Daxor Corp: Form 10-Q for the period ended Sep 30, 2011

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

The following discussion of the our financial condition and results of our operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2010. This Quarterly Report on Form 10-Q contains forward-looking statements based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements are usually accompanied by words such as “believes,” “may,” “should,” “anticipates,” “estimates,” “expects,” “future,” “intends,” “hopes,” “plans,” and similar expressions, and the negative thereof. Forward-looking statements involve risks and uncertainties and our actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors.

BUSINESS OVERVIEW

Daxor Corporation is a medical device manufacturing company that offers additional biotech services, such as cryobanking, through its wholly owned subsidiary Scientific Medical Systems Corp. The main focus of Daxor Corporation has been the development and marketing of an instrument that rapidly and accurately measures human blood volume. This instrument is used in conjunction with a single use diagnostic injection and collection kit that the Company also sells to its customers.

SEC ADMINISTRATIVE PROCEEDING

On August 31, 2011, an Administrative Law Judge of the SEC issued his decision finding Daxor to be an Investment Company as defined by the Investment Company Act of 1940. A major factor in the decision was his opinion that we are in the business of investing and more than 40% of our assets are comprised of investment securities.

The management of the Company believes the additional disclosures that would be necessary if Daxor were to become an Investment Company would not materially affect investment policies and practices currently in place.

As disclosed in our press release of September 1, 2011, the Board of Directors and the Management of Daxor are considering different options. We may register as an Investment Company, appeal the decision or take the Company private. The management of the Company believes that if we register or take the Company private, our operations and ongoing research efforts will not be materially affected.

See Part II, Item 1 Legal Proceedings for a full discussion of the SEC Administrative Proceeding.

RECENT DEVELOPMENTS

Blood volume derangements are associated with a variety of medical and surgical conditions. It is well established that clinical assessments of blood volume using physical examination or simple blood tests are frequently inadequate to determine total blood volume. Daxor is therefore actively supporting blood volume research in several strategic areas including Heart Failure, Critical Care/Trauma, and Transfusion Decisions during Surgery. These therapeutic areas are ones in which patient diagnosis and/or treatment may be greatly improved by the information obtained from a blood volume analysis, as outlined below.

Heart Failure

Heart failure, a major cause of morbidity and mortality among the elderly, is a serious public health problem. Expenditures related to the care of heart failure patients approach $38 billion annually, which makes congestive heart failure the most expensive condition covered by Medicare. The majority of patients treated for heart failure must be treated with medications which produce drastic changes in their blood volumes.

Daxor has previously sponsored several studies to assess the benefits of blood volume analysis in heart failure patients. One landmark study, conducted by Dr. Stuart Katz when he was an Investigator at the Columbia Presbyterian Medical Center, categorized patients as hypervolemic (volume expanded), normovolemic (having a normal blood volume), or hypovolemic (volume contracted) and recorded their outcomes over time. At the end of one year, 39% of the hypervolemic patients had died or received an urgent heart transplant. In contrast, none of the normovolemic or hypovolemic patients died or received an urgent transplant. At the end of two years, 55% of hypervolemic patients had died or received an urgent heart transplant, while the normovolemic patients continued to have a 0% mortality rate. This study showed a remarkable correlation between blood volume and outcome and suggested that effectively treating patients to normovolemia may dramatically improve their outcomes.

This study also examined the accuracy of clinical assessment of volume status in these patients. Experienced cardiologists assessed patients’ blood volume status using standard laboratory tests and physical examination. When choosing between three possible choices—decreased, normal, or increased blood volume—specialists were correct only 51% of the time in categorizing these severely ill cardiac patients relative to the direct measurement results provided by the BVA-100. This study was cited in the American College of Cardiology/American Heart Association guidelines for the treatment of chronic heart failure in support of the recommendation to assess blood volume status of heart failure patients at every doctor’s visit.

Daxor recently began to enroll patients in a multi-center study which is a follow-up to this earlier study. The TEAM-HF ( T reatment to E uvolemia/Normovolemia by A ssessment and M easured Blood Volume in H eart F ailure) Study will enroll a total of 300 patients from thirteen (13) participating medical centers. The TEAM-HF Study will compare heart failure management strategies based on clinical assessment of volume status versus direct measurement of blood volume using the BVA-100 to determine whether use of blood volume data leads to decreases in re-hospitalization and mortality, and improved function and quality of life for heart failure patients. Dr. Stuart Katz, who is now the Director of the Heart Failure Program at New York University, is extending his previous research by serving as the National Principal Investigator for this study. Data collection and management for the TEAM-HF Study is being performed by an independent Data Collection Center – the Nathan S. Kline Institute for Psychiatric Research. Daxor has also retained the services of three statisticians, two of whom are faculty members at New York University, to assist with data analysis for the TEAM-HF Study.

