SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
December 31, 2003 0-12248
Daxor Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2682108
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
350 Fifth Avenue
Suite 7120
New York, New York 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 244-0555
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $.01 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. |_|
As of March 17, 2004, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $20,560,997. The market value of Common
Stock of the Registrant, par value $.01 per share, was computed by reference to
the closing price of one share on such date, as reported by the American Stock
Exchange, which was $14.25.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, as of March 17, 2004: 4,640,026 shares.
DOCUMENTS INCORPARATED BY REFERENCE:
The information required by Part III is incorporated by reference from the proxy
statement for the 2004 Annual Meeting of Shareholders which will be filed with
the Securities and Exchange Commission within 120 days after the close of the
Registrant's 2003 year end.
DAXOR CORPORATION
FORM 10-K
For the Fiscal Year Ended December 31, 2003
TABLE OF CONTENTS
Item Description Page
---- ----------- ----
PART I
Item 1. Business 2
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 7A.Quantitative and Qualitative Disclosures about Market Risk 16
Item 8. Financial Statements and Supplementary Data 16
Index to Financial Statements and Schedules 17
Item 9. Changes and Disagreements with Accountants on Accounting
and Financial Disclosure 18
Item 9A.Controls and Procedures 18
PART III
Item 10.Directors and Executive Officers of the Registrant 18
Item 11.Executive Compensation 18
Item 12.Security Ownership of Certain Beneficial Owners and Management
Related Shareholder Matters 18
Item 13.Certain Relationships and Related Transactions 18
Item 14.Principal Accountant Fees and Services 18
PART IV
Item 15.Exhibits, Financial Statement Schedule and Reports on Form 8-K 19
Signatures 20
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14 of the Exchange Act, as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14 of the Exchange Act, as adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
1
Item 1. Business
Daxor Corporation is a medical device manufacturing Company with additional
biotech services. Daxor was originally founded in 1970 for cryobanking services.
For the past 10 years, its major focus has been on the development of an
instrument that rapidly and accurately measures human blood volume. The
instrument, called the BVA-100(TM), is used in conjunction with a single use
diagnostic injection and collection kit. The Company maintains a website,
www.daxor.com which describes its operations.
The Company obtained marketing clearance from the FDA for the instrument and for
its specialized single use injection kit known as Volumex(TM). After successful
beta testing for the Blood Volume Analyzer at hospitals in the New York
metropolitan region, the Company expanded marketing efforts outside of the New
York region. Test results from hospital sites indicated that the Blood Volume
Analyzer was accurate and provided information that was important in a wide
variety of acute and chronic medical and surgical situations. The Company
manufactures its own injection kit components. The Company established a small
scale manufacturing facility in Oak Ridge, Tennessee for research and
development purposes. The Blood Volume Analyzer is also manufactured for Daxor
by an Original Equipment Manufacturer (OEM). This combination provides
flexibility to meet potential increased market demand. The injection kit filling
is performed by an FDA licensed radiopharmaceutical manufacturer. The Company
has received United States, European Common Market, and Japanese patents for its
Blood Volume Analyzer.
Blood volume measurement has been available for more than 60 years in formats
that required as much as four to eight hours of technician time with variable
degrees of accuracy. Due to the time required, certain technical shortcuts were
often used which reduced the accuracy of the measurement. An additional problem
was the difficulty of calculating an accurate expected normal blood volume for a
specific individual. Normal blood volume has been shown to vary in relation to
the degree of deviation from ideal weight. A leaner individual has a higher
blood volume percentage of body weight as compared to an obese individual. The
computations for an individual's normal expected blood volume were complex and
time consuming. The BVA-100(TM) Blood Volume Analyzer automated these
computations by calculating blood volume measurement to within accuracy of
approximately 98% while providing the precise measurement of the normal blood
volume for that specific individual based on the height, weight and sex of the
patient. In emergency situations, preliminary results can be available within 15
to 20 minutes, and final results within 45 to 50 minutes. The Company's patented
injection and collection kit, Volumex(TM), utilizes Albumin I-131 which is a
classic tracer used for blood volume measurement. The kit includes two matching
standards along with the pre-measured volumetric flow chamber. This kit has
resulted in the elimination of the previous time consuming steps whereby the
institution needed to create their own standards.
Measurement of blood volume is achieved by the use of an indicator or tracer
that is injected into a patient, and followed by the collection of timed blood
samples. The volume of blood in a patient is inversely proportional to the
dilution of the tracer. The measurement, while relatively simple in principle,
has been difficult to perform accurately and rapidly because of the high degree
of precision required in each step. The standard techniques require the hospital
or user to prepare an exact matching set of standards and with precise and
complete injection of the tracer. Due to the difficulty in achieving this type
of precision, blood volume measurements are currently performed in only a small
minority of hospitals in the United States. The standard tests, the hemoglobin
and the hematocrit, used to diagnose anemia, measure only the thickness
(percentage of red cells to plasma within the blood) and not the volume of an
individual's blood. These surrogate or proxy tests are well known to be
misleading in many situations where blood volume is abnormal. In acute
situations of blood loss, such as during surgery or after trauma, it may take as
long as 24 to 72 hours for the hematocrit to accurately or reasonably reflect
the degree of blood loss.
Patients may have delayed transfusions because the full degree of blood loss is
not reflected by these proxy tests. Delayed transfusions or fluid replacement
may result in
2
serious complications, including the death of the patient. The largest potential
use for the Blood Volume Analyzer is for evaluation and treatment of
outpatients' medical problems. Many disease conditions result in alterations of
blood volume which may have serious consequences for the patient.
Syncope, or sudden loss of consciousness, is a major cause for hospitalization
in the United States. As many as one million individuals per year experience an
episode of syncope. Patients who experience syncope may suffer severe injuries
when they collapse. Some patients may experience light-headedness without
complete loss of consciousness. Evaluation of such patients includes
neurological and cardiovascular testing, however, they do not usually include a
blood volume measurement. Low blood volume can be a predisposition to syncope.
Patients with this condition are frequently treated with different types of
drugs without precise knowledge of the underlying cause of the syncope.
The Cardiovascular Department of the Cleveland Clinic obtained a BVA-100(TM)
Blood Volume Analyzer in March 2000 for their Syncope Section. Results on over
one thousand patients in the Cleveland Clinic have demonstrated that a
significant percentage of such patients have moderate to severe hypovolemia (low
blood volume) which would not have been diagnosed without an actual blood volume
measurement. This scientific data has been submitted for publication in a
medical journal by Dr. Fetnat Fouad-Tarazi, Head of Hemodynamic and
Neuroregulation Lab, the Syncope Clinic, Department of Cardiology. The Cleveland
Clinic Cardiovascular Department is ranked number one in the United States
according to the annual US News & World Report survey of US Hospitals. The
hospital is ranked number 3 overall out of more than 6,200 hospitals in the
country. At the present time, most patients evaluated for syncope in hospitals
have tilt-table testing which identifies patients who may be at risk for
syncope. However, tilt-table testing does not differentiate patients who have
low blood volume from those who have neurological dysfunction of their blood
pressure. Only a blood volume measurement can provide this differential
diagnosis. The treatment for low blood volume involves medication to expand the
blood volume to normal. Neurological dysfunction involves different medical
treatment to control the low blood pressure. Blood volume measurement provides a
key test to facilitate correct treatment of patients.
According to the Journal of Clinical Geriatrics, one out of every three elderly
patients has a condition known as orthostatic hypotension. Orthostatic
hypotension is a condition when a person rises from a sitting or reclining
position, the blood pressure drops. This sudden drop in blood pressure may cause
dizziness or even loss of consciousness. One in eight elderly Americans
experience a hip fracture. It is unknown how many of these hip fractures are
caused by patients having a transient drop in blood pressure. A blood volume
measurement can help differentiate the cause of orthostatic hypotension. Some
patients with low blood volume caused by either low red cell volume or low
plasma volume can be treated with medications. Patients who have a normal blood
volume with orthostatic hypotension have a condition related to autonomic
dysfunction or ineffective control of the constriction of small blood vessels. A
medication is available for treating this condition.
A recent study by the Mayo Clinic estimated that there are 50 million Americans
who have hypertension (high blood pressure). It is reported that 70% of
hypertensive patients have their blood pressures inadequately controlled.
