Financial
Statements
For
the Year Ended
December
31, 2020
Table
of Contents
Exhibits
Daxor
Corporation
February
25, 2021
Dear
Fellow Shareholder:
I
am pleased to report that 2020 was a year of many accomplishments for the Company in the areas of financial performance, commercialization
of our products, groundbreaking research and development, and new prospective medical trials for the use of our diagnostic product
in the management of critical care, COVID-19, and heart failure with leading institutions. The Company has been awarded supply
contracts for our next-generation patent-pending blood volume analyzer system which has both military and civilian utility as
well as a cooperative research agreement by The US Department of Defense. The Company has also received additional support for
its next-generation analyzer from a highly-competitive grant funded by the National Institutes of Health for 2021 and was a featured
company by the Sepsis Alliance at its inaugural 2020 national meeting. Exciting research showing the extremely cost-effective
value of our diagnostic was presented at the 2020 Heart Failure Society of America (“HFSA”) meeting among the more
than half a dozen research outcomes utilizing Daxor’s technology over the course of the year. Key hires to lead the commercialization
team led to new distributor agreements and the ramping up of both sales and clinical support staff for the company. All of these
developments have taken place against a backdrop of the challenging conditions of the COVID-19 pandemic which disrupted supply
chain, caused massive global casualties, shut down economies, and limited the ability of hospitals to provide urgently needed
routine care to patients. It was with dedication to the thousands of patients we serve every year that the Company rose to the
challenge and thrived in this difficult environment, providing diagnostic testing for ICU’s filled with COVID-19 patients,
as well as heart failure and a variety of other conditions that are optimally managed with our diagnostic test.
Beginning
with financial performance, the Company is pleased to report a 50.4 percent increase in the unaudited revenues of our blood
volume diagnostic operating division and an asset value growth of 48 cents per share for the Company. The Company’s
share price rose 33.0% over the course of the year, outperforming the overall rise in the market of US stocks of 15.5% and
small caps 18.5% despite intense volatility in asset prices and an impaired market conditions due to COVID disruptions.
Revenue growth was driven by a combination of the sale and leasing of our capital equipment to hospitals and orders for our
single-use blood volume diagnostics kits for critical care (including COVID-19 management) as well as other indications and
additionally by orders from The US Department of Defense as well as third-party companies contracting with Daxor to conduct
blood volume analysis on their products.
At
December 31, 2020, Daxor had net assets of $15,675,186 or $3.89 per share, a 14% increase of $0.48 per share from the $3.41 per
share value reported at December 31, 2019. For the year ended December 31, 2020, Daxor had dividend income of $262,938, net realized
losses on investments of $1,140,264, and net realized gains from options hedging of $778,881. There was a net change in the unrealized
depreciation on investments, options and securities borrowed of $1,581,557 as the COVID-19 pandemic had a significant negative
impact on the markets worldwide in the early part of the year. There was a net realized loss from the operating division relating
to spend on research, development, sales and overhead of $2,709,397 as the Company ramped up investment in research and development,
commercial sales teams, as well as production facilities for our next generation blood volume analyzers which are anticipated
to be coming to market over the next twelve months.
During the year ended December 31, 2020,
under the previously issued registration statement, the Company sold in the open market to institutional investors 265,352 shares
of the Company’s stock. The sales were completed in two offerings. In March 2020, the Company sold 140,352 shares at a price
of $14.25 per share with net proceeds to the Company of $1,762,115. In July 2020 the Company sold 125,000 shares at a price of
$20.00 per share with net proceeds to the Company of $2,273,991. No warrants were issued as part of either transaction.
Accelerating
commercialization is a priority for Company management, and in this area Jean Oertel, VP is leading the way. Jean, a veteran from
both Medtronic and Sensionics, has focused on building out the sales and clinical support team. To amplify the reach of our products,
new distribution agreements have been signed with 3rd party distributors to reach hospitals that are not covered by Daxor’s
own reps. Daxor achieved the coveted ISO 13485 certification in February of this year, which paves the way for international distributors
to also sell our product in the near future; a multi-channel distribution model is anticipated to increase our sales and generate
further awareness of our products and their benefit in a diverse range of medical conditions for both in-patient and out-patient
care.
Further
improving the attractiveness of the Company’s offerings is new data presented at the October 2020 HFSA meeting showing that
the blood volume analysis guided by Daxor’s BVA-100 is five times more “cost-effective” than the benchmark for
the standard of “good value” in the metric of health care economics. The Company is able to generate compelling financial
models which leverage this data for further evidence that not only does the BVA-100 reduce hospitalized heart failure mortality
by over 82% on a 30 day and 365 day basis based upon previous published peer-reviewed research, but that it does so at a cost
which is a fraction of other interventions that are currently administered at hospitals across the country.
Even
as evidence of cost-effectiveness and clinical utility builds around the current BVA-100 analyzer, Company management has also
prioritized the accelerated research and development of the next generation of point of care blood volume analyzers, operating
out of Daxor’s fully-owned state-of-the-art 20,000 square foot research and production facility in Oak Ridge, Tennessee
(“DORO”). The US Department of Defense and the Center for Advancing Point of Care Technology (funded by The National
Institutes of Health) have awarded the Company four contract awards for Daxor’s next generation blood volume analyzer. This
device will be a significant leap forward in capabilities compared to the current BVA-100. The next generation device is designed
to be portable, three times faster, simpler, and able to operate in areas that a test requiring a lab to analyze results is just
not practical. Daxor was awarded these highly competitive contracts on the basis of its proposals showing not only revolutionary
technology but also our ability to successfully develop and commercialize diagnostics in this area where the company has over
40 years of experience as the global leader in Blood Volume analysis technology. The company applied for 6 new patents in 2020
covering aspects of the new system as well as further applications of blood volume measurement and its treatment paradigms. Management
anticipates that a similar number of new patents will also be filed in 2021 as R&D accelerates and new technologies are being
developed based upon contracts that have been awarded and partnerships with 3rd party technology accelerators have been signed.
. The Company has added engineering, scientific, and production personnel to accelerate the development of new products at its
highly-cost effective DORO facility instead of out-sourcing to expensive and slower contract research organizations and anticipates
that investment in this area will accelerate this fiscal year as we develop highly-valuable patentable technology to drive growth
and partnerships in years to come.
2020
also saw the initiation and continuation of research studies utilizing Daxor’s BVA for patient care. NYU Langone Health
initiated an ongoing multi-center study of BVA for COVID-19 patients hospitalized in the ICU. This study which is ongoing at three
hospital centers and is poised to add a fourth as the Company anticipates outcomes to be published this year. In addition, Duke
University has initiated a Prospective Randomized Control Trial for the treatment of heart failure guided by BVA. This study will
add to the ongoing evidence regarding the benefits of BVA for heart failure use, an area that the Company has focused on with
increasing evidence of both the clinical and financial benefit for improving outcomes. The prospective trial initiated in partnership
with CHF Solutions, a Minnesota-based company which specializes in precision fluid removal technology is continuing for the utilization
of BVA to guide ultrafiltration/aquapheresis, although enrollment was slowed due to the pandemic limiting patient access. Research
presented at the Society for Critical Care Medicine in 2020 supported the uniqueness and accuracy of BVA to assess patient volume
status in the ICU, this area is also a growing part of the Company’s business.
The
strong trend of healthcare is toward individualized care and cost-effectiveness. Our BVA diagnostic is a non-invasive, inexpensive,
and rapid blood test which allows care teams to solve the significant challenge of accurately managing the fluid levels of patients,
whether it is in the heart failure clinic or the ICU, and studies published and presented are proving just how exciting the potential
for this approach is. Reducing mortality, lowering complications, reducing hospital resource use and length of stay with a non-invasive
and 98% accurate test is achievable with our patented technology. Just as exciting is the next-generation of products that are
in our development pipeline slated for completion this year which should further enhance the accessibility of our test and open
it up to both government as well as civilian hospital systems on an international scale.
