UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 Form 10-K xANNUAL REPORT PURSUANT
TO SECTION 13
OR 15(d) OF THE SECURITIES Exchange Act of 1934 For the fiscal year ended: December 31, 2005Oro TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________  to _________ Commission file number 0-12248 Daxor Corporation(Exact
  name of registrant as specified in its charter)  New York



13-2682108(State
  or Other Jurisdiction of

(I.R.S.
  EmployerIncorporation
  or Organization)

Identification
  No.) 350 5th Avenue, Suite 7120, New York, New York 10118
(Address of Principal Executive Offices) Registrants telephone
number, including area code: 212-244-0555
Name of each exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to section 12(g) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE(Title of each class) Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. oYes     x  No Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. oYes     x  No Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days xYes     o  No Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. oYes     x  No Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act) oYes     x  No Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act oYes     x  No The aggregate market value of the voting stock held by non-affiliates
of the registrant based upon the closing price of the registrants common stock on as of March 31, 2005, the last day of the
registrants most recently completed first fiscal quarter was $26,368,724.
As of March 31, 2006, there
were 4,620,426 shares of the Registrants common stock, par value $.01 per
share, outstanding. DOCUMENTS INCORPORATED BY
REFERENCE The Registrant maintains an
internet website at www.daxor.com for Daxor Corporation. For the
Scientific Medical Systems subsidiary, the website is www.Idant.com.
None of the information contained on this website is incorporated by reference
into this Form 10-K or into any other document filed by the Registrant with the
Securities and Exchange Commission. 1    TABLE
OF CONTENTS

Item

Description


PagePART IItem 1.

Business

2Item 1A.

Risk Factors

17Item 2.

Properties

18Item 3.

Legal Proceedings

18Item 4.

Submission of Matters to a Vote of Security
Holders

18PART IIItem 5.

Market for Registrants Common Equity, Related Shareholder
  Matters and Issuer Purchases of Equity Securities

19Item 6.

Selected Financial Data

20Item 7.

Managements Discussion and Analysis of Financial
Condition and
  Results of Operations

21Item 7A.

Quantitative and Qualitative Disclosures about Market
Risk

26Item 8.

Consolidated Financial Statements and Supplementary
Data

30Index to Financial Statements

30Item 9.

Changes and Disagreements with Accountants on Accounting and
  Financial Disclosure

49Item 9A.

Controls and Procedures

49PART IIIItem 10.

Directors and Executive Officers of the
Registrant

50Item 11.

Executive Compensation

50Item 12.

Security Ownership of Certain Beneficial Owners and Management
  and Related Shareholder Matters

50Item 13.

Certain Relationships and Related Transactions

50Item 14.

Principal Accountant Fees and Services

50PART IVItem 15.

Exhibits and Financial Statement Schedules

51Introductory Note: Forward Looking Statements

This Form 10-K contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements include statements regarding our plans, goals, strategies, intent,
beliefs or current expectations. These statements are expressed in good faith
and based upon reasonable assumptions when made, but there can be no assurance
that these expectations will be achieved or accomplished. Sentences in this
document containing verbs such as believe, plan, intend, anticipate,
target, estimate, expect, and the like, and/or future tense or
conditional constructions (will, may, could, should,, etc.) constitute
forward-looking statements that involve risks and uncertainties. Items
contemplating, or making assumptions about, actual or potential future sales,
market size, collaborations, trends or operating results also constitute such forward-looking
statements. These statements are only predictions and actual results could
differ materially. Certain factors that might cause such a difference are
discussed throughout this Annual Report on Form 10-K, including the section
entitled Risk Factors. Any forward-looking statement speaks only as of the
date we made the statement, and we do not undertake to update the disclosures
contained in this document or reflect events or circumstances that occur
subsequently or the occurrence of unanticipated events.

PART I

Item 1. Business

Daxor Corporation is a
medical device manufacturing company with additional biotechnology services.
Daxor was originally founded in 1970 for cryobanking services and continues
these services through its wholly owned subsidiary, Scientific Medical Systems.
For the past 11 years, the Companys major focus has been on the development of
the BVA-100® Blood Volume Analyzer, an instrument that rapidly and accurately
measures human blood volume. The instrument is used in conjunction with
Volumex®, a single use

2

radiopharmaceutical
diagnostic injection and collection kit. The Company also performs cryobanking
of blood through Scientific Medical Systems and of semen through Idant, a
subdivision of Scientific Medical Systems. The Company maintains websites at,
www.daxor.com and www.idant.com that describes its operations.

