DAXOR CORP

Regulatory Filings • Feb 27, 2006

CORRESP 1 filename1.htm

February 24, 2006

Mr. Gary Todd United States Securities and Exchange Commission Division of Corporate Finance Mail Stop 6010 Washington, D.C. 20549

Dear Mr. Todd:

Thank you for granting us additional time to respond to your letter dated October 7, 2005. In response to the issues you raised we submit the following:

Form 10-K as of December 31, 2004

| 1. | We
understand that the issue of the Company’s status under the Investment
Company Act is under review. |
| --- | --- |
| 2. | Regarding
comments 3, 6 and 11 that we had stated would be effective with the Form 10Q
for September 30, 2005: |
| We have
disclosed information for three segments: “Equipment sales and related
services”, “Cryobanking and related services” and “Investment activity”. Of
these three segments, only “Equipment sales and related services” and
“Cryobanking and related services” are operational providing services to
external customers. One segment, “Cryobanking and Related Services” has
income from 2 external sources, the semen bank and long term blood storage.
The results of these operations have been aggregated with the “Cryobanking
and Related Services” segment in accordance with Paragraph 17 of SFAS 131. | |
| The
“Investment activity” segment is unique to Daxor because it represents such a
large portion of the company’s “Other Income and Expense”. We are disclosing
this to assist the users of our financial statements under the “more
information” principle of SFAS 131. Also, as specified in Paragraphs 21 and
32 of SFAS 131, Daxor is required to reconcile the segment information back
to the income statement. The disclosure of investment activity assists the
users of our financial statements in this reconciliation process. It should
be understood that Daxor is not in the business of investing. | |

Daxor’s Income Statement now only reflects “Operating Revenues” and “Operating Expenses” from the 2 operating segments. The investment income and expense is reported after “Loss from Operations”. This method of reporting is consistent with the treatment of investment activity as a non-operating segment.

a. Comment 6- Note 5 of our Form 10Q disclosed our obligations as follows:

5) LOANS PAYABLE

As at September 30, 2005 and December 31, 2004, the Company has a note payable of $1,500,000 with a bank with an annual option to renew, and is classified as short term. The note balance is an aggregate of borrowings (loans) that renews as one note each year, but is subject to different interest rates depending on the individual amount of each borrowing.

The loan bears interest at approximately 3.0% and is secured by certain marketable securities of the Company. Short term margin debt due to brokers secured by the Company’s marketable securities totaled $6,301,290 at September 30, 2005 and $2,613,285 at December 31, 2004.

We will begin to use the format you requested with our form 10K for the year ended December 31, 2005.

b. Comment 11 : Your request was “Please disaggregate the item “purchase of marketable securities, net” to separately present purchases and sales. Unless the bank loans have initial maturities of less than ninety days, that item should be similarly disaggregated. Refer to SFAS95 for guidance”.

Starting with our Form 10K for the year ended December 31, 2005 we will be fully compliant with your request to disaggregate the item “purchase of marketable securities, net” to separately present purchases and sales. We will also disaggregate the item “proceeds from bank loan”.

| 3. | In
accordance with APB 22, we will continue to disclose our critical accounting
policies. We will continue to expand on them in all future filings as we
started to do with our 10Q for the June 30, 2005. In accordance with FR-60,
management will ensure that disclosure in the MD&A is balanced and fully
responsive. Also in accordance with FR-60, our audit committee will review
the selection, application and disclosure of critical accounting policies
prior to the finalizing and filing of our 10K for the year ended December 31,
2005 and all subsequent annual filings. Our critical accounting policy
disclosure will address the nature and extent of subjective estimates,
management judgment and potential variability inherent to policies that
management had identified as critical as mandated in FR-72. |
| --- | --- |
| 4. | As mandated
in S-K Item 305(a) (3), market risk sensitive instruments shall be grouped
based on common characteristics within each risk exposure category in tabular
form. There is currently no foreign exchange risk category or commodity price
risk category. |

| 5. | As required
by paragraph 39 of SFAS 131, all future filings will provide information
about the extent of our reliance on major customers. If revenues from
transactions with a single external customer amount to 10% or more of our
revenues, we will disclose that fact, the total amount of revenues from each
such customer, and the identity of the segment or segments reporting the
revenues. We are aware that paragraph 39 of SFAS 131 does not require us to
disclose the identity of the customer. | |
| --- | --- | --- |
| 6. | We
acknowledge that short sales of securities need to be marked to market with
the changes in value recorded in earnings as they occur in accordance with
SFAS 113. | |
| | • | The form 10K
for 2004 including the audited financial statements and selected financial
data schedule on page 13 will need to be amended. However the amendment is
not necessary in order to comply with the guidance set forth in Question 7 to
the FASB publication “A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities: Questions
and Answers” regarding the marking short sale obligations to market. The
attached schedule shows the cost and market value of our Short Sales of
Securities at 12/31/04 and based on the guidance provided by SAB 99, this
amount is immaterial. |
| | • | As stated
above, a schedule is attached showing the market value of our short positions
at December 31, 2004. This information is not available for the preceding
four fiscal years. |
| | • | As part of
the schedule showing gross unrealized gains and gross unrealized losses
mentioned above, a materiality analysis has been done in accordance with the
guidance in SAB 99 for the last five fiscal years. Based on this guidance, it
is our opinion that the 10K for the year ended December 31, 2004 is the only
one that needs to be amended. |
| 7. | Any puts and
calls will be recognized at fair value on our Form 10K for 2005 and the
changes in fair value will be reflected in our earnings in accordance with
SFAS 133. Our Form 10K for 2005 will show the fair value of our put and call
options at December 31, 2005 and December 31, 2004. The schedule mentioned in
Point 6 shows the fair value of our put and call options for the years ended
December 31, 2000 through December 31, 2004. | |
| | With respect
to the options and the question of short positions, since our communication
of September 15, 2005, we have marked to market all short positions and
included the effect of this adjustment in our income statement. Our policy
has been to permit up to 5% of the account to be in short positions.
Historically, the number of short positions has been significantly less than
5% of our account. | |

| | We have
reviewed the positions for the years 2002, 2003, 2004 and 2005. In each of
those years the average short position was less than 1% of the account value.
In some years, there were no short positions. Since the short positions were
immaterial, it is not necessary to restate our results. In the instances
where there were short positions, a profit or loss was included in our income
statement under “investment income” when the position was closed out. Our
current policy is to mark to market all short stock and include this in our
quarterly and annual results. |
| --- | --- |
| 8. | The restated
10K for the year ended December 31, 2004 when filed, will include the
amendment requested together with certifications from the current CEO and CFO
in the form currently set forth in Item 601(b) (31) of Regulation S-K. |

Form 10-Q as of June 30, 2005

Restatements, page F-7

| 9. | Starting
with our 10Q for the quarter ended June 30, 2005, we have restated our
results for 2004 in order to correct an error in accounting for storage
revenues. These restated amounts have not been audited. Our outside auditors
expect to have their audit of these numbers completed no later than March 31,
2006. Once the audited numbers are available, we will perform a materiality
analysis in accordance with the guidance in SAB 99 and amend the 2004 10K if
necessary. |
| --- | --- |
| 10. | Storage revenues
were accounted for on a cash basis from the beginning of operations through
December 31, 2003. From January 1, 2004 through September 30, 2005, the
storage fees were billed on an annual basis and revenue was recognized when
the invoices were generated. Effective with the fourth quarter of 2005, the
storage clients have been billed in stub periods in order to get them on a
quarterly billing cycle. Therefore in the future, revenue recognition will
not include deferred revenue from storage fees being currently invoiced.
Storage revenue will be billed and earned in the same period in which the
invoices are generated. The balance in Deferred Storage Revenue at September
30, 2005 will be fully earned by December 31, 2006. |
| 11. | The restated
amounts for each quarter in 2004 have been disclosed on the Form 10Q’s for
the comparable periods in 2005. The total corrected amount for 2004 will be
reflected on the amended 10K for the year ended December 31, 2004. If
necessary, we will file a Form 8-K for 2004 and disclose the information
required under Item 4.02 of Form 8-K. |

Other

1. In response to your request, we acknowledge the following:

| • | The company
is responsible for the adequacy and accuracy of the disclosure in the filing. |
| --- | --- |
| • | Staff
comments or changes to disclosures in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing;
and |
| • | The company
may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States. |

I trust the above information will meet with your satisfaction.

Very truly yours,

| Joseph
Feldschuh, M.D. | David
Frankel |
| --- | --- |
| President | Treasurer |

Daxor Corporation Summary of Short Positions at 12/31/04, 12/31/03, 12/31/02, 12/31/01 and 12/31/00

| Date — 12/31/2004 see note 1 | Short Positions Sold For — $ 974,161 | $ 591,483 | $ 382,678 | $ 4,230,641 | Net
Unrealized Gain as a Percentage of Total
Income Reported on Form 10K — 9.05 % | $ (580,268 | ) | $ (197,590 | ) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 12/31/2003 | $ 663,466 | $ 547,595 | $ 115,871 | $ 3,165,437 | 3.66 % | $ (1,076,189 | ) | $ (960,318 | ) |
| 12/31/2002 | $ 98,683 | $ 71,775 | $ 26,908 | $ 2,701,937 | 1.00 % | $ (193,851 | ) | $ (166,943 | ) |
| 12/31/2001 | $ 16,128 | $ 14,337 | $ 1,791 | $ 2,716,376 | 0.07 % | $ 299,355 | | $ 301,146 | |
| 12/31/2000 | $ 67,584 | $ 43,287 | $ 24,297 | $ 2,645,770 | 0.92 % | $ (55,194 | ) | $ (30,897 | ) |
| Summary of 2004
Information | | | | | | | | | |
| Puts and Calls | 969,231 | 585,142 | 384,089 | | | | | | |
| Short Sale of
Securities | 4,930 | 6,341 | (1,411 | ) | | | | | |
| Total at
12/31/04 | 974,161 | 591,483 | 382,678 | | | | | | |