In addition, Daxor is currently supporting a study which will determine whether use of blood volume measurement to help guide fluid removal by ultrafiltration (UF) in patients hospitalized with decompensated Heart Failure (HF) leads to improved outcomes. The 50 patients who enroll in this interventional study will undergo 4 blood volume measurements: (1) immediately before UF, (2) 30 minutes after UF is complete, (3) at 30-day follow-up and (4) at 90-day follow-up. Patients will be randomized into two groups: in the experimental group, the physician will be given the BVA-100 results, which – in conjunction with continuous hematocrit monitoring – will guide fluid removal during UF. In the control group, the physician will not be given the BVA-100 results. In this case, fluid removal will be based upon physicians’ clinical assessment. Some of the outcomes that will be compared between the two groups include survival, rehospitalization, the incidence of decreased kidney function, and the need for long-term hemodialysis. This study is currently in progress, and 25 patients have enrolled to date. The Principal Investigator for this study is Dr. Mitchell Saltzberg, the Medical Director of the Heart Failure program at the Christiana Care Health System.

Daxor also provided support – along with Medtronic, Inc. – for a clinical study to assess whether the OptiVol ® implantable cardiac device is able to provide an accurate estimate of patients’ blood volume status. At the present time, it is difficult to accurately identify increases in blood volume that may predict which patients are likely to experience a worsening of symptoms and future heart failure events. One invasive method that is sometimes used to identify early blood volume increases is Medtronic’s OptiVol ® system, which continuously monitors the thoracic fluid status of heart failure patients. The objective of this study is to determine whether there is a correlation between intrathoracic impedance, as measured by Medtronic’s OptiVol ® system, and total blood and plasma volume as measured by Daxor’s non-invasive BVA-100. This study, which is being led by Dr. Adrian Van Bakel, the Medical Director of the Heart Failure and Cardiac Transplant Program of the Medical University of South Carolina, was recently completed and the data is currently being analyzed.

Critical Care/Trauma

Optimal management of fluid status is an essential component of critical care medicine. At the present time, physicians rely on imprecise clinical signs and symptoms to guide their fluid resuscitation decisions. Direct blood volume measurement can be used to take the guesswork out of volume assessment and to enable more precise and appropriate treatment.

Dr. Mihae Yu and colleagues at the Queen’s Medical Center in Honolulu, Hawaii, have been studying the use of blood volume measurement in the critical care unit. They have performed blood volume measurement in the surgical intensive care unit and recorded how the results have influenced their treatment decisions. Some of their results were published in the February 2009 issue of the American Journal of Surgery . The findings were based on 86 blood volume measurements from 40 patients, and showed that blood volume measurement results led to a change in treatment plan 36% of the time. Among patients who received a pulmonary artery catheter (PAC) for hemodynamic measurements, treatment would have been changed 50% of the time if blood volume data had been available to treating physicians. Among patients who did not receive PAC measurement, treatment would have changed 33% of the time if the blood volume data had been available.

Dr. Yu completed a major study, partially funded by Daxor, in which blood volume measurement was conducted in the intensive care unit. The purpose of the study was to determine whether survival and length of hospital stay could be improved by incorporating blood volume measurement into treatment decisions in the intensive care unit. They found that use of the BVA-100 to guide fluid and red blood cell management led to a significant improvement in mortality in critically ill surgical patients with septic shock, severe sepsis, severe respiratory failure and/or cardiovascular collapse. Patients in the control group, whose resuscitation was guided by findings from pulmonary artery catheterization (PAC) demonstrated statistically significant untreated volume abnormalities and red blood cell deficiencies more often than patients in the group who were resuscitated based on blood volume measurement data (48% vs. 37% and 33% vs. 16%, respectively). This correlated with significantly greater mortality for patients in the control group (24% mortality) than for patients in the blood volume measurement group (8% mortality; P=0.03). These findings indicate that blood volume analysis permits more accurate assessment of patients’ volume status and more precise fluid resuscitation and saves lives. Their most recent findings were published in the March 2011 issue of the medical journal Shock .

Daxor also supported a second study of blood volume analysis in critically injured trauma patients. This study, which assessed blood volume changes over a three-day period, was led by Dr. Marty Schreiber, Chief of Trauma at the Oregon Health and Science University. They found that the peripheral hematocrit – which is traditionally used as a marker for blood loss – does not provide an adequate estimate of red blood cell volume in critically ill patients who have been fluid resuscitated. Although the peripheral hematocrit was relatively accurate in patients with normal or contracted blood volumes, based on comparison to the results of direct blood volume measurement, it was quite inaccurate in patients with expanded blood volumes. In fact, the peripheral hematocrit led to overdiagnosis of anemia in 46.7% of critically ill patients with expanded blood volumes. These findings were published in the March 2011 issue of The Journal of Trauma .

Transfusion Decisions During Surgery

Effective volume management during surgery requires accurate assessment of a patient’s need for transfusions. The decision to transfuse a patient depends on appropriately balancing the benefits vs. risks of transfusion for each patient at any given time. Blood volume measurement, by quantifying a patient’s blood volume prior to surgery, can provide important information about how much blood loss a patient can safely sustain.