Daxor
has been reporting as an investment company under the Investment Company Act of 1940 since January 1, 2012. See the Notes to the
Financial Statements of Form N-CSR for further information on Daxor’s strategies and goals regarding its investments in
publicly traded securities, to help fund its diagnostic operations. Because of its significant holding of publicly traded securities,
the SEC currently classifies Daxor as a closed-end investment management company with a fully-owned medical operating division;
however, the primary focus of management is on our operational objectives. Daxor anticipates that as the value of the operating
company continues to increase as a percentage of assets owned, it will be eligible to file under its previous designation as an
operating company and report as an operating company, and will take steps to accomplish this result.
Any
shareholder who is interested in learning more about our medical instrumentation and biotechnology operations should visit our
website at www.daxor.com or contact our investor relations representative Bret Shapiro of CORE IR at 516-222-2560 for more detailed
information. We periodically issue press releases regarding research reports and placements of the BVA-100 Blood Volume Analyzer
in hospitals.
Go
Paperless with E-Delivery
In
order to sign up for electronic delivery of shareholder reports and prospectuses, please send an email to info@daxor.com.
If you do not hold your account directly with Daxor, please contact the firm that holds your account about electronic delivery.
Cordially
Yours,
Michael
Feldschuh
CEO
and President
Daxor
Corporation
Statement
of Assets and Liabilities
December
31, 2020
Assets:
|
|
|
|
|
Investments
in securities, at fair value (cost of $2,002,115)
|
|
$
|
6,871,885
|
|
Investment
in operating division, at fair value (cost of $3,118,857)
|
|
|
8,800,000
|
|
Receivables
from broker:
|
|
|
|
|
Restricted
cash
|
|
|
617,800
|
|
Dividends
receivable
|
|
|
29,298
|
|
Tax
credits receivable, prepaid taxes and other assets
|
|
|
233,892
|
|
Total
Assets
|
|
|
16,552,875
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Margin
loans payable
|
|
|
170,689
|
|
Securities
sold short, at fair value (proceeds $561,881)
|
|
|
627,000
|
|
Accounts
payable and accrued expenses
|
|
|
80,000
|
|
Total
Liabilities
|
|
|
877,689
|
|
|
|
|
|
|
Net
Assets
|
|
$
|
15,675,186
|
|
|
|
|
|
|
Net
Asset Value, (10,000,000 shares authorized, 5,316,530 issued and 4,033,877 shares outstanding of $0.01 par value capital stock
outstanding)
|
|
$
|
3.89
|
|
Net
Assets consist of:
|
|
|
|
|
Capital
paid in
|
|
$
|
11,438,156
|
|
Total
distributable earnings
|
|
|
14,860,033
|
|
Treasury
Stock
|
|
|
(10,623,003
|
)
|
Net
Assets
|
|
$
|
15,675,186
|
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Statement
of Operations
For
the Year Ended December 31, 2020
Investment
Income:
|
|
|
|
|
Dividend
income (net of foreign withholding taxes of $1,982)
|
|
$
|
262,938
|
|
Other
income
|
|
|
1,502
|
|
Total
Investment Income
|
|
|
264,440
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
Investment
administrative charges
|
|
|
554,424
|
|
Dividend
expense
|
|
|
103,700
|
|
Professional
fees
|
|
|
39,100
|
|
Transfer
agent fees
|
|
|
28,292
|
|
Interest
expense
|
|
|
8,402
|
|
Other
taxes
|
|
|
8,856
|
|
Total
Expenses
|
|
|
742,774
|
|
|
|
|
|
|
Net
Investment(Loss)
|
|
|
(478,334
|
)
|
|
|
|
|
|
Realized
and Unrealized Gain (Loss) on Investments and Other items:
|
|
|
|
|
Net
realized (loss) from investments in securities and securities sold short
|
|
|
(1,140,264
|
)
|
Net
realized gain from options
|
|
|
778,881
|
|
Net
change in unrealized (depreciation) on investments, options and securities borrowed
|
|
|
(1,581,557
|
)
|
Net
change in unrealized appreciation on operating division
|
|
|
3,400,000
|
|
Realized
loss on investment in operating division
|
|
|
(2,709,397
|
)
|
Net
Realized and Unrealized Loss on Investments and Investment in Operating Division
|
|
|
(1,252,337
|
)
|
|
|
|
|
|
Income
tax (benefit)
|
|
|
(25,280
|
)
|
|
|
|
|
|
Net
(Decrease) in Net Assets Resulting From Operations
|
|
$
|
(1,705,391
|
)
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Statement
of Changes in Net Assets
|
|
Year
Ended
December
31, 2020
|
|
|
Year
Ended
December
31, 2019
|
|
Decrease
in Net Assets Resulting from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment loss
|
|
$
|
(478,334
|
)
|
|
$
|
(144,050
|
)
|
Net
realized (loss) from investments in securities and securities sold short
|
|
|
(1,140,264
|
)
|
|
|
3,650,223
|
|
Net
realized gain from options
|
|
|
778,881
|
|
|
|
38,226
|
|
Net
change in unrealized (depreciation) on investments, options and securities borrowed
|
|
|
(1,581,557
|
)
|
|
|
(1,462,849
|
)
|
Net
change in unrealized appreciation on operating division
|
|
|
3,400,000
|
|
|
|
(250,000
|
)
|
Realized
loss on investment in operating division
|
|
|
(2,709,397
|
)
|
|
|
(2,327,247
|
)
|
Income
tax benefit
|
|
|
25,280
|
|
|
|
-
|
|
Net
Decrease in Net Assets Resulting From Operations
|
|
|
(1,705,391
|
)
|
|
|
(495,697
|
)
|
|
|
|
|
|
|
|
|
|
Capital
Share Transactions:
|
|
|
|
|
|
|
|
|
Proceeds
from treasury stock sold
|
|
|
4,036,106
|
|
|
|
-
|
|
Proceeds
from the exercise of stock options
|
|
|
201,195
|
|
|
|
-
|
|
Increase
in net assets resulting from stock-based compensation
|
|
|
377,607
|
|
|
|
199,358
|
|
|
|
|
|
|
|
|
|
|
Net
Increase in Net Assets Resulting From Capital Share Transactions
|
|
|
4,614,908
|
|
|
|
199,358
|
|
|
|
|
|
|
|
|
|
|
Total
Net Increase (Decrease) in Net Assets
|
|
|
2,909,517
|
|
|
|
(296,339
|
)
|
|
|
|
|
|
|
|
|
|
Net
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period
|
|
|
12,765,669
|
|
|
|
13,062,008
|
|
|
|
|
|
|
|
|
|
|
End
of Period (including undistributed net investment income of $6,380,024 in 2020 and $6,941,975 in 2019 included in net assets)
|
|
$
|
15,675,186
|
|
|
$
|
12,765,669
|
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Statement
of Cash Flows
For
the Year Ended December 31, 2020
Cash
flows from operating activities:
|
|
|
|
|
Net
decrease in net assets resulting from operations
|
|
$
|
(1,705,391
|
)
|
Adjustment
to reconcile net decrease in net assets resulting from operations to net cash used in operating activities:
|
|
|
|
|
Net
realized loss from investments in securities and securities sold short
|
|
|
1,140,264
|
|
Net
realized gain from options
|
|
|
(778,881
|
)
|
Net
change in unrealized depreciation on investments, options and securities borrowed
|
|
|
1,581,557
|
|
Net
change in unrealized appreciation of operating division
|
|
|
(3,400,000
|
)
|
Investment
in/advances to operating division
|
|
|
(2,709,397
|
)
|
Realized
loss on operating division
|
|
|
2,709,397
|
|
Purchases
of securities
|
|
|
(893,045
|
)
|
Proceeds
from sales of securities
|
|
|
1,608,066
|
|
Proceeds
from securities borrowed at fair value
|
|
|
16,568,139
|
|
Payments
to cover securities borrowed at fair value
|
|
|
(16,915,228
|
)
|
Stock
based compensation expense
|
|
|
377,607
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
Decrease
in dividends receivable
|
|
|
3,440
|
|
Increase
in tax credit receivable, prepaid taxes and other assets
|
|
|
(35,418
|
)
|
Increase
in accounts payable and accrued expenses
|
|
|
1,250
|
|
Net
cash used in operating activities
|
|
|
(2,447,640
|
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Proceeds
from margin loan payable
|
|
|
3,025,433
|
|
Repayment
of margin loan payable
|
|
|
(4,197,294
|
)
|
Proceeds
from sale of treasury stock
|
|
|
4,036,106
|
|
Proceeds
from the exercise of stock options
|
|
|
201,195
|
|
Net
cash provided by financing activities
|
|
|
3,065,440
|
|
|
|
|
|
|
Net
change in cash and restricted cash
|
|
$
|
617,800
|
|
Cash
and restricted cash at beginning of year
|
|
|
-
|
|
Cash
and restricted cash at end of year
|
|
$
|
617,800
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
$
|
3,566
|
|
|
|
|
|
|
Interest
on margin loan payable
|
|
$
|
8,402
|
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Financial
Highlights
The
table below sets forth financial data for weighted average shares of stock outstanding for each year and for one share of capital
stock outstanding throughout the years presented. The total investment return does not reflect sales load.
