-----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, FqXoaYDqvlwiJO/XDaLHN/7RbheggYz8KLiHcDbJVeFbDEmFNgQUk6zsCwF8hX6q 26NjG0nQo4ijYDeFJNa1lA== 0001019056-10-001246.txt : 20101112 0001019056-10-001246.hdr.sgml : 20101111 20101112132821 ACCESSION NUMBER: 0001019056-10-001246 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20100930 FILED AS OF DATE: 20101112 DATE AS OF CHANGE: 20101112 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09999 FILM NUMBER: 101185122 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-Q 1 daxor_3q10.htm FORM 10-Q Unassociated Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
Quarterly Report Under Section 13 or 15(d)
of the
Securities Act of 1934
 
FOR QUARTER ENDED September 30, 2010
Commission File Number 001-09999
 
DAXOR CORPORATION
(Exact Name as Specified in its Charter)

New York
 
13-2682108
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
350 Fifth Ave
Suite 7120
New York, New York 10118
(Address of Principal Executive Offices & Zip Code)
 
Registrant’s Telephone Number:
 
(212) 244-0555
(Including Area Code)
   
 
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No ¨
 
Indicate 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 such shorter period that the registrant was required to post and submit such files)
Yes ¨  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 the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large Accelerated filer
o
Accelerated Filer ¨
       
 
Non-accelerated filer
o (Do not check if a smaller reporting company) 
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨  No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
CLASS:COMMON STOCK
4,226,837 OUTSTANDING AT November 8, 2010
PAR VALUE: $.01 per share
 
 
 
 

 
 
DAXOR CORPORATION AND SUBSIDIARY
 
TABLE OF CONTENTS
 
           
PART I.
 
FINANCIAL INFORMATION
     
           
 
Item 1.
FINANCIAL STATEMENTS
     
           
   
Index to Financial Statements
     
           
      1  
           
     
2-3
 
           
     
4
 
           
     
5-23
 
           
   
24-33
 
           
   
34-36
 
           
   
36
 
           
     
       
   
37
 
           
   
39
 
           
   
39
 
           
   
39
 
           
   
39
 
           
   
39
 
           
   
40
 
 
 
 

 
 
DAXOR CORPORATION AND SUBSIDIARY
 
   
UNAUDITED
September 30,
2010
   
December 31,
2009
 
ASSETS
           
             
CURRENT ASSETS
           
Cash and cash equivalents
  $ 107,043     $ 277,088  
Receivable from broker
    22,958,895       16,629,427  
Available-for-sale securities, at fair value
    58,074,095       53,270,726  
Accounts receivable, net of allowance for doubtful accounts of $112,787 in 2010 and $92,421 in 2009
    287,784       240,615  
Inventory
    381,954       454,407  
Prepaid expenses and other current assets
    173,795       104,431  
Total Current Assets
    81,983,566       70,976,694  
                 
Property and equipment, net
    4,227,352       4,173,138  
Other assets
    37,158       37,158  
                 
Total Assets
  $ 86,248,076     $ 75,186,990  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued liabilities
  $ 563,331     $ 533,631  
Loans payable
    3,638,537        
Income taxes payable
    3,074,248       943,075  
Mortgage payable, current portion
    45,935       43,431  
Put and call options, at fair value
    5,470,803       4,249,123  
Securities borrowed, at fair value
    15,632,373       10,771,279  
Deferred revenue
    67,162       46,902  
Deferred income taxes
    9,128,483       10,627,351  
Total Current Liabilities
    37,620,872       27,214,792  
                 
LONG TERM LIABILITIES
               
                 
Mortgage payable, less current portion
    312,107       346,861  
                 
Total Liabilities
    37,932,979       27,561,653  
                 
STOCKHOLDERS’ EQUITY
               
Common stock, $.01 par value, Authorized - 10,000,000 shares Issued – 5,316,550 shares Outstanding – 4,226,837 and 4,250,318 shares at September 30, 2010 and December 31, 2009, respectively
    53,165       53,165  
Additional paid in capital
    10,675,228       10,675,228  
Accumulated other comprehensive income
    15,724,214       16,016,375  
Retained earnings
    33,460,262       32,241,597  
Treasury stock, at cost, 1,089,713 and 1,066,232 shares at September 30, 2010 and December 31, 2009, respectively
    (11,597,772 )     (11,361,028 )
Total Stockholders’ Equity
    48,315,097       47,625,337  
Total Liabilities and Stockholders’ Equity
  $ 86,248,076     $ 75,186,990  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
1

 
 
DAXOR CORPORATION AND SUBSIDIARY
FOR THE THREE MONTHS ENDED
 
   
September 30,
2010
   
September 30,
2009
 
REVENUES:
           
             
Operating Revenues – equipment sales and related services
  $ 368,201     $ 330,286  
Operating Revenues – cryobanking and related services
    85,080       84,090  
                 
Total Revenues
    453,281       414,376  
                 
Cost of Sales:
               
                 
Cost of equipment sales and related services
    174,014       166,910  
Cost of cryobanking and related services
    11,728       11,840  
                 
Total Cost of Sales
    185,742       178,750  
                 
Gross Profit
    267,539       235,626  
                 
OPERATING EXPENSES:
               
                 
Research and development expenses:
               
                 
Research and development-equipment sales and related services
    642,143       637,895  
                 
Research and development-cryobanking and related services
    52,587       45,941  
                 
Total Research and Development Expenses
    694,730       683,836  
                 
Selling, General & Administrative Expenses:
               
                 
Selling, general, and administrative- equipment sales and related services
    651,639       611,216  
Selling, general, and administrative- cryobanking and related services
    206,035       188,007  
                 
Total Selling, General & Administrative Expenses
    857,674       799,223  
                 
Total Operating Expenses
    1,552,404       1,483,059  
                 
Loss from Operations
    (1,284,865 )     (1,247,433 )
                 
Other Income (Expenses):
               
                 
Dividend income-investment portfolio
    635,678       729,731  
Realized gains on sale of securities, net
    2,370,510       4,482,999  
Mark to market of short positions
    2,735,102       (1,185,688 )
Other revenues
    3,041       2,964  
Interest expense, net of interest income of $456 and $8,590
    (20,323 )     (37,898 )
Administrative expense relating to portfolio investments
    (35,227 )     (45,986 )
                 
Total Other Income
    5,688,781       3,946,122  
                 
Income before Income Taxes
    4,403,916       2,698,689  
                 
Income Tax Expense
    1,799,112       72,847  
Net Income
  $ 2,604,804     $ 2,625,842  
                 
Comprehensive Income:
               
                 
Net Income
  $ 2,604,804     $ 2,625,842  
Unrealized Gain on Securities Held for Sale, Net of Deferred Income Taxes
   
3,829,575
     
3,608,065
 
Comprehensive Income
  $
6,434,379
    $
6,233,907
 
                 
Weighted average number of shares outstanding – basic and diluted
    4,232,691       4,250,518  
                 
Net income per common equivalent share – basic and diluted
  $ 0.62     $ 0.62  
                 
Dividends paid per common share
  $ 0.25     $ 0.25  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
2

 
 
DAXOR CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED]
FOR THE NINE MONTHS ENDED
 
   
September 30,
2010
   
September 30,
2009
 
REVENUES:
           
             
Operating Revenues – equipment sales and related services
  $ 958,929     $ 968,884  
Operating Revenues – cryobanking and related services
    258,956       259,949  
                 
Total Revenues
    1,217,885       1,228,833  
                 
Cost of Sales:
               
                 
Cost of equipment sales and related services
    516,304       499,259  
Cost of cryobanking and related services
    26,626       34,045  
                 
Total Cost of Sales
    542,930       533,304  
                 
Gross Profit
    674,955       695,529  
                 
OPERATING EXPENSES:
               
                 
Research and development expenses:
               
                 
Research and development-equipment sales and related services
    2,166,121       1,845,019  
Research and development-cryobanking and related services
    155,143       140,352  
                 
Total Research and Development Expenses
    2,321,264       1,985,371  
                 
Selling, General & Administrative Expenses:
               
                 
Selling, general, and administrative- equipment sales and related services
    1,950,852       1,866,234  
Selling, general, and administrative- cryobanking and related services
    534,930       551,959  
                 
Total Selling, General & Administrative Expenses
    2,485,782       2,418,193  
                 
Total Operating Expenses
    4,807,046       4,403,564  
                 
Loss from Operations
    (4,132,091 )     (3,708,035 )
                 
Other Income (Expenses):
               
                 
Dividend income-investment portfolio
    1,722,944       2,353,240  
Realized gains on sale of securities, net
    9,936,557       9,934,443  
Mark to market of short positions
    (2,355,785 )     (408,761 )
Other revenues
    9,124       8,891  
Interest expense, net of interest income of $1,378 and $6,526
    (35,506 )     (165,425 )
Administrative expense relating to portfolio investments
    (101,244 )     (109,286 )
                 
Total Other Income
    9,176,090       11,613,102  
                 
Income before Income Taxes
    5,043,999       7,905,067  
Income Tax Expense
    2,343,258       583,814  
Net Income
  $ 2,700,741     $ 7,321,253  
                 
Comprehensive Income:
               
                 
Net Income
  $ 2,700,741     $ 7,321,253  
Unrealized (Loss) Gain on Securities Held for Sale, Net of Deferred Income Taxes
   
(292,161
)    
1,426,733
 
Comprehensive Income
  $
2,408,580
    $
8,747,986
 
                 
Weighted average number of shares outstanding – basic
    4,240,753       4,266,707  
                 
Net income per common equivalent share – basic
  $ 0.64     $ 1.72  
                 
Weighted average number of shares outstanding-diluted
    4,240,753       4,288,707  
                 
Net income per common equivalent share – diluted
  $ 0.64     $ 1.71  
                 
Dividends paid per common share
  $ 0.35     $ 0.35  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
3

 
 
DAXOR CORPORATION AND SUBSIDIARY
FOR THE NINE MONTHS ENDED
 
   
September 30,
2010
   
September 30,
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income   $ 2,700,741     $ 7,321,253  
Adjustment to reconcile net income to net cash used in operating activities:
               
Depreciation
    222,737       211,271  
Non-cash compensation expense associated with employee stock compensation plans
          14,681  
Deferred income taxes
    (1,282,320 )     (1,794,311 )
Bad debt allowance
    20,366       3,776  
Gain on sale of fixed assets
    (52,533 )      
Loss on disposal of fixed assets
    285       16,433  
Realized gains on sale of investments
    (9,936,557 )     (9,934,443 )
Non cash dividend income
          (1,938 )
Mark to market adjustments on options & short sales
    2,355,785       408,761  
                 
Change in operating assets and liabilities:
               
(Increase) Decrease in accounts receivable
    (67,535 )     24,351  
Increase in prepaid expenses & other current assets
    (69,364 )     (646,803 )
(Increase) Decrease in inventory
    72,453       (49,837 )
Increase (Decrease) in accounts payable and accrued liabilities
    29,700       (147,331 )
Increase in income taxes payable
    2,131,173       386,042  
Increase in deferred revenue
    20,260       29,871  
                 
Net cash used in operating activities
    (3,854,809 )     (4,158,224 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property and equipment
    (289,703 )     (1,914,491 )
Proceeds from sale of fixed assets
    65,000          
Increase in receivable due from broker
    (5,176,245 )     (8,438,475 )
Increase in securities borrowed, at fair market value
    4,861,094       8,935,734  
Purchases of put and call options
    (419,080 )     (2,697,775 )
Proceeds from sales of put and call options
    14,344,491       22,504,260  
Acquisition of available for sale securities
    (21,818,503 )     (34,514,941 )
Proceeds from sale of available for sale securities
    11,383,466       31,618,787  
                 
Net cash provided by investing activities
    2,950,520       15,493,099  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from margin loan payable
    29,622,601       47,784,335  
Repayment of margin loan payable
    (27,137,287 )     (58,563,144 )
Proceeds from loans from officers
          1,140,000  
Repayment of loans from officers
          (1,140,000 )
Repayment of bank loan
          (1,285,000 )
Proceeds from bank loan
          250,000  
Purchase of treasury stock
    (236,744 )     (488,396 )
Dividends paid
    (1,482,076 )     (1,488,781 )
Repayment of mortgage payable
    (32,250 )     (29,926 )
Net cash provided by (used in) financing activities
    734,244       (13,820,912 )
                 
Net decrease in cash and cash equivalents
    (170,045 )     (2,486,037 )
                 
Cash and cash equivalents at beginning of period
    277,088       2,545,040  
                 
Cash and cash equivalents at end of period
  $ 107,043     $ 59,003  
                 
Supplemental Disclosures of Cash Flow Information:
               
Cash paid during the period for:
               
                 
Interest
  $ 37,340     $ 180,541  
Income taxes
  $ 1,556,483     $ 2,873,491  
 
See accompanying notes to unaudited condensed consolidated financial statements.

 
4

 
 
DAXOR CORPORATION AND SUBSIDIARY
September 30, 2010
(Unaudited)
 
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
BUSINESS
 
Daxor Corporation (the “Company”) is a medical device manufacturing company that offers additional biotech services, such as cryobanking, through its wholly owned subsidiary, Scientific Medical Systems Corp. The Company provides long-term frozen blood and semen storage services to enable individuals to store their own blood and semen. The main focus of Daxor Corporation has been the development of an instrument that rapidly and accurately measures human blood volume. This instrument is used in conjunction with a single use diagnostic injection and collection kit.
 
SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods presented. The condensed consolidated financial statements are unaudited and are subject to such year-end adjustments as may be considered appropriate and should be read in conjunction with the historical consolidated financial statements of Daxor Corporation for the years ended December 31, 2009, 2008 and 2007, included in Daxor Corporation’s Annual Report and Form 10-K for the fiscal year ended December 31, 2009. The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures r equired by accounting principles generally accepted in the United States of America. Operating results for the three and nine month periods ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.
 
These condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“US GAAP”) and under the same accounting principles as the consolidated financial statements included in the Annual Report on Form 10-K. Certain information and footnote disclosures related thereto normally included in the financial statements prepared in accordance with US GAAP have been omitted in accordance with Rule 8-03 of Regulation S-X.
 
Management has evaluated subsequent events through the date of this filing.
 
Fair Value of Financial Instruments
 
The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities, deferred option premiums and loans payable approximate fair value because of their short maturities. The carrying amount of the mortgage payable is estimated to approximate fair value as the mortgage carries a market rate of interest.
 
Fair Value Measurements
 
The Company utilizes the provisions of FASB ASC 820 - Fair Value Measurements (“ASC 820”) for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. ASC 820 establishes the framework for measuring fair value and expands related disclosures. Broadly, the ASC 820 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes market or observable inputs as the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the a bsence of market inputs.
 
 
Level 1, is defined as observable inputs being quoted prices in active markets for identical assets;
     
 
Level 2, is defined as observable inputs including quoted prices for similar assets; and
     
 
Level 3, is defined as unobservable inputs in which little or no market data exists, therefore requiring assumptions based on the best information available.

 
5

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Effective January 1, 2009, the Company adopted the provisions of FASB ASC 820-10 with respect to non-financial assets and liabilities. This pronouncement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The adoption of FASB ASC 820-10 did not have any impact on the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2010.
 
On January 1, 2010, the Company adopted the new provisions of ASU No. 2010-06 - Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements (the “ASU”). The ASU amended standards require disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the first quarter of 2010. The impact on the Company’s disclosures was not significant. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the first quarter of 2011. We do not expect these new standards to significantly impact our consolidate d financial statements.
 
 
6

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Available-for-Sale Securities
 
Available-for-sale securities represent investments in debt and equity securities (primarily common and preferred stock of electric utility companies) that management has determined meet the definition of available-for-sale under FASB ASC 320 - Accounting for Certain Investments in Debt and Equity Securities (“ASC 320”). 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).
 
At certain times, the Company will engage in short selling of stock. When this occurs, the short position is marked to the market and recorded as a realized sale. 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 (Level 1 inputs).
 
Put and Call Options at fair value
 
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 - Accounting for Derivative Instruments and Hedging Activities, these options are marked to market for each reporting period using readily available market quotes (Level 1 inputs), 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.
 
All proceeds of the put and call options which are equity contracts are shown net of the mark to market adjustment in the current liability section of the balance sheet as Put and call options, at fair value.
 
Receivable from Broker
 
The Receivable from Brokers includes cash proceeds from the sales of securities and dividends. These proceeds are invested in dividend bearing money market accounts. The restricted cash is held by the brokers to satisfy margin requirements.
 
The following table summarizes Receivable from Broker at September 30, 2010 and December 31, 2009:
 
Description
 
(Unaudited)
September 30, 2010
   
December 31, 2009
 
Money Market Accounts
  $ 7,215,521     $ 6,062,298  
Restricted Cash
    15,743,374       10,567,129  
Total Receivable from Broker
  $ 22,958,895     $ 16,629,427  
 
 
7

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Securities borrowed at fair value
 
When a call option that has been sold short is exercised, this creates a short position in the related common stock. The recorded cost of these short positions is the amount received on the sale of the stock plus the proceeds received from the underlying call option. These positions are shown on the Balance Sheet as “Securities borrowed at fair value” and the carrying value is reduced or increased at the end of each quarter by the mark to market adjustment which is recorded in accordance with ASC 320.
 
Investment Goals, Strategies and Policies
 
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 in 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.

 
8

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
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.
 
Reclassifications
 
Certain reclassifications have been made to the Company’s September 30, 2009 condensed consolidated statement of operations to conform to the September 30, 2010 presentation.
 
Inventory
 
Inventory is stated at the lower of cost or market, using the first-in, first-out method (FIFO), and consists primarily of finished goods.
 
Earnings per Share
 
The Company computes earnings per share in accordance with ASC 260 - Earnings per Share. Basic earnings per common share is computed by dividing income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share are based on the average number of common shares outstanding during each period, adjusted for the effects of outstanding stock options.
 
The following table summarizes the earnings per share calculations for the three months ended September 30, 2010 and September 30, 2009:

   
Three months ended September 30, 2010
   
Three months ended September 30, 2009
 
Basic and diluted shares
    4,232,691       4,250,518  
Net Income
  $ 2,604,804     $ 2,625,842  
Basic and diluted income per share
  $ 0.62     $ 0.62  
 
Certain stock options were not included in the computation of the earnings per share due to their anti-dilutive effect. The number of anti-dilutive options totaled 55,800 and 66,300 for the three months ended September 30, 2010 and 2009, respectively
 
The following table summarizes the earnings per share calculations for the nine months ended September 30, 2010 and September 30, 2009:
 
   
Nine months ended September 30, 2010
   
Nine months ended September 30, 2009
 
Basic shares
    4,240,753       4,266,707  
Dilutions: stock options
          22,000  
Diluted shares
    4,240,753       4,288,707  
Net Income
  $ 2,700,741     $ 7,321,253  
Basic earnings per share
  $ 0.64     $ 1.72  
Diluted earnings per share
  $ 0.64     $ 1.71  
 
Certain stock options were not included in the computation of the earnings per share due to their anti-dilutive effect. The number of anti-dilutive options totaled 54,800 and 67,300 for the nine months ended September 30, 2010 and 2009, respectively
 
 
9

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Dividends
 
The Company has paid a total dividend of $0.35 for the nine months ended September 30, 2010 as follows: $0.10 per share on June 16, 2010 and $0.25 per share on September 30, 2010. The Company paid a total dividend of $1.35 per share in 2009.
 
In 2008, Management instituted a policy of paying dividends when funds are available. The goal of management is to pay a total dividend of $1.00 per share in 2010 provided funds are available.
 
(2) AVAILABLE-FOR-SALE SECURITIES
 
The Company uses the historical cost method in the determination of its realized and unrealized gains and losses. The following tables summarize the Company’s investments as of:
 
Summary of Available for Sale Securities as of September 30, 2010 (Unaudited)
 
Type of Security
 
Market Value
   
Cost of Securities
   
Net Unrealized Gain
   
Unrealized Gains
   
Unrealized Losses
 
Common Stock
  $ 55,878,129     $ 32,072,963     $ 23,805,166     $ 25,287,525     $ (1,482,359 )
Preferred Stock
    2,195,966       1,979,264       216,702       517,330       (300,628 )
Total Equity Securities
  $ 58,074,095     $ 34,052,227     $ 24,021,868     $ 25,804,855     $ (1,782,987 )
 
Summary of Unrealized Losses of Available for Sale Securities as of September 30, 2010 (Unaudited)
 
     Less Than Twelve
Months
    Twelve Months or
Greater
    Total  
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
Marketable Equity Securities
  $ 4,377,210     $ 313,552     $ 3,171,185     $ 1,469,435     $ 7,548,395     $ 1,782,987  
 
Summary of Unrealized Gains on Available for Sale Securities as of September 30, 2010 (Unaudited)
 
    Less Than Twelve
Months 
    Twelve Months or
Greater
    Total   
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
   
Fair Value
   
Unrealized Gains
 
Marketable Equity Securities
  $ 6,207,798     $ 553,704     $ 44,317,902     $ 25,251,151     $ 50,525,700     $ 25,804,855  
 
 
10

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Summary of Available for Sale Securities as of December 31, 2009
 
Type of Security
 
Market Value
   
Cost of Securities
   
Net Unrealized Gain
   
Unrealized Gains
   
Unrealized Losses
 
Common Stock
  $ 51,207,654     $ 26,673,055     $ 24,534,599     $ 26,771,744     $ (2,237,145 )
Preferred Stock
    2,063,072       1,957,094       105,978       370,187       (264,209 )
Total Equity Securities
  $ 53,270,726     $ 28,630,149     $ 24,640,577     $ 27,141,931     $ (2,501,354 )
 
Summary of Unrealized Losses of Available for Sale Securities as of 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  
 
Summary of Unrealized Gains on Available for Sale Securities as of 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  
 
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. This percentage may be temporarily decreased to 70% if deemed necessary by management. 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.
 
At September 30, 2010 and December 31, 2009, available for sale securities consisted mostly of preferred and common stocks of utility companies. At September 30, 2010 and December 31, 2009, 96.22% and 96.13% of the market value of the Company’s available for sale securities was made up of common stock, respectively.
 
The Company’s portfolio value is exposed to fluctuations in the general value of electric utilities. An increase of interest rates could put downward pressure on the valuation of utility stocks.
 
Electric utilities operate in an environment of federal, state and local regulations, and they may disproportionately affect an individual utility. The Company believes that it’s exposure to regulatory risk is mitigated due to the diversity of holdings consisting of 87 separate common and preferred stocks. As of September 30, 2010 there were three holdings of common stock which comprised 32.67% of the total market value of the available for sale investments. These three holdings are FirstEnergy, Exelon and Entergy
 
 
11

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
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.
     
 
·
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.
 
Unrealized Losses on Available for Sale Securities
 
At September 30, 2010, 53.3% or $950,571 of the total unrealized losses of $1,782,987 was comprised of the following two securities: $292,163 for Dynegy, Inc. (“Dynegy”) and $658,408 for Citigroup Inc. (“Citigroup”).
 
Dynegy, Inc.
 
At September 30, 2010, Daxor owned 88,000 shares of Dynegy with a cost basis of $8.19 per share and a market value of $4.87 per share. On November 1, 2010 the market value of Dynegy was $4.57 which is $3.62 or 44% less than our cost basis of $8.19 per share.
 
On November 1, 2010, Dynegy announced that the Federal Energy Regulatory Commission (“FERC”) had approved the acquisition of Dynegy by The Blackstone Group LP. The sale must still be approved by Dynegy shareholders. Dynegy management has stated that it feels the sale is in the best interest of the shareholders.
 
The Blackstone Group announced in August it would pay $4.50 per share and assume more than $4 billion in Dynegy debt to take the company private. The deal is expected to close before the end of November 2010.
 
The Company sold 129,000 shares of Dynegy during the quarter ended September 30, 2010 for a total realized loss of $1,144,425. These realized losses are included in the results for the period ended September 30, 2010.
 
The Company sold 23,000 shares of Dynegy from October 1, 2010 through November 10, 2010 for a realized loss of $110,000. The Company recorded this loss of $110,000 as an impairment charge during the quarter ended September 30, 2010. As of November 10, 2010, the Company owned 65,000 shares of Dynegy with a cost basis of $7.79 per share.
 
 
12

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
Citigroup Inc.
 
At September 30, 2010, Daxor owned 329,407 shares of Citigroup with a cost basis of $5.90 per share and a market value of $3.91 per share. On November 1, 2010, the market value of Citigroup was $4.15 per share which is $1.75 or 30% less than our cost basis of $5.90 per share.
 
During the first quarter of 2009, the stock was at $1.00 per share and as of November 1, 2010, was trading at $4.15 per share. The stock price has increased by 25% from January 1, 2010 through November 1, 2010, going from $3.31 per share to $4.15 per share.
 
Citigroup reported net income of $9.3 billion in the first nine months of 2010 versus $6.0 billion in the first nine months of 2009. Their provision for credit losses and benefits declined to $5.9 billion which is the lowest level since the second quarter of 2007. The growth in net income is attributable to improved revenues, continued monitoring of expenses and a decline in the cost of credit.
 
Citigroup has reduced headcount to 258, 000 at September 30, 2010 versus 375,000 at the peak level in 2007. Total Operating Expenses were 2% lower during the nine months ended September 30, 2010 as compared to the same period in 2009.
 
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 September 30, 2010, the Tier 1 Capital Ratio was 12.5%, Total Capital Ratio was 16.1% and the Leverage Ratio was 6.6%. Citigroup is considered “well capitalized” under the federal regulatory agency definitions at September 30, 2010.
 
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 September 30, 2010.
 
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 September 30, 2010 on Citigroup.
 
Daxor Corporation
Summary of Unrealized Losses on Dynegy, Inc and Citigroup, Inc.
As of September 30, 2010
 
         
Less Than Twelve Months
   
Tweleve Months or Greater
   
Total
 
   
Total
         
Unrealized
         
Unrealized
         
Unrealized
 
Security
 
Cost
   
Fair Value
   
Loss
   
Fair Value
   
Loss
   
Fair Value
   
Loss
 
Dynegy, Inc.
  $ 720,723     $ 167,041     $ 53,742     $ 261,519     $ 238,421     $ 428,560     $ 292,163  
Citigroup, Inc.
    1,946,389                   1,287,981       658,408       1,287,981       658,408  
Total
  $ 2,667,112     $ 167,041     $ 53,742     $ 1,549,500     $ 896,829     $ 1,716,541     $ 950,571  
 
 
13

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
(3) SEGMENT ANALYSIS
 
The Company has two operating segments: Equipment Sales and Related Services, and Cryobanking and Related Services.
 
The Equipment Sales and Related Services segment comprises the Blood Volume Analyzer equipment and related activity. This includes equipment sales, equipment rentals, equipment delivery fees, BVA-100 kit sales and service contract revenues.
 
The Cryobanking and Related Services segment is comprised of activity relating to the storage of blood and semen, and related laboratory services and handling fees.
 
Although not deemed an operating segment: the Company reports a third business segment; Investment activity. This segment reports the activity of the Company’s investment portfolio. This includes all earnings, gains and losses, and expenses relating to these investments.
 
The following table summarizes the results of each segment described above for the three months ended September 30, 2010 (unaudited).
 
   
September 30, 2010
 
   
Equipment
Sales &
Related
Services
   
Cryobanking
& Related
Services
   
Investment
Activity
   
Total
 
                         
Revenues
  $ 368,201     $ 85,080     $     $ 453,281  
                                 
Expenses
                               
Cost of sales
    174,014       11,728             185,742  
Research and development expenses
    642,143       52,587             694,730  
Selling, general and administrative expenses
    651,639       206,035             857,674  
                                 
Total Expenses
    1,467,796       270,350             1,738,146  
                                 
Operating loss
    (1,099,595 )     (185,270 )           (1,284,865 )
                                 
Investment income, net
                5,706,063       5,706,063  
 
                               
Other income (expense)
                               
                                 
Interest expense, net
    (6,896 )           (13,427 )     (20,323 )
                                 
Other income
    3,041                   3,041  
                                 
Total Other Income (Expense)
    (3,855 )           (13,427 )     (17,282 )
                                 
Income (loss) before income taxes
    (1,103,450 )     (185,270 )     5,692,636       4,403,916  
                                 
Income tax expense
    75,403             1,723,709       1,799,112  
                                 
Net income (loss)
  $ (1,178,853 )   $ (185,270 )   $ 3,968,927     $ 2,604,804  
                                 
Total assets
  $ 5,052,684     $ 162,402     $ 81,032,990     $ 86,248,076  
 
 
14

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
The following table summarizes the results of each segment described above for the three months ended September 30, 2009 (unaudited).
 
   
September 30, 2009
 
   
Equipment
Sales &
Related
Services
   
Cryobanking
& Related
Services
   
Investment
Activity
   
Total
 
                         
Revenues
  $ 330,286     $ 84,090     $     $ 414,376  
                                 
Expenses
                               
Cost of sales
    166,910       11,840             178,750  
Research and development expenses
    637,895       45,941             683,836  
Selling, general and administrative expenses
    611,216       188,007             799,223  
Total Expenses
    1,416,021       245,788             1,661,809  
                                 
Operating loss
    (1,085,735 )     (161,698 )           (1,247,433 )
                                 
Investment income, net
                3,981,056       3,981,056  
                                 
Other income (expense)`
                               
                                 
Interest expense, net
    (7,691 )           (30,207 )     (37,898 )
Other income
    2,964                   2,964  
Total Other Income (Expense)
    (4,727 )           (30,207 )     (34,934 )
                                 
Income (loss) before income taxes
    (1,090,462 )     (161,698 )     3,950,849       2,698,689  
                                 
Income tax expense
    55,835             17,012       72,847  
                                 
Net income (loss)
  $ (1,146,297 )   $ (161,698 )   $ 3,933,837     $ 2,625,842  
                                 
Total assets
  $ 5,340,141     $ 184,181     $ 74,030,949     $ 79,555,271  
 
 
15

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
The following table summarizes the results of each segment described above for the nine months ended September 30, 2010 (unaudited).
 
   
September 30, 2010
 
   
Equipment
Sales &
Related
Services
   
Cryobanking
& Related
Services
   
Investment
Activity
   
Total
 
                         
Revenues
  $ 958,929     $ 258,956     $     $ 1,217,885  
                                 
Expenses
                               
Cost of sales
    516,304       26,626             542,930  
Research and development expenses
    2,166,121       155,143             2,321,264  
Selling, general and administrative expenses
    1,950,852       534,930             2,485,782  
                                 
Total Expenses
    4,633,277       716,699             5,349,976  
                                 
Operating loss
    (3,674,348 )     (457,743 )           (4,132,091 )
                                 
Investment income, net
                9,202,472       9,202,472  
                                 
Other income (expense)
                               
                                 
Interest expense, net
    (21,142 )     296       (14,660 )     (35,506 )
                                 
Other income
    9,124                   9,124  
                                 
Total Other Income (Expense)
    (12,018 )     296       (14,660 )     (26,382 )
                                 
Income (loss) before income taxes
    (3,686,366 )     (457,447 )     9,187,812       5,043,999  
                                 
Income tax expense
    111,403             2,231,855       2,343,258  
                                 
Net income (loss)
  $ (3,797,769 )   $ (457,447 )   $ 6,955,957     $ 2,700,741  
                                 
Total assets
  $ 5,052,684     $ 162,402     $ 81,032,990     $ 86,248,076  
 
 
16

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
The following table summarizes the results of each segment described above for the nine months ended September 30, 2009 (unaudited).
 
   
September 30, 2009
 
   
Equipment
Sales &
Related
Services
   
Cryobanking
& Related
Services
   
Investment
Activity
   
Total
 
                         
Revenues
  $ 968,884     $ 259,949     $     $ 1,228,833  
                                 
Expenses
                               
Cost of sales
    499,259       34,045             533,304  
Research and development expenses
    1,845,019       140,352             1,985,371  
Selling, general and administrative expenses
    1,866,234       551,959             2,418,193  
Total Expenses
    4,210,512       726,356             4,936,868  
                                 
Operating loss
    (3,241,628 )     (466,407 )           (3,708,035 )
                                 
Investment income, net
                11,769,636       11,769,636  
                                 
Other income (expense)
                               
                                 
Interest expense, net
    (23,466 )           (141,959 )     (165,425 )
Other income
    8,891                   8,891  
                                 
Total Other Income (Expense)
    (14,575 )           (141,959 )     (156,534 )
                                 
Income (loss) before income taxes
    (3,256,203 )     (466,407 )     11,627,677       7,905,067  
Income tax expense
    85,835       1,000       496,979       583,814  
                                 
Net income (loss)
  $ (3,342,038 )   $ (467,407 )   $ 11,130,698     $ 7,321,253  
                                 
Total assets
  $ 5,340,141     $ 184,181     $ 74,030,949     $ 79,555,271  
 
 
17

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
(4) LOANS AND MORTGAGE PAYABLE
 
LOANS PAYABLE
 
Short-term debt to brokers (margin debt), is secured by the Company’s marketable securities, and totaled $3,638,537 at September 30, 2010 and $0 at December 31, 2009. The interest rate on the Company’s margin debt at September 30, 2010 was 1.008%
 
MORTGAGE PAYABLE
 
Daxor financed the purchase of the land and buildings in Oak Ridge, Tennessee with a $500,000 10-year mortgage, with the first five years fixed at 7.49%. On January 2, 2012, there is a single payment of $301,972 for the remaining principal and interest on the mortgage. The Company has the option of making this payment or refinancing the mortgage for an additional five year term at a fixed rate of interest that would be set on January 2, 2012.
 
(5) PUT AND CALL OPTIONS AT FAIR VALUE
 
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. 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.
 
For the three months ended September 30, 2010, the Company recorded a gain from marking put and call options to market of $3,945,415. For the three months ended September 30, 2009, the Company recorded income from marking put and call options to market of $896,426. These amounts are included in the Statements of Operations as part of mark to market of short positions.
 
For the nine months ended September 30, 2010, the Company recorded a loss from marking put and call options to market of ($1,416,884). For the nine months ended September 30, 2009, the Company recorded income from marking put and call options to market of $412,704. These amounts are included in the Statements of Operations as part of mark to market of short positions.
 
All proceeds of the put and call options which are equity contracts are shown net of the mark to market adjustment in the current liability section of the balance sheet as Put and call options, at fair value.
 
 
18

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
The following summarizes the Company’s Put and Call Options as of September 30, 2010 (unaudited) and December 31, 2009:
 
Put and Call Options
 
Selling Price
   
Fair Market
Value
   
Unrealized
Gain
 
September 30, 2010
  $ 9,410,272     $ 5,470,803     $ 3,939,469  
December 31, 2009
    9,605,476       4,249,123       5,356,353  
 
(6) SECURITIES BORROWED AT FAIR VALUE
 
The Company maintains short positions in certain marketable securities. The liability for short sales of securities is included in “Securities borrowed at fair market value” in the accompanying balance sheets. The respective market values of these positions were $15,632,373 and $10,771,279 as of September 30, 2010 and December 31, 2009.
 
(7) CURRENT INCOME TAXES
 
The Company accrues income taxes in interim periods based upon its estimated annual effective tax rate.
 
The current income tax expense for the three months ended September 30, 2010 and 2009 (unaudited) is comprised of the following:
 
   
September 30,
   
September 30,
 
   
2010
   
2009
 
Regular tax and Alternative Minimum Tax (AMT)
  $ 707,389     $ (254,844 )
Personal Holding Company Tax (PHC)
    80,943       180,000  
State Franchise Taxes
    75,403        
Total  Current Income Tax Provision
    863,735       (74,844 )
Deferred Income Taxes
    935,377       147,691  
Total Income Tax Expense (Benefit)
  $ 1,799,112     $ 72,847  
 
The current income tax expense for the nine months ended September 30, 2010 and 2009 (unaudited) is comprised of the following:
 
   
September 30,
   
September 30,
 
   
2010
   
2009
 
Regular tax and Alternative Minimum Tax (AMT)
  $ 2,643,679     $ 1,562,125  
Personal Holding Company Tax (PHC)
    870,496       785,000  
State Franchise Taxes
    111,403       31,000  
Total  Current Income Tax Provision
    3,625,578       2,378,125  
Deferred Income Taxes
    (1,282,320 )     (1,794,311 )
Total Income Tax Expense
  $ 2,343,258     $ 583,814  
 
 
19

 
 
DAXOR CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Continued)
(Unaudited)
 
(8) DEFERRED INCOME TAXES
 
The deferred income tax liability is comprised of the following:
 
   
(unaudited)
September 30,
2010
   
December 31,
2009
 
             
Deferred Tax Liabilities:
           
             
Fair market value adjustment for available -for -sale securities
  $ 8,407,654     $ 8,624,202