Daxor recently sponsored a study of blood volume changes throughout cardiac surgery as measured by the BVA-100. This study was led by Principal Investigator Dr. Mark Nelson at the Virginia Commonwealth University. Three sequential blood volume analyses were conducted: (1) before surgery; (2) immediately after surgery; (3) and 2 hours after transfer to the intensive care unit. The hypothesis was that red cell volume would be well conserved as a result of cell salvage and transfusion practices employed in the operating room. The preliminary findings from this study demonstrated a greater than anticipated loss of red cells and total blood volume during and after surgery. These results were presented at the 2010 Society of Cardiovascular Anesthesiologists meeting and are expected to be published in the near future.

RESULTS OF OPERATIONS

Three months ended September 30, 2011 as compared with three months ended September 30, 2010:

Operating Revenues and Expenses

For the three months ended September 30, 2011, consolidated operating revenues decreased to $340,907 from $453,281for the same period in 2010, a decrease of $112,374 or 24.8%. The main reasons for this decrease are:

• No sales of Blood Volume Analyzers during the current quarter versus one machine sold in the same period in 2010 for a total of $65,000.
• The Company sold 701 Volumex Kits during the current quarter versus 791 for the same period in 2010 for a decrease of 90 kits or 11.3%. The revenue from Blood Volume Kit Sales decreased to $221,314 in the current quarter from $257,783 for the same period in 2010 for a decrease of $36,469 or 14.1%. The reason for the difference between the percentage increases in kits sold and revenue from kit sales was a small increase in kit sale prices which was not effective until September 30, 2010.

There were 60 Blood Volume Analyzers placed at September 30, 2011 versus 56 at September 30, 2010. For the three months ended September 30, 2011, the Company provided 47 Volumex doses free of charge to facilities utilizing the BVA-100 for research versus 51 during the same period in 2010.

The following tables provide gross margin information on Equipment Sales & Related Services for the three months ended September 30, 2011 and September 30, 2010:

The major reason for the increase in Gross Profit Percentage on Kit Sales during the current quarter was an increase in the price of kits which was effective September 1, 2010.

The additional revenue for Equipment Sales and Other during the current quarter consists almost entirely of shipping charges and service contract revenue.

Even though the Company did not sell any Blood Volume Analyzers during the current quarter, it still incurred production related expenses for the BVA-100.

S,G&A (selling, general and administrative) and R&D (Research and Development) costs for Equipment Sales and Related Services were $1,230,937 for the three months ended September 30, 2011 versus $1,293,782 for the same period in 2010, for a decrease of $62,845 or 4.9%. The three major reasons for this decrease were reductions of $33,412 in professional fees, $12,910 in laboratory supplies and $35,260 in payroll and related expenses. There were $22,830 of Legal Expenses incurred during the three months ended September 30, 2011 for the SEC Administrative Proceeding. At this time, management is unable to estimate the amount of any additional future costs that may be incurred by the Company for the SEC proceeding.

Research & Development expenses for Equipment Sales and Related Services were $591,043 for the three months ended September 30, 2011 versus $642,143 for the same period in 2010 for a decrease of $51,100 or 8.0%.

Daxor remains committed to making Blood Volume Analysis a standard of care in at least three different disease states. In order to achieve this goal, we are continuing to spend time and money in research and development to get the best product to the market. We are still working on the following three projects: 1) GFR: Glomerular Filtration Rate, 2) Total Body Albumin Analysis, and 3) Wipes tests for radiation contamination/detection. We are also progressing on the next version of the delivery device for the radioactive dose Volumex. The current version is the “Max-100” which has a patent. The next version, the “Max-200” will be without a needle and should afford the company extended protection with a second patent when it is completed.

Operating revenues for the Cryobanking segment, which includes both blood banking and semen banking, decreased to $80,676 for the three months ended September 30, 2011 from $85,080 for the same period in 2010 for a reduction of $4,404 or 5.2% The major reason for this decrease is a reduction in $5,609 of revenues from Semen storage, analysis and processing.

S,G&A (selling, general and administrative) and R&D (Research and Development) costs for the Cryobanking and related services segment were $221,666 for the three months ended September 30, 2011 versus $258,622 for the same period in 2010, for a decrease of $39,956 or 14.3%. The main reason for this was an addition of $21,129 to the reserve for bad debts during the quarter ended September 30, 2010 versus none in the current quarter.

Consolidated Operating Expenses

The total consolidated operating expenses for the third quarter of 2011 were $1,452,603 versus $1,552,404 in 2010 for a decrease of $99,801 or 6.4%. The major reason for this decrease was reductions of $33,412 in professional fees, $12,910 in laboratory supplies and $37,652 in payroll and related expenses.