|
|
Year
Ended
December 31, 2020
|
|
|
Year
Ended
December 31, 2019
|
|
Net
Asset Value Per Share, Beginning of Year
|
|
$
|
3.41
|
|
|
$
|
3.49
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
Net
investment (loss) income
|
|
|
(0.08
|
)
|
|
|
(0.03
|
)
|
Net
realized and unrealized (loss)gain from investments, options and securities borrowed
|
|
|
(0.32
|
)
|
|
|
0.59
|
|
Net
realized and unrealized gain (loss) from operating division
|
|
|
0.11
|
|
|
|
(0.69
|
)
|
Other
|
|
|
0.01
|
|
|
|
0.01
|
|
Total
loss from Operations
|
|
|
(0.28
|
)
|
|
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
Capital share
transactions:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of treasury stock and exercise of stock options
|
|
|
0.70
|
|
|
|
-
|
|
Increase
in net assets from stock based compensation
|
|
|
0.06
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) in Net Asset Value Per Share
|
|
|
0.48
|
|
|
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
Net
Asset Value Per Share, End of Year
|
|
$
|
3.89
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
Market Price
Per Share of Common Stock, Beginning of Year
|
|
$
|
9.40
|
|
|
$
|
8.20
|
|
Market
Price Per Share of Common Stock, End of Year
|
|
$
|
12.50
|
|
|
$
|
9.40
|
|
Change
in Price Per Share of Common Stock
|
|
$
|
3.10
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
Total
Investment Return
|
|
|
32.98
|
%
|
|
|
14.63
|
%
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
3,935,902
|
|
|
|
3,746,858
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, End of Year (in 000’s)
|
|
$
|
15,675
|
|
|
$
|
12,766
|
|
|
|
|
|
|
|
|
|
|
Ratio
of total expenses to average net assets
|
|
|
5.79
|
%
|
|
|
4.26
|
%
|
|
|
|
|
|
|
|
|
|
Ratio
of net investment (loss) income after income taxes to average net assets
|
|
|
(3.53
|
)%
|
|
|
(1.12
|
)%
|
|
|
|
|
|
|
|
|
|
Portfolio
turnover rate
|
|
|
12.54
|
%
|
|
|
0.00
|
%
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Financial
Highlights (continued)
|
|
Year
Ended December 31, 2018
|
|
|
Year
Ended
December 31, 2017
|
|
|
Year
Ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value Per Share, Beginning of Year
|
|
$
|
3.68
|
|
|
$
|
4.04
|
|
|
$
|
3.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
0.00
|
|
|
|
0.07
|
|
|
|
0.03
|
|
Net
realized and unrealized gain (loss) from investments, options and securities borrowed
|
|
|
0.03
|
|
|
|
0.23
|
|
|
|
0.56
|
|
Net
realized and unrealized loss from operating division
|
|
|
(0.36
|
)
|
|
|
(0.62
|
)
|
|
|
(0.21
|
)
|
Income
tax (expense) benefit
|
|
|
0.09
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
0.05
|
|
|
|
(0.01
|
)
|
|
|
(0.05
|
)
|
Total
income (loss) from Investment Operations
|
|
|
(0.19
|
)
|
|
|
(0.33
|
)
|
|
|
0.33
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to shareholders from net investment income
|
|
|
(0.00
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in Net Asset Value Per Share
|
|
|
(0.19
|
)
|
|
|
(0.36
|
)
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value Per Share, End of Year
|
|
$
|
3.49
|
|
|
$
|
3.68
|
|
|
$
|
4.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price
Per Share of Common Stock, Beginning of Year
|
|
$
|
4.57
|
|
|
$
|
8.24
|
|
|
$
|
7.60
|
|
Market
Price Per Share of Common Stock, End of Year
|
|
|
8.20
|
|
|
|
4.57
|
|
|
|
8.24
|
|
Change
in Price Per Share of Common Stock
|
|
$
|
3.63
|
|
|
$
|
(3.67
|
)
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investment Return
|
|
|
79.43
|
%
|
|
|
(44.54
|
)%
|
|
|
8.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
3,741,954
|
|
|
|
3,767,756
|
|
|
|
3,825,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, End of Year (in 000’s)
|
|
$
|
13,062
|
|
|
$
|
13,758
|
|
|
$
|
15,344
|
|
Ratio
of total expenses to average net assets
|
|
|
3.14
|
%
|
|
|
1.90
|
%
|
|
|
2.44
|
%
|
Ratio
of net investment income before income taxes to average net assets
|
|
|
0.07
|
%
|
|
|
1.89
|
%
|
|
|
0.86
|
%
|
Ratio
of net investment (loss) income after income taxes to average net assets
|
|
|
2.55
|
%
|
|
|
1.72
|
%
|
|
|
0.78
|
%
|
Portfolio
turnover rate
|
|
|
0.52
|
%
|
|
|
3.63
|
%
|
|
|
7.59
|
%
|
The
accompanying notes are an integral part of these financial statements.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
1.
Organization and Investment Objective
Daxor
Corporation (the “Company”) is registered under the Investment Company Act of 1940, as amended, as a diversified,
closed-end management investment company.
The
Company qualifies as a “controlled company” under NYSE American LLC rules, as the estate of Joseph Feldschuh, M.D.
controls more than 50% of the Company’s voting power, as evidenced by the Company’s ownership records. The estate
owns 63.2% of the outstanding shares. As a result, the estate has the ability to control the outcome on any matter requiring the
approval of shareholders of the Company.
The
Company’s investment goals, objectives and principal strategies are as follows:
A.
|
The
Company’s investment goals and objectives 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 from the Company’s Operating
Division.
|
|
|
B.
|
In
order to achieve these goals, the Company maintains a diversified securities portfolio comprised primarily of electric utility
company 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 net short position is the total fair market value of the Company’s short positions reduced
by the amount due to the Company from the Broker. If the amount due from the Broker is more than the fair market value of
the short positions, the Company will have a net receivable from the Broker. The Company’s investment policy is to maintain
a minimum of 80% of its portfolio in equity securities of utility companies. 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.
|
2.