BVA-100 BLOOD VOLUME ANALYZER

Blood volume measurement has
a large potential market. Blood volume derangements are associated with a
variety of medical conditions, and it is well established that clinical
assessment of blood volume using physical examination or simple blood tests
such as hematocrit testing are frequently inadequate to determine total blood
volume. Previous methods of directly measuring blood volume have been extremely
complex and time-consuming. The BVA-100 is a CLIA rated medium complexity
instrument that can measure blood volume with 98% accuracy within 60 to 90
minutes. Participating institutions utilize the BVA-100 for diagnosing and
treating patients with heart failure, syncope and to aid in fluid management in
the critical care unit. The BVA-100 has also been used to aid in the diagnosis
and treatment of polycythemia, hypertension, anemia, chronic fatigue, and for
presurgical evaluation. Additional possible uses include management of kidney
dialysis and for use in a comprehensive program of blood optimization for
elective surgery.

History and Development of the BVA-100

Blood volume measurement has
been available for more than 60 years, although previous methods required as
much as four to eight hours of technician time with variable degrees of
accuracy. Measurement of blood volume is achieved by infusing a radioisotope
indicator, or tracer, into a patients vein and then collecting timed blood
samples after the tracer has distributed evenly throughout the circulatory
system. The volume of blood in a patient is inversely proportional to the
dilution of the tracer. The measurement, while relatively simple in principle,
has been difficult to perform accurately and rapidly because of the high degree
of precision required in each step. Standard techniques require a technician to
prepare an exact matching set of standards, precisely and completely injecting
the tracer, collecting five timed blood samples, and then prepare the samples
in precise quantities for measurement. Due to the time required, certain
technical shortcuts were often used that reduced the accuracy of the
measurement. Therefore, the complexity and length required for achieving an accurate
blood volume result, prior to the introduction of Daxors BVA-100 Blood Volume
Analyzer, blood volume measurements were performed in only a small minority of
hospitals in the United States.

Instead of accurate blood
volume measurement, physicians who needed to assess volume status commonly used
clinical assessment with physical examination or standard surrogate, or proxy,
tests such as hemoglobin and hematocrit. However, these methods have frequently
been found to be inadequate determinations of total blood volume The only time
the hematocrit or hempglobin is accurate is when the patients volume status is
normal. If the total blood volume is off, then the use of these tests can
produce misguided information. Hemoglobin and hematocrit testing measure only
the thickness of the blood (percentage of red cells to plasma within the blood)
and not the actual volume. Physical Symptoms are not reliable indicators of
blood volume status. In acute situations, such as during surgical blood loss or
after trauma, it may take as long as 24 to 72 hours for the hematocrit to
reasonably reflect the degree of blood loss.

An additional problem was
the difficulty of calculating an accurate normal blood volume for a specific
individual. Daxors Chief Scientific Officer published his findings in Circulation
in April 1977, that showed normal blood volume has been shown to vary in
relation to the degree of deviation from ideal weight. A leaner individual has
a higher blood volume percentage of body weight as compared to an obese
individual. The computations for an individuals normal expected blood volume
were complex and time consuming, and frequently simpler norms incorporating
body weight or body surface area were used. These norms, however, are known to
have systematic errors for individuals who are lean, obese, short, or tall.

The BVA-100® Blood Volume
Analyzer enables rapid, reliable measurement of blood volume. The Companys
patented injection and collection kit, Volumex, utilizes Albumin I-131, a
classic tracer used for blood volume measurement. The kit includes two matching
standards and a pre-measured volumetric flow-through chamber that contains the
radiopharmaceutical. This kit eliminates most of the previous time consuming
steps to prepare for a blood volume as well as improves accuracy. The BVA-100
software automatically calculates the blood volume evaluates the statistical
reliability of the measurement, and compares the results to a the most accurate
known predicted norm, which is a function of the patients height, weight and
gender. Results are available within 60 to 90 minutes. In emergency situations,
preliminary results can be available within 20 to 25 minutes.