RESULTS OF OPERATIONS

Nine months ended September 30, 2011 as compared with nine months ended September 30, 2010:

For the nine months ended September 30, 2011, consolidated operating revenues decreased to $1,076,515 from $1,217,885 for the same period in 2010, a decrease of $141,370 or 11.6%. The main reasons for this decrease are:

• No sales of Blood Volume Analyzers during the current nine month period versus one machine sold in the same period in 2010 for a total of $65,000.
• The Company sold 2,272 Volumex Kits during the current nine month period versus 2,399 for the same period in 2010 for a decrease of 127 kits or 5.3%. The revenue from Blood Volume Kit Sales decreased to $725,907 in the current quarter from $770,695 for the same period in 2010 for a decrease of $44,788 or 5.8%. The reason for the difference between the percentage increases in kits sold and revenue from kit sales was a small increase in kit sale prices which was not effective until September 30, 2010.

There were 60 Blood Volume Analyzers placed at September 30, 2011 versus 56 at September 30, 2010. For the nine months ended September 30, 2011, the Company provided 50 Volumex doses free of charge to facilities utilizing the BVA-100 for research versus 69 during the same period in 2010.

The following tables provide gross margin information on Equipment Sales & Related Services for the nine months ended September 30, 2011 and September 30, 2010:

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The major reason for the increase in Gross Profit Percentage on Kit Sales during the current nine month period was an increase in the price of kits which was effective September 1, 2010.

The additional revenue for Equipment Sales and Other during the current nine month period consists almost entirely of shipping charges and service contract revenue.

Even though the Company did not sell any Blood Volume Analyzers during the nine months ended September 30, 2011, it still incurred production related expenses for the BVA-100.

S,G&A (selling, general and administrative) and R&D (Research and Development) costs for Equipment Sales and Related Services were $4,757,146 for the nine months ended September 30, 2011 versus $4,116,973 for the same period in 2010, for an increase of $640,173 or 15.6%.

The major reason for this increase was an additional $846,977 of professional fees in the current period. There were $1,036,930 of Legal Expenses incurred during the nine months ended September 30, 2011 for the SEC Administrative Proceeding. At this time, management is unable to estimate the amount of any additional future costs that may be incurred by the Company for the SEC proceeding.

The increased professional fees during the nine months ended September 30, 2011 were partially offset by reductions in payroll and related expenses of $147,984 and laboratory supplies of $61,004.

Research & Development expenses for Equipment Sales and Related Services were $1,853,350 for the nine months ended September 30, 2011 versus $2,166,121 for the same period in 2010 for a decrease of $312,771 or 14.4%. The major reasons for this decrease were a reduction in salary expense of $224,698 for Research and Development and $70,000 of software charges related to the development of WIN BVA 6.0 that was incurred during the first nine months of 2010 which did not reoccur in 2011

Operating revenues for the Cryobanking segment, which includes both blood banking and semen banking, decreased to $235,357 for the nine months ended September 30, 2011 from $258,956 for the same period in 2010 for a reduction of $23,599 or 9.1% .The major reason for this decrease is a reduction in $29,192 of revenues from Semen storage, analysis and processing.

S,G&A (selling, general and administrative) and R&D (Research and Development) costs for the Cryobanking and related services segment were $624,618 for the nine months ended September 30, 2011 versus $690,073 for the same period in 2010, for a decrease of $65,455 or 9.5%. A major reason for this is a decrease in salaries allocated from the Equipment Sales and Related Services Division of $28,921. This allocation has no effect on the consolidated operating results.

Consolidated Operating Expenses

The total consolidated operating expenses for the nine months ended September 30, 2011 were $5,381,764 versus $4,807,046 in 2010 for an increase of $574,718 or 12.0%. The major reason for this increase was an additional $846,977 of professional fees. There were $1,036,930 of Legal Expenses incurred during the nine months ended September 30, 2011 for the SEC Administrative Proceeding.

INVESTING SEGMENT

Unrealized Losses on Available for Sale Securities

At September 30, 2011, 82.82% or $5,820,878 of the total unrealized losses of $7,028,030 was comprised of the following three securities: $3,631,118 for Bank of America, $823,789 for Citigroup Inc. and $1,365,971 for USEC.

Bank of America

At September 30, 2011, Daxor owned 560,295 shares of Bank of America with a cost basis of $12.60 per share and a market value of $6.12 per share. On October 31, 2011, the market value was $6.83 per share which is $5.77 or 46% lower than our cost basis of $12.60 per share. As of September 30, 2011, the book value of the Company was $20.80 per share which is substantially more than the current market price and the cost basis of the shares owned by Daxor.

Revenue, net of interest expense for the quarter ended September 30, 2011 increased to $28.4 billion from $26.7 billion during the quarter ended September 30, 2010.

The Company took advantage of its strong liquidity position during the quarter ended September 30, 2011 and reduced short term debt by $17 billion and long term debt by $28 billion.

On October 18, 2011, Bank of America reported net income of $6.2 billion for the quarter ended September 30, 2011 versus a net loss of $7.3 billion for the same period in 2010.

In order to be “well capitalized” under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital Ratio of at least 6%, a Total Capital Ratio of at least 10%, and a Leverage ratio of at least 3% not to be subject to a Federal Reserve Board directive to maintain higher capital levels. At September 30, 2011, the Tier 1 Capital Ratio was 11.48%, the Total Capital Ratio was 15.86% and the leverage ratio was 7.11%. Bank of America is considered “well capitalized” under the federal regulatory agency definitions at September 30, 2011.