Significant Accounting Policies
Basis
of Presentation and Use of Estimates
The
Company is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB)
Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America (“GAAP”), including, but not limited to,
ASC 946. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate;
however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements
may differ from the value ultimately realized upon sale or maturity.
The
following is a summary of significant accounting policies consistently followed by the Company in the preparation of its financial
statements.
Valuation
of Investments
The
Company carries its investments in securities at fair value and utilizes various methods to measure the fair value of its investments
on a recurring basis. Fair value is an estimate of the exit price, representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement
date). Fair value measurements are not adjusted for transaction costs. GAAP establishes a hierarchy that prioritizes inputs to
valuation methods. The three levels of inputs are:
Level
1- Unadjusted quoted prices in active markets for identical assets and liabilities that the Company has the ability to access.
Level
2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for
similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level
3 - Unobservable inputs for an asset or liability, to the extent relevant observable inputs are not available; representing
the Company’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and
would be based on the best information available.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
2.
Significant Accounting Policies - (continued)
Valuations
of Investments (continued)
The
availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including,
for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets,
and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment
exercised in determining fair value is greatest for instruments categorized in Level 3.
The
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the
fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input
that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in those securities.
Investments
in securities, securities borrowed and put and call options that are freely traded and are listed on a national securities exchange
are valued at the last reported sales price on the last business day of the year; securities traded on the over-the-counter market
and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked
prices.
The
Company establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorized
within Level 3 of the fair value hierarchy are fair, consistent, and verifiable. At December 31, 2020, Level 3 investments consist
solely of the Company’s investment in its wholly owned Operating Division at fair value. The Company’s Audit Committee
oversees the valuation process of the Company’s Level 3 investments. The Audit Committee is comprised of members of the
Company’s Board of Directors and is responsible for the valuation processes and procedures and evaluating the overall fairness
and consistent application of the valuation policies. For this valuation process the Audit Committee meets semi-annually or as
needed, and in conjunction with reports from an independent valuation company determines the valuations of the Company’s
Level 3 investments. Valuations determined by the Audit Committee are required to be supported by the independent valuation company
whose reports may include information such as market data, third-party pricing sources; industry accepted pricing models, counterparty
prices, or other appropriate methods. On an annual basis, the Company engages the services of an independent valuation company
to perform an independent review of the valuation of the Company’s investment in its wholly owned Operating Division, and
may adjust its valuations based on the recommendations from the valuation firm.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
2.
Significant Accounting Policies - (continued)
Valuation
of Derivative Instruments
The
Company accounts for derivative instruments under FASB ASC 815, “Derivatives and Hedging,” which establishes accounting
and reporting standards requiring that derivative instruments be recorded in the statement of assets and liabilities at fair value.
The changes in the fair values of derivatives are included in the statements of operations as a component of net realized and
unrealized loss from investments.
Investment
Transactions and Income and Expenses
Investment
transactions are accounted for on the trade date. Realized gains and losses on sales of investments are calculated on the basis
of identifying the specific securities delivered. Dividend income and expense are recorded on the ex-dividend date, and interest
income is recognized on the accrual basis. Expenses are recorded on an accrual basis.
Distributions
Net
investment income and net realized gains are accumulated within the Company and used to pay expenses, to make additional investments
or held in cash as a reserve and at the discretion of the Company, to pay dividends to shareholders.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC” topic 606). The new
revenue recognition guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The guidance requires an entity to follow a five step model to (a) identify the contract(s) with a customer, (b)
identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price
to the performance obligations in the contract, and (e) recognize revenue when the entity satisfies a performance obligation.
The
Company recognizes revenues in the Operating Division from product sales when a product is shipped and recognizes revenue from
service contracts as the revenues are earned over the life of service contract and performance obligations are met.
Income
Taxes
The
Company accounts for income taxes under the provisions of FASB ASC 740, “Income Taxes.” This pronouncement requires
recognition of deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the
year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes
in tax rates is recognized in the statement of operations in the period in which the enactment rate changes. Deferred tax assets
and liabilities are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it
is more likely than not that the deferred tax assets will not be realized.
The
Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, “Accounting for Uncertainties
in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
2.
Significant Accounting Policies - (continued)
Treasury
Stock
Treasury
stock is recorded under the cost method and shown as a reduction of net assets.
3.
Fair Value Measurements of Investments, Financial Instruments and Related Risks
The
following tables summarize the inputs used as of December 31, 2020 for the Company’s assets and liabilities measured at
fair value on a recurring basis at December 31, 2020, categorized by the above mentioned fair value hierarchy and also by denomination:
Assets
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Common
Stocks
|
|
$
|
6,416,310
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,416,310
|
|
Preferred
Stocks
|
|
|
455,575
|
|
|
|
-
|
|
|
|
-
|
|
|
|
455,575
|
|
Investment
in Operating Division
|
|
|
-
|
|
|
|
-
|
|
|
|
8,800,000
|
|
|
|
8,800,000
|
|
Total
|
|
$
|
6,871,885
|
|
|
$
|
-
|
|
|
$
|
8,800,000
|
|
|
$
|
15,671,885
|
|
Liabilities
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Securities
sold short, at fair value
|
|
$
|
627,000
|
|
|
|
|
|
|
|
|
|
|
$
|
627,000
|
|
The
Company purchases equity securities in the form of common and preferred stocks, primarily in the utility sector which historically
have a high degree of safety and pays dividends. The common and preferred stocks are recorded at fair value at the unadjusted
closing quoted price on active securities markets.
Purchased
call and put options: When the Company purchases an option; an amount equal to the premium paid by the Company is recorded as
an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market
value of the option purchased. If the purchased option expires, the Company realizes a loss equal to the amount of premium paid.
When an instrument is purchased or sold through the exercise of an option, the related premium paid is added to the basis of the
instrument acquired or deducted from the proceeds of the instrument sold. The risk associated with purchasing put and call options
is limited to the premium paid.
Written
call and put options: When the Company writes (sells) an option, an amount equal to the premium received by the Company is recorded
as an obligation on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market
value of the written option. If the written option expires, the Company realizes a gain equal to the amount of premium received.
When an instrument is purchased or sold through the exercise of an option, the related premium received is adjusted to the basis
of the instrument acquired or the instrument sold. The risk associated with writing options is based on the difference between
the strike price of the option and current market price of the underlying security less premium received. See Note 7 for further
discussion of Investment and Market Risk Factors and risks of written call and put options.
Securities
sold short: The Company sells securities that it does not own, and it will therefore be obligated to purchase such securities
at a future date. The value of the open short position is recorded as a liability, and the Company records an unrealized gain
or loss to the extent of the difference between the proceeds received and the value of the open short position. The Company records
a realized gain or loss when a short position is closed out. By entering into short sales, the Company bears the market risk of
increases in the value of the security sold short in excess of the proceeds received. Possible losses from short sales differ
from losses that could be incurred from purchases of securities because losses from short sales may be unlimited whereas losses
from purchases cannot exceed the total amount invested. See Note 1 regarding the Company’s investment goals and its use
of covered positions and Note 7 for further discussion of Investment and Market Risk Factors.
During
the year ended December 31, 2020, the Company realized proceeds of $2,153,948 from the sale of investment securities.
All
transfers are recognized by the Company at the end of each reporting period. Transfers between Levels 2 and 3 (if any) generally
relate to whether significant unobservable inputs are used for the fair value measurements. See Note 2 – Significant Accounting
Policies for additional information related to the fair value hierarchy and valuation techniques and inputs. During the year 2020
there were no transfers between Levels.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
3.
Fair Value Measurements of Investments, Financial Instruments and Related Risks (continued)
The
following table is a reconciliation of the beginning and ending balances for the Company’s assets measured at fair value
on a recurring basis using significant unobservable inputs (level 3) during the year ended December 31, 2020:
|
|
Balance
at
|
|
|
|
December
31, 2020
|
|
Balance,
December 31, 2019
|
|
$
|
5,400,000
|
|
Net
change in unrealized appreciation on operating division
|
|
|
3,400,000
|
|
Investment
in/advances to operating division
|
|
|
2,709,397
|
|
Realized
loss on investment in operating division
|
|
|
(2,709,397
|
)
|
Balance,
December 31, 2020
|
|
$
|
8,800,000
|
|
The
Company’s Level 3 asset consists of its investment in its wholly owned Operating Division at fair value and requires significant
judgment due to the absence of quoted market prices, inherent lack of liquidity, heavy reliance on Level 3 inputs, and the long-term
nature of such investments. Since its inception, the Operating Division has not generated significant revenue and has incurred
substantial operating losses. Due to these substantial losses, the Operating Division has been completely dependent on funding
from the Company to sustain its operations. Investment in Operating Division is primarily located in Oak Ridge, Tennessee and
was initially valued at transaction value for identified assets (property and equipment, land, buildings and laboratory equipment),
less accumulated depreciation adjusted for investment in/advances to operating division, business operations and activity and
realized losses. Based on Company initiatives started in 2016 and through 2019, related to potential partnerships, joint ventures,
product development, marketing and other operations of the Operating Division, the Company hired an independent valuation company
to perform a valuation of the Operating Division. The Company updated the initial 2016 valuation and subsequent valuations at
December 31, 2017 through December 31, 2020, using the Income Approach and Market Approaches as defined in SFAS 157 (ASC 820).
Based on the valuation approaches, the valuation ranges were $7,800,000 to $9,800,000 for the Income Approach at December 31,
2020. In determining the Income Approach value range, the Gordon Growth Model valuation technique was used with a discount rate
of 24.0 % and long-term growth rate of 3.0%. Significant increases (decreases) in these unobservable inputs in isolation could
result in significant changes in fair value measurements. The Income Approach was weighted 95% given the current financial performance
and expectations as to longer-term revenue growth and profitability and a 5% weight to two (2) arm’s length Daxor share
sales transactions which raised $4.0 million, resulting in a midpoint of value range of $8,800,000.
4.
Derivative Instruments
The
Company may write call and put options in order to generate additional investment income as part of its investment strategy. In
the opinion of management, the use of financial derivative instruments in its investment program is appropriate and customary
for the investment strategies employed reducing certain investment risks.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
4.
Derivative Instruments - (continued)
The
following table summarizes the Company’s activity in call and put options for the period ended December 31, 2020.
Total
Proceeds
Received
on
open
positions
at
01/01/20
|
|
|
Sale
of
Options
from
01/01/20-12/31/20
|
|
|
Expirations,
Purchases and
Assignments
of
Options
from
01/01/20-12/31/20
|
|
|
Proceeds
Received
on
open
positions
at
12/31/20
|
|
|
Market
Value
at
12/31/20
|
|
|
Unrealized
(Loss)
at
12/31/20
|
|
$
|
24,063
|
|
|
$
|
778,881
|
|
|
$
|
802,944
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
For
the period ended December 31, 2020, the Company recorded a realized net gain of $778,881 on call and put options.
5.
Income Taxes (Benefit)
The
net income tax expense (benefit) for the period ended December 31, 2020 is comprised of the following:
Current
Income Tax Expense (Benefit):
|
|
|
|
|
Federal
|
|
$
|
(25,280
|
)
|
State
and local
|
|
|
-
|
|
Total
current income tax expense (benefit)
|
|
|
(25,280
|
)
|
Deferred
Tax Expense:
|
|
|
|
|
Federal
|
|
$
|
-
|
|
State
and local
|
|
|
-
|
|
Total
deferred tax expense
|
|
|
-
|
|
Net
income tax (benefit)
|
|
$
|
(25,280
|
)
|
The
Company has a net operating loss carry forward of approximately $21,668,363 at December 31, 2020. Approximately $16,744,764 of
these losses relates to years prior to 2018 and will begin to expire in 2033. Approximately $4,923,599 of these losses relate
to the years 2018 through 2020, and will not expire, but are subject to limitations on usage.
The
following table sets forth the net operating loss carry forwards by state and local jurisdiction at December 31, 2020:
New
York State
|
|
$
|
7,893,975
|
|
New
York City
|
|
$
|
8,126,861
|
|
California
|
|
$
|
1,107,429
|
|
Tennessee
|
|
$
|
6,137,387
|
|
South
Carolina
|
|
$
|
9,636,414
|
|
For
tax years beginning after December 31, 2017, the Alternative Minimum Tax (“ATM”) on corporations was repealed. Credits
could be utilized to offset regular tax liability for years 2018 through 2021 and were to be fully refundable by 2021. In 2020
the C.A.R.E.S. Act was passed by the United States Congress and signed into law which accelerated the utilization and the credit
available became fully refundable by 2020. As a result, the Company recorded $353,986 as income tax receivable, and benefit of
the same amount in 2018 of which $189,633 was refunded in 2019. The remaining balance of $189,633 was eligible to be refunded
2020. The Company received the remaining balance of $189,633 in early 2021.
At
December 31, 2020, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were
required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months.
The Company recognizes interest and penalties related to uncertain tax positions in investment administrative expenses. As of
December 31, 2020, the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
5.
Income Taxes (Benefit) - (continued)
In
certain cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the
relevant tax authorities. The Company files federal, state and local income tax returns in jurisdictions with varying statutes
of limitations. The 2016 through 2018 tax years generally remain subject to examination by federal, state and local tax authorities.
Under
Internal revenue code section 542, a company is defined as a Personal Holding Company (“PHC”) if it meets both an
ownership test and an income test. The ownership test is met if a company has five or fewer shareholders that own more than 50%
of the company, which is applicable to Daxor. The income test is met if PHC income items such as dividends, interest and rents
exceed 60% of adjusted ordinary gross income. Adjusted ordinary income is defined as all items of income except capital gains.
For the year ended December 31, 2020, more than 60% of Daxor’s adjusted gross income came from items defined as PHC income.
Determining
the PHC tax liability requires computing Daxor’s “undistributed PHC income” and taxing such PHC income at the
statutory rate of 20%. Undistributed PHC income is current year taxable income of the Company, exclusive of the net operating
loss carry forward deduction that is allowed for regular tax purposes. The Company incurred no liability for PHC for the year
ended December 31, 2020 due to the net operating losses applied to realized gains incurred during the year.
Computed
expected provision at statutory rates
|
|
|
(21.0
|
)%
|
Valuation
allowance
|
|
|
3.2
|
%
|
Dividend
received deduction
|
|
|
(1.2
|
)%
|
State
taxes
|
|
|
1.4
|
%
|
Non-deductible/non-taxable
and other items
|
|
|
16.1
|
%
|
Effective
income tax (benefit) rate
|
|
|
(1.5
|
)%
|
6.
Deferred Income Taxes
Deferred
income taxes result from differences in the recognition of gains and losses on marketable securities; stock options, as well as
from carry forwards of the Company’s net operating losses of approximately $22,283,795 at December 31, 2020, and tax credits
of approximately $1,126,000 for tax purposes. At December 31, 2020 the aggregate cost of investments for federal income tax
purposes was $5,120,972.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
6.
Deferred Income Taxes - (continued)
The
significant components of deferred tax assets and liabilities are reflected in the following table:
Unrealized
gains on investments in securities
|
|
$
|
(1,150,674
|
)
|
Unrealized
losses on short positions
|
|
|
15,387
|
|
Unrealized
gain on investment in operating division
|
|
|
(1,342,398
|
)
|
Net
operating loss-carry forward
|
|
|
6,418,640
|
|
Net
capital loss carry forward
|
|
|
(23,948
|
)
|
Business
tax credits carried forward
|
|
|
1,126,208
|
|
Others
|
|
|
14,980
|
|
Deferred
Income Tax Available for use
|
|
|
5,058,195
|
|
Valuation
allowance
|
|
|
(5,058,195
|
)
|
Net
Deferred Tax Asset
|
|
$
|
-
|
|
Realization
of deferred tax assets is dependent on future earnings. Due to the uncertainty of the realization of its net deferred tax assets,
the Company has provided a valuation allowance. In assessing the potential to realize the deferred tax asset, management considers
whether it is more likely than not that some or perhaps all of the deferred tax assets will be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and
tax planning strategies in making their assessment. The Company recorded a valuation allowance of $5,058,195 at December 31, 2020.
The valuation allowance increased $1,256,619 from December 31, 2019. If the Company becomes profitable before the expiration of
the loss carry forwards, it would have the ability to utilize them in order to offset any taxable income.
7.
Investment and Market Risk Factors
The
Company enters into investments in securities, call and put options and securities borrowed and/or financial instruments that
may have off balance sheet risks, where the potential loss due to changes in the market (market risk), failure of counterparty
to perform on the transaction risk (credit risk) and other risk elements, such as interest rate risk, exceeds the value and/or
obligations of such financial instruments. It is the Company’s general policy to mitigate such risks by transacting with
established counterparties. The Company transacts with and custodies investment assets at UBS Financial Services, Inc. (“Broker”).
The
Company’s investments in securities arise from investments in long common and preferred stocks, selling common stocks short
and transacting in put and call (naked and covered) options. These investments are subject to equity risks of increases and decreases
in market exchange prices such as on the NASDAQ.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
7.
Investment and Market Risk Factors - (continued)
The
Company is subject to certain inherent risks arising from its investing activities of selling securities short and writing put
and call options. Selling securities short creates an obligation to purchase the securities at an unknown future date, subject
to the Company’s discretion, at the then prevailing future market prices. Securities borrowed create the risk that the ultimate
obligation may exceed the liability reflected in these financial statements.
The
Company collects premiums and the opportunity to create option premium income when writing put and call options if the options
expire out-of-the-money. Writing put and call options gives the option buyer the right to exercise the option against the option
writer. Writing put options obligates the writer to purchase the stock at the strike price if the stocks’ current market
price is below the strike price prior to expiration of the put option. The potential loss in writing a put option is the strike
price less the premium collected if the stock price falls to zero. Writing call options obligates the writer to sell the stock
at the strike price if the stock’s current market price is greater than the strike price prior to expiration of the call
option. The potential loss in writing a naked call option is unlimited as the rise of a stock price is unlimited. The potential
loss in writing a covered call is limited to the strike price less the cost of the underlying security the Company holds in the
portfolio. The Company endeavors to write covered calls but may also write naked calls.
Cash
receivable from broker and margin loans payable reflect accounts with the Company’s Broker. Due from broker represents amounts
receivable from brokers that are available for investing but have not been invested. Margin loan payable represents obligations
to the Broker for leveraging investments in securities. Investments in securities are collateral for the margin loan payable.
The Company does not have the right of setoff nor netting agreements between brokers.
The
Company’s investments may be subject to changes in interest rates as they may affect equity and option markets. Interest
rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income
investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer
maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest
rates than obligations with shorter maturities.
The
Company is subject to volatility risk which refers to the magnitude of the movement, but not the direction of the movement, in
a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s
price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price
typically indicate lower volatility risk.
Legal,
tax and regulatory changes continue to occur in the United States and globally, additionally, regulatory environments, as a whole,
continue to evolve and change. The effect of any future legal, tax and/or regulatory changes are unknown and could be substantial
and adverse.
8.
Related Party Transactions
The
Company reported $66,094 of portfolio administrative expenses which is included in investment administrative charges on the Statement
of Operations for period ended December 31, 2020. These charges represent a portion of the payroll and related expenses of two
(2) employees of the Operating Division for services performed for the Company. The Company sold 265,352 treasury shares to institutional
investors during the year ended December 31, 2020 for net proceeds of $4,036,106.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
9.
Margin Loan and Paycheck Protection Program (“PPP”) Loan
The
Company has total margin loan payable at December 31, 2020 of $170,689. This loan is secured by the Company’s investments
in marketable securities. The interest expense on the margin loans for the period ended December 31, 2020 was $8,402. The ability
of the Company to incur margin debt at any given time is based on the current amount outstanding and the market value of the portfolio
of marketable securities. There are no set repayment terms for the Company’s margin loan.
The
following table summarizes the margin loan activity for the year ended December 31, 2020:
Balance
at
12/31/20
|
|
|
Weighted
average interest
rate
at 12/31/20
|
|
|
Maximum
amount outstanding
during
the year
|
|
|
Average
amount outstanding
during
the year
|
|
|
Weighted
average interest
rate
during the year
|
|
$
|
170,689
|
|
|
|
1.288
|
%
|
|
$
|
1,424,495
|
|
|
$
|
390,079
|
|
|
|
1.874
|
%
|
In
April 2020 the Operating Division of the Company applied for and received $290,102 under the 2020 Coronavirus Aid, Relief and
Economic Security Act (the “CARES Act”). The loan is being accounted for as a liability of the Operating Division
and is part of the value of the Operating Division at December 31, 2020. The Operating Division Company applied for forgiveness
of the PPP loan in 2020. Forgiveness of the loan was approved on January 4, 2021 by the Small Business Administration (“SBA”).
10.
Capital Stock
At
December 31, 2020, there were 10,000,000 shares of $0.01 par value capital stock authorized. The paid in capital of $11,438,156
at December 31, 2020 consists of the following amounts:
Additional
Paid in Capital in excess of par value of common stock
|
|
$
|
11,384,990
|
|
Common
Stock
|
|
|
53,166
|
|
Total
Paid in Capital
|
|
$
|
11,438,156
|
|
11.
Treasury Stock
The
Company’s Board of Directors from time to time has authorized the repurchase of shares of the Company’s common stock
in the open market usually as funds are available and if the stock is trading at a price which management feels is undervalued.
The Company did not repurchase any shares of the Company during the year ended December 31, 2020. During the year ended December
31, 2020, under the previously issued registration statement, the Company sold in the open market to institutional investors 265,352
shares of the Company’s stock. The sales were completed in two offerings. In March 2020, the Company sold 140,352 shares
at a price of $14.25 per share, or gross proceeds of $2,000,016; net proceeds to the Company of $1,762,115. In July 2020 the Company
sold 125,000 shares at a price of $20.00 per share, or gross proceeds of $2,500,000; net proceeds to the Company of $2,273,991.
The Company received proceeds of $201,195 upon the exercise of stock options.
Treasury
stock at December 31, 2020:
Treasury
Stock at repurchase price
|
|
$
|
10,623,003
|
|
Treasury
Stock shares
|
|
|
1,282,653
|
|
12.
Dividends
In
2008, management instituted a policy of paying dividends when funds are available. The Company did not declare a dividend for
the year 2020.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
13.
Stock Options
In
June 2019, the Board of Directors of the Company approved the Daxor Corporation 2020 Incentive Compensation Plan (the “2020
Plan”). In April 2020 the Company received exemptive relief from the Securities & Exchange Commission (“SEC”)
and The 2020 Plan was given approval to become operational effective in April, 2020. The 2020 Plan was approved by shareholders
of the Company on June 25, 2020. In addition to Stock Options, awards under the 2020 Plan can consist of Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Deferred Stock Units, Cash Awards and Bonus Stock (collectively, “Stock Awards”).
The 2020 Plan is an effort to provide incentive to employees, officers, agents, consultants, and independent contractors through
proprietary interest. The Board of Directors acts as the Plan Administrator, and may issue these Stock Awards at its discretion.
The
2020 Plan replaces the 2004 Stock Option Plan.
The
maximum number of shares that may be issued under the 2020 Plan is 250,000 or 5% of the Company’s outstanding shares, whichever
is greater. Under the provisions of the 2020 Plan, the exercise price of any stock options issued is a minimum of 110% of the
closing market price of the Company’s stock on the grant date of the option. Previously, the Company issued options to various
employees under the previous 2004 Stock Option Plan and the Stock Option Plan that was also administered by the Board of Directors.
All issuances have varying vesting and expiration timelines. As at December 31, 2020, the 2020 Plan had 170,529 options outstanding
and 28,788 were exercisable. The 2004 Stock Option Plan had 172,566 options outstanding and 172,566 were exercisable. The Company
has not granted options under the 2004 Stock Option Plan since August 2018. The 2004 Stock Option Plan ceased operation upon approval
of the 2020 Plan, although stock options that were awarded under the 2004 Plan that have not expired are still eligible to be
exercised.
At
December 31, 2020, there was $1,599,003 of unvested stock-based compensation expense to recognize. The Company recognized $377,607
of stock-based compensation expense, which is included in investment administrative charges in the Statement of Operations for
the year ended December 31, 2020. There was no aggregate intrinsic value at December 31, 2020 as the closing price of the Company’s
stock was lower than the average exercise price of the underlying options. The intrinsic value is calculated based on the difference
between the closing market price of the Company’s common stock and the exercise price of the underlying options.
To
calculate the option-based compensation, the Company used the Black-Scholes option-pricing model. The Company’s determination
of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by the Company’s stock
price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards, risk-free interest rate, and the expected life of
the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of
the stock options. The expected volatility, holding period, and forfeitures of options are based on historical experience.
For
the year ended December 31, 2020, 170,529 stock options were granted to employees, Directors and outside consultants from the
2020 Plan with a weighted average exercise price of $14.28. The stock options granted during the year ended December 31, 2020
from the 2020 Plan are still outstanding and 28,788 stock options have vested as of December 31, 2020.
The
fair values of stock options granted in the year ended December 31, 2020 were estimated using the Black-Scholes option-pricing
model with the following assumptions for the year ended December 31, 2020.
|
|
2020
|
|
Risk
free rate
|
|
|
0.14
|
%
|
Expected
life (in years)
|
|
|
4.65
|
|
Expected
volatility
|
|
|
79.84
|
%
|
Dividend
yield
|
|
|
0.00
|
%
|
|
|
|
|
|
Weighted Average
grant date fair value per share
|
|
$
|
14.28
|
|
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
13.
Stock Options - (continued)
The
details of employee option activity for the 2020 Plan for the year ended December 31, 2020 is as follows:
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price
|
|
Outstanding
and Exercisable, January 1, 2020
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
170,529
|
|
|
$
|
14.28
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at December 31, 2020
|
|
|
170,529
|
|
|
$
|
14.28
|
|
The
following tables summarize information concerning currently outstanding and exercisable options at December 31, 2020:
Range
of Exercise Prices
|
|
|
Number
Outstanding at
December
31, 2020
|
|
|
Weighted
Average
Remaining
Contractual Life
at
December 31, 2020
|
|
Weighted
Average Exercise Price at December 31, 2020
|
|
$
|
12.50
- $18.95
|
|
|
|
170,529
|
|
|
4.65
years
|
|
$
|
14.28
|
|
Range
of Exercise Prices
|
|
|
Number
Exercisable at
December
31, 2020
|
|
|
Weighted
Average Exercise Price at December 31, 2020
|
|
$
|
12.50
- $17.25
|
|
|
|
28,788
|
|
|
$
|
13.69
|
|
The
details of employee option activity for the 2004 Stock Option Plan for the year ended December 31, 2020 is as follows:
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price
|
|
Outstanding
and Exercisable, January 1, 2020
|
|
|
194,233
|
|
|
$
|
8.56
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(21,667
|
)
|
|
|
9.29
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at December 31, 2020
|
|
|
172,566
|
|
|
$
|
8.60
|
|
The
following tables summarize information concerning currently outstanding and exercisable options from the 2004 Stock Option Plan
at December 31, 2020:
Range
of Exercise Prices
|
|
|
Number
Outstanding at
December
31, 2020
|
|
|
Weighted
Average
Remaining
Contractual Life
at
December 31, 2020
|
|
Weighted
Average Exercise Price at December 31, 2020
|
|
|
Below
- $9.52
|
|
|
|
172,566
|
|
|
2.24
years
|
|
$
|
8.60
|
|
Range
of Exercise Prices
|
|
|
Number
Exercisable at
December
31, 2020
|
|
|
Weighted
Average Exercise Price at December 31, 2020
|
|
|
Below
- $9.52
|
|
|
|
172,566
|
|
|
$
|
8.60
|
|
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
14.
Commitment
On
January 20, 2016, the Company signed a lease which commenced on January 22, 2016 and expires on June 30, 2021 for 3,112 square
feet of office space in New York City. The Rent Commencement Date under the lease was June 22, 2016 and will expire on June
30, 2021.
The
future minimum lease payments exclusive of future cost of living and tax escalation increases are $107,364:
Period
Covered:
|
|
Number
of Months
|
|
Commitment
|
|
|
|
|
|
|
|
January
1, 2021 through June 30, 2021
|
|
6
|
|
$
|
107,364
|
|
Total
Commitment
|
|
|
|
$
|
107,364
|
|
The
rent expense is allocated to and reflected in the Operating Division’s results of operations which are not a part of these
financial statements. The Company’s Operating Division adopted Accounting Standards Update No. 2016-02, Leases (Topic842),
(“ASC 842”) effective January 1, 2019 using the effective date transition method and utilizing the Company’s
incremental borrowing rate of 3.3% and did not have a material effect on the operations, financial position and cash flows of
its Operating Division. The Operating Division had an initial recognition right of use asset, and corresponding liability of $506,896
adopting ASC 842 on January 1, 2019. The right of use asset and corresponding liability at December 31, 2020 was $101,364.
Daxor
Corporation
Notes
to Financial Statements
December
31, 2020
15.
Registration Statement
The
Company has filed a Form N-2 Registration Statement under the Securities Act of 1933, which permits the Company to raise additional
equity capital by issuing additional shares of common stock from time to time in varying amounts and by different offering methods,
at prices and on terms to be determined by market conditions at the time of offering. During any 12-month period, the aggregate
market value of securities the Company may offer may not exceed one third of the aggregate market value of voting and non-voting
common equity held by persons who are not affiliates of the Company.
16.
Contingency
Idant
Labs, a wholly owned subsidiary of the Company settled a civil complaint in Federal District Court in the State of Illinois in
relation to the sale of anonymous donor semen that allegedly led to the birth of two children with alleged autism. Idant Labs
settled the civil complaint in the amount of $250,000 that was paid through the Company’s insurance company in 2019. All
complaints have been dismissed in 2020.
17.
Recently Issued Accounting Pronouncements
In
August 2018, FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”) related to FASB ASC Topic 820 Fair
Value Measurement and Disclosures – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 eliminates,
amends, and adds to the fair value measurement disclosure requirements of ASC Topic 820. The amendments are designed to provide
more useful information to financial statement users. ASU 2018-13 is effective for interim and annual reporting periods beginning
after December 15, 2019. The Company adopted ASU 2018-13 effective December 31, 2019 and did not have a material effect on the
operations, financial position and cash flows of the Company.
In
February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which
supersedes existing lease accounting standards. Together with subsequent amendments, this created Accounting Standards Codification
Topic 842 (“ASC 842”). ASC 842 requires that a lessee recognize a right-of-use asset and a corresponding liability
for its obligation under virtually all operating leases, as well as expands disclosure requirements. ASC 842 was effective for
annual reporting periods beginning after December 15, 2018. Early adoption was permitted. The Company’s Operating Division
adopted ASC 842 effective January 1, 2019 and did not have a material effect on the operations, financial position and cash flows
of its Operating Division.
18.
Coronavirus (COVID-19) Pandemic
The
global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and the prolonged
economic impact is uncertain. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets,
industries and individual issuers, are not known. The operational and financial performance of the issuers of securities
in which the Funds invest depends on future developments, including the duration and spread of the outbreak, and such uncertainty
may in turn adversely affect the value and liquidity of the Funds’ investments, impair the Funds’ ability to satisfy
redemption requests, and negatively impact the Funds’ performance.
19.
Subsequent Events
On
January 22, 2021, the Company received the Federal Tax refund of $189,633. On January 4, 2021, the Company was notified by the
Small Business Administration the Paycheck Protection Plan (“PPP”) loan in the amount of $290,102 was forgiven.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and Board of Directors of
Daxor
Corporation
Opinion
on the Financial Statements
We
have audited the accompanying statement of assets and liabilities of Daxor Corporation (the “Company”), including
the schedule of investments, as of December 31, 2020, the related statements of operations and cash flows for the year then ended,
the statements of changes in net assets for each of the two years in the period then ended, and the related notes (collectively
referred to as the “financial statements”) and the financial highlights for each of the years in the five year period
then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial
position of the Company as of December 31, 2020, and the results of its operations and cash flows for the year then ended, the
changes in net assets for each of the two years in the period then ended, and the financial highlights for the each of the five
years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement,
whether due to error or fraud.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of December 31, 2020 by correspondence with the Company’s securities broker.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable
basis for our opinion.
/s/
WithumSmith+Brown, PC
|
|
|
|
We
have served as the Company’s auditor since 2016.
|
|
|
|
New
York, New York
|
|
February
25, 2021
|
|
Daxor
Corporation
Supplemental
Data
General
Investment
Products Offered
●
|
Are
not FDIC Insured
|
●
|
May
Lose Value
|
●
|
Are
Not Bank Guaranteed
|
The
investment return and principal value of an investment in Daxor Corporation will fluctuate in part as the prices of the individual
securities in which it invests fluctuate, so that your shares, when sold, may be worth more or less than their original cost.
You should consider the investment objectives, risks, charges and expenses of Daxor and Daxor’s operating business carefully
before investing. For a free copy of the Company’s definitive prospectus (when available), which contains this and other
information, call the Company at 212- 330-8500.
This
shareholder report must be preceded or accompanied by the Company’s prospectus for individuals who are not current shareholders
of the Company.
Voting
Proxies on Portfolio Securities
A
description of the policies and procedures that the Company uses to determine how to vote proxies relating to portfolio securities
owned by the Company and the Company’s proxy voting record for the 12-month period ended June 30, 2020 are available (i)
without charge, upon request, by calling 1-212-330-8500 and (ii) on the Securities and Exchange Commission’s website: www.sec.gov.
Disclosure
of Portfolio Holdings
The
SEC has adopted the requirement that all investment companies file a complete schedule of investments with the SEC for their first
and third fiscal quarters on Form N-PORT. The Company’s Form N-PORT for March 31, 2020, and September 30, 2020 reporting
portfolio securities held by the Company, are available on the Commission’s website at http://www.sec.gov, and may be reviewed
and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the public reference
room may be obtained by calling 800-SEC-0330.
Daxor
Corporation
Privacy
Policy
The
Company and Your Personal Privacy-
Daxor
Corporation is an investment company registered with the Securities and Exchange Commission under the Investment Company Act of
1940.
What
Kind of Non-Public Information do we Collect About you if you Become a Shareholder?
Daxor
Corporation does not collect non-public information about our shareholders.
What
Information do we disclose and to whom do we disclose it?
We
do not disclose any non-public personal information about our customers or former customers of our operating division to anyone,
other than our service providers who need to know such information and as otherwise permitted by law. If you want to find out
what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17
of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What
do we do to protect Your Personal Information?
We
restrict access to non-public personal information about our customers or former customers to the people who need to know that
information in order to perform their jobs or provide services to you. We maintain physical, electronic, and procedural safeguards
to keep your personal information confidential.
Daxor
Corporation
About
the Corporation’s Directors and Officers
The
Corporation is governed by a Board of Directors that meets to review investments, performance, expenses and other business matters,
and is responsible for protecting the interests of shareholders. The majority of the Corporation’s directors are independent
of Daxor Corporation.; the only “inside” directors is an officer and a director of Daxor Corporation. The Board of
Directors elects the Corporation’s officers, who are listed in the table. The business address of each director and officer
is 350 Fifth Avenue, Suite 4740, New York, NY 10118.
Name,
Address and Age
|
|
Position(s)
Held with Company
|
|
Term
of Office
and
Length of
Time
Served
|
|
Principal
Occupation(s)
During
Past
Five Years
|
|
Number
of Portfolios Overseen By Directors
|
|
Other
Directorships Held (during past five years) by Director
|
“Noninterested
Persons”
|
|
|
|
|
|
|
|
|
|
|
James
Lombard 350 Fifth Avenue (Empire State Building), Suite 4740
New
York, New York 10118
|
|
Director
|
|
One
year term, Director since 1989
|
|
Director
of Administrative Services Division, New York City Council (Retired).
|
|
None
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Age:
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
D Cremisi, MD 350 Fifth Avenue (Empire State Building), Suite 4740 New York, New York 10118
|
|
Director
|
|
One
year term, Director since 2020
|
|
Medical
Director, AstraZeneca Pharmaceuticals
|
|
None
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Age:
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
Feuer 350 Fifth Avenue (Empire State Building), Suite 4740 New York, New York 10118
|
|
Director
|
|
One
year term, Director since 2016
|
|
Managing
Partner, Feuer & Orlando
|
|
None
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Age:
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joy
Goudie, Esq. 350 Fifth Avenue (Empire State Building), Suite 4740 New York, New York 10118
|
|
Director
|
|
One
year term, Director since 2020
|
|
Partner,
Wissing Miller, LLP Patent Attorney.
|
|
None
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Age:
64
|
|
|
|
|
|
|
|
|
|
|
Name,
Address and Age
|
|
Position(s)
Held with Company
|
|
Term
of Office and Length of Time Served
|
|
Principal
Occupation(s) During Past Five Years
|
|
Number
of Portfolios Overseen By Directors
|
|
Other
Directorships Held (during past five years) by Director
|
“Interested
Persons”
|
|
|
|
|
|
|
|
|
|
|
Michael
Feldschuh 350 Fifth
Avenue
(Empire State Building), Suite
4740
New York, New York 10118
|
|
Director
|
|
One
year term, Director since 2013
|
|
Executive
Vice President Chairman, President, CEO
|
|
One
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Age:
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan
Feldschuh
350
Fifth
Avenue
(Empire
State
Building),
Suite
4740,
New
York, New
York
10118
|
|
Director
|
|
One
year term, Director since 2017
|
|
Chief
Scientific Officer
|
|
None
|
|
None
|
Age
56
|
|
|
|
|
|
|
|
|
|
|
The
Daxor’s Statement of Additional Information includes additional information about the Directors and is available free of
charge, upon request, by calling toll-free at 212-330-8500.
Daxor
Corporation
December
31, 2020