Hypertension is caused primarily by two variables. There is either a) excessive
blood (hypervolemia) or fluid retention within the circulation or b) excessive
tightening of the blood vessels (vasoconstriction). Diuretics are one major
category of drugs used to treat hypertension. Diuretics cause the kidney to
excrete salt and water thereby decreasing the blood volume and lowering the
blood pressure. A second major category of medications are vasodilators. These
drugs relax the blood vessels and lower the blood pressure. Within each of these
two major categories are drugs that work by different mechanisms, but they all
fall into one of these two main therapeutic categories, diuretics or
vasodilators. Treatment is often a trial and error approach because neither
vasoconstriction nor blood volume is actually measured in a patient (with rare
exception). One of the most serious complications of hypertension is loss of
kidney function (renal failure) which may require a patient to undergo permanent
renal dialysis.
3
Over the past year, the Company has received reports on patients treated for
hypertension with diuretics, who have a low blood volume. The physicians
treating these patients reduced or removed the diuretic therapy.
African-Americans have been reported to have significantly higher rates of
strokes and kidney failure as compared to Caucasians for comparable levels of
elevated blood pressure. Diuretic therapy is expected to benefit patients whose
elevated blood pressure is caused by an expanded blood volume. It may however be
harmful for patients whose high blood pressure is accompanied by low blood
volume. At the present time, there is inadequate data to determine whether
African- Americans, as a group, are more likely to be treated with diuretics.
The kidney is particularly vulnerable to low blood volume. It is well known that
certain medications, such as diuretics, can cause blood volume to decrease, and
increase the possibility of kidney failure. The measurement of blood volume in
the treatment of hypertension may help prevent these types of complications. By
measuring the blood volume within the patient, the physician can make a more
rational or scientific choice in regard to the medical therapy to be
administered.
The New England Journal of Medicine and the Journal of the American Medical
Association (JAMA) recently published 2 large-scale studies concerning the use
of diuretics vs. vasodilators. One of the studies that encompassed thousands of
patients found that diuretics were better. The other study which also
encompassed thousands of patients came to the opposite conclusion.
Unfortunately, in neither of these studies was blood volume measured. Physicians
have been puzzled by these conflicting results. The Mayo clinic, which purchased
the BVA-100(TM), previously reported that blood volume measurements can be
helpful in defining therapy. If every patient with hypertension had at least one
blood volume performed in their lifetime to help define optimum therapy, this
would be a very cost-effective test. This is because of the high degree of
complications such as kidney failure which hypertensive patient's experience.
Surgical patients who lose blood are particularly at risk for blood volume
derangements. Sometimes the first indication that a patient with a relatively
lower hematocrit has lost a large quantity of blood is the collapse of the
circulation. Sometimes physicians resort to the use of Pulmonary Artery
Catheterization (PAC). PAC involves the insertion of a catheter into a vein
through the right chamber of the heart and into the lung. This has frequently
been used as a surrogate technique to evaluate blood volume in critically ill
patients. However, PAC directly measures pressure, not volume. The Lutheran
Medical Center (New York) reported research on the first comparison of PAC with
direct blood volume measurements in patients. Their findings using the
BVA-100(TM) confirmed that PAC could be inaccurate and misleading in patients
who had significant blood volume deficits. Hypovolemia, or low blood volume, can
be particularly dangerous during surgery and may lead to sudden severe drops in
blood pressure. Such a drop in blood pressure, also known as shock, is
associated with strokes, heart attacks or even sudden death.
The Lutheran Medical Center has also published reports on the use of the Blood
Volume Analyzer in septic or toxic shock. Septic shock has death rates as high
as 40-70%. Using the BVA-100(TM), Lutheran Medical Center reported preliminary
results on 40 patients diagnosed with septic shock who were found to have
unanticipated low blood volume. The patients treated with fluids and blood to
restore their blood volume to normal levels had a markedly reduced death rate.
These findings, if verified on a larger scale, would be very important for
marketing the Blood Volume Analyzer. A primary goal of the Company is to have
the Blood Volume Analyzer become a standard of care within hospitals as part of
the decision-making process for administration of blood and intravenous therapy.
If these preliminary findings in the treatment of septic shock are verified, it
could be expected to have a significant impact on hospital demand for obtaining
a Blood Volume Analyzer.
Septic shock is a common daily occurrence in all hospitals. Major pharmaceutical
companies have attempted to find pharmaceutical agents that will reverse shock.
To date, these tests have been unsuccessful. A recent report on patients in
septic shock indicated a slight improvement in patients who were treated with a
new drug, Xigris. The cost of this drug is approximately $7000 per dose. Recent
reports from the V.A. Hospital in San Juan, Puerto Rico, which purchased a Blood
Volume Analyzer, are encouraging. Preliminary reports from the Intensive Care
Unit confirm that some patients treated for severe low blood volume were able to
recover without the use of Xigris. Other institutions are currently
investigating the use of blood volume measurement in Intensive Care Units.
4
If additional studies confirm that correction of blood volume should be the
primary focus on treating septic shock, then blood volume measurement would
become an integral part of the therapy for septic shock.
The cost of a diagnostic kit is approximately $299.00. The combined cost of
blood volume measurement and fluid and/or blood replacement would be
significantly lower than the anticipated cost of the septic shock drug which
only benefits a small percentage of patients.
Approximately 5 million individuals are treated annually for congestive heart
failure. The January 2000 issue of the American College of Cardiology reported
on a series of patients treated for congestive heart failure with low blood
volume and who were decompensated. Over-treatment of congestive heart failure is
very difficult to detect and symptoms of over-treatment can be confused with the
primary disease itself. It is estimated that $38 billion is spent annually on
treatment for congestive heart failure, of which $23 billion is spent annually
on hospital treatment of congestive heart failure patients. Congestive heart
failure is the number one reason for admission to hospitals in the US for
patients over 65 years of age. Three thousand patients annually receive heart
transplants. The overwhelming majority of patients treated for heart failure
must be treated with a combination of drugs. Two major heart studies from the
New York Presbyterian Medical Center and Hospital were recently published in the
leading cardiac journal Circulation. One study involved the treatment of anemia
in heart failure patients using the BVA-100(TM). The second study involved the
effects of Erythropoietin on exercise performance in anemic patients with
congestive heart failure. Senior authors were Ana-Silvia Androne, MD; Stuart D.
Katz, MD, et al; and Donna M. Mancini, MD; Stuart D. Katz, MD; et al.
respectively.
Dr. Stuart Katz, currently Associate Professor of Internal Medicine and
Cardiology at Yale University Medical Center at New Haven prepared additional
reports on blood volume measurement on heart failure patients utilizing the
BVA-100(TM). These papers have been accepted for publication in 2004 in the
Journal of the American College of Cardiology. An important finding in these
medical evaluations is that it is very difficult for physicians to accurately
evaluate congestive heart failure and blood volume status without actually
measuring the patient's blood volume. Nevertheless physicians are forced to make
major decisions to alter the patient's blood volume without the correct
knowledge of the patient's true blood volume status. Multiple case reports from
other cardiologists on the use of the Blood Volume Analyzer have confirmed that
congestive heart failure patients may have serious blood volume derangements
that cannot be correctly diagnosed without an actual blood volume measurement.
In 2003, the BVA-100(TM) was successfully installed in several top hospitals and
leading facilities around the nation. Among these was The Boeckman Burn Center
of the Children's Hospital Medical Center in Akron, Ohio. It is the first burn
unit in the United States to obtain a BVA-100(TM). Dr. Robert Klein, Director of
the Boeckman Burn Center stated that burn patients frequently have serious
complex abnormalities of blood volume which predisposes them to kidney failure.
Dr. Klein concluded that if the BVA-100(TM) proves to be effective in measuring
blood volume in these complex cases and avoiding some of these dreaded
complications, it will be an important advance in the treatment of burn
patients.
In May 2003, Grammercy Diagnostic Services obtained a BVA-100(TM). Dr. Peter
Rentrop, President and Medical Director, stated that blood volume measurement
was beneficial particularly in the treatment of congestive heart failure,
hypertension and syncope. Dr. Rentrop is an internationally recognized
interventional cardiologist with a long-standing special interest in nuclear
medicine and is a founding member of the American Society of Nuclear Cardiology.
Dr. Rentrop and his group were among the first to use streptokinase therapy to
halt a heart attack's progress. He concluded that streptokinase therapy may
preserve the heart's primary function of pumping blood.
Grammercy Diagnostics is a model of a free standing facility for non-hospitals.
Grammercy performs over four thousand nuclear medical diagnostic procedures
annually. In addition to Dr. Rentrop, there are thirteen additional
cardiologists who are affiliated with the group.
5
Researchers at Columbia Presbyterian are in the midst of a study involving
patients with so-called diastolic heart failure utilizing the BVA-100(TM).