After considering the available positive and negative evidence in addition to the ability of Daxor to hold the stock until the market price exceeds our cost as it did at March 31, 2011, management has determined that an impairment charge is not necessary at September 30, 2011 on Bank of America.

Citigroup

At September 30, 2011, Daxor owned 38,440 shares of Citigroup with a cost basis of $47.05 per share and a market value of $25.62. On October 31, 2011, the market value was $31.59 per share which is $15.46 or 33% lower than our cost basis of $47.05 per share. During the first quarter of 2009, the stock was at $10.00 per share and as of October 31, 2011, was trading at $31.59 per share. The stock price has decreased by 5% from January 1, 2010 through October 31, 2011 going from $33.10 per share to $31.59 per share. As of September 30, 2011, the book value of the Company was $60.56 which is substantially more than the current market price and the shares owned by Daxor.

Citigroup reported net income of $3.8 billion for the quarter ended September 30, 2011 versus net income of $2.1 billion for the quarter ended September 30, 2010. Revenue was $20.8 billion during the current quarter versus $20.7 billion for the same period in 2010.

Citigroup has increased headcount to 267,000 at September 30, 2011 from 260,000 at March 31, 2011. This is still less than the peak level of 375,000 from 2007. Total Operating Expenses were 8% higher during the nine months ended September 30, 2011 as compared to the same period in 2010.

During 2009, Citigroup repaid $20 billion of TARP (Troubled Asset Relief Program) trust preferred securities and exited a loss sharing agreement. As a result of these transactions, effective in 2010, Citigroup is no longer deemed to be a beneficiary of “exceptional financial assistance” under TARP.

In order to be “well capitalized” under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital Ratio of at least 6%, a Total Capital Ratio of at least 10% , and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. At September 30, 2011, the Tier 1 Capital Ratio was 13.5%, Total Capital Ratio was 16.9% and the Leverage Ratio was 7.0%. Citigroup is considered “well capitalized” under the federal regulatory agency definitions at June 30, 2011 and all of these percentages have improved since December 31, 2010.

The operating environment for Citigroup continues to be difficult but the stock price has mostly been trending upward since the first quarter of 2010. Citigroup has now recorded a profit for seven consecutive quarters versus a loss for the year ended December 31, 2009. Citigroup is no longer deemed to be a beneficiary of “exceptional financial assistance” under TARP and is considered to be “well capitalized” under the federal regulatory agency definitions at September 30, 2011.

After considering the available positive and negative evidence in addition to the ability of Daxor to hold the stock until the market price exceeds our cost, management has determined that an impairment charge is not necessary at September 30, 2011 on Citigroup.

USEC

At September 30, 2011, Daxor owned 422,400 shares of USEC with a cost basis of $4.84 per share and a market value of $1.61 per share. On October 31, 2011 the market value of USEC was $2.10 per share which is $2.74 or 57% less than our cost basis of $4.84 per share.

The stock price has decreased by 65% from January 1, 2011 through October 31, 2011, going from $5.99 per share to $2.10 per share. As of September 30, 2011, the Book Value of the Company was approximately $10.93 per share. This is substantially more than the current market price and the cost basis of the shares owned by Daxor.

USEC Inc., together with its subsidiaries, supplies low enriched uranium (LEU) to commercial nuclear power plants in the United States and internationally. It also performs contract work for the U.S. Department of Energy (DOE) and DOE contractors at the Paducah and Portsmouth gaseous diffusion plants. USEC Inc’s contract work includes support services and the maintenance of Portsmouth gaseous diffusion plant in a state of cold shutdown. In addition, the company provides nuclear energy solutions and services, including the design, fabrication, and implementation of spent nuclear fuel technologies; nuclear materials transportation and storage systems; and nuclear fuel cycle and energy consulting services.

USEC reported a net loss of $44.7 million for the nine months ended September 30, 2011, versus a net loss of $1.5 million for the same period in 2010. Revenue for the current nine month period was $1.209 billion which is a 12% increase from 2010. The Gross Profit Margin was 6.1% during the nine months ended September 30, 2011 versus 8.0% for the nine months ended September 30, 2010.

Electricity makes up approximately 70% of USEC’s production cost. The Company is focused on negotiations with their major power supplier and other utilities in order to obtain lower cost power with less volatility in pricing after their current contract expires in 2012.

In their news release of November 4, 2011, the Company reaffirmed expected revenue of approximately $1.7 billion for 2011 and a gross profit of approximately $100 million.

After considering the available positive and negative evidence in addition to the ability of Daxor to hold the stock until the market price exceeds our cost, management has determined that an impairment charge is not necessary at September 30, 2011 on USEC.