The Company obtained
marketing clearance from the FDA for the BVA-100 Blood Volume Analyzer in 1997,
and for its Volumex specialized single use injection kit in 1998. The Company
manufactures its own injection kit components and specialized collection kit,
and injection kit filling is performed by an FDA licensed radiopharmaceutical
manufacturer. The Company can provide customized collection kits for customers
with special needs. The Company established a small scale
manufacturing facility in Oak Ridge, Tennessee, primarily for research and
development purposes, with limited manufacturing capabilities. The Company has
received United States, European Common Market, and Japanese patents for its
Blood Volume Analyzer.

After successful beta
testing for the Blood Volume Analyzer at hospitals in the New York metropolitan
region, the Company expanded marketing efforts outside of the New York region.
The initial beta testing period can be considered to have run from

3

approximately early 1998 to
mid 2000. The next phase of beta testing was a change in focus to reaching out
to major hospitals in the United States, such as the Mayo Clinic, The National
Institutes of Health (NIH), and the Cleveland Clinic. This phase was marked by
incorporation of the BVA-100® into several research studies, many of which
later resulted in publication. This phase, which lasted from approximately mid
2000 to mid 2003, resulted in the first retention of instruments by hospitals
and the utilization of the instrument on a wider scale by nationally recognized
physicians and institutions. Test results from hospital sites indicated that the
Blood Volume Analyzer was accurate and provided information that was important
in a wide variety of acute and chronic medical and surgical situations. The
first results from studies began to appear in 2000, but it was not until 2002
that we began to see publication in peer reviewed journals of studies initiated
in 2000. Often there is a gap of 2-4 years between initial contact and full
publication in a peer reviewed journal. In 2002 the Company retained a
recruiting firm to develop a professional sales team. Since 2003, we have
entered a marketing phase, focusing on developing a strong marketing team and
working to transition the BVA-100® from utilization primarily in research
studies into widespread clinical use. In 2003, we also initiated a major
overhaul of the BVA-100® technology from a DOS-based system to a Windows based
system (see Research and Development).

MARKET OPPORTUNITY

Utilization of the BVA-100

The Company believes that
the most significant market for its blood volume measurement equipment consists
of approximately 8,500 hospitals and Radiology Imaging Centers in the United
States. The Company believes that there is an additional international market
of 10,000-14,000 potential users of the BVA-100. Below we describe some of the
many widespread conditions in which blood volume measurement promises to
improve diagnosis and treatment.

Blood volume measurement is
an approved test with six separate CPT codes. Reimbursement has been received
from a number of insurance companies, including Medicare, for measurement of
blood volume using the BVA-100 Blood Volume Analyzer. Reimbursement is
particularly important for hospitals because revenue from patients who are
admitted to the hospital is based upon set amounts from the insurance companies
based on the condition for which they were admitted. However, out-patients
provide an additional stream of cash flow with well defined costs and the
ability for the hospital to be profitable by providing such services.

Scientific Studies Utilizing the BVA-100

Since 2002, a number of
studies have been published utilizing data obtained from the BVA-100, one of
which was cited in the American College of Cardiology/American Heart
Association treatment guidelines for heart failure. Other studies are ongoing,
and Vanderbilt University is preparing a symposium on blood volume that will
feature a number of articles from institutions that utilize the BVA-100. These
completed and published studies represent the areas in which blood volume
measurement has already achieved some measure of acceptance and utilization,
and in which expanded utilization is likely.

Daxor has worked extensively
with the facilities who have published research studies to help them to
publication. Daxor has provided these facilities with use of equipment, training,
ongoing consultation, help with interpretation and display of results. For
certain research projects, daxor has also provided the Volumex doses and
financial support. The Company believes that supporting these initial studies
will result in increased acceptance and utilization of the BVA-100 Blood Volume
Analyzer.

Heart Failure

Approximately 5 million
individuals are treated annually for heart failure. It is estimated that $38
billion is spent annually on heart failure treatment, of which $23 billion is
spent on hospital treatment. Heart failure is the number one reason for
admission to hospitals in the US for patients over 65 years of age. The
overwhelming majority of patients treated for heart failure must be treated
with a combination of powerful drugs that may drastically change the patients
blood volume. Three thousand patients annually receive heart transplants, and
an increasing number are receiving left ventricular assist devices (LVAD), a
type of mechanical heart.