Diastolic heart failure is a major category of difficult to treat heart failure
patients where a blood volume measurement may provide essential information for
optimum treatment. Results are expected to be available later this year.
Low red cell volume, or Anemia, is a common occurrence in patient's undergoing
chemotherapy for AIDS or cancer. Epogen and Procrit, which are manufactured by
the Amgen Corporation, can provide therapy for such conditions. Procrit is
distributed by the Ortho Division of Johnson & Johnson. The standard surrogate
tests, hematocrit and hemoglobin, may not reflect the full degree of decreased
red blood cell volume in such patients. A blood volume measurement can detect
unrecognized low blood volume or "hidden anemia" in such patients that may be
contributing to a profound feeling of weakness common in such conditions. A
patient who has a low blood volume that is undetected may have an artificially
elevated hematocrit. Such a patient may experience severe fatigue and other
symptoms that could be improved by appropriate treatment. These patients have a
form of "hidden anemia" and are not optimally treated. It is only with the use
of a blood volume measurement that the lower red cell volume could be detected
and treated. Blood volume measurement that could detect low blood volume in
patients with cancer, kidney disease, or heart failure could significantly
increase the justification and use of these blood stimulants.
Chronic fatigue syndrome is a condition said to affect approximately one million
Americans, particularly patients with low blood pressure. Low blood volume has
been reported to be a factor in such conditions. The ability to measure blood
volume with a high degree of precision and accuracy may identify patients with
low blood volume who are not optimally treated at the present time.
There are over 4 million patients who receive blood transfusions every year. The
Company believes that if the BVA-100(TM) were available in every hospital, it
would be feasible for the hospital to routinely perform a blood volume test on
every patient for whom a blood transfusion appeared to be indicated. Several
manufacturers including Northfield Laboratories, Biopure, and Hemosol
Corporation are testing blood substitutes. To date, despite many attempts by
these companies, none of them have received FDA approval for these procedures.
These substitutes can be used for surgical procedures instead of donor
transfusions. These artificial blood substitutes have the advantage of a long
shelf life and the ability to be sterilized. They have the disadvantage of a
shortened half-life in the body after transfusion. None of the companies elected
to use a BVA-100(TM) in their studies. In these studies, patients were being
treated with a blood substitute without knowing what the patient's blood volume
was at the beginning of the transfusion and the patients' blood volume at the
end of the transfusion. This type of information can be readily available if the
BVA-100(TM) was used in studies involving blood substitutes. Lack of this type
of basic information may be one of the factors behind the FDA's unwillingness
over the past 10 years to license any of these types of hemoglobin substitutes.
There have been recent reports in the New England Journal of Medicine that as
many as 60% of patients undergoing Cardiac Bypass Surgery (CABG) experience some
degree of measurable permanent brain damage such as memory loss. Under current
transfusion practices, patients may undergo major surgery with half the
concentration of normal red cells. The practice of undertransfusion is
widespread. In the Journal Transfusion, Dr. Robert Valeri, a senior researcher
at the Boston Naval Hospital estimated that there may be as many as 40,000 heart
attacks per one million operations due to undertransfusions. The Company is
attempting to initiate a cooperative program which will involve the use of blood
volume measurement combined with the use of blood substitutes during surgery.
The Company believes that it can provide a significant advantage to companies
currently testing blood substitutes on patients without a precise knowledge of
the patient's actual blood volume. Patients who have low blood volume at the
start of surgery may respond very differently than a patient with a normal blood
volume who is treated with a blood substitute. The current guidelines for the
use of these products are based on hemoglobin and hematocrit measurements. These
tests, however, may be very misleading in regard to the total amount of red
cells a patient has in his/her body.
6
The Company is currently exploring the development of low blood volume detection
and treatment programs in conjunction with several hospitals. Many patients
undergoing elective surgery donate blood to themselves prior to that surgery.
Some patients have undetected low blood volume and should not be donating blood.
Undetected "hidden anemia" can be corrected if diagnosed prior to surgery by the
use of medications such as Epogen or Procrit. A woman has 16-18% less red cell
volume than a man of equal height and weight. Women suffer from a higher rate of
complications and require more transfusion during Cardiac Bypass Surgery (CABG).
The use of low blood volume detection and treatment programs can result in a
significant improvement in patients at the time they are undergoing surgery.
Common complications from acute low blood volume are strokes, heart attacks, and
kidney failure.
Surgical patients who experience these complications require extended hospital
stays for which the hospitals are often not reimbursed. Hospitals operate under
a Diagnostic Regulatory Guideline (DRG) system for reimbursement. The DRG system
means that a hospital will be reimbursed according to a diagnosis, not according
to the number of days that a patient spends in the hospital.
Hospitals, however, have a significant monetary incentive aside from the desire
to provide better patient care, to avoid having patients undergo surgery in a
blood depleted state. A low blood volume detection and treatment program can
significantly improve the opportunity for patients to avoid complications from
hypovolemia as well as transfusions with donor blood. The Company believes that
the most significant market for its blood volume measurement equipment consists
of approximately 8,500 hospitals and Radiology Imaging Centers in the United
States.
The Company believes that there is an additional international market of 10,000
to 14,000 potential users of its BVA-100(TM). 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(TM). Reimbursement is particularly important for
hospitals because they may receive additional reimbursement and income from
non-hospitalized patients who undergo blood volume measurement.
SCIENTIFIC MEDICAL SYSTEMS SUBSIDIARY (wholly owned by Daxor)
BLOOD BANKING
The Company's blood bank is the only one in New York that allows people to store
their own red blood cells (RBC) for up to ten years. In 1985, the Company
established the first facility in the United States for long-term autologous
(self-storage) blood banking. The blood banking industry is a group of
for-profit and not-for-profit corporations whose total revenue is estimated to
exceed six billion dollars.
Utilizing cryobiology technology, frozen blood is capable of being stored for up
to 20 years, however, the current legal limit is 10 years for RBC. The present
donor system of blood transfusions presents risks to those individuals receiving
blood. This is a risk that can be avoided by utilizing one's previously stored
blood. There are approximately 15-18 million blood transfusions administered
annually to 4 million patients. Despite improved testing, significant risks
still remain from diseases such as West Nile Virus, which can be transmitted by
transfusion. Diseases such as Hepatitis and HIV can also be transmitted by
infected donors who may test negative for up to 6 months after the initial
infection. The FDA is particularly cautious and will not permit an individual
who received a transfusion to donate blood to another person for a period up to
1 year after receiving the transfusion. This regulation is designed to exclude
donors who may be infected but undetectable by the standard tests used for
screening donors.
The risks of infection and other complications are compounded by the frequent
withholding of blood from severely anemic patients by their physicians because
of the known risks of transfusion. It is a common medical practice to replace
the first three pints of lost blood with three pints of sterile water or their
equivalent. This problem has not been brought to the public's attention, but it
is widely known among physicians who have treated patients who have lost blood.
The number of patient's who suffer major complications, including sudden death
from under-transfusion, is unknown but significant.
7
The Blood Volume Analyzer has the potential to detect under-transfusion in such
individuals before complications occur. Physicians who fear the complications of
transfusion with potentially contaminated blood do not have these concerns when
patients use autologous blood (self-storage).
The Company believes that an educational process can establish the advantages of
autologous blood storage. Education can also overcome opposition to any change
in the current blood banking system from established tax-exempt (non-profit) and
profit-making entities. The Company believes that it can work with some
voluntary blood banks and hospitals to establish joint marketing of long term
frozen personal blood storage programs.
Blood Banking services are provided by a broad spectrum of organizations.
Approximately one-half of the blood supply used for transfusions, are supplied
by the American Red Cross and its affiliates. The other portion is supplied by
various other tax-exempt and for-profit organizations. Some hospitals operate
their own donor services, but require the services of outside vendors such as
the Red Cross for adequate supplies of blood products. At the present time there
are no other organizations providing long-term personal frozen blood storage in
the Northeastern United States. It is the Company's intentions to form alliances
with other short-term donor blood banks to expand frozen personal blood storage
services.
The Company views personal blood storage as a supplement to and not as
competition to other existing blood donor services.
Idant (Division of Scientific Medical Systems, subsidiary of Daxor Corporation)
Semen (Sperm) Banking
In 1985, Idant was the first semen bank to institute an AIDS quarantine period
for frozen semen. Viruses such as HIV and Hepatitis B or C may be undetectable
for up to six months in infected individuals. By freezing the semen of donors
and re-testing the donor six months later, the risk of Hepatitis or AIDS can be
virtually eliminated. In 1989, New York State and a number of other states
enacted laws requiring sperm banks to freeze and quarantine sperm for a minimum
of six months. The donors are tested at the beginning and at the end of the
six-month period. By storing semen from a large cross-section of donors, Idant
is able to offer anonymous donor semen with varying physical characteristics
that meet our client's needs. The Company maintains a complete physical
description of each donor on file and matches multiple physical characteristics
and additional special characteristics sought by the family to those of the
sterile father. The Company also provides, on request, special screening for
rare hereditary recessive genetic traits. The increased likelihood of a child
who resembles his recipient father can make the child, who is conceived via
artificial insemination, much more psychologically acceptable to the father.
Storage of Sperm for Personal Use
Idant pioneered both the technology and the commercial application of long-term
preservation of human sperm for use in artificial insemination. The division has
provided frozen semen services to physicians worldwide. Idant holds
approximately 50,000 human semen units in long-term storage at its central New
York City facility. The Company was the first semen bank in the state of New
York, out of more than 50 licensed banks, to be accredited by the American
Association of Tissue Banks. Idant provides semen storage services for clients
which remain viable for many years. Idant has received confirmation of normal
births from semen stored as long as 16 years. The Company's facility is used by
men who, for a variety of reasons, anticipate impairment of their ability to
father children and by men who have been found to be marginally fertile. These
men may now be able to have children by use of assisted reproductive techniques
that increase their probability of fertility. The facility is also used by men
who plan to undergo sterilization by vasectomy, but who believe that they might
desire children in the future. Artificial insemination using stored sperm is
much more effective and less expensive than present techniques of vasectomy
reversal.
8
In addition, patients with a variety of diseases, including many types of
cancer, store semen prior to undergoing treatment by chemotherapy or radiation.
By utilizing cryogenic preservation facilities, these patients, who are
frequently in their teens or twenties, will be able to father their own children
after cancer treatment, despite the high risk of sterility and birth defects
associated with treatments. The Company receives referrals for these services
from multiple sources, primarily physicians.
The Company uses a customized carousel canister system in its sperm bank storage
system. This permits retrieval of specimens from lower levels without removal of
upper specimens.
Most other banks use a "rack and cane" pull-up system, which requires removal of
upper specimens from the tank to retrieve specimens at lower levels. In such a
bank, a specimen may be exposed to a temperature change of -321oF (the
temperature of the liquid nitrogen) to room temperature of 72oF more than 100
times during its storage lifetime. This will result in a gradual degradation of
the specimen. In the Idant system the specimen remains under liquid nitrogen
almost continuously while in storage.
The Company is aware of only one other semen bank, which uses the carousel
system for long-term storage of semen. Idant periodically spot-checks its bank
storage to test viability of selected specimens of stored semen. The results of
these spot-checks have shown sperm samples held in excess of 23 years, at minus
321 degrees, to have almost no loss in viability or change in condition.
Patent and Copyright Protection
The Company has received separate United States patents on its Blood Volume
Analyzer BVA-100(TM) and for its Volumex(TM) injection kit. These are the only
US patents ever issued for an instrument dedicated to the measurement of total
human blood volume for a specific individual. The Company received a European
patent covering 12 countries. The Company received the first patent ever issued
for an instrument in Japan to measure human blood volume. The instrument is
designed to work with an injection kit manufactured by the Company. It is
theoretically possible to use the Blood Volume Analyzer without the kit by
preparing the reagents used for the test. However, the cost and time for such
preparations would be uneconomical and it is unlikely that a purchaser of the
instrument would use it without purchasing the reagent kit. This is the first
U.S. patent ever issued for a system, which permits a fixed quantitative amount
of isotope to be injected for diagnostic purposes. The injection system was
specifically designed for use with the BVA-100(TM). However, it can be used for
other diagnostic test purposes where a precise complete quantitative injection
of a diagnostic reagent is required.
The Company expects to file additional patents for tests associated with the
BVA-100(TM). These include filing a patent for equipment which will automate the
measurement of glomerular filtration rate of the kidney. This is a very
important and sensitive test of kidney function. At the present time this test
is infrequently performed because of the difficulty in the current methodology.
The Company believes that it can automate this process which will make it more
feasible for regular medical use.
A patent will be filed for the measurement of total albumin. Albumin is a major
carrier of human protein in the body. Albumin derangement is common in many
disease states. Burn patients in particular have serious loss of albumin, and
replacement quantities may be difficult to calculate. Patients in congestive
heart failure also frequently have albumin derangements. The ability to measure
total body albumin accurately would be expected to facilitate more precise
therapy.
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 33 years of the Bank's operations, it has never had a mix-up
in any stored specimen.
Marketing
The Company is marketing its Blood Volume Analyzer either on a direct sale,
lease, or an instrument loaner basis to potential users. Primarily, users are
expected to be hospitals, surgi-centers, and imaging centers (radiology). The
Company also has been
9
demonstrating its equipment at major trade shows that relate to the following
departments within hospitals such as Nuclear Medicine, Nuclear Cardiology,
Cardiology, Intensive Care, Trauma, and the ER. The Company recognized after the
initial beta testing that it was important to have the Blood Volume Analyzer at
leading medical institutions. Publications and reports from such institutions
are particularly important for acceptance by the general medical community.
During the past 2 years, a number of leading facilities acquired a Blood Volume
Analyzer. The US News and World Report provides an annual ranking of 6200
Hospitals in the United States. The Mayo Clinic, and The Cleveland Clinic,
ranked respectively 2 and 3 in the annual ranking of hospitals have a
BVA-100(TM). The Cleveland Clinic Cardiovascular Department ranked number 1 in
the US will soon be reporting on over 1000 patients on who blood volume testing
was performed. In addition to these facilities, Vanderbilt Medical Center, and
the New York Hospital Presbyterian Medical Center ranked in the top 20 in the
Annual Survey of Hospitals also have a Blood Volume analyzer. The National
Institutes of Health, the leading US government research agency, has acquired a
Blood Volume Analyzer.
The Company's marketing efforts are focused on documenting the beneficial
effects of blood volume measurement as well as developing cost benefit analysis
studies. Hospitals and health facilities are exceedingly cost conscientious in
regard to acquiring additional medical technology. Blood volume measurement is
an approved and reimbursable Medicare test. Such studies are particularly
important to HMO's which focus on avoiding hospitalization when possible. As
these studies become available, they will be incorporated into the marketing
program of the Company.
In September 2002, the Company hired a National Sales Manager and 3 other
Regional Sales Managers with extensive experience in the medical device and
nuclear medicine field. In the past 9 months, several different sales models
were tested. It was determined that the best model was a National Sales Manager
with regional sales representatives. John Reyes Guerra, one of the original
regional vice presidents was made National Sales Manager. The sales staff was
expanded to 10 sales personnel plus 4 support personnel. As part of the support
system, one sales representative was hired to contact all physicians in the
regions and to assist in marketing efforts. If this concept is successful, the
Company will institute a similar structure in other regions. Working in
conjunction with the existing staff, they have begun to develop the foundations
for an in depth marketing program utilizing the results from major teaching
hospitals. The Company believes that this is the appropriate time to continue
expanding marketing and sales efforts. The Company is also exploring the hiring
of a separate staff to market blood banking services.
The Company's website (http:// www.daxor.com) contains extensive detail about
the BVA-100(TM) Blood Volume Analyzer as well as examples of actual cases (with
patient identities removed). The website permits rapid communication between
marketing personnel and potential users prior to an onsite visit.
Competition
Blood Volume Analyzer
The medical technology market is intensely competitive. However, there are no
direct competing instruments manufactured or marketed that perform rapid
semi-automated blood volume analysis, such as the BVA-100(TM). The Company
believes that its receipt of a United States, European and Japanese patent for
its Blood Volume Analyzer provides significant protection against any future
potential competition in the blood volume analysis field.
The receipt of the U.S. patent for the injection kit system provides significant
additional protection as the Company believes that the kits will be a major
source of revenue. The Company believes that its main hindrance to market
acceptability will be the need to demonstrate that its blood volume measurement
equipment is capable of producing accurate data on a cost effective basis. Test
kit costs will be modest relative to the cost of the critical information
derived from the test. The Company is evaluating the filing of additional
patents in regards to its injection collection kit system for blood volume
analysis.
10
Blood Banking
The Idant frozen blood bank is the only facility that provides long-term
personal frozen blood storage in the Northeastern United States. Multiple
companies which previously attempted to provide long-term personal blood storage
to members of the public were unsuccessful. To date, the Company has not made a
profit from its blood banking services. The Company believes however that
additional technology which enables longer use of frozen blood after it is
stored may enable such services to eventually become sustainable financially and
profitable.
Semen Banking
There are at least 300 sperm banks in the United States operated by either
commercial entities or by academic institutions. The Idant semen bank was the
first semen bank in the State of New York that was accredited by the American
Association of Tissue Banks. There are 10 semen banking organizations in the
United States that have achieved this accreditation. The Company has developed a
web site www.Idant.com, which will be helpful for marketing purposes.
Regulation
The development, testing, production and marketing of medical devices is subject
to regulation by the FDA under the Federal Food, Drug and Cosmetic Act, and may
be subject to regulation by similar agencies in various states and foreign
countries.
The governing statutes and regulations generally require manufacturers to comply
with regulatory requirements designed to assure the safety and effectiveness of
medical devices. The FDA clearance for marketing of the Blood Volume Analyzer,
BVA-100(TM), and the associated quantitative injection kit marks one of the most
important milestones in the history of Daxor. The products manufactured by and
for the Company in regard to the BVA-100(TM) are subject to continuing FDA
regulations and inspections.
The New York State Department of Health regulates the Company's Idant semen and
blood bank within New York State. The Idant Semen Bank and Blood Bank are
divisions of Scientific Medical Systems, which is a subsidiary wholly owned by
the Daxor Corporation. Scientific Medical Systems has its own separate
directors. These facilities are licensed and annually inspected by the New York
State Department of Health.
Employees
On March 24, 2004, the Company had 35 employees. None of the Company's employees
are covered by a collective bargaining agreement. The Company believes that its
employee relations are good.
Item 2. Properties
In December 2002, the Company signed a new thirteen-year lease for its existing
facility at the Empire State Building. The Company has occupied this space since
January 1992. The company currently occupies approximately 7,500 square feet.
The lease has a two year option for renewal after thirteen years. There are
options for an additional 18,000 square feet of space. The Company has a
manufacturing facility in Oak Ridge, Tennessee which is currently manufacturing
the BVA-100(TM) Blood Volume Analyzers.
Item 3. Legal Proceedings
The Company has pending several claims incurred in the normal course of
business, which, in the opinion of management, as well as the advice of outside
legal counsel, there is no merit to these claims nor will they have a material
effect on the financial statements.
11
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 2003.
Part II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock is traded on the American Stock Exchange under the symbol DXR.
2003
High Low
---- ---
First Quarter 16.15 13.86
--------------------------------------------------------------------------------
Second Quarter 16.25 11.60
--------------------------------------------------------------------------------
Third Quarter 17.65 14.50
--------------------------------------------------------------------------------
Fourth Quarter 15.40 13.50
--------------------------------------------------------------------------------
2002
High Low
---- ---
First Quarter 19.65 17.35
--------------------------------------------------------------------------------
Second Quarter 19.00 16.50
--------------------------------------------------------------------------------
Third Quarter 17.50 15.00
--------------------------------------------------------------------------------
Fourth Quarter 16.10 14.00
--------------------------------------------------------------------------------
On February 27 2004, the Company had approximately 201 holders of record of the
Common Stock. The Company believes there are approximately 1600 beneficial
holders.
The Company paid a single cash dividend, $.50, on the Common Stock in 1997. Any
future dividends will be dependent upon the Company's earnings, financial
condition and other relevant factors.
12
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data with
respect to the Company and is qualified in its entirety by reference to the
financial statements and notes thereto, from which these data were derived,
included elsewhere in the report.
Selected Operations Statement Data:
Year Ended December 31,
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Operating revenues $ 1,013,647 $ 767,608 $ 591,692 $ 635,868 $ 500,969
Other revenues 15,571 35,694 166,676 109,920 74,407
Dividend income 1,897,669 1,858,025 1,860,289 1,842,583 1,856,119
Gains on sale of investments 238,550 40,610 97,719 57,399 469,595
----------- ----------- ----------- ----------- -----------
Total revenues 3,165,437 2,701,937 2,716,376 2,645,770 2,901,090
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Operations of laboratories
& costs of production 1,489,264 805,985 814,657 1,052,000 833,751
Selling, general and
administrative 2,644,967 2,028,200 1,412,687 1,429,395 2,016,004
Interest expenses, net
of interest income 83,133 39,257 119,926 198,341 147,105
----------- ----------- ----------- ----------- -----------
Total costs and expenses 4,217,364 2,873,442 2,347,270 2,679,736 2,996,860
----------- ----------- ----------- ----------- -----------
Net loss before
income taxes (1,051,927) (171,505) 369,106 (33,966) (95,770)
Provision for income taxes 24,262 22,346 69,751 21,228 1,360
----------- ----------- ----------- ----------- -----------
Net income/(loss) $(1,076,189) $ (193,851) $ 299,355 $ (55,194) $ (97,130)
=========== =========== =========== =========== ===========
Weighted average number of
shares outstanding 4,647,350 4,662,947 4,664,909 4,675,826 4,721,492
----------- ----------- ----------- ----------- -----------
Net income per common
equivalent share $ (0.23) $ (0.04) $ 0.06 $ (0.01) $ (0.02)
=========== =========== =========== =========== ===========
Selected Balance Sheet Data:
Year Ended December 31,
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Working capital 36,044,529 33,136,421 34,979,217 38,309,247 28,869,309
Total assets 48,300,532 41,573,565 43,540,153 49,575,118 35,846,065
Total liabilities* 11,883,362 8,026,668 8,211,186 10,903,280 6,566,496
Shareholders' equity 36,417,170 33,546,897 35,328,967 38,671,838 29,279,569
Return on equity* 0.00% 0.00% 0.77% 0.00% 0.00%
* Return on equity is calculated by dividing the Company's net income for
the period by the shareholders' equity at the beginning of the period.
* Total liabilities include deferred taxes of $8,531,081 for unrealized
gains.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Year end 2003 was the first time that revenues from Daxor's BVA division
exceeded Idant's revenues. Idant Laboratories subsidiary contributed 45%,58% and
54% of operating revenues in 2003, 2002 and 2001 respectively. The Company's
operations in semen banking and blood banking (laboratories) have received
limited promotion however, the Company has taken steps to increase awareness of
these services. The potential market for the Blood Volume Analyzer is
significantly larger than the Company's current operations. The Company
anticipates that proceeds from Daxor's Blood Volume Analyzer will be the primary
source of revenue in the immediate future. The Company believes that the
potential market for blood volume measurement and analysis is between 15-20
million tests per year. Successful penetration of even a small fraction of the
market would significantly change the Company's structure. The Company intends
to focus its major marketing efforts on the Blood Volume Analyzer.
During fiscal year 2003 and early 2004, Daxor expanded its sales and marketing
staff. The Company intends to increase its marketing efforts to add to its
operational income. Some of the steps the Company had undertaken, such as
consolidating certain manufacturing facilities at Oak Ridge, Tennessee and
simultaneously contracting with an Original Equipment Manufacturer (OEM) will
permit greater economies of scale. The Company's primary focus will be to
increase operating revenues even if this initially results in lower profits or
even a loss.
YEAR ENDED DECEMBER 31, 2003 AS COMPARED TO DECEMBER 31, 2002
Total revenues increased by 17% to $3,165,437 in 2003, up from $2,701,937
reported in 2002. Dividend income earned on the Company's securities portfolio
was $1,897,669 an increase from the $1,858,025 reported in 2002. Gains on the
sale of investments were $238,550 in 2003 as compared to $40,610 in 2002.
Operating revenues increased to $1,013,647 in 2003, an increase of 32% from
$767,608 in 2002. Total costs and expenses increased by 47% to $4,217,364 in
2003 from $2,873,442 in 2002. The increase in operating expenses was primarily
due to increased hiring of personnel and additional marketing and selling
expenses related to the Blood Volume Analyzer. The Company anticipated these
increased operating expenses and intends to continue expanding its marketing and
sales staff. There was a net loss before income taxes of $(1,051,927) in 2003
vs. a loss of ($171,505) in 2002. In 2003, the Company's total assets were
$48,300,532 with loans (short-term) totaling $2,502,106. The Company's asset to
debt ratio in 2003 was 19.3:1. In 2002, the Company's total assets were
$41,573,565 with loans (short-term) totaling $1,434,046. The Company's asset to
debt ratio in 2002 was 29:1.
YEAR ENDED DECEMBER 31, 2002 AS COMPARED TO DECEMBER 31, 2001
Total revenues were $2,701,937 in 2002, down from $2,716,376 reported in 2001.
Dividend income earned on the Company's securities portfolio was $ 1,858,025 a
decrease from the $1,860,289 reported in 2001. Gains on the sale of investments
were $40,610 in 2002 as compared to $97,719 in 2001. Operating revenues
increased to $767,608 in 2002 from $591,692 in 2001. Total cost and expenses
increased to $2,873,442 from $2,347,270 in 2001. This increase was partially
caused by increased hiring of personnel and additional marketing and selling
expenses. There was a net loss before income taxes of ($171,505) in 2002 vs.
$369,106 in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's management has pursued a policy of maintaining sufficient
liquidity and capital resources in order to assure continued availability of
necessary funds for the viability and projected growth of all ongoing projects.
The Company maintains its diversified securities portfolio comprised primarily
of electric utilities preferred and common stocks. The income derived from these
investments has helped to offset the operating and marketing expenses of
developing
14
the Blood Volume Analyzer. The Company has followed a conservative policy of
assuring adequate liquidity so that it can expand its marketing, and research &
development without the necessity of raising additional capital. The securities
in the Company's portfolio were selected to provide stability of both income and
capital.
At December 31, 2003, the Company had $2,502,106 in short-term debt vs.
$1,434,046 in 2002. At year-end 2003, shareholders' equity was $36,417,170. At
year-end 2002, the Company had shareholders' equity of $33,546,897. At December
31, 2003 the Company's security portfolio had a market value of $47,399,159 vs.
$40,573,162 in 2002. In 2002, the Company's sales staff comprised of 4 salesmen
plus 3 support personnel. The Company has recently expanded to 11 sales staff
and 4 support personnel.
In 1998, the Company purchased the assets of Wellport Manufacturing Company in
Rochester, New York. They had previously manufactured the MAX-100(TM) portion of
the injection and collection kit. The Company now manufactures its own
collection kit. The final filling and shipping of the kit is performed by an FDA
licensed radiopharmaceutical manufacturer. In 2000, the Company leased space in
Oak Ridge, Tennessee to manufacture its own BVA-100(TM) Blood Volume Analyzers.
In 2003, the Company anticipated to sell more BVA-100(TM)'s, and therefore
contracted for additional space in Oak Ridge to manufacture the collection kits,
as well as have capacity for final assembly and shipping of the BVA-100(TM)
system. The Company has a separate contract with an Original Equipment
Manufacturer to manufacture additional Blood Volume Analyzers. The Company is
reviewing options to purchase some of the original equipment manufacturers who
provide various parts of the BVA-100(TM) Blood Volume Analyzer system. The
Company experimented on a limited basis with independent medical distributors in
2001- 2003. These marketing attempts did not produce successful results and it
motivated the Company to employ its own dedicated staff for marketing and sales.
The Company believes that as wider acceptance is achieved and blood volume
measurement becomes a standard of care for various surgical and medical
conditions, independent medical distributors may be effective. This will
initially increase expenses faster than revenues, but it is expected to
ultimately result in a more rapid acceptance of the BVA-100(TM) technology.
The Company sells, as well as offers to lease, or rent its Blood Volume Analyzer
BVA-100(TM) as part of an overall marketing plan. The Company, also as part of
its marketing program, will loan an instrument for a limited time period,
however, facilities evaluating the instrument must pay for the kits. The Company
established Daxor Capital with a relationship through De Lage Landen. Based in
the Netherlands, it is one of the largest private banks in the world. De Lage
Landen has extensive experience in capital equipment leasing through its
existing relationships with premier corporations such as Toshiba and Abbott. The
significance of this relationship is as sales through leases increases, Daxor
will not have to diminish its capital outlay for equipment as DLL will fund the
net present value of the lease upon installation of the equipment. In an effort
to obtain the best rates for our clients, the Company will also work with other
independent leasing firms.
The Company is also developing a blood volume laboratory staffing program with
one of its clients. Under such program, the Company may provide management
services as well as equipment services. With respect to blood banking, recent
technological advances have significant potential in proving the safety of blood
banking. A major handicap for the use of frozen blood was the fact that after it
was thawed, the blood had to be used within 24 hours. New technology approved by
the FDA and utilized by the U.S. military, enables blood to be used for up to 2
weeks after it has been thawed. The Company, in addition to its regular frozen
blood banking services, intends to implement this type of program. This type of
program will initially produce a net loss, but the Company believes that there
is sufficient potential demand that such a program will be self sustaining.
Year-end 2003 finds the Company 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 more than adequate to sustain
the additional expenses associated with an expanding sales and marketing
program.
15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is currently not exposed to any risk from currency fluctuations. The
Company's investment portfolio is a major source of revenue. A summary of the
status of this portfolio as of December 31, 2003 is reported on schedule IX (see
F-6). The market value of this portfolio is related to fluctuations with the
electric utility industry. Between 5% and 10% of the Company's portfolio are
non-utilities. The Company will sell puts on stocks that it is willing to own.
The Company neither sells naked calls nor engages in derivative transactions.
Fluctuations in the value of these holdings for the past 5 years are reflected
and closely correlated with changes in the total assets of the Company (see item
6: selected financial data).
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of Daxor Corporation:
We have audited the accompanying consolidated balance sheets of Daxor
Corporation as at December 31, 2003 and 2002, the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2003. Our audits also included the
financial statement schedules listed in the Index at Item F-6 and F-7.
These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Daxor Corporation as at December 31, 2003
and 2002, and the results of their operations and its cash flows for each of the
three years in the period ended December 31, 2003 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
herein.
Frederick A. Kaden & Co.
Brentwood, New York
March 17, 2004
16
Index to Financial Statements and Financial Schedules
Consolidated Financial Statements as at December 31, 2003 and 2002
and for the three years ended December 31, 2003
Balance Sheets F-2
Statements of Income F-3
Statements of Shareholders' Equity F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5
Schedule I-Marketable Securities-Other Investments0Year Ended
December 31, 2003 F-6
Schedule IX- Short-term Borrowings-Years Ended December 31, 2003
2002, and 2001 F-6
Schedule X- Supplementary Income Statement Information Years Ended
December 31, 2003, 2002, and 2001 F-7
17
DAXOR CORPORATION
FINANCIAL STATEMENTS
================================================================================
DAXOR CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2003 2002
------------ ------------
----------------------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 3,324 $ 13,035
Marketable Securities at Fair Value
December 31,2003 and December 31,
2002. (Notes 1 and 2) 47,399,159 40,573,162
Accounts receivable 137,008 211,979
Other current assets 388,400 364,913
------------ ------------
Total Current Assets 47,927,891 41,163,089
EQUIPMENT AND IMPROVEMENTS
Storage tanks 125,815 125,815
Leasehold improvements, furniture
and equipment 931,468 928,581
Laboratory equipment 291,571 290,104
------------ ------------
1,348,854 1,344,500
Less: Accumulated depreciation and amortization 1,045,481 1,005,625
------------ ------------
Net equipment and improvements 303,373 338,875
Other Assets 69,268 71,601
Total Assets $ 48,300,532 $ 41,573,565
============ ============
----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 183,052 $ 112,481
Loans payable (Notes 1 and 2) 2,502,106 1,434,046
Other Liabilities 667,123 106,440
Deferred Taxes (Note 1) 8,531,081 6,373,701
------------ ------------
Total Liabilities 11,883,362 8,026,668
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 10,000,000 shares: issued and
outstanding shares 4,640,026 December 31,
2003 and 4,657,784 December 31, 2002 53,097 53,097
Additional Paid in capital 9,801,548 9,798,232
Net unrealized holding gains
on available-for-sale securities (Note 1) 16,560,334 12,372,477
Retained earnings 15,169,967 16,246,156
Treasury stock (5,167,776) (4,923,065)
------------ ------------
Total Shareholders' Equity 36,417,170 33,546,897
Total Liabilities and Shareholders' Equity $ 48,300,532 $ 41,573,565
============ ============
See accompanying notes to financial statements
(F-2)
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
-------------------------
2003 2002 2001
----------- ----------- -----------
Revenues:
-----------------------------------------------------------------------------------------------
Operating revenues $ 1,013,647 $ 767,608 $ 591,692
Other revenues 15,571 35,694 166,676
Dividend income 1,897,669 1,858,025 1,860,289
Gains on sale of securities 238,550 40,610 97,719
----------- ----------- -----------
Total Revenues 3,165,437 2,701,937 2,716,376
----------- ----------- -----------
-----------------------------------------------------------------------------------------------
Costs and expenses:
-----------------------------------------------------------------------------------------------
Operations of Laboratories & Costs of Production 1,489,264 805,985 814,657
Selling, General, and Administrative 2,644,967 2,028,200 1,412,687
Interest expense, net of interest income 83,133 39,257 119,926
----------- ----------- -----------
Total costs and expenses 4,217,364 2,873,442 2,347,270
----------- ----------- -----------
Net Income/( Loss) before Income Taxes (1,051,927) (171,505) 369,106
Provision for income taxes (Note 9) 24,262 22,346 69,751
----------- ----------- -----------
Net Loss $(1,076,189) $ (193,851) $ 299,355
=========== =========== ===========
Weighted Average Number of Shares Outstanding 4,647,100 4,662,947 4,664,909
----------- ----------- -----------
Net Income per Common Equivalent Share $ (0.23) $ (0.04) $ 0.06
=========== =========== ===========
See accompanying notes to financial statements
================================================================================
DAXOR CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
Three Years Ended December 31, 2003
-----------------------------------
Common stock Additional
Number Paid-in Retained Treasury
of Shares Amount Capital Earnings Stock
--------- ------ ------- -------- -----
--------------------------------------------------------------------------------------------------------------------------------
Balance January 1,2001 4,664,909 $ 53,097 $ 9,798,232 $ 16,140,652 $ (4,813,530)
--------------------------------------------------------------------------------------------------------------------------------
Net income for the year ended
December 31,2001 299,355
--------------------------------------------------------------------------------------------------------------------------------
Balance December 31,2001 4,664,909 $ 53,097 $ 9,798,232 $ 16,440,007 $ (4,813,530)
--------------------------------------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31,2002 $ (193,851)
Purchase of Treasury Stock (7,125) $ (109,535)
--------------------------------------------------------------------------------------------------------------------------------
Balance December 31,2002 4,657,784 $ 53,097 $ 9,798,232 $ 16,246,156 $ (4,923,065)
--------------------------------------------------------------------------------------------------------------------------------
Net loss for the year ended
December 31,2003 $ (1,076,189)
Sale of Treasury Stock 2,142 $ 3,316 $ 27,420
Purchase of Treasury Stock (19,900) $ (272,131)
--------------------------------------------------------------------------------------------------------------------------------
Balance December 31,2003 4,640,026 $ 53,097 $ 9,801,548 $ 15,169,967 $ (5,167,776)
==========================================================--------==============================================================
See accompanying notes to financial statements
F-3
DAXOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2003 2002 2001
----------- ----------- -----------
Cash flows from operating activities:
Net income or (loss) $(1,076,189) $ (193,851) $ 299,355
----------- ----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 47,189 54,453 57,735
(Gain) loss on sale of investments (238,550) (40,610) (97,719)
(Gain) loss on sale of equipment -- (2,750) --
Basis of leased equipment sold 45,000 -- --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 74,971 (37,737) (66,315)
(Increase) decrease in other current assets (23,487) (52,603) 51,448
(Increase) decrease in other assets
net of amortization -- (300) (33,900)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities net of "short sales" 66,471 60,626 11,024
Total adjustments (28,406) (18,921) (77,727)
----------- ----------- -----------
Net cash provided by operating activities (1,104,595) (212,772) 221,628
----------- ----------- -----------
Cash flows from investing activities:
Payment for purchase of equipment and
improvements (54,354) (114,879) (10,994)
Proceeds from sale of equipment -- 2,750 --
Net cash provided or (used) in purchase
and sale of investments (340,893) (517,207) 962,111
Net proceeds (repayments) of loans from
brokers used to purchase investments 868,060 734,046 (775,363)
Proceeds from "short sales" not closed 663,466 98,683 16,128
----------- ----------- -----------
Net cash provided by/(used in) investing activities 1,136,279 203,393 191,882
----------- ----------- -----------
Cash flows from financing activities
Receipt / (repayment) of bank loan 200,000 (300,000) --
Proceeds from sale of treasury stock 30,736
Payment for purchase of treasury stock (272,131) (109,535) --
----------- ----------- -----------
Net cash used in financing activities (41,395) (409,535) --
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (9,711) (418,914) 413,510
Cash and cash equivalents at beginning of year 13,035 431,949 18,439
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,324 $ 13,035 $ 431,949
=========== =========== ===========
See accompanying notes to financial statements
F-4
DAXOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements as of December 31, 2003
and 2002 and for the three years ended December 31, 2003 have been prepared in
conformity with principles of accounting applicable to a going concern. Daxor
Corporation operates in the medical services and technology industry.
The consolidated financial statements include the accounts of the Company
and its subsidiary. All significant inter-company transactions and balances have
been eliminated in consolidation.
(1) MARKETABLE SECURITIES
Upon adoption of FASB No. 115, management has determined that the
company's portfolio is best characterized as "Available-For-Sale". This has
resulted in the balance sheet carrying value of the company's marketable
securities investments, as of December 31, 2003 and December 31, 2002 being
increased approximately 112.48% and 85.89% respectively over its historical
cost. A corresponding increase in shareholders' equity has been effectuated. In
accordance with the provisions of FASB No. 115, the adjustment in shareholders'
equity to reflect the company's unrealized gains has been made net of the tax
effect had these gains been realized. The following tables summarize the
company's investments as of:
December 31, 2003
Type of Unrealized Unrealized
security Cost Fair Value holding gains holding losses
-------- ---- ---------- ------------- --------------
Equity $22,271,842 $47,368,871 $25,407,422 $ 310,393
Debt 35,902 30,288 2,170 7,784
----------------------------------------------------------------
Total $22,307,744 $47,399,159 $25,409,592 318,177
=========== =========== =========== ===========
December 31, 2002
Type of Unrealized Unrealized
security Cost Fair Value holding gains holding losses
-------- ---- ---------- ------------- --------------
Equity $21,796,315 $40,547,587 $19,960,514 $ 1,209,242
Debt 30,669 25,575 8,865 13,959
----------------------------------------------------------------
Total $21,826,984 $40,573,162 $19,969,379 $ 1,223,201
=========== =========== =========== ===========
At December 31, 2003, the securities held by the Company had a market
value of $47,399,159 and a cost basis of $22,307,744 resulting in a net
unrealized gain of $25,091,415 or 112.48% of cost.
At December 31, 2002, the securities held by the Company had a market
value of $40,573,162 and a cost basis of $21,826,984 resulting in a net
unrealized gain of $18,746,178 or 85.89% of cost.
At December 31, 2003 and December 31, 2002, marketable securities, primarily
consisting of preferred and common stocks of utility companies, are valued at
fair value.
F-5
(2) Loans Payable
As at December 31, 2003 and December 31, 2002, the Company had loans
outstanding aggregating $900,000 and $ 700,000 borrowed on a short term basis
from a bank, which are secured by certain marketable securities of the Company.
The loans bear interest at approximately 3.0%.
Short term margin debt due to brokers, secured by the Companies marketable
securities, totaled $1,602,106 at December 31, 2003 and $734,046 at December 31,
2002.
(3) Accounts receivable
Accounts receivable are deemed to be fully collectible.
(4) Equipment and Improvements
Depreciation of equipment and improvements is taken using the straight
line method. For 2003, 2002 and 2001 the charges to income for depreciation
using this method were $47,189, $54,453 and $57,735 respectively.
The cost of maintenance and repairs is charged to expense as incurred. The
cost of betterments and additions are capitalized and depreciated over the life
of the asset. The cost of assets disposed of or determined to be non-revenue
producing, together with the related accumulated depreciation applicable
thereto, are eliminated from the accounts, and any gain or loss is recognized.
(5) Other Liabilities
At December 31, 2003 and December 31, 2002, the Company also maintained a
short position in certain marketable securities. These positions were sold for
$663,466 at December 31, 2003, and $98,683 at December 31, 2002, and had
respective market values of $547,595 and $71,775 resulting in unrealized gains
of $ 115,871 at December 31, 2003 and $26,908 at December 31, 2002.
(6) Commitments and Contingencies
(A) Operating Leases
Future minimum rental payments under non-cancelable operating lease are as
follows:
2004 $229,719
2005 $229,719
2006 $229,719
2007 $229,719
2008 $229,719
Rent expense for all non-cancelable operating leases was $ 281,506,
$239,543 and $386,248 for the years ended December 31, 2003, 2002 and 2001
respectively.
B) Contingent Liabilities
The Company has pending several claims incurred in the normal course of
business, which, in the opinion of management, based on the advice of outside
legal counsel, will not have a material effect on the financial statements.
(7) Research and Development Expenses
Research and development expenses were $348,265, $330,000, and $325,745
for 2003, 2002, and 2001 respectively. All research and development costs are
expensed in the year they occur.
(8) Interest Expense and Income
Interest expense was $86,675, $40,532, and $120,373 and interest income
was $3,542, $1,275 and $447 in 2003, 2002 and 2001 respectively.
F-5
(9) Income Taxes
The following is a reconciliation of the federal statutory tax rate
of 35% for 2003, 2002 and 2001, with the provision for income taxes:
2003 2002 2001
------- ------- -------
Statutory tax rate 0 0 107,774
Tax benefit of NOL -107,774
State and city taxes 24,262 22,346 69,751
------- ------- -------
Provision for income taxes 24,262 22,346 69,751
------- ------- -------
Effective federal tax rate 0% 0% 0%
------- ------- -------
(10) Subsidiaries
Daxor Corporation has formed a wholly owned subsidiary, Scientific Medical
Systems, Inc., which has the operations of the sperm bank, blood bank and
laboratory. The results of operations have been consolidated in these financial
statements.
(11) Stock Options
As of March 17,2004, Daxor Corporation has granted 62,800 stock options
with strike prices ranging from $10.00 to $21.00 per share. Of the 62,800
options only 47,800 are fully vested. The additional 15,000 shares vest 5000
shares per year over the next 3 years. Utilizing the Black-Scholes option
valuation model (American) the net additional expense of the 62,800 stock
options with a current stock price of $14.25 per share would be $6,840. This
amount represents less than 1/10th of $0.01 to the Company's EPS.
F-5
SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
The following tables summarize the company's investments as of:
December 31, 2003
Type of Unrealized Unrealized
Security Cost Fair Value Holding gains holding losses
-------- ---- ---------- ------------- --------------
Equity $22,271,842 $47,368,871 $25,407,422 $ 310,393
Debt 35,902 30,288 2,170 7,784
-----------------------------------------------------------------
Total $22,307,744 $47,399,159 $25,409,592 $ 318,177
=========== =========== =========== ===========
SCHEDULE IX
SHORT-TERM BORROWINGS
Years Ended December 31, 2003, 2002, 2001
---------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
---------------------------------------------------------------------------------------------------------
Weighted
average Maximum Average Weighted
Category of interest amount amount average
aggregate Balance at rate at end outstanding outstanding interest
short-term the end of of the during this during the rates during
borrowings period period period period the period
---------------------------------------------------------------------------------------------------------
2003
---------------------------------------------------------------------------------------------------------
Banks 900,00 3.00% 900,000 883,333 3.00%
---------------------------------------------------------------------------------------------------------
Brokers 1,602,106 3.29% 1,808,910 1,541,733 3.59%
---------------------------------------------------------------------------------------------------------
All Categories 2,502,106 3.24% 2,708,910 2,425,066 3.47%
---------------------------------------------------------------------------------------------------------
2002
---------------------------------------------------------------------------------------------------------
Banks 700,000 4.12% 1,000,000 725,000 4.07%
---------------------------------------------------------------------------------------------------------
Brokers 734,046 4.05% 734,046 568,725 4.15%
---------------------------------------------------------------------------------------------------------
All Categories 1,434,046 4.08% 1,734,046 1,293,725 4.13%
---------------------------------------------------------------------------------------------------------
2001
---------------------------------------------------------------------------------------------------------
Banks 1,000,000 5.7% 1,000,000 1,000,000 6.95%
---------------------------------------------------------------------------------------------------------
Brokers 0 6.12% 1,054,607 678,343 6.01%
---------------------------------------------------------------------------------------------------------
All Categories 1,000,000 5.91% 2,054,607 1,678,343 6.54%
---------------------------------------------------------------------------------------------------------
The average borrowings were determined on the basis of the amounts outstanding
at each month-end. The weighted interest rate during the year was computed by
dividing actual interest expense in each year by average short-term borrowings
in such year.
F-6
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
--------------------------------------------------------------------------------
COLUMN A COLUMB B
--------------------------------------------------------------------------------
Item Charged to costs and expenses
---- Year ended December 31,
-----------------------
2003 2002 2001
------- ------- -------
Maintenance and repairs $ * $ * $ *
Depreciation and amortization
of intangible assets pre-
operating costs and
similar deferrals 47,189 54,453 57,735
Taxes, other than payroll and
income taxes * * *
Royalties -- -- --
Advertising costs * * *
--------------------------------------------------------------------------------
* less than 1% of total revenues for the year.
--------------------------------------------------------------------------------
F-7
Item 9. Changes and Disagreements with Accountants on Accounting and Financial
Disclosure
There were no changes in and disagreements with accountants on accounting and
financial disclosures.
Item 9A. Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 13a-14 under the Securities
and Exchange of 1934, as amended. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Company's
periodic SEC filings.
There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
Part III.
Item 10. Directors and Executive Officers of the Registrant
The information required by item 10 is incorporated by reference to our proxy
statement for our 2004 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2003 year end.
Item 11. Executive Compensation
The information required by item 11 is incorporated by reference to our proxy
statement for our 2004 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2003 year end.
Item 12. Security Ownership of Certain Beneficial Owners and Management Related
Shareholder Matters
This information required by item 12 is incorporated by reference to our proxy
statement for our 2004 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2003 year end.
Item 13. Certain Relationships and Related Transactions
There are no relationships or related transactions beyond those which have been
disclosed in the 10-K.
Item 14. Principal Accountant Fees and Services
The information required by item 14 is incorporated by reference to our proxy
statement for our 2004 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2003 year end.
18
Part IV
Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a)(1) LIST OF FINANCIAL STATEMENTS
The following financial statements are included herein under Part II, Item 8,
Financial Statements and Supplementary Data:
o Independent Auditor's Report
o Consolidated Financial Statements as at December 31,2003 and 2002 and for
the three years ended December 31, 2003, 2002, and 2001
o Consolidated Balance Sheets- December 31, 2003 and 2002
o Consolidated Statements of Income for the years ended December 31, 2003,
2002, and 2001
o Statements of Shareholder's Equity for the Three years ended December 31,
2003
o Consolidated Statement of Cash Flows for the years ended December 31,
2003, 2002 and 2001
o Notes to Consolidated Financial Statements
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES
o Schedule I- Marketable Securities-Other Investments-Year Ended December
31, 2003
o Schedule IX- Short-term Borrowings-Years Ended December 31, 2003, 2002,
and 2001
o Schedule X- Supplementary Income Statement Information- Years Ended
December 31,2003, 2002,and 2001
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, are not applicable, or information required is not
included in the financial statements or notes thereto and, therefore, have been
omitted.
(3) LIST OF EXHIBITS
Description of Exhibits
31.1 Certification by Principal Executive Officer Pursuant to Securities
Exchange Act Rule 13a-14
31.2 Certification of Principal Accounting Officer Pursuant to Securities
Exchange Act Rule 13a-14
32.1 Certification by Joseph Feldschuh, MD pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification by Stephen Feldschuh pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
There were no Reports on Form 8-K.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
DAXOR CORPORATION
by: /s/ Joseph Feldschuh
------------------------
Joseph Feldschuh, M.D
President and Principal
Executive Officer
Chairman of the Board
Dated: March 26,2004
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Joseph Feldschuh President and Director March 26, 2004
-------------------------- Principal Executive Officer
Joseph Feldschuh, M.D.
/s/ Stephen Feldschuh Vice President of Operations March 26, 2004
-------------------------- & Principal Accounting Officer
Stephen Feldschuh
/s/ Gary Fischman, PhD Vice President March 26, 2004
--------------------------
Gary Fischman, PhD
/s/ Liliya Morgaylo Corporate Treasurer March 26, 2004
--------------------------
Liliya Morgaylo
/s/ Diane M. Meegan Corporate Secretary March 26, 2004
--------------------------
Diane M. Meegan
/s/ Robert Willens Director March 26, 2004
--------------------------
Robert Willens
/s/ James Lombard Director March 26, 2004
--------------------------
James Lombard
/s/ Martin Wolpoff Director March 26, 2004
--------------------------
Martin Wolpoff
/s/ Bruce Slovin Director March 26, 2004
--------------------------
Bruce Slovin
Board of Directors:
Name Title
Dr. Joseph Feldschuh Chairman, President, & CEO
James Lombard Director
Martin Wolpoff Director
Robert Willens Director
Bruce Slovin Director
20