Daxor Corporation

Summary of Unrealized Losses on Bank of America, Citigroup and USEC

As of September 30, 2011

Investment Gains (Losses)

Gains on the sale of investments were $253,505 for the three months ended September 30, 2011 versus $2,370,510 for the same period in 2010 for a decrease of $2,117,005. For the three months ended September 30, 2011, the Company recorded a loss from marking put and call options and short positions of stock to market of ($6,808,910) versus a gain of $2,735,102 for the same period in 2010. Interest expense was $29,769 for the three months ended September 30, 2011 versus $20,323 for the three months ended September 30, 2010. Administrative expenses relating to portfolio investments were $31,444 for the three months ended September 30, 2011 versus $35,227 for the same period in 2010.

Gains on the sale of investments were $6,277,552 for the nine months ended September 30, 2011 versus $9,936,557 for the same period in 2010 for a decrease of $3,659,005. For the nine months ended September 30, 2011, the Company recorded a loss from marking put and call options and short positions of stock to market of ($12,764,473) versus a loss of ($2,355,785) for the same period in 2010. Interest expense, net of interest income was $141,677 for the nine months ended September 30, 2011 versus $35,506 for the nine months ended September 30, 2010. The major reason for this increase was interest charges on certain short equity positions of $69,919 during the nine months ended September 30, 2011 versus $10,067 for the same period in 2010. Administrative expenses relating to portfolio investments were $101,153 for the nine months ended September 30, 2011 versus $101,244 for the same period in 2010.

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.

As of September 30, 2011, cash and cash equivalents totaled $29,711 versus $57,741 at December 31, 2010. Cash used in operating activities was $5,518,739 for the nine month period ended September 30, 2011. The decrease was primarily due to funding the loss from operations of $4,780,806 for the current nine month period and a decrease of $2,244,221 in income taxes payable.

Cash used in investing activities was $3,334,676 for the nine months ended September 30, 2011. A major reason for this is the acquisition of available for sale securities of $14,276,361 which was offset by proceeds from the sale of available for sale securities of $5,605,503 and sales of put and call options of $8,794,637.

A total of $8,825,385 of cash was provided during the current nine month period from financing activities. This was mainly due to proceeds received from margin loans of $25,213,762 which were offset by repayment of margin loans of $15,631,644.

The Company’s investment portfolio has been a critical source of supplemental income to partially offset the continuing losses from operations. Without the income from the investment portfolio, the Company would have needed to raise additional operating funds through either debt or equity financing or a combination of the two. The Company’s portfolio has maintained a net value above historical cost for each of the past 107 consecutive quarters.

The Company’s investment goals, strategies and policies are as follows:

1. The Company’s investment goals are capital preservation, maintaining returns on capital with a high degree of safety and generating income from dividends and option sales to help offset operating losses.

2. In order to achieve these goals, the Company maintains a diversified securities portfolio comprised primarily of electric utility common and preferred stocks. The Company also sells covered calls on portions of its portfolio and also sells puts on stocks it is willing to own. It also sells uncovered calls and may have net short positions in common stock up to 15% of the value of the portfolio. The Company’s net short position may temporarily rise to 20% of the Company’s portfolio without any specific action because of changes in valuation, but should not exceed this amount. The Company’s investment policy is to maintain a minimum of 80% of its portfolio in electric utilities. The Board of Directors has authorized this minimum to be temporarily lowered to 70% when Company management deems it to be necessary. Investments in utilities are primarily in electric companies. Investments in non-utility stocks will generally not exceed 20% of the value of the portfolio.

3. Investment in speculative issues, including short sales, maximum of 15%.

4. Limited use of options to increase yearly investment income.

a. The use of “Call” Options Covered options can be sold up to a maximum of 20% of the value of the portfolio. This provides extra income in addition to dividends received from the Company’s investments. The risk of this strategy is that investments may be called away, which the Company may have preferred to retain. Therefore, a limitation of 20% is placed on the amount of stock on which options can be written. The amount of the portfolio on which options are actually written is usually does not exceed 10% of the value of the portfolio. The historical turnover of the portfolio is such that the average holding period is in excess of five years for available for sale securities.

b. The use of “Put” options Put options are written on stocks which the Company is willing to purchase. While the Company does not have a high rate of turnover in its portfolio, there is some turnover; for example, due to preferred stocks being called back by the issuing Company, or stocks being called away because call options have been written. If the stock does not go below the put exercise price, the Company records the proceeds from the sale as income. If the put is exercised, the cost basis is reduced by the proceeds received from the sale of the put option. There may be occasions where the cost basis of the stock is lower than the market price at the time the option is exercised.

c. Speculative Short Sales/Short Options The Company normally limits its speculative transactions to no more than 15% of the value of the portfolio. The Company may sell uncovered calls on certain stocks. If the stock price does not rise to the price of the call, the option is not exercised and the Company records the proceeds from the sale of the call as income. If the call is exercised, the Company will have a short position in the related stock. The Company then has the choice of covering the short position, or selling a put against it. If the put is exercised, then the short position is covered. The Company’s current accounting policy is to mark to the market at the end of each quarter any short positions, and include it in the income statement. While the Company may have short positions equal to 15% of its accounts, in actual practice the net short stock positions usually account for less than 10% of the assets of the Company..