In the May 2004 issue of the
American
Journal of Cardiology, Dr. Ana-Silvia Androne, Dr. Stuart Katz and
colleagues at Columbia Presbyterian Medical Center published a landmark study
utilizing the BVA-100® to measure blood volume in NYHA Class III and IV heart
failure patients. In this observational study, cardiologists treated the
patients according to their usual clinical guidelines without incorporating
blood volume measurement which were performed on the patients. Patients were
categorized as hypovolemic, normovolemic, or hypervolemic, and their outcomes
over time were recorded. 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 suggests that effectively treating patients to
normovolemia promises to improve outcomes.

The study also reported on
the accuracy of clinical assessment of volume status in these patients.
Physicians who were trained in cardiology assessed patients blood volume
statuses using standard laboratory tools and physical examination. When
choosing between three possible choicesdecreased, normal, or increased blood
volumespecialists were correct only 51% of the time in

4

evaluating these severely
ill cardiac patients when compared to the direct measurement results provided
by the BVA-100. This study was cited in the most recent revision of the
American College of Cardiology/American Heart Association guidelines for the
treatment of chronic heart failure.

This landmark study
highlights the importance of correcting a heart failure patients blood volume
to normal. The most recent revision of the heart failure treatment guidelines
of the American College of Cardiology and American Heart Association (ACC/AHA)
has cited the Androne study and has referred to the BVA-100 Blood Volume
Analyzer as an accurate method of blood volume measurement. The ACC/AHA
guidelines have for the past 20 years recommended blood volume assessment as an
essential component of the diagnosis and ongoing treatment of heart failure.
This study is the first to provide direct evidence that achievement of
normovolemia is associated with improved outcomes, and that treating to
normovolemia is a legitimate goal.

Two earlier studies from New
York Presbyterian Medical Center and Hospital were published in the leading
cardiac journal Circulation. One study used blood volume measurement with
Daxors BVA-100, Blood Volume Analyzer to distinguish between true anemia and
hemodilution in heart failure patients. The second study examined the effects
of erythropoietin on exercise performance in anemic heart failure patients.
Senior authors were, respectively, Ana-Silvia Androne, MD, Stuart D. Katz, MD,
et al, and Donna M. Mancini, MD. These studies demonstrated that different
heart failure patients with similar physical symptoms and low hematocrits might
have true anemia (a decrease in red cell volume) or hemodilution (an increase
in plasma volume). These differences were not reliably identified without
direct blood volume measurement from the BVA-100.

Many of the patients in the
above studies were severely ill and were being considered for heart transplant
or implantation of left ventricular assistance devices. Several other studies
have recently confirmed that anemic heart failure patients may have very
significant improvement through pharmacological treatment rather than more
expensive and risky surgical interventions. Cardiac transplants are obviously
available to only a very small fraction of congestive heart failure patients.
Left ventricular assistance devices (LVAD) may be available as an interim
measure while waiting for transplantation and have been studied as a possible
destination therapy. While the mortality rate of LVAD implantation continues to
improve, the one-year mortality after LVAD implantation averages around 50%.
Further, LVAD therapy is costly (initial costs average around $200,000, with
approximately $100,000 in annual follow-up costs for surviving patients),
requires intensive follow-up, and is available at only a limited number of
heart failure care centers. The ability to effectively treat these patients
pharmacologically promises not only to prolong patients lives but to be less
expensive.

In the November 2005 issue
of the American Heart Journal, Dr. Karen James and colleagues from the
Cleveland Clinic published a study utilizing the BVA-100, comparing blood
volume measurement, brain natriuretic peptide (BNP, a common test used to
measure the severity of heart failure), and hemodynamic measurements in the
short term treatment of acute heart failure. All patients had expanded volumes
at the beginning of treatment and tended to experience improvement in blood
volume and symptoms after treatment. Blood volume was a better indicator of
improvement than brain natriuretic peptide. The authors concluded that blood
volume measurement may be a better measurement to track short-term improvement
in heart failure. This is the first study of its kind in which serial direct
blood volume measurements were performed, first before treatment and then 24-36
hours after initiation of acute heart failure treatment in the cardiac ICU. The
study also documented that blood volume measurement was more accurate than
Pulmonary Artery Catheterization (PAC), Brain Natiuretic Peptide, or any other
test in determining the blood volume status of the patient. PAC is an invasive
procedure with significant risks in contrast to whole blood volume measurement,
which is a non-invasive procedure.

Dr. Matthew Maurer, et al.
at Columbia Presbyterian, recently published a study in the April 2005 issue of
the Journal
of Cardiac Failure.This study utilized the BVA-100 Blood Volume
Analyzer with other diagnostic methods to identify subgroups of patients with
diastolic heart failure. Diastolic heart failure is a major category in heart
failure that is difficult to treat. Blood volume measurement may provide
essential information for optimum treatment in these patients.

Multiple case reports from
other cardiologists using the Blood Volume Analyzer have confirmed that heart
failure patients may have serious blood volume derangements that cannot be
correctly diagnosed without direct blood volume measurement. Utilization of
blood volume measurement in heart failure treatment may significantly prolong
lives and reduce expensive and risky interventions.

5

Critical Care (Intensive Care Unit)

One of the essential
components of critical care is the optimal management of fluid status. Correct
interpretation of clinical signs and symptoms is essential for fluid
resuscitation and fluid management in the critical care setting. Blood volume
measurement promises to take the guesswork out of volume assessment and enable
more precise and appropriate treatment.

Dr. Mihae Yu and colleagues
at Queens Medical Center in Honolulu, HI, 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 results have
influenced treatment decisions. In their most recent results, including 86 data
points from 40 patients, 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 was changed 20% of the
time. Among patients who did not receive PAC measurement, treatment was changed
45% of the time. Dr. Yu and colleagues, with Dr. Elizabeth Biuk as the senior
author, have presented their findings at the Society of Critical Care 2006 annual
meeting and their studies were featured in the November 2005 issue of Anesthesiology
News. These studies are preliminary studies that should be followed
up by additional evaluation of how incorporating blood volume measurement intro
critical care treatment affects outcomes.

Syncope

Syncope, or sudden loss of
consciousness, has been estimated to be responsible for 3-5% of emergency
department visits and 1-6% of hospital admissions. As many as one million
individuals per year experience an episode of syncope.

An
important condition related to syncope is orthostatic hypotension, which has
been estimated to be present in one out of every three elderly patients.
Orthostatic hypotension is a sudden drop in blood pressure that occurs when an
individual rises to a standing position. It may cause dizziness, loss of
balance, or a complete loss of consciousness. If an episode of orthostatic
hypotension precipitates a fall, the person may suffer severe injuries, such as
a broken hip. One in eight elderly Americans experiences a hip fracture.

Effective treatment of
syncope requires an understanding of the underlying causes in each individual.
Among other possible causes, a low blood volume can contribute to a
predisposition to syncope. Some pharmacological treatments include
fludrocortisone, which increases the plasma volume, and midodrine, which causes
increased constriction of the blood vessels. The safety and effectiveness of
these medications can be affected by blood volume derangements.

Since March 2000, the Syncope
Section in the Cardiovascular Department of the Cleveland Clinic has been
utilizing the BVA-100® for help in diagnosing over 2000 syncope patients. These
patients have presented with a wide range of blood volume derangements,
including moderate to severe hypovolemia that would not have been diagnosed
without blood volume measurement. Results from blood volume measurement and
tilt table testing (a standard test in syncope diagnosis) have been prepared
for publication by Dr. Fetnat Fouad-Tarazi, Head of the Hemodynamic and
Neuroregulation Lab.

Transfusion Decisions in Surgery

Effective use of transfusion
in surgical situations requires accurate assessment of a patients need for
transfusion. Knowing whether and when to transfuse blood depends on effectively
balancing the benefits and risks of transfusion for each patient at any given
time. The risks of donor transfusion, such as infectious disease transmission
and transfusion reactions, are well documented, and physicians frequently
attempt to avoid these risks by withholding transfusion until a patient is
severely anemic. Under current transfusion practices, patients may undergo
major surgery with half the concentration of normal red cells. This level of
anemia, however, has its own risks. There have been recent reports in the New England
Journal of Medicine that as many as 40 - 50% of patients undergoing
cardiac bypass graft surgery (CABG) experience some degree of measurable
permanent brain damage such as memory loss. In the journal Transfusion, Dr. Robert Valeri,
a senior researcher at the Boston Naval Hospital, estimated that there may be
as many as 40,000 heart attacks per one million operations due to
undertransfusion.

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.

Dr K Shevde and colleagues
from Maimonides Medical Center in Brooklyn published a report in the November
2002 issue of the Journal of Clinical Anesthesia that evaluated blood volume
measurement results with the BVA-100 to compare transfusion requirements in
males and females undergoing coronary bypass graft surgery. They found that
women, on average, had lower blood volumes than men prior to surgery and
received more transfusions despite losing the same amounts of blood. This is
the first study to document the reasons why women are at increased risk for
requiring a transfusion when undergoing cardiac bypass surgery.

Clinical Validation of the BVA-100

In addition to examining the
role of blood volume in relation to various medical conditions, some studies
have examined how blood volume measurement with the BVA-100 compares to other
measurement methods. These reports provide important validation for

6

physicians to accept the use
of the BVA-100 in clinical settings.

Dr. SJ Alrawi and colleagues
from the Lutheran Medical Center (New York) published an article in the
November 2002 Saudi Medical Journal comparing the BVA-100 with pulmonary
artery catheterization. In this study, patients in the critical care unit
received pulmonary artery catheterization as well as blood volume measurement
with the BVA-100, and results were compared. There was some correlation between
blood volume and cardiac output, but otherwise measurements using the pulmonary
artery catheter and blood volume results were not related to each other. This
indicates that, in addition to being invasive, pulmonary artery catheterization
does not provide an accurate estimate of blood volume. Direct blood volume measurement
is less invasive and more accurate

Dr. Howard Dworkin and
colleagues from William Beaumont Hospital compared blood volume measurement
with the BVA-100 to the previous gold standard blood volume measurement method,
which consists of simultaneous radioisotopic measurement of red cell and plasma
volume. They found that results correlated very closely with each other, but
measurement with the BVA-100 took 90 minutes as opposed to 3.5 hours required
for the standard method. These findings support the reliability and improved
feasibility of the BVA-100 for clinical use. Results from this study were
presented at the 2005 annual meeting of the Society of Nuclear Medicine.

Other Uses for the BVA-100

Below are examples of some
other major conditions for which blood volume measurement promises to improve
diagnosis and treatment. While no research studies have been published focusing
specifically on these conditions, some users of the BVA-100 utilize blood
volume measurement in their treatment of these and other conditions.

Hypertension

A recent study by the Mayo
Clinic estimated that 50 million Americans have hypertension (high blood
pressure). It is reported that 70% of hypertensive patients have their blood
pressures inadequately controlled. Hypertension is caused primarily by two
variables: abnormal expansion of blood volume or excessive constriction of the
blood vessels. Hypertension treatments are aimed at reducing blood volume (such
as with diuretics) or relaxing the blood vessels (such as with vasodilators),
but for any individual patient, the specific choice of treatment is determined
on a trial and error basis. With blood volume measurement, blood volume
expansion can be confirmed or ruled out, allowing a physician to choose
treatment more precisely and avoid the risks of inappropriate treatment.

One of the most serious
complications of hypertension is loss of kidney function (renal failure), which
may result in a patient requiring permanent renal dialysis. The kidney is
particularly vulnerable to low blood volume. Certain medications, such as
diuretics, can cause blood volume to decrease and, when inappropriately
prescribed, can increase the possibility of kidney failure. The measurement of
blood volume in the treatment of hypertension may help prevent these types of
complications.

African-Americans are
disproportionately at risk for hypertension and have been reported to have
significantly higher rates of kidney failure as a complication of hypertension.
Howard University, a 482-bed award winning university and teaching
hospital, has contracted to
receive the Blood Volume Analyzer on a trial basis. For more than 141
years, Howard University Hospital has pioneered treatment techniques and is the
only African American academic and comprehensive health care center in the
country.

While no studies have been
published on the use of the BVA-100 in hypertension, several medical facilities
have been using the BVA-100 on a clinical basis in the diagnosis and treatment
of hypertensinon. