based on our current model. The blood volume analyzer, however, works most efficiently with the tracer injection kit system which has a separate patent and which expires in 2016.
 
Albumin is a very important carrier molecule in the body and helps prevent the collapse of the plasma volume because of the oncotic pressure it exerts within the vascular system. Without adequate albumin a patient may develop pulmonary edema which is a condition where water leaks from the blood vessels into the lungs. It is a very serious complication which is frequently seen in heart failure patients.
 
Once we have achieved FDA approval of an automated method to measure total body albumin, we will discontinue the manufacture of the current Blood Volume Analyzer and provide a new system which will calculate an accurate measurement of red cell volume, plasma volume, total blood volume, as well as total body albumin. We believe but cannot be certain at this time that we will achieve a patent for this type of instrument.
 
We expect that sales of our tracer kit will ultimately be our most important source of revenue. We do not believe at the present time someone would attempt to manufacture another blood volume analyzer without having access to the patented kit system.
 
There are indirect or surrogate tests of blood volume which consist of measurement of the hematocrit or hemoglobin, and measurements of pressures within the heart itself which involve cardiac catheterization. We do not consider these to be significant competition for our product. With respect to the use of hematocrit, this is a common method of estimating a person’s blood volume. This test is known to be particularly inaccurate in instances such as acute blood loss, after surgery, or in conditions such as heart failure or any condition where blood has been lost suddenly. There is also indirect competition in the form of surrogate tests for central venous pressure (cvp) that attempts to infer or imply total blood volume, red cell volume and plasma volume.
 
It is our belief that tens of thousands of patients every year develop kidney failure, strokes, or heart attacks, some of which result in death, because physicians  are late in recognizing the degree of blood loss due to utilization of inaccurate surrogate measurement such as hematocrit and hemoglobin. It is these inaccurate tests which we are attempting to replace by the use of accurate measurement of blood volume.
 
Cardiac catheterization involves an invasive procedure of threading a catheter into the right chambers of the heart and lungs. For many years this procedure was almost universally used until it was recognized that intra-cardiac pressures may not correlate with total body blood volume and the results could be highly misleading. This procedure is used much less frequently now but could still be considered an indirect competing technique for blood volume measurement.
 
It is these inaccurate tests which we are attempting to replace by the use of accurate measurement of blood volume. We believe this can be a powerful financial incentive for hospitals to utilize blood volume measurement in the treatment of heart failure. Preliminary unpublished results utilizing the BVA-100 have indicated a significant reduction in heart failure re-admissions when patients are treated on the basis of precise measurements.
 
 
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Blood Banking
 
The blood banking industry has organizations ranging from small limited service providers to large full service organizations. The American Red Cross and its affiliates dominate the market and have significantly greater public exposure, goodwill and resources than we do. We compete for customers based on a variety of factors, including reputation, customer service, performance, expertise, price and scope of service offerings. The Company believes it competes favorably in these areas.
 
Fees charged for products and services are generally set at levels based on the supply and demand for specific products, and are influenced by the competition among blood products suppliers and federal reimbursement rates to hospital customers. Since many of the Company’s competitors are tax-exempt, they do not bear the tax burden the Company faces, and they have access to lower cost tax-exempt debt financing. Their status as charitable institutions may also give them an advantage in recruiting volunteer donors. In addition, certain competitors have advantages over the Company as a result of established positions and relationships with the communities they serve.
 
To the best of our knowledge, our frozen blood bank is the only facility that provides long-term personal frozen blood storage in the Northeastern United States. The Red Cross and similar organizations provide blood storage prior to surgery. The blood is refrigerated but is usable for only 42 days. However, recent studies have demonstrated that refrigerated blood loses key enzymes within two weeks which causes significant loss of ability to transport oxygen effectively.
 
A published study 2 has shown that using old blood is associated with a significantly higher risk of complications, as well as death. In contrast, frozen blood retains needed enzymes for at least 4-6 days after it is thawed and processed for use.
 
The freezing and thawing of blood involves a complicated process utilizing a special cryoprotective agent which must be processed in a sterile manner. At the time of processing and thawing, the cryoprotective agent must be removed in a sterile manner.
 
The previous methodology used to thaw and process the removal of the cryoprotective agent allowed it to be used for only 24 hours after thawing. A new process approved by the FDA, which we use, allows blood to be used for up to 14 days after it has been thawed and separated from the cryoprotective agent. To the best of our knowledge, no other facility in the Northeastern United States provides this type of service.
 
Our personal blood storage service allows a patient to store his or her own blood in case they need a transfusion during surgery. This would not be competitive with existing blood donor services such as the Red Cross. This is because a patient would be using his or her own blood instead of donated blood from a stranger which we believe to be a superior service.
 
For example, semen bank donors are required to have donated semen frozen and stored for six months. The donor is required to be re-tested six months later. This process is used because there is a window of non-detect ability for a person who may be infected with diseases such as HIV or hepatitis where they will not be detected by standard tests.
 
Our Idant Labs subsidiary pioneered the concept of storage and re-testing of donor semen in 1985. This concept is now legally mandated in most states with semen banking facilities.
 
The double testing of blood donors is not done in most instances due to cost considerations. The use of autologus blood storage eliminates the risk of someone receiving contaminated blood from another source since they are using their own blood. To date, our frozen blood banking services have not been profitable because of inadequate utilization. However, with increased utilization this service could be profitable.
 
The use of autologus blood storage eliminates the risk of someone receiving contaminated blood from another source since they are now using their own blood. To date, frozen blood banking services have not been profitable because of inadequate utilization. With increased utilization, this service could become profitable.
 
In the past, the Company has experienced significant opposition from some non-profit blood banking organizations that viewed frozen autologous blood as a potential competitive threat to their operations. It is the Company’s intention to form alliances with hospitals utilizing the Blood Optimization Program. The Company views personal blood storage as a supplement to and not as competition to other existing blood donor services. The Company will initially focus its attention on facilities within a 200 mile radius of New York City. If the Program proves successful, the Company will then develop satellite facilities in conjunction with other medical partners in other parts of the United States. For further discussion, please see the patent and copyright section above.
 
Semen Banking
 
There are at least 300 sperm banks in the United States operated either by commercial entities or by academic institutions. The Company believes that its unique storage system, coupled with clear documentation of successful conception from the longest-term frozen stored semen in medical history, will help to expand its marketing efforts. The Company’s use of heat-sealable straws rather than vials for semen storage, avoids the risk of cross-contamination with other samples.
 
The high security straws used by Idant also have a larger volume to surface ratio, which helps to optimize the freezing process. Moreover, Idant Laboratories employs a customized carousel storage system which keeps the frozen semen straws continuously submerged in liquid nitrogen. This carousel system allows for withdrawal of a single specimen without any other specimens leaving the liquid nitrogen and becoming partially defrosted. The Company has also developed a web site (www.Idant.com) that is helpful for marketing purposes.
 

2 The Association Between Duration of Storage of Transfused Red Blood Cells and Morbidity and Mortality After Reoperative Cardiac Surgery: International Anesthesia Research Society; July 2006; Number 1; Volume 103
 
 
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In 2004, Idant received confirmation of two successful conceptions utilizing sperm stored at Idant respectively for, 21 and 28 years. This was the longest successful cryopreservation of sperm in medical history. The Company believes that its unique storage system for human sperm is responsible for this extraordinary success.
 
There are other companies that Idant competes with that have larger donor bases and are better known because they have more resources to devote to marketing and advertising their services. There is always a possibility that another Company with more resources will develop a superior technology for storing human sperm.
 
Semen bank donors are required to have donated semen frozen and stored for six months. The donor is required to be re-tested six months later. This process is used because there is a window of non-detect ability for a person who may be infected with diseases such as HIV or hepatitis where they will not be detected by standard tests.
 
Our Idant Labs subsidiary pioneered the concept of storage and re-testing of donor semen in 1985. This concept is now legally mandated in most states with semen banking facilities.
 
WARRANTIES
 
The Company recognizes warranty and indemnification that require a guarantor to recognize and disclose a liability for obligations it has undertaken in relation to the issuance of the guarantee.
 
The Company warrants that its products are free from defects in material and workmanship for a period of one year from the date of initial acceptance by our customers. The warranty does not cover any losses or damage that occurs as a result of improper installation, misuse or neglect and repair or modification by anyone other than the Company or its authorized repair agent. The Company’s policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale. The Company’s repair rate of product under warranty has been minimal and a historical percentage has not been established. The Company has not provided for any reserves for such warranty liability.
 
The Company generally warrants its Blood Volume Analyzers against defects in material and workmanship for a period of up to one year from the date of shipment, plus any extended warranty period purchased by the consumer. With respect to semen banking and blood banking, the Company warrants that its methods of storage are in compliance with all existing federal and state regulations.
 
GOVERNMENT REGULATION
 
The development, production and marketing of medical devices are subject to regulation by the FDA under the Federal Food, Drug and Cosmetic Act. Daxor is a FDA registered medical device manufacturer that has processes and procedures in place to ensure compliance with the FDA Good Manufacturing (GMP) regulations.
 
The FDA has established three classes of controls for medical devices. Class I includes devices with the lowest risk, Class II includes devices of intermediate risk including most diagnostic devices and Class III includes those with the greatest risk that must meet the most stringent regulatory requirements. Daxor currently manufactures five different medical devices registered with the FDA; three Class I devices and two Class II devices. The two Class II devices, the BVA-100 software (WinBVA) and the MAX-100 drug delivery device required and have received FDA 510(k) approval prior to market introduction. Any currently planned new products are also expected to be categorized as Class I or Class II devices. Daxor Research and Development (R&D) follows a design control process that minimizes the risk of delay in receiving 510(k) approva l to market new products.
 
As a registered medical device manufacturer, Daxor is subject to periodic inspection by the FDA of manufacturing facilities, production records, product design records and complaint files. If an FDA inspection identifies a non-compliance with GMP regulations, a regulatory action might possibly occur. Daxor conducts regular internal audits to ensure compliance with all GMP regulations. The last FDA inspection of Daxor was in June 2006 and no adverse findings were noted.
 
In addition to the FDA, Daxor is subject to inspection by other state, federal and private agencies. Investigators from these agencies have all inspected Daxor facilities in Oak Ridge, Tennessee with no adverse findings. The dates of the inspections and names of the agencies are as follows:
 
 
Tennessee Board of Pharmacy on November 30, 2007.
 
Underwriters Laboratory on May 4, 2009.
 
 
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Our facilities in New York City were also inspected over the last two years with no adverse findings. The dates of the inspections and the names of the agencies are as follows:
 
 
New York City Bureau of Radiation Safety in November of 2007.
 
New York City Fire Department in May of 2008.
 
The New York State Department of Health regulates the Company’s Idant Semen and Blood Banks 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.
 
PRODUCT LIABILITY EXPOSURE
 
The Company’s business involves the inherent risk of product liability claims. The Company currently maintains general product liability insurance and an umbrella liability policy, which the Company believes are sufficient to protect the Company from any potential liability risks to which it may be subject. However, there can be no assurances that product liability insurance coverage will continue to be available or, if available, that it can be obtained in sufficient amounts or at a reasonable cost.
 
ENVIRONMENTAL
 
The Company believes it is in compliance with the current laws and regulations governing the protection of the environment and that continued compliance would not have a material adverse effect on the Company or require any material capital expenditures. Compliance with local codes for the installation and operation of the Company’s products is the responsibility of the end user.
 
EMPLOYEES
 
On February 22, 2010, the Company had a labor force of forty one, all of whom were leased through ADP Total Source. The Company maintains a work force at its main headquarters in New York City, a manufacturing division and a technology support group in Oak Ridge, Tennessee and account managers in various parts of the Continental United States and Hawaii.
 
We have a contract with ADP Total Source to provide certain professional employment services such as health insurance to our employees at rates that we would not qualify for otherwise, a retirement plan and payroll services to our personnel. Pursuant to this contract, our personnel are employees of, and paid by, ADP Total Source as part of an employee leasing arrangement. We lease the services of these employees from ADP, and reimburse ADP for the costs of compensation and benefits. All of the employees referred to in the Annual Report are full time employees. For purposes of our Annual Report, we consider employees of ADP covered by this contract to be employees of the Company.
 
INVESTING ACTIVITIES
 
The Company maintains a portfolio of Available for Sale Securities. As described in Item 1A: Risk Factors, the income generated by the portfolio has been instrumental in offsetting the Company’s cumulative operating loss for the five year period ended December 31, 2009. The Company’s investing activities are also discussed in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements. The Company’s investing activities are not part of its operating business and functions as a separate segment.
 
The company will also engage in the short selling of stock. When this occurs, the short position is marked to the market and this adjustment is recorded in the Statement of Operations. Any gain or loss is recorded for the period presented
 
Historical cost is used by the Company to determine all gains and losses, and fair market value is obtained by readily available market quotes on all securities.
 
The Company’s investment goals, strategies and policies are as follows:
 
 
1.
The Company’s investment goals are capital preservation, maintaining returns on capital with a high degree of safety and generating income from dividends and option sales to help offset operating losses.
     
 
2.
In order to achieve these goals, the Company maintains a diversified securities portfolio comprised primarily of electric utility common and preferred stocks. The Company also sells covered calls on portions of its portfolio and also sells puts on stocks it is willing to own. It also sells uncovered calls and may have net short positions in common stock up to 15% of the value of the portfolio. The Company’s net short position may temporarily rise to 15% of the Company’s portfolio without any specific action because of changes in valuation, but should not exceed this amount. The Company’s investment policy is to maintain a minimum of 80% of its portfolio in electric utilities. The Board of Directors has authorized this minimum to be temporarily lowered to 70% when Company management deems it to be necessary. Investments i n utilities are primarily in electric companies. Investments in non-utility stocks will generally not exceed 20% of the value of the portfolio.
     
 
3.
Investment in speculative issues, including short sales, maximum of 15%.
     
 
4.
Limited use of options to increase yearly investment income.
 
 
a.
The use of “Call” Options. Covered options can be sold up to a maximum of 20% of the value of the portfolio. This provides extra income in addition to dividends received from the company’s investments. The risk of this strategy is that investments may be called away, which the company may have preferred to retain. Therefore, a limitation of 20% is placed on the amount of stock on which options can be written. The amount of the portfolio on which options are actually written is usually between 3-10% of the portfolio. The historical turnover of the portfolio is such that the average holding period is in excess of five years for available for sale securities.
     
 
b.
The use of “Put” options. Put options are written on stocks which the company is willing to purchase. While the company does not have a high rate of turnover in its portfolio, there is some turnover; for example, due to preferred stocks being called back by the issuing company, or stocks being called away because call options have been written. If the stock does not go below the put exercise price, the company records the proceeds from the sale as income. If the put is exercised, the cost basis is reduced by the proceeds received from the sale of the put option. There may be occasions where the cost basis of the stock is lower than the market price at the time the option is exercised.
     
 
c.
Speculative Short Sales/Short Options. The company normally limits its speculative transactions to no more than 15% of the value of the portfolio. The company may sell uncovered calls on certain stocks. If the stock price does not rise to the price of the call, the option is not exercised and the company records the proceeds from the sale of the call as income. If the call is exercised, the company will have a short position in the related stock. The company then has the choice of covering the short position, or selling a put against it. If the put is exercised, then the short position is covered. The company’s current accounting policy is to mark to the market at the end of each quarter any short positions, and include it in the income statement. While the company may have so-called speculative positions equal to 15% of its accounts, in actual practice the net short stock positions usually account for less than 10% of the assets of the company.

 
5.
In the event of a merger, the Company will elect to receive shares in the new company if this is an option. If the proposed merger is a cash only offer, the Company will receive cash and be forced to sell the stock.
 
Item 1A. Risk Factors
 
Operating Losses
 
The Company incurred cumulative operating losses of $26,075,156 during the five year period ended December 31, 2009. These losses have mainly resulted from ongoing expenses for marketing and research and development as the Company attempts to build a market for its products. During this same time period, the Company had cumulative net income from investments of $62,705,493 which covered operating losses and provided the necessary funds for our continued research and development and marketing. It is the opinion of management that the financial health of the Company would have been adversely affected if our net income from investments during this time had been substantially less than losses from operations.
 
 
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During the two years ended December 31, 2006, the Company had cumulative losses after income taxes of $2,121,512. For the three years ended December 31, 2009 the Company had cumulative net income after income taxes of $31,593,243. There is no guarantee that future income from investments will continue to completely offset operating expenses as was the case on an individual and cumulative basis for each of the three years ended December 31, 2009.
 
Sales of Blood Volume Kits
 
In the Company’s fiscal year ended December 31, 2009, the sale of Blood Volume Kits accounted for 67.4% of the Company’s total consolidated sales. There were four customers (hospitals) that accounted for 60.3% of the Company’s sale of Blood Volume Kits.
 
Management believes that the loss of any one customer would have an adverse effect on the Company’s consolidated business for a short period of time. All four of these hospitals have purchased their BVA-100 equipment. The Company has not had any situations in which a hospital, after having purchased a blood volume analyzer, discontinued purchasing Volumex kits. This suggests that, when more hospitals purchase equipment, they will continue with ongoing purchase of Volumex kits. The Company continues to seek new customers, so that any one hospital will represent a smaller percentage of overall sales.
 
In the Company’s fiscal year ended December 31, 2008, the sale of Blood Volume Kits accounted for 57.1% of the Company’s total consolidated sales. There were three customers (hospitals) that accounted for 49.5% of the Company’s sale of Blood Volume Kits.
 
Medicare and Medicaid Reimbursement
 
As disclosed in our previous filings, the Centers for Medicare and Medicaid Services (CMS) implemented a significant policy change affecting the reimbursement for all diagnostic radiopharmaceutical products and contrast agents which was effective as of January 1, 2008. As a result of this policy change, diagnostic radiopharmaceuticals such as Daxor’s Volumex are no longer separately reimbursable by Medicare for outpatient services. At this time, it is still unclear if this policy change will also be implemented by private third party health insurance companies.
 
The reimbursement policy for hospital outpatients through December 31, 2007 included payment for both the cost of the procedure to perform a blood volume analysis (BVA) and the radiopharmaceutical (Daxor’s Volumex radiopharmaceutical). CMS’s policy now only includes the reimbursement for the procedure and would require the hospital to absorb the cost of the radiopharmaceutical. There will be an upward adjustment for the procedure code to include some of the costs of the radiopharmaceutical. However, this upward adjustment does not entirely cover the costs associated with the procedure and the radiopharmaceutical.
 
In response to Medicare’s change in its reimbursement policy for diagnostic radiopharmaceuticals, Daxor has lobbied CMS both individually and as a member of the Society of Nuclear Medicine’s APC Task Force, which is a select group of representatives from industry and healthcare that represents the more than 16,000 nuclear medicine professionals in the United States. One of the missions of the APC Task Force is to work directly with the CMS in an attempt to amend the current policy limiting the reimbursement of diagnostic radiopharmaceuticals for outpatient diagnostic services. There is no guarantee that the APC task force will be successful in their efforts to persuade the CMS to amend their policy of limiting the reimbursement of diagnostic radiopharmaceuticals for outpatient diagnostic services.
 
Health Insurance Legislation
 
On March 21, 2010, the U.S. House of Representatives passed the “Patient Protection and Affordable Care Act (H.R.3590).” This legislation was signed into law by President Obama on March 23, 2010. The goal of this legislation is to make healthcare more accessable to Americans. At this time we are unable to quantify how this legislation will affect our operating income. Although it is possible that increased coverage could lead to greater access to our products and services if the reimbursement rate is lower, this would limit the benefit to Daxor and could have a negative impact on our operating results and our business.
 
Available for Sale Securities
 
At December 31, 2009, 93.5% of the fair market value of the Company’s investment portfolio consisted of utility stocks whose market price can be sensitive to rising interest rates. At December 31, 2008, 79.5% of the Company’s investment portfolio consisted of utility stocks. The Company’s investment policy calls for a minimum of 80% of the investment portfolio to consist of utility stocks. The Board of Directors has authorized this minimum to be temporarily lowered to 70% when management deems it to be necessary.
 
At March 31, 2009, June 30, 2009 and September 30, 2009 the percentage of the Company’s investment portfolio which consisted of utility stocks was 78.0%, 79.9% and 85.5% respectively.
 
At December 31, 2009, the Company’s investment portfolio consisted of 83 separate stocks. The top three holdings as of this date in the investment portfolio were Entergy Corporation, First Energy Corporation and Exelon. These three holdings comprised 39.9% of the value of the investment portfolio and also accounted for 30.0% of the dividend income for the year ended December 31, 2009. A reduction in dividend payments by these companies could have a material effect on the Company’s dividend income.
 
 
22

 
 
The Company also receives significant income from option sales related to its investment portfolio. The income from options is variable, and less predictable than income from dividends from the Company’s portfolio, which have minor variations. The ability of the Company to sell options is related to the market value of its available for sale securities. If there is a decrease in the market value of the Company’ available for sale securities, this could negatively impact income from option sales.
 
There is a risk that in an environment of rising interest rates that the market value of these stocks could decline and the utilities could reduce their dividend payments to compensate for increased interest expense. This could have an adverse effect on the Company’s ability to fund research and development and marketing efforts necessary to build a market for our products.
 
Investment Company
 
In 2005 and 2007, the Company and Dr. Joseph Feldschuh, its President and Chief Executive Officer, respectively, received Wells Notices from the Securities and Exchange Commission (“SEC”) requesting their comments on the SEC Staff’s view that the Company was in violation of Section 7(a) of the Investment Company Act in that it was operating as an unregistered investment company. The Company and Dr. Feldschuh responded to those requests when made. The Company has not received a closing notice or other substantive response from the SEC to either of these submissions. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our s ubmissions to the SEC in response to the Wells Notices.
 
In November 2009, the staff of the Northeast Regional Office of the SEC contacted the Company and invited both the Company and Dr. Feldschuh to make a new Wells submission based upon more recent operations and results. The Company and Dr. Feldschuh responded to the staff’s invitation on December 20, 2009. The Company has not received a closing notice or other substantive response from the SEC to its December 20, 2009 submission. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submission to the SEC in response to the Wells Notices.
 
There is a risk that the SEC may attempt to designate Daxor as an investment company under the Investment Company Act.
 
Key Individual
 
The Company has a significant dependence on a single individual, Dr. Joseph Feldschuh, who is the CEO of the Company. Dr. Feldschuh is the Chief Scientist of the Company and is believed to have more experience with blood volume measurement than any other physician in the United States. He is involved in assisting and advising various physician groups that are conducting research. His scientific knowledge would be difficult to replace.
 
Dr. Feldschuh is also the sole individual responsible for investment decisions with respect to the Company’s investment portfolio. The loss of his services in this area would be expected to result in a material reduction in return on the Company’s assets.
 
Patents
 
Our patents for the BVA 100 expire in May 2010. We are in the process of developing an automated system for measuring total body albumin, which we will incorporate into the next generation of Blood Volume Analyzers when we apply for a new patent. It is difficult to determine when or if our application for a new patent would be approved.
 
The blood volume analyzer, however, works most efficiently with the tracer injection kit system which has a separate patent and which expires in 2016. It is possible that another Company could develop another version of the Blood Volume Analyzer which would use a different tracer injection kit. To the best of our knowledge, this has not happened yet and Management views the development of a competing tracer injection kit as unlikely.
 
Volumex Syringes
 
All of the Company’s orders for Volumex syringes are filled by a single FDA approved radio pharmaceutical manufacturer. This manufacturer is the only one approved by the FDA in the United States to manufacture Volumex for interstate commerce. If this manufacturer were to cease filling the Volumex syringes for Daxor before the Company had a chance to make alternative arrangements, the effect on Daxor’s operating revenue could be material.
 
Regulatory Risk or Approvals
 
There is a risk of delay until regulatory approvals are received for any new products the Company may attempt to bring to market in the future. At this point, management is unable to assess how long such a delay would be or the effect on sales that it could have.
 
Item 1B Unresolved Staff Comments
 
In 2005 and 2007, the Company and Dr. Joseph Feldschuh, its President and Chief Executive Officer, respectively, received Wells Notices from the Securities and Exchange Commission (“SEC”) requesting their comments on the SEC Staff’s view that the Company was in violation of Section 7(a) of the Investment Company Act in that it was operating as an unregistered investment company. The Company and Dr. Feldschuh responded to those requests when made. The Company has not received a closing notice or other substantive response from the SEC to either of these submissions. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submissions to the SEC in response to the Wells Notices.
 
In November 2009, the staff of the Northeast Regional Office of the SEC contacted the Company and invited both the Company and Dr. Feldschuh to make a new Wells submission based upon more recent operations and results. The Company and Dr. Feldschuh responded to the staff’s invitation on December 20, 2009. The Company has not received a closing notice or other substantive response from the SEC to its December 20, 2009 submission. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submission to the SEC in response to the Wells Notice. 
 
 
23

 
 
There is a risk that the SEC may attempt to designate Daxor as an Investment Company under the Investment Company Act.
 
Item 2. Properties
 
In December 2002, the Company signed a twelve year lease extension commencing January 1, 2003, for its existing facility at the Empire State Building. The Company has occupied this space since January 1992. The Company currently occupies approximately 7,200 square feet. The lease has a two year option for renewal after ten years with an option for an additional 18,000 square feet of space. The Company has a pilot manufacturing facility in Oak Ridge, Tennessee which is currently manufacturing the BVA-100 Blood Volume Analyzers, and where R&D activities are performed.
 
On January 3, 2007, Daxor closed on the purchase of 3.5 acres of land at 107 and 109 Meco Lane, Oak Ridge, Tennessee that contains two separate 10,000 sq. ft. buildings. The buildings were constructed in 2004; each structure is a single story steel frame with metal shell and roof constructed on a concrete slab. The total purchase price for the land and property was $775,000 plus closing fees. All Warehousing and Distribution for the BVA-100 takes place along with related software support and development at the facility located at 107 Meco Lane. Most of the Company’s Research and Development (R&D) and Verification and Validation (V&V) functions are also fulfilled at this location. The Management Information Support Function and Hardware Disast er Relief Center which mirrors and backs up all computer activity in the New York City Headquarters is also located at 107 Meco Lane.
 
The building at 109 Meco Lane is currently being used for radiopharmaceutical distribution. In order to be able to use the facility for this type of distribution, we have obtained our licenses from the Federal Nuclear Regulatory Commission and the State of Tennessee for nuclear capability. The Company subsequently obtained a license from the Food and Drug Administration (FDA) to become a re-shipper. This license enables Daxor to receive batches of Volumex from our third party manufacturer and to ship the doses to our clients.
 
In November of 2008, a construction project commenced at 109 Meco Lane. The project was completed during the first quarter of 2010 and the total cost was approximately $2,500,000. The project involved the construction of laboratory and office space. The validation in for the laboratory space and related instruments started during the first quarter of 2010 and Management expects it will be completed by the end of the second quarter of 2010.
 
The Company subleases a small portion of its New York City office space to the President of the Company for five hours per week. This sublease agreement has no formal terms and is executed on a month to month basis. The annual amount of rental income received from the President of the Company in each of the years ended December 31, 2009, 2008 and 2007 was $11,854, $11,478 and $11,022.
 
Item 3. Legal Proceedings
 
The Company has no material legal proceedings pending. From time to time, the Company is the subject of legal proceedings arising in the ordinary course of business. The Company does not believe that any proceedings currently pending or threatened will have a material adverse effect on its business or results of operations.
 
In 2005 and 2007, the Company and Dr. Joseph Feldschuh, its President and Chief Executive Officer, respectively, received Wells Notices from the Securities and Exchange Commission (“SEC”) requesting their comments on the SEC Staff’s view that the Company was in violation of Section 7(a) of the Investment Company Act in that it was operating as an unregistered investment company. The Company and Dr. Feldschuh responded to those requests when made. The Company has not received a closing notice or other substantive response from the SEC to either of these submissions. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submissions to the SEC in response to the Wells Notices.
 
In November 2009, the staff of the Northeast Regional Office of the SEC contacted the Company and invited both the Company and Dr. Feldschuh to make a new Wells submission based upon more recent operations and results. The Company and Dr. Feldschuh responded to the staff’s invitation on December 20, 2009. The Company has not received a closing notice or other substantive response from the SEC to its December 20, 2009 submission. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submission to the SEC in response to the Wells Notice.
 
There is a risk that the SEC may attempt to designate Daxor as an Investment Company under the Investment Company Act.
 
 
24

 
 
 
 
25

 
 
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
The common stock is traded on the New York Stock Exchange under the symbol DXR.
 
2009
   
High
   
Low
 
               
 
First Quarter
  $ 16.70     $ 14.10  
 
Second Quarter
  $ 15.60     $ 10.06  
 
Third Quarter
  $ 13.00     $ 9.78  
 
Fourth Quarter
  $ 15.10     $ 11.00  
 
2008
   
High
   
Low
 
                   
 
First Quarter
  $ 14.75     $ 8.51  
 
Second Quarter
  $ 19.00     $ 11.55  
 
Third Quarter
  $ 18.53     $ 14.99  
 
Fourth Quarter
  $ 16.98     $ 13.47  
 
On February 23, 2010, the Company had approximately 137 holders of record of the Common Stock. The Company believes there are approximately 1,150 beneficial holders of their Common Stock.
 
For the year ended December 31, 2009, the Company paid total dividends of $5,739,299 or $1.35 per share on its Common Stock. The $1.35 per share was paid as follows: $0.10 per share on June 15th, $0.25 per share on September 8th and a special dividend of $1.00 per share on December 24, 2009.
 
For the year Ended December 31, 2008, the Company paid total dividends of $6,452,502 or $1.50 per share on its Common Stock. The dividend of $1.50 per share was paid as follows: $0.25 per share on August 26th, $0.25 per share on November 26th and a special dividend of $1.00 per share on December 30, 2008.
 
Prior to 2008, the last dividend paid was a single cash dividend of $0.50 per share on the Common Stock in 1997. No dividends have been declared or paid in 2010 and any future dividends will be dependent upon the Company’s earnings, financial condition and other relevant factors.
 
 
26

 
 
Item 6. Selected Financial Data.
 
The following table sets forth certain selected financial data with respect to the Company. The consolidated statements of operations data for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 are derived from our audited consolidated financial statements that are included in this Form 10-K.
 
Operations Data:
 
   
Year Ended December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
                               
Total operating revenues
  $ 1,688,826     $ 1,761,055     $ 1,869,779     $ 1,486,449     $ 1,343,538  
                                         
Costs and expenses:
                                       
                                         
Operations of laboratories & costs of production
    704,866       717,278       682,786       631,567       565,742  
Research and development
    2,825,151       2,438,423       2,576,708       2,332,399       2,152,261  
Selling, general and administrative
    3,267,997       3,812,506       4,041,155       3,947,404       3,528,560  
Total costs and expenses
    6,798,014       6,968,207       7,300,649       6,911,370       6,246,563  
                                         
Loss from operations
    (5,109,188 )     (5,207,152 )     (5,430,870 )     (5,424,921 )     (4,903,025 )
                                         
Other income and expenses:
                                       
Dividend income
    2,936,976       2,509,966       2,419,476       2,273,737       2,511,054  
Gains on sale of investments
    9,689,425       17,249,716       14,853,934       3,316,710       1,515,653  
Mark to market of short positions
    (79,755 )     5,364,215       357,337       (544,629 )     (204,225 )
Other revenues
    11,854       11,924       11,112       13,838       14,686  
Investment recovery
                            75,000  
Admin expense relating to portfolio investments
    (134,457 )     (99,935 )     (55,538 )     (44,564 )     (36,842 )
Interest expense, net of interest Income
    (162,983 )     (147,501 )     (197,211 )     (363,952 )     (296,114 )
Total other income and expenses
    12,261,060       24,888,385       17,389,110       4,651,140       3,579,212  
                                         
Income (loss) before income taxes
    7,151,872       19,681,233       11,958,240       (773,781 )     (1,323,813 )
                                         
Provision for income taxes
    1,329,114       4,557,964       1,311,024       11,750       12,168  
                                         
Net Income (loss)
  $ 5,822,758     $ 15,123,269     $ 10,647,216     $ (785,531 )   $ (1,335,981 )
                                         
Weighted average number of common shares outstanding - basic
    4,262,643       4,350,951       4,572,119       4,625,168       4,638,384  
Weighted average number of common shares outstanding - diluted
    4,284,643       4,375,623       4,572,119       4,625,168       4,638,384  
                                         
Income (loss) per common equivalent share - basic
  $ 1.37     $ 3.48     $ 2.33     $ (0.17 )   $ (0.29 )
Income (loss) per common equivalent share - diluted
  $ 1.36     $ 3.46     $ 2.33     $ (0.17 )   $ (0.29 )
                                         
Dividends paid per common share
  $ 1.35     $ 1.50                    
 
Selected Balance Sheet Data:
 
   
Year Ended December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
                               
Total assets
  $ 75,186,990     $ 76,824,181     $ 102,560,500     $ 78,166,312     $ 59,565,053  
Total liabilities*
  $ 27,561,653     $ 33,363,540     $ 47,644,615     $ 32,528,520     $ 20,820,252  
Stockholders’ equity
  $ 47,625,337     $ 43,460,641     $ 54,915,885     $ 45,637,792     $ 38,744,801  
 
* Total liabilities include deferred taxes on unrealized gains.
 
 
27

 
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
RESULTS OF OPERATIONS
 
Operating Revenues
 
For the year ended December 31, 2009, consolidated revenue from operations was $1,688,826 versus $1,761,055 for the year ended December 31, 2008 for a decrease of $72,229 or 4.1%. For the year ended December 31, 2007, operating revenues were $1,869,779.
 
Equipment sales and kit sales decreased from $1,381,105 in 2008 to $1,343,610 in 2009. In 2009 the Company sold one blood volume analyzer for a total of $55,000 versus four in 2008 for a total of $260,000. In 2007, the Company sold six blood volume analyzers for a total of $390,500.
 
The revenue from kit sales increased by 13.2% for the year ended December 31, 2009 versus the same period in 2008. The revenue from kit sales increased by 4.4% for year ended December 31, 2008 versus the same period in 2007. The number of kits sold increased by 14.5% for the year ended December 31, 2009 versus the same period in 2008. The number of kits sold increased by 3.2% for the year ended December 31, 2008 versus the same period in 2007. 3,565 patients, utilizing the BVA-100, had blood volume measurements in 2009 versus 3,113 in 2008 and 3,015 in 2007. For the year ended December 31, 2009 the Company provided 344 Volumex doses free of charge to facilities utilizing the BVA-100 for research versus 472 in 2008 and 328 in 2007.
 
The major reasons for the current year increase in kit sales are an increase in utilization of existing instruments along with 56 Blood Volume Analyzers placed into service at December 31, 2009 versus 53 placed into service at December 31, 2008 and 50 at December 31, 2007. The last price adjustment on Blood Volume Kits was a 5% increase effective February 1, 2007.
 
The decrease in Gross Profit Percentage on Kit Sales for the year ended December 31, 2009 versus 2008 is mostly due to an increase in productions costs which was partially offset by a reduced amount of Volumex doses provided free of charge to facilities using the BVA-100 for research. Our costs increased in 2009 and we have not increased prices on our Volumex kits since February 1, 2007 which is also a factor in our declining margins since 2007.
 
The major reasons for the decrease in gross profit percentage from 2008 to 2007 is that in 2008 472 Volumex doses were provided free of charge to facilities using the BVA-100 for research versus 328 in 2007 and an increase in production costs.
 
The following table provides gross margin information on Equipment Sales & Related Services for the years ended December 31, 2009, 2008 and 2007:
 
Equipment Sales
 and Related Services:
 
Kit Sales Year Ended
December 31, 2009
 
Equipment Sales and Other Year Ended
December 31, 2009
 
Total Year Ended
December 31, 2009
Revenue
 
$1,139,262
 
$204,348
 
$1,343,610
Cost of Goods Sold
 
606,926
 
56,190
 
663,116
Gross Profit
 
532,336
 
148,158
 
680,494
Gross Profit Percentage
 
46.7%
 
72.5%
 
50.7%
 
Equipment Sales
and Related Services:
 
Kit Sales Year Ended
December 31, 2008
 
Equipment Sales and Other Year Ended
 December 31, 2008
 
Total Year Ended
 December 31, 2008
Revenue
 
$1,005,981
 
$375,124
 
$1,381,105
Cost of Goods Sold
 
516,054
 
158,522
 
674,576
Gross Profit
 
489,927
 
216,602
 
706,529
Gross Profit Percentage
 
48.7%
 
57.7%
 
51.2%
 
Equipment Sales
 and Related Services:
 
Kit Sales Year Ended
 December 31, 2007
 
Equipment Sales and Other Year Ended
 December 31, 2007
 
Total Year Ended
 December 31, 2007
Revenue
 
$963,318
 
$489,883
 
$1,453,201
Cost of Goods Sold
 
397,429
 
237,509
 
634,938
Gross Profit
 
565,889
 
252,374
 
818,263
Gross Profit Percentage
 
58.7%
 
51.5%
 
56.3%
 
 
28

 
 
Operating revenues from Cryobanking and related services decreased during the year ended December 31, 2009 by $34,734 or 9.1% from 2008. A major factor in this decrease was a reduction in revenue from semen storage and analysis by $17,340 or 5.5% to $296,385 versus $313,725 in the year ended December 31, 2008.
 
Operating revenues from Cryobanking and related services decreased during the year ended December 31, 2008 by $36,628 or 8.8% versus the year ended December 31, 2007. This was due mainly to revenue from semen storage decreasing by $19,392 or 6.9% to $262,675 in 2008 versus $282,067 in 2007. There was also a decrease of $14,743 in semen analysis and other lab services in 2008.
 
The Company’s Idant Laboratories subsidiary contributed 20.4%, 21.6%, and 22.3% of operating revenues in 2009, 2008 and 2007 respectively.
 
Operating Expenses
 
For the years ended December 31, 2009, 2008 and 2007, consolidated expenses from operations totaled $6,093,148, $6,250,929 and $6,617,863 respectively.

For the years ended December 31, 2009, 2008 and 2007, the consolidated loss from operations was $5,109,188, $5,207,152 and $5,430,870 respectively.
 
The total Operating costs for Daxor and the BVA segment were $5,155,221 for the year ended December 31, 2009 versus $5,343,176 for the year ended December 31, 2008 for a decrease of $ 187,955 or 3.5%. The main reason for this decrease is a reduction of $211,450 in payroll and related expenses.
 
Total Operating costs for Daxor and the BVA segment were $5,343,176 for the year ended December 31, 2008 versus $5,716,563 for the year ended December 31, 2007 for a decrease of $ 373,387 or 6.5%. The main reason for this decrease is a reduction of $278,489 in payroll and related expenses.
 
Research and Development expenses for Daxor and the BVA segment increased in 2009 by $373,396 or 16.5% to $2,630,997 from $2,257,601 in 2008. Research and Development expenses for this segment were $2,390,352 for the year ended December 31, 2007. Daxor remains committed to making Blood Volume Analysis a standard of care in at least three disease conditions. In order to achieve this goal, we are continuing to spend time and money in research and development in order to get the best product to market. We are still working on the following three projects: 1) GFR: Glomeril Filtration Rate, 2) Total Body Albumin Analysis, and 3) Wipe Tests for radiation contamination and detection. We are also progressing on the next version of the delivery device for the radioactive dose Volumex. The current version is the “Max-100” which has a pa tent. The next version, the “Max-200” will be without a needle and should give the company extended protection with a second patent when it is completed.
 
Total Operating Costs for the Cryobanking segment were $937,927 for the year ended December 31, 2009 versus $907,753 for the year ended December 31, 2008 for an increase of $30,174 or 3.3%. The main reasons for this increase were additional professional fees and allocated expenses from the BVA segment of $17,260 and $27,613 respectively. The allocated expenses represent charges paid by Daxor and the BVA segment on behalf of the Cryobanking segment for items such as salaries and rent. These allocated expenses have no effect on our consolidated operating results.
 
Total Operating Costs Cryobanking segment were $907,753 for the year ended December 31, 2008 versus $901,300 for the year ended December 31, 2007 for an increase of $6,453 or 0.7%.
 
 
29

 
 
INVESTING SEGMENT
 
Unrealized Losses on Available for Sale Securities
 
At December 31, 2009, 81.2% or $2,031,976 of the total unrealized losses of $2,501,354 was comprised of the following three securities: $842,469 for Citigroup Inc. (“Citigroup”), $629,394 for USEC (“USEC, Inc.”) and $560,113 for Dynegy, Inc. (“Dynegy”).
 
Citigroup Inc.

At December 31, 2009, Daxor owned 279,807 shares of Citigroup with a cost basis of $6.32 per share and a market value of $3.31 per share. On March 25, 2010, the market value of Citigroup was $4.27 per share which is $2.05 or 32% less than our cost basis of $6.32 per share.

During the first quarter of 2009, the stock was at $1.00 per share and as of March 25, 2010, was trading at over $4.00 per share.  The stock price has increased by 29% from January 1, 2010 through March 25, 2010.

Citigroup, which is the core part of the business, earned $14.8 billion in 2009 versus $6.2 billion in 2008 despite difficult market conditions caused by a recessionary business environment. This division represents 60% of Citigroup’s total assets and 90% of their deposits. Also, their revenue from Securities and Banking increased by 23% in 2009 versus 2008 and total deposits on hand were 8% higher at December 31, 2009 versus December 31, 2008.

Citigroup has reduced headcount to 265,000 at December 31, 2009 versus 375,000 at the peak level in 2007. Operating expenses during the fourth quarter of 2009 were $12.3 billion versus $15.1 billion in the fourth quarter of 2008 and $15.7 billion in the fourth quarter of 2007. The charges for 2008 do not include goodwill impairment.

During 2009, Citigroup repaid $20 billion of TARP (Troubled Asset Relief Program) trust preferred securities and exited a loss sharing agreement. As a result of these transactions, effective in 2010, Citigroup is no longer deemed to be a beneficiary of “exceptional financial assistance” under TARP. As of December 31, 2009, the United States Treasury Department owned 27% of Citigroup’s stock.

In order to be “well capitalized” under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital Ratio of at least 6%, a Total Capital Ratio of at least 10% , and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. At December 31, 2009, the Tier 1 Capital was 11.67%, Total Capital was 15.25% and Leverage was 6.89%. Citigroup is considered “well capitalized” under the federal regulatory agency definitions at year end.

The operating environment for Citigroup continues to be difficult but the stock price has been trending upward since the first quarter of 2009 and the profit of the core business more than doubled in 2009 versus 2008. Management at Citigroup has substantially reduced operating expenses and headcount which should help operating results in future periods. Citigroup is no longer deemed to be a beneficiary of “exceptional financial assistance” under TARP and is considered to be “well capitalized” under the federal regulatory agency definitions at December 31, 2009.

After considering the available positive and negative evidence in addition to the ability of Daxor to hold the stock until the market price exceeds our cost, management has determined that an impairment charge is not necessary at December 31, 2009 on Citigroup.
 
USEC, Inc.
 
At December 31, 2009, Daxor owned 226,000 shares of USEC with a cost basis of $6.63 per share and a market value of $3.85 per share. On March 25, 2010, the market value of USEC was $5.55 per share which is $1.08 or 16% less than our cost basis of $6.63 per share.

During the past year, USEC has been as low as $3.22 per share and as high as $7.24 which is above our cost basis of $6.63 per share. The market value of the stock has increased by 44% from January 1, 2010 through March 25, 2010. As of December 31, 2009 the book value of USEC was $11.25 per share which is substantially higher than our cost basis.

USEC is a leading supplier of low enriched uranium for commercial nuclear power plants. Low enriched uranium is a critical component in the production of nuclear fuel for reactors to produce electricity. USEC is now in the process of deploying what their management anticipates will be the world’s most advanced uranium enrichment technology, known as American Centrifuge.

There are currently 440 nuclear reactors in operation globally and 53 new reactors are under construction worldwide and applications to build as many as 27 new reactors in the United States are now being reviewed by the Nuclear Regulatory Commission. According to the World Nuclear Association (WNA), 142 additional reactors are on order or planned and another 327 have been proposed.

It is expected that the global emphasis on reducing greenhouse gas emissions will provide strong incentive for utilities to build nuclear power stations. The WNA expects demand for uranium enrichment to roughly double over the next two decades as new reactors become operational.

There is still a lower growth forecast for electric power demand due to the recession that began in 2008 and lower prices for alternative fuels. It is possible that this will slow the need for new nuclear power capacity and the cost estimates for new reactors have also risen substantially in recent years.

However, it is also likely that population growth and increasing per capita demand for electric power, especially in emerging markets and environmental concerns favoring the use of nuclear power will provide a strong foundation to increase future demand for nuclear power.

Daxor management feels that USEC’s positions as a supplier of low enriched uranium combined with their deployment of advanced uranium enrichment technology has them well positioned to take advantage of what should be growing demand in the future for nuclear power despite the current difficult economic climate. The stock price has increased by 44% since January 1, 2010 and is still trading at a substantial discount to book value.

After considering the available positive and negative evidence in addition to the ability of Daxor to hold the stock until the market price exceeds our cost, Daxor management has determined that an impairment charge is not necessary at December 31, 2009 on USEC.
 
Dynegy, Inc.
 
At December 31, 2009, Daxor owned 764,500 shares of Dynegy with a cost basis of $2.54 per share and a market value of $1.81 per share. On March 25, 2010, the market price of Dynegy was $1.30 per share which is $1.24 or 49% lower than our cost basis of $2.54 per share.

The book value of Dynegy at December 31, 2009 is $4.83 per share which is almost double our cost basis of $2.54 per share. The stock price of Dynegy has a record of volatility, being at $8.11 per share in February 2008, as low as $1.05 in March 2009 before going back to $2.63 per share in October 2009.

Dynegy’s liquidity improved from $1.9 billion at December 31, 2009 to $2.3 billion at February 19, 2010. The liquidity at February 19, 2010 consisted of $746 million in cash on hand and $1.5 billion in unused availability under the company’s credit facility. The cash balance increased from $471 million at December 31, 2009 to $746 million at February 19, 2010 due to increased cash inflows from the company’s collateral clearing agent due to lower commodity prices.

In 2009, Dynegy was able to repurchase approximately $830 million of bonds due in 2011 and 2012 which largely eliminated near term bond maturities until 2015.

Dynegy reported a loss of $1.24 billion in 2009 after a profit of $208 million in 2008 and $324 million in 2007. The loss in 2009 is largely due to assets which were sold at a loss.

The price of energy has declined since the summer of 2008 which reflects a similar decline in natural gas prices and the impact of general economic conditions. However, Dynegy management believes that over the long term, power demand and pricing will increase.

Dynegy recently reported that they spent $600 million to cut emissions of pollutants at its power plants in Illinois and that the total investment for this project should be approximately $1 billion. This work has been completed at five out of its eight coal-fired units in Illinois. Dynegy is also switching to low sulfur coal and expects their coal fired plants in Illinois to cut emissions of nitrogen oxides, sulfur dioxide and mercury by approximately 90%.

Dynegy has  low cost power generation plants spread across seven states which use coal, oil and natural gas. The generating capacity is geographically diverse with 43% in the Midwest, 32% in the West and 25% in the Northeast. This geographic diversity prevents the Company from becoming too dependent on one part of the Country.

The generating capacity is also diverse with 34% from natural gas-fired combined-cycle capacity, 25% from natural gas-fired peaking capacity, 31% from baseload coal/oil capacity and 10% from dual fuel capacity. This diversity of generating capacity helps to minimize the impact of any potential volatility in commodity prices.

It is expected that as future demand increases, prices for power will increase accordingly and this should lead to a return to profitability for Dynegy.

Daxor management has determined that an impairment charge is not necessary at December 31, 2009 on Dynegy after taking the recent decline in the stock price into account because Dynegy is a geographically diverse low cost producer of electricity with a diverse generating capacity. These two factors protect the Company from being overly dependent on one region of the country or one type of commodity.

The stock price of Dynegy has decreased by 49% since January 1, 2010. However, the stock does have a history of volatile price fluctuations and it was trading as high as $2.63 in October of 2009. The recent market price is well below the book value of $4.83 per share at December 31, 2009 which would seem to indicate that the stock is strongly undervalued. The recent repurchase of bonds and improved liquidity position have also helped to strengthen Dynegy’s balance sheet.
 
Daxor Corporation
Summary of Unrealized Losses on Citigroup Inc., USEC, Inc. and Dynegy, Inc.
As at December 31, 2009
 
         
Less Than Twelve Months
   
Tweleve Months or Greater
   
Total
 
   
Total
         
Unrealized
         
Unrealized
         
Unrealized
 
Security
 
Cost
   
Fair Value
   
Loss
   
Fair Value
   
Loss
   
Fair Value
   
Loss
 
Citigroup Inc.
  $ 1,768,630     $ 852,325     $ 757,099     $ 73,836     $ 85,370     $ 926,161     $ 842,469  
USEC, Inc.
    1,499,494       387,695       220,385       482,405       409,009       870,100       629,394  
Dynegy, Inc.
    1,943,858       1,338,314       429,109       45,431       131,004       1,383,745       560,113  
Total
  $ 5,211,982     $ 2,578,334     $ 1,406,593     $ 601,672     $ 625,383     $ 3,180,006     $ 2,031,976  

 
 
30

 
 
Dividend Income
 
Dividend income earned for the year ended December 31, 2009 was $2,936,976 versus $2,509,966 for the year ended December 31, 2008, for an increase of $427,010, or 17.0%. The main reason for this increase was the receipt in 2009 of a onetime special dividend of $282,425 on a stock that is not in the portfolio of available for sale securities at December 31, 2009.
 
For the year ended December 31, 2007, dividend income was $2,419,476.
 
Investment Gains
 
The net realized gains on the sale of investments were $9,689,425 for the year ended December 31, 2009 versus $17,249,716 for the year ended December 31, 2008 which represents a decrease of $7,560,291 or 43.8%. The main reasons for this decrease are that the Company had the following realized losses in 2009: $1,664,657 on 285,214 shares of Dynegy, $3,559,808 on 430,100 shares of USEC and $3,372,455 on 366,790 shares of Bank of America Common Stock. The shares of Dynegy and USEC were sold in order to generate tax savings and lower the cost basis on the remaining 764,500 shares of Dynegy and 226,000 shares of USEC still in the Company’s portfolio of available for sale securities at December 31, 2009. The Company did not own any Bank of America Common Stock at December 31, 2009.
 
For the year ended December 31, 2007, gains on the sale of investments were $14,853,934.
 
The sum of dividend income plus investment gain from sale of securities was $12,626,401 for the year ended December 31, 2009 versus $19,759,682 for the year ended December 31, 2008 and $17,273,410 for the year ended December 31, 2007.
 
LIQUIDITY AND CAPITAL RESOURCES
 
As of December 31, 2009, cash and cash equivalents totaled $277,088 versus $2,545,040 at December 31, 2008. Cash used in operating activities was $5,253,123 for the year ended December 31, 2009. The decrease in cash and cash equivalents was primarily due to funding the operating loss for the current year.
 
Cash provided by investing activities was $25,539,873 for the year ended December 31, 2009. This increase is mainly attributable to the proceeds from sales of available for sale securities of $39,328,708 and put and calls options of $26,046,162 which were partially offset by the acquisition of available for sale securities of $35,119,377. The acquisition of property and equipment of $2,166,724 during the current year includes $1,946,263 for the construction project at 109 Meco Lane.
 
In November of 2008, a construction project commenced at 109 Meco Lane. The project involved the construction of laboratory and office space and was completed during the first quarter of 2010 at an approximate cost of $2,500,000.
 
A total of $22,554,702 of cash was used during the current year in financing activities and this was primarily due to the repayment of margin loans payable.
 
During the year ended December 31, 2009, the President and CEO of the Company loaned a total of $1,140,000 to the Company in a series of advances ranging from $40,000 to $500,000. The loan due to the President of the Company never exceeded $650,000 and all advances were repaid within two weeks without interest. Each loan advance and repayment took place prior to July 1, 2009.
 
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.
 
 
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Income from the Company’s security portfolio is a major asset for the Company as it continues its efforts in research and development and marketing. At December 31, 2009, the Company is in a satisfactory financial position with adequate funds available for its immediate and 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. The Company believes that its present liquidity and assets are adequate to sustain the expenses associated with its research and development and marketing efforts.
 
The following table shows the Fair Market Value, Cost, Net Unrealized Gain, Unrealized Gain and Loss at December 31st from 2005 through 2009.

Valuation Date:
 
Fair Market Value
   
Cost
   
Net Unrealized Gain
   
Unrealized Gains
   
Unrealized Losses
 
December 31, 2009
  $ 53,270,726     $ 28,630,149     $ 24,640,577     $ 27,141,931     $ (2,501,354 )
December 31, 2008
    68,339,143       50,709,601       17,629,542       28,469,540       (10,839,998 )
December 31, 2007
    74,919,193       29,987,157       44,932,036       47,386,399       (2,454,363 )
December 31, 2006
    66,968,446       23,307,390       43,661,056       43,927,770       (266,714 )
December 31, 2005
    57,246,006       25,649,467       31,596,539       32,440,131       (843,592 )
 
It is the opinion of Management that the Company is undercapitalized with respect to the Blood Volume Analyzer and the Blood Optimization Program. Based on present conditions, it is unlikely that additional capital can be raised on reasonable terms without significant dilution to existing shareholders. The Company believes that if the blood volume analyzer becomes a standard of care in any one of the areas described in this 10-K filing, it will then have much easier access to additional capital.
 
The Company’s investment portfolio has been a critical source of supplemental income which has offset the cumulative operating losses for the five year period ended December 31, 2009. Without the income from the investment portfolio, the Company would have needed to raise additional operating funds through either debt or equity financing or a combination of the two. The Company’s portfolio has maintained a net value above historical cost for each of the past 100 consecutive quarters.
 
The income derived from these investments has been essential to help offset the research, 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 and development without the sudden necessity of raising additional capital. The securities in the Company’s portfolio are selected to provide stability of both income and capital. The Company has been able to achieve financial stability because of these returns, which have covered the Company’s cumulative losses from operations for the five year period ended December 31, 2009. The Company’s investment policy is reviewed at least once yearly by the Board of Directors and the Audit Committee. Individual investment decisions are made solely by the Company’s President and CEO, Dr. Joseph Feldschuh.
 
The Company currently has adequate resources for the current level of marketing and research and development expenses for the BVA-100 Blood Volume Analyzer as well as capital to sustain its localized semen and blood banking services. At present, the Company does not have adequate resources to expand its marketing force to all areas of the country. The Company is simultaneously expanding its research and development efforts to develop additional instrumentation for renal function testing, specifically glomerular filtration testing. The current primary focus is on the BVA-100 Blood Volume Analyzer with respect to expenditure of resources.
 
CRITICAL ACCOUNTING POLICIES
 
Available for Sale Securities
 
    Available-for-sale securities represent investments in debt and equity securities (primarily common and preferred stock of utility companies)that management has determined meet the definition of available-for-sale under FASB ASC 320, “Investments.” Accordingly, these investments are stated at fair market value and all unrealized holding gains or losses are recorded in the Stockholders’ Equity section as Accumulated Other Comprehensive Income (Loss). Conversely, all realized gains, losses and earnings are recorded in the Statement of Operations under Other Income (Expense).
 
The company will also engage in the short selling of stock. When this occurs, the short position is marked to the market and this adjustment is recorded in the Statement of Operations. Any gain or loss is recorded for the period presented
 
Historical cost is used by the Company to determine all gains and losses, and fair market value is obtained by readily available market quotes on all securities.
 
 
32

 
 
The Company’s investment goals, strategies and policies are as follows:
 
 
1.
The Company’s investment goals are capital preservation, maintaining returns on capital with a high degree of safety and generating income from dividends and option sales to help offset operating losses.
     
 
2.
In order to achieve these goals, the Company maintains a diversified securities portfolio comprised primarily of electric utility common and preferred stocks. The Company also sells covered calls on portions of its portfolio and also sells puts on stocks it is willing to own. It also sells uncovered calls and may have net short positions in common stock up to 15% of the value of the portfolio. The Company’s net short position may temporarily rise to 15% of the Company’s portfolio without any specific action because of changes in valuation, but should not exceed this amount. The Company’s investment policy is to maintain a minimum of 80% of its portfolio in electric utilities. The Board of Directors has authorized this minimum to be temporarily lowered to 70% when Company management deems it to be necessary. Investments i n utilities are primarily in electric companies. Investments in non-utility stocks will generally not exceed 20% of the value of the portfolio.
     
 
3.
Investment in speculative issues, including short sales, maximum of 15%.
     
 
4.
Limited use of options to increase yearly investment income.

 
a.
The use of “Call” Options. Covered options can be sold up to a maximum of 20% of the value of the portfolio. This provides extra income in addition to dividends received from the company’s investments. The risk of this strategy is that investments may be called away, which the company may have preferred to retain. Therefore, a limitation of 20% is placed on the amount of stock on which options can be written. The amount of the portfolio on which options are actually written is usually between 3-10% of the portfolio. The historical turnover of the portfolio is such that the average holding period is in excess of five years for available for sale securities.
     
 
b.
The use of “Put” options. Put options are written on stocks which the company is willing to purchase. While the company does not have a high rate of turnover in its portfolio, there is some turnover; for example, due to preferred stocks being called back by the issuing company, or stocks being called away because call options have been written. If the stock does not go below the put exercise price, the company records the proceeds from the sale as income. If the put is exercised, the cost basis is reduced by the proceeds received from the sale of the put option. There may be occasions where the cost basis of the stock is lower than the market price at the time the option is exercised.
     
 
c.
Speculative Short Sales/Short Options. The company normally limits its speculative transactions to no more than 15% of the value of the portfolio. The company may sell uncovered calls on certain stocks. If the stock price does not rise to the price of the call, the option is not exercised and the company records the proceeds from the sale of the call as income. If the call is exercised, the company will have a short position in the related stock. The company then has the choice of covering the short position, or selling a put against it. If the put is exercised, then the short position is covered. The company’s current accounting policy is to mark to the market at the end of each quarter any short positions, and include it in the income statement. While the company may have so-called speculative positions equal to 15% of its accounts, in actual practice the net short stock positions usually account for less than 10% of the assets of the company.
 
 
5.
In the event of a merger, the Company will elect to receive shares in the new company if this is an option. If the proposed merger is a cash only offer, the Company will receive cash and be forced to sell the stock.
 
Our investment policy calls for a minimum of 80% of the value of our portfolio of Available for Sale Securities to be maintained in utility stocks. Operating under this policy, Management’s investment strategy is to purchase utility stocks which it considers to be undervalued relative to the market in anticipation of an increase in the market price.
 
It is possible that the market value of a stock may go below our cost after we purchase it even though we considered the stock to be undervalued relative to the market at the time we purchased it. When that occurs, we follow the provisions of SEC Staff Accounting Bulletin: Codification of Staff Accounting Bulletins, Topic 5-M (“SAB 5-M”): Miscellaneous Accounting, Other Than Temporary Investments in Debt and Equity Securities in determining whether an investment is other than temporarily impaired. The factors we review and/or consider include the following:
 
 
·
The extent to which the market value has been less than cost.
     
 
·
An evaluation of the financial condition of an issuer including a review of their profit and loss statements for the most recent completed fiscal year and the preceding two years.
 
 
33

 
 
 
·
The examination of the general market outlook of the issuer. This could include but is not limited to the issuer having a unique product or technology which would appear likely to have a positive impact on future earnings.
     
 
·
A review of the general market conditions.
     
 
·
Our intent and ability to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value.
     
 
·
Specific adverse conditions related to the financial health of, and business outlook for, the issuer.
     
 
·
Changes in technology in the industry and its affect on the issuer
     
 
·
Changes in the issuer’s credit rating.
 
Revenue Recognition
 
The Company recognizes operational revenues from several sources. The first source is the sale of equipment, the Blood Volume Analyzer, to customers. The second source is the sale of single-use tracer doses supplied as Volumex Kits that are injected into the patient and measured by the Blood Volume Analyzer. The third source of revenue is service contracts on the Blood Volume Analyzer, after it has been sold to a customer. The fourth source of revenue is the storage fees associated with cryobanked blood and semen specimens, and associated laboratory tests.
 
The Company currently offers three different methods of purchasing the Blood Volume Analyzer equipment. A customer may purchase the equipment directly, lease the equipment, or rent the equipment on a month-to-month basis. The revenue generated by a direct sale is recognized in the period in which the equipment is shipped. If a customer is to select the “lease” option, the Company refers its customer to a third party finance company with which it has established a relationship, and if the lease is approved, the Company receives 100% of the sales proceeds from the finance company and recognizes 100% of the revenue in the period in which the equipment is shipped. The finance company then deals directly with the customer with regard to lease payments and related collections. Daxor Corporation does not guarantee payments to the le asing company.
 
The sales of the single-use radioisotope doses (Volumex) that are used in conjunction with the Blood Volume Analyzer are recognized as revenue in the period in which the doses are shipped.
 
When Blood Volume Analyzer equipment has been sold to a customer, the Company offers a one year warranty on the product, which covers all mechanical failures. This one year warranty is effective on the date of sale of the equipment. After the one year period expires, customers may purchase a service contract through the Company, which is usually offered in one year increments. These service contracts are recorded by the Company as deferred revenue and are amortized into income in the period in which they apply.
 
     The storage fees associated with the cryobanked blood and semen samples are recognized as income in the period for which the fee applies. The Company invoices customers for storage fees on a quarterly basis. The Company will only recognize revenue for those storage fees that are earned in the current reporting period, and will defer the remaining revenues to the period in which they are earned.
 
Comprehensive Income (Loss)
 
The Company reports components of comprehensive income under the requirements of FASB ASC 220, “Comprehensive Income”. This statement establishes rules for the reporting of comprehensive income and requires certain transactions to be presented as separate components of stockholders’ equity. The Company currently reports the unrealized holding gains and losses on available-for-sale securities, net of deferred taxes, as accumulated other comprehensive income (loss).
 
Product Warranties and Related Liabilities
 
The Company offers a one year warranty on the Blood Volume Analyzer equipment. This warranty is effective on the date of sale and covers all mechanical failures of the equipment. All major components of the equipment are purchased and warranted by the original third party manufacturers.
 
Once the initial one year warranty period has expired, customers may purchase annual service contracts for the equipment. These service contracts warranty the mechanical failures of the equipment that are not associated with normal wear-and-tear of the components.
 
 
34

 
 
To date, the Company has not experienced any major mechanical failures on any equipment sold. In addition, the majority of the potential liability would revert to the original manufacturer. Due to this history, a liability has not been recorded with respect to product / warranty liability.
 
Contractual Obligations
 
In December 2002, the Company signed a lease which commenced on January 1, 2003, for its existing facility at the Empire State Building. The lease expires on December 31, 2015. The Company has occupied this space since January 1992. The company currently occupies approximately 7,200 square feet. There are options for an additional 18,000 square feet of space. The Company has acquired a 20,000 square foot manufacturing facility in Oak Ridge, Tennessee which is currently manufacturing the BVA-100 Blood Volume Analyzers, and where R&D activities are performed. The Company’s Volumex syringes are filled by an FDA approved radio pharmaceutical manufacturer. The manufacturer has worked with Daxor since 1987. The manufacturer’s prices are reviewed annually.
 
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
 
     
Payments Due By Period
 
Contractual Obligations
 
Total
   
Less Than
1 Year
   
1 – 3 Years
   
3 – 5 Years
   
More Than
5 years
 
(Long-Term Debt Obligations) 1
  $ 444,352     $ 71,190     $ 373,162              
(Capital Lease Obligations)
                             
(Operating Lease Obligations) 2
  $ 1,884,240     $ 314,040     $ 628,080     $ 628,080     $ 314,040  
(Purchase Obligations)
                             
(Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP)
                             
Total
  $ 2,328,592     $ 385,230     $ 1,001,242     $ 628,080     $ 314,040  
 
1 This amount represents the total monthly mortgage payment of $5,932 which includes principal and interest for the property purchased at 107 and 109 Meco Lane in Oak Ridge, Tennessee. There is a monthly payment of $5,932 through December of 2011. The Company has the option of making a balloon payment of $301,972 in January of 2012 or refinancing the remaining amount of the mortgage.
 
2 This amount represents a total monthly rental payment of $26,170 which consists of base rent of $25,415 and $755 for two separate spaces at 350 5th Avenue.
 
CODE OF ETHICS AND BUSINESS CONDUCT
 
The Company has a Code of Ethics and Business Conduct which was approved by the Board of Directors in March 2005. The Code of Ethics and Business Conduct applies to all directors, officers, employees and other representatives of the Company including the Chief Executive Officer and Chief Financial Officer. A copy of the Code of Ethics and Business Conduct is available for free at www.daxor.com
 
 
35

 
 
Summary of Actual Portfolio Investments
 
The company’s portfolio value is exposed to fluctuations in the general value of utilities. An increase of interest rates could affect the company in two ways: one would be to put downward pressure on the valuation of utility stocks as well as increase the company’s cost of borrowing.
 
Because of the size of the unrealized gains in the company’s portfolio, the company does not anticipate any changes which could reduce the value of the company’s utility portfolio below historical cost. Utilities operate in an environment of federal, state and local regulations, and they may disproportionately affect an individual utility. The company’s exposure to regulatory risk is mitigated due to it’s diversity of holdings. At December 31, 2009 and 2008, the company held 83 and 104 separate stocks, respectively.
 
As part of the Company’s investment strategy, put and call options are sold on various stocks the Company is willing to buy or sell. The premiums received are deferred until such time as they are exercised or expire. In accordance with FASB ASC 815 “Derivatives and Hedging.” these options are marked to market for each reporting period using readily available market quotes, and this fair value adjustment is recorded as a gain or loss in the Statement of Operations.
 
Upon exercise, the value of the premium will adjust the basis of the underlying security bought or sold. Options that expire are recorded as income in the period they expire.
 
December 31, 2009
 
The following is summary information on the Securities Portfolio held by Daxor Corporation during the year ended and as at December 31, 2009:

Description
 
Percent of Portfolio Cost
   
Market Value
   
Cost
   
Unrealized Gains
   
Unrealized Losses
   
Dividends and Interest
 
Utilities-Common Stock
    84.96 %   $ 49,368,191     $ 24,324,721     $ 26,389,467     $ (1,345,997 )   $ 2,209,834  
Non-Utilities Common
    8.20 %     1,839,463       2,348,334       382,277       (891,148 )     10,712  
Total Common Stock
    93.16 %     51,207,654       26,673,055       26,771,744       (2,237,145 )     2,220,546  
Utilities-Preferred Stock
    0.95 %     455,388       270,497       186,541       (1,650 )     26,523  
Non-Utilities-Preferred
    5.89 %     1,607,684       1,686,597       183,646       (262,559 )     112,393  
Total Preferred Stock
    6.84 %     2,063,072       1,957,094       370,187       (264,209 )     138,916  
Total Portfolio
    100.00 %   $ 53,270,726     $ 28,630,149     $ 27,141,931     $ (2,501,354 )   $ 2,359,462  
 
During the year ended December 31, 2009, the Company received $ 575,634 of dividends on stocks that were not in the Securities Portfolio at December 31, 2009 and was charged $700 for dividends on short positions. The Company also received $2,580 in money market dividends.
 
Summary of Put and Call Options at December 31, 2009
 
Description
 
Market Value
   
Proceeds Received
   
Unrealized Gains
   
Unrealized Losses
 
Puts
  $ 3,201,918     $ 8,113,249     $ 4,963,279     $ (51,948 )
Calls
  $ 1,047,205     $ 1,492,227     $ 1,006,742     $ (561,720 )
Total Puts and Calls
  $ 4,249,123     $ 9,605,476     $ 5,970,021     $ (613,668 )
 
 
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December 31, 2008
 
The following is summary information on the Securities Portfolio held by Daxor Corporation during the year ended and as at December 31, 2008:

Description
 
Percent of Portfolio Cost
   
Market Value
   
Cost
   
Unrealized Gains
   
Unrealized Losses
   
Dividends and Interest
 
Utilities-Common Stock
    63.25 %   $ 53,875,289     $ 32,074,124     $ 27,660,548     $ (5,859,383 )   $ 2,096,733  
Non-Utilities Common
    30.95 %     12,035,699       15,692,238       610,069       (4,266,608 )     124,453  
Total Common Stock
    94.20 %     65,910,988       47,766,362       28,270,617       (10,125,991 )     2,221,186  
Mutual Funds- Non-Utilities
    0.34 %     165,500       172,710             (7,210 )        
Utilities-Preferred Stock
    0.53 %     438,884       270,498       173,317       (4,931 )     26,523  
Non-Utilities-Preferred
    4.87 %     1,823,771       2,467,026       25,606       (668,861 )     123,134  
Total Preferred Stock
    5.40 %     2,262,655       2,737,524       198,923       (673,792 )     149,657  
Total Equities
    99.94 %     68,339,143       50,676,596       28,469,540       (10,806,993 )     2,370,843  
Utilities-Bonds
    .06 %           33,005             (33,005 )      
Total Portfolio
    100.00 %   $ 68,339,143     $ 50,709,601     $ 28,469,540     $ (10,839,998 )   $ 2,370,843  
 
During the year ended December 31, 2008, the Company received $ 87,465 of dividends on stocks that were not in the Securities Portfolio at December 31, 2008 and was charged $32,483 for dividends on short positions. The Company also received $84,141 in money market dividends.
 
Summary of Put and Call Options at December 31, 2008

Description
 
Proceeds Received
   
Market Value
   
Unrealized Gains
   
Unrealized Losses
 
Puts
  $ 7,125,645     $ 7,118,277     $ 2,364,802     $ (2,357,434 )
Calls
  $ 6,686,330     $ 1,306,082     $ 5,575,222     $ (194,974 )
Total Puts and Calls
  $ 13,811,975     $ 8,424,359     $ 7,940,024     $ (2,552,408 )
 
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
 
The Securities and Exchange Commission’s rule related to market risk disclosure requires that we describe and quantify our potential losses from market risk sensitive instruments attributable to reasonably possible market changes. Market risk sensitive instruments include all financial or commodity instruments and other financial instruments that are sensitive to future changes in interest rates, currency exchange rates, commodity prices or other market factors.
 
The Company maintains an investment portfolio primarily consisting of electric utility companies which are publicly traded common and preferred stock. These are categorized as available-for-sale securities.
 
In addition to receiving income from dividends, the Company also has an investment policy of selling puts on stocks that it is willing to own. Such options usually have a maturity of less than 1 year. The Company will also sell covered calls on securities within its investment portfolio. Covered calls involve stocks, which usually do not exceed 15% of the value of the company’s portfolio and have never exceeded 15% of the company’s portfolio value.
 
The Company will, at times, sell naked or uncovered calls, as well as, engage in short sales as part of a strategy to mitigate risk. Such short sales are usually less than 15% of the company’s portfolio value.
 
Puts, calls and short sales, collectively referred to as short positions, are all marked to market for each reporting period and any gain or loss is recognized through the Statement of Operations and labeled as “Mark to market of short positions”.
 
The Company’s investment strategy is reviewed at least once a year, and more frequently as needed, at board meetings. The Company’s investing policy permits investment in non-electric utilities for up to 20% of the corporate portfolio value. This percentage may be temporarily increased to 30% if deemed necessary by management.
 
At December 31, 2009, unrealized gains were $27,141,931 and unrealized losses were ($2,501,354) on available for sale securities for a ratio of 10.85 to 1.
 
At December 31, 2009, 96.13% of the market value of the Company’s available for sale securities is made up of common stock. There is a risk that any of these stocks could be sold as the result of an involuntary tender offer and that the security could not be replaced with an investment offering a similar yield.
 
 
37

 
 
The Company’s portfolio value is exposed to fluctuations in the general value of electric utilities. An increase of interest rates could affect the company in two ways; one would be to put downward pressure on the valuation of utility stocks as well as increase the company’s cost of borrowing.
 
Because of the size of the unrealized gains in the company’s portfolio, the Company does not anticipate any changes which could reduce the value of the Company’s utility portfolio below historical cost. Electric utilities operate in an environment of federal, state and local regulations, and they may disproportionately affect an individual utility. The Company’s exposure to regulatory risk is mitigated due to the diversity of holdings consisting of 83 separate common and preferred stocks.
 
The top three holdings as of December 31, 2009 in the investment portfolio were Entergy Corporation, First Energy Corporation and Exelon. These three holdings comprised 39.9% of the value of the investment portfolio and also accounted for 30.0% of the dividend income for the year ended December 31, 2009. A reduction in dividend payments by these companies could have a material effect on the Company’s dividend income.
 
The Company is not exposed to any foreign currency risk or commodity price risk through its holdings of equity securities and put and call options.
 
The Company is not exposed to any interest rate risk since it does not have any long term debt other than a fixed rate mortgage securing real property in Oak Ridge, Tennessee.
 
In 2005 and 2007, the Company and Dr. Joseph Feldschuh, its President and Chief Executive Officer, respectively, received Wells Notices from the Securities and Exchange Commission (“SEC”) requesting their comments on the SEC Staff’s view that the Company was in violation of Section 7(a) of the Investment Company Act in that it was operating as an unregistered investment company. The Company and Dr. Feldschuh responded to those requests when made. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submissions to the SEC in response to the Wells Notices.
 
In November 2009, the staff of the Northeast Regional Office of the SEC contacted the Company and invited both the Company and Dr. Feldschuh to make a new Wells submission based upon more recent operations and results. The Company and Dr. Feldschuh responded to the staff’s invitation on December 20, 2009. The Company has not received a closing notice or other substantive response from the SEC to its December 20, 2009 submission. No conclusions regarding disposition of our cash management policy should be drawn from the lack of a closing notice or other substantive response to our submission to the SEC in response to the Wells Notice.
 
There is a risk that the SEC may attempt to designate Daxor as an Investment Company under the Investment Company Act.
 
Daxor Corporation
Summary of Available for Sale Securities
As at December 31, 2009
 
Type of Security
 
Total Fair Market Value
   
Total Cost
   
Total Net Unrealized Gain
 
Common Stock
  $ 51,207,654     $ 26,673,055     $ 24,534,599  
Preferred Stock
    2,063,072       1,957,094       105,978  
Total Portfolio
  $ 53,270,726     $ 28,630,149     $ 24,640,577  
 
Summary of Proceeds Received and Market Valuation at 12/31/09
Put and Call Options

Total Proceeds Received
on open positions at 01/01/09
 
Sale of
Options from
01/01/09-12/31/09
   
Expirations
and Assignments
of Options from
01/01/09-12/31/09
   
Proceeds Received
on open positions
at 12/31/09
   
Market Value
at 12/31/09
   
Unrealized
Appreciation
at 12/31/09
 
$ 13,811,975
  $ 26,044,493     $ 30,250,992     $ 9,605,476     $ 4,249,123     $ 5,356,353  
 
 
38

 
 
Daxor Corporation
Summary of Unrealized Losses on Available for Sale Securities
As at December 31, 2009
 
     Less Than Twelve Months      Twelve Months or Greater      Total  
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
Marketable Equity Securities
  $ 2,874,316     $ 1,451,436     $ 1,917,505     $ 1,049,918     $ 4,791,821     $ 2,501,354  
 
Daxor Corporation
Summary of Unrealized Gains on Available for Sale Securities
As at December 31, 2009
 
     Less Than Twelve Months      Twelve Months or Greater      Total  
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
 
Marketable Equity Securities
  $ 4,025,079     $ 696,783     $ 44,453,826     $ 26,445,148     $ 48,478,905     $ 27,141,931  
 
Daxor Corporation
Summary of Available for Sale Securities
As at December 31, 2008

Type of Security
 
Total Fair Market Value
   
Total Cost
   
Total Net Unrealized Gain (Loss)
 
Common Stock
  $ 65,910,988     $ 47,766,362     $ 18,144,626  
Mutual Funds
    165,500       172,710       (7,210 )
Preferred Stock
    2,262,655       2,737,524       (474,869 )
Total Equities
  $ 68,339,143     $ 50,676,596     $ 17,662,547  
Bonds
          33,005       (33,005 )
Total Portfolio
  $ 68,339,143     $ 50,709,601     $ 17,629,542  
 
Summary of Proceeds Received and Market Valuation at 12/31/08
Put and Call Options
 
Total Proceeds Received on open positions at 01/01/08
 
Sale of Options from 01/01/08-12/31/08
   
Expirations and Assignments of Options from 01/01/08-12/31/08
   
Proceeds Received on open positions at 12/31/08
   
Market Value at 12/31/08
   
Unrealized Appreciation at 12/31/08
 
$ 7,645,833
  $ 34,377,992     $ 28,211,850     $ 13,811,975     $ 8,424,359     $ 5,387,616  
 
 
39

 
 
Daxor Corporation
Summary of Unrealized Losses on Available for Sale Securities
As at December 31, 2008
 
    Less Than Twelve Months      Twelve Months or Greater   Total  
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
Marketable Equity Securities
  $ 14,232,869     $ 7,675,656     $ 2,106,718     $ 3,131,337     $ 16,339,587     $ 10,806,993  
Corporate Bonds
                    $ 33,005             33,005  
Total
  $ 14,232,869     $ 7,675,656     $ 2,106,718     $ 3,164,342     $ 16,339,587     $ 10,839,998  
 
Daxor Corporation
Summary of Unrealized Gains on Available for Sale Securities
As at December 31, 2008
 
    Less Than Twelve Months     Twelve Months or Greater     Total  
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
 
Marketable Equity Securities
  $ 4,842,933     $ 691,610     $ 47,156,623     $ 27,777,930     $ 51,999,556     $ 28,469,540  
Corporate Bonds
                    $              
Total
  $ 4,842,933     $ 691,610     $ 47,156,623     $ 27,777,930     $ 51,999,556     $ 28,469,540  
 
 
40

 
 
Item 8. Financial Statements and Supplementary Data.
 
Index to Consolidated Financial Statements
 
 
 
41

 
 
 
To the Stockholders and Board of Directors of Daxor Corporation
 
We have audited the accompanying consolidated balance sheets of Daxor Corporation and subsidiary (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclos ures in the financial statements, 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Daxor Corporation and subsidiary as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
 
/s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
 
 
Saddle Brook, NJ
 
March 26, 2010
 
 
42

 
 
DAXOR CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
 
DAXOR CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

   
December 31,
   
December 31,
 
   
2009
   
2008
 
ASSETS
           
             
CURRENT ASSETS
           
             
Cash and cash equivalents, including $0 of  Treasury Bills in 2009 and $1,994,558 at 2008
  $ 277,088     $ 2,545,040  
Receivable from broker (held in money market accounts)
    6,062,298       2,829,979  
Available-for-sale securities, at fair value
    53,270,726       68,339,143  
Securities sold, not received, at fair value
    10,567,129        
Accounts receivable, net of reserve of $92,421 in 2009 and $88,645 in 2008
    240,615       205,568  
Inventory
    454,407       426,826  
Prepaid expenses and other current assets
    104,431       131,912  
Total Current Assets
    70,976,694       74,478,468  
                 
Property and equipment, net
    4,173,138       2,308,555  
Other assets
    37,158       37,158  
                 
Total Assets
  $ 75,186,990     $ 76,824,181  
                 
LIABILITIES AND STOCKHOLDERS EQUITY
               
                 
CURRENT LIABILITIES
               
                 
Accounts payable and accrued liabilities
  $ 533,631     $ 604,420  
Loans payable
          13,052,162  
Income taxes payable
    943,075       2,643,958  
Mortgage payable, current portion
    43,431       40,306  
Puts and calls, at fair value
    4,249,123       8,424,359  
Securities borrowed, at fair value
    10,771,279       107,871  
Deferred revenue
    46,902       33,349  
Deferred income taxes
    10,627,351       8,066,823  
Total Current Liabilities
    27,214,792       32,973,248  
                 
LONG TERM LIABILITIES
               
                 
Mortgage payable, less current portion
    346,861       390,292  
Total Liabilities
    27,561,653       33,363,540  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS’ EQUITY
               
Common stock, $.01 par value
               
Authorized - 10,000,000 shares
               
Issued - 5,316,550 shares
               
Outstanding – 4,250,318 and 4,289,118 shares, respectively
    53,165       53,165  
Additional paid in capital
    10,675,228       10,660,547  
Accumulated other comprehensive income
    16,016,375       11,459,203  
Retained earnings
    32,241,597       32,158,138  
Less: cost of common stock held in  treasury, at cost, 1,066,232 shares in 2009 and 1,027,432 in 2008
    (11,361,028 )     (10,870,412 )
Total Stockholders Equity
    47,625,337       43,460,641  
Total Liabilities and Stockholders Equity
  $ 75,186,990     $ 76,824,181  
 
See accompanying notes to consolidated financial statements.
 
 
43

 
 
DAXOR CORPORATION AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31

   
2009
   
2008
   
2007
 
REVENUES:
                 
                   
Operating revenues - equipment sales and related services
 
$
1,343,610
   
$
1,381,105
   
$
1,453,201
 
                         
Operating revenues - cryobanking and related services
   
345,216
     
379,950
     
416,578
 
                         
Total Revenues
   
1,688,826
     
1,761,055
     
1,869,779
 
                         
Costs of Sales:
                       
Cost of sales - equipment sales and  related services
   
663,116
     
674,576
     
634,938