5. In the event of a merger, the Company will elect to receive shares in the new company if this is an option. If the proposed merger is a cash only offer, the Company will receive cash and be forced to sell the stock.

The income derived from these investments has been essential to help offset the research, operating and marketing expenses of developing the Blood Volume Analyzer. The Company has followed a conservative policy of assuring adequate liquidity so that it can expand its marketing and research and development without the sudden necessity of raising additional capital. The securities in the Company’s portfolio are selected to provide stability of both income and capital. The Company has been able to achieve financial stability because of these returns, which have covered a significant portion of the Company’s continuing losses from operations. The Company’s investment policy is reviewed at least once yearly by the Board of Directors and the Audit Committee. Individual investment decisions are made solely by the Company’s CEO, Dr. Joseph Feldschuh.

The Company currently has adequate resources for the current level of marketing and research and development expenses for the BVA-100 Blood Volume Analyzer as well as capital to sustain its localized semen and blood banking services. The Company may not, at the present time, have adequate resources to expand its marketing force to all areas of the country. The Company is simultaneously expanding its research and development efforts to develop additional instrumentation for renal function testing, specifically glomerular filtration testing. The Company recently explored the potential for raising additional capital but the terms would have been disadvantageous to existing shareholders. The current primary focus is on the BVA-100 Blood Volume Analyzer with respect to expenditure of resources. The Company anticipates hiring additional regional managers to the existing sales/marketing team. It is the goal of the marketing team to develop an individual sales team for each regional manager. The Company is also expanding its support services personnel.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements and accompanying footnotes included in this report have been prepared in accordance with accounting principles generally accepted in the United States with certain amounts based on management’s best estimates and judgments. To determine appropriate carrying values of assets and liabilities that are not readily available from other sources, management uses assumptions based on historical results and other factors that they believe are reasonable. Actual results could differ from those estimates.

Our critical accounting policies, are described in our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to our critical accounting policies as of and for the three and nine month period ended September 30, 2011.

CODE OF ETHICS AND BUSINESS CONDUCT

The Company has a Code of Ethics and Business Conduct which was approved by the Board of Directors in March 2005. The Code of Ethics and Business Conduct applies to all directors, officers, employees and other representatives of the Company including the Chief Executive Officer and Chief Financial Officer. A copy of the Code of Ethics and Business Conduct is available for free at www.daxor.com (http://www.daxor.com)

The Securities and Exchange Commission’s rule related to market risk disclosure requires that we describe and quantify our potential losses from market risk sensitive instruments attributable to reasonably possible market changes. Market risk sensitive instruments include all financial or commodity instruments and other financial instruments that are sensitive to future changes in interest rates, currency exchange rates, commodity prices or other market factors.

We are not exposed to market risks from changes in foreign currency rates. The Company maintains an investment portfolio primarily consisting of electric utility companies which are publicly traded common and preferred stock. These are categorized as available-for-sale securities.

In addition to receiving income from dividends, the Company also has an investment policy of selling puts on stocks that it is willing to own. Such options usually have a maturity of less than 1 year. The Company will also sell covered calls on securities within its investment portfolio. Covered calls involve stocks, which usually do not exceed 15% of the value of the company’s portfolio and have never exceeded 15% of the company’s portfolio value.

The Company will, at times, sell naked or uncovered calls, as well as, engage in short sales as part of a strategy to mitigate risk. Such short sales are usually less than 15% of the company’s portfolio value.

Puts, calls and short sales, collectively referred to as short positions, are all marked to market for each reporting period and any gain or loss is recognized through the Statement of Operations and labeled as “Mark to market of short positions”.

The Company’s investment strategy is reviewed at least once a year, and more frequently as needed, at board meetings. The Company’s investing policy permits investment in non-electric utilities for up to 20% of the corporate portfolio value. This percentage may be temporarily increased to 30% if deemed necessary by management.

At September 30, 2011 and December 31, 2010, available for sale securities consisted mostly of preferred and common stocks of utility companies. At September 30, 2011 and December 31, 2010, 96.37% and 96.16% of the market value of the Company’s available for sale securities was made up of common stock, respectively. As of September 30, 2011 there were five holdings of common stock which comprised 47.54% of the total market value of the available for sale investments. These five holdings are Entergy, Exelon, First Energy, Bank of America, and National Grid.

The Company’s portfolio value is exposed to fluctuations in the general value of electric utilities. An increase of interest rates could put downward pressure on the valuation of utility stocks.

Electric utilities operate in an environment of federal, state and local regulations, and they may disproportionately affect an individual utility. The Company believes that it’s exposure to regulatory risk is mitigated due to the diversity of holdings consisting of 73 separate common and preferred stocks.

Electric utilities operate in an environment of federal, state and local regulations, and they may disproportionately affect an individual utility.

The Company is not exposed to any foreign currency risk or commodity price risk through its holdings of equity securities and put and call options.

The Company is not exposed to any interest rate risk since it does not have any long term debt other than a fixed rate mortgage securing real property in Oak Ridge, Tennessee.

Summary of Available for Sale Securities as of September 30, 2011 (Unaudited)

Summary of Unrealized Losses of Available for Sale Securities as of September 30, 2011 (Unaudited)

Summary of Unrealized Gains on Available for Sale Securities as of September 30, 2011 (Unaudited)

Summary of Proceeds Received and Market Valuation as of September 30, 2011 (Unaudited)

Put and Call Options

Summary of Available for Sale Securities as of December 31, 2010

Summary of Proceeds Received and Market Valuation at 12/31/10

Put and Call Options

36

Daxor Corporation

Summary of Unrealized Losses on Available for Sale Securities

As at December 31, 2010

Daxor Corporation

Summary of Unrealized Gains on Available for Sale Securities

As at December 31, 2010

As of September 30, 2011, 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, Chief Financial Officer and Treasurer, 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 that the Company’s disclosure controls and procedures were effective as of the quarter ended September 30, 2011 in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in its periodic SEC filings. During the quarter ended September 30, 2011, there were no significant changes in internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

The Company’s management and board of directors are fully committed to the review and evaluation of the procedures and policies designed to assure effective internal control over financial reporting.

On September 17, 2010, the SEC instituted administrative proceedings pursuant to the Investment Company Act of 1940.The New York City staff of the Enforcement Division of the SEC are claiming that Daxor is an investment company. The Company has disclosed in previous filings that it is dependent upon earnings from its investment portfolio to fund operations.

This proceeding and related decision rendered on August 31, 2011 is discussed in greater detail in Note (9) Certain Concentrations and Contingencies and Part II Item 1, Legal Proceedings of this Form 10-Q.

The Company has a significant dependence on a single individual, Dr. Joseph Feldschuh, who is the CEO of the Company. Dr. Feldschuh is the Chief Scientist of the Company and is believed to have more experience with blood volume measurement than any other physician in the United States. He is also the co-inventor of the BVA-100, the inventor of the blood volume kit and a new Blood Volume Analyzer which will incorporate a method for total body albumin analysis.

The Company has disclosed in previous public filings that it is dependent upon earnings from its investment portfolio to fund operations and that a single individual, Dr. Joseph Feldschuh, makes all investment decisions.

He is involved in assisting and advising various physician groups that are conducting research. His scientific knowledge would be difficult to replace. However, if Dr. Feldschuh was unable to continue in his present scientific capacity, there are individuals currently working for Daxor who would be able to continue his activities in this area.

In 2009, the members of the Board of Directors determined that it was in the best interests of employees and shareholders to address the issue of leadership succession in case Dr. Feldschuh was unable to continue in his current roles. His son, Jonathan Feldschuh, who is the co-inventor of the BVA-100 that is currently in use, would take over the scientific responsibilities until a permanent Chief Scientific Officer could be found. Jonathan Feldschuh currently works for Daxor as a consultant on a limited basis.

However, Dr. Feldschuh is also the sole individual responsible for investment decisions with respect to the Company’s investment portfolio. The Company’s investment goals, strategies and policies are described in detail in this filing and previous quarterly and annual filings. These goals, strategies and policies have been largely developed by Dr. Feldschuh utilizing financial newspapers and a single advisory service. There are no computer algorithms used in the management of the investment portfolio. Dr. Feldschuh manages the portfolio and is assisted by a single part time administrative assistant who has no role in any of the investment decisions.

The loss of his services in this area would be expected to result in a material reduction in return on the Company’s assets. Dr. Feldschuh has no formal training in business and has been primarily educated and trained as a Physician and a Scientist with significant knowledge of mathematics, biology and related sciences.

The Company has maintained and increased spending when management deems it to be appropriate on research and development even as operating losses have increased. In order to help fund the operating loss and allow the Company’s research and development efforts to continue, Dr. Feldschuh decided to increase the amount of option trading. The option trading had previously been a part of the Company’s investment strategy. This allowed the Company to earn significantly increased returns during a period of extreme volatility in the markets.

Dr. Feldscshuh recommended that the assets in the Company’s investment portfolio not be entrusted to any financial manager, hedge fund or asset manager in case he is no longer able to function in his role of managing the Company’s investment portfolio. The Board of Directors approved Dr. Feldschuh’s recommendation that no funds from the Company’s portfolio would be transferred to a hedge fund or financial manager for management and the positions in utility stocks would be kept in an effort to maintain the current level of dividend income.

In the event that Dr. Feldschuh is unable to continue in his role of managing the Company’s investment portfolio, no new option positions would be initiated and Michael Feldschuh, the son of Dr. Joseph Feldschuh would assist in the process of closing the option positions that would be open at the time Dr. Feldschuh is unable to continue in his current capacity. Michael Feldschuh has eighteen years of experience as a hedge fund manager. The Company would then be limited to dividend income from the portfolio of available for sale securities. It is highly unlikely that this dividend income would be sufficient to cover the current level of operating losses. The Board of Directors would then determine what appropriate steps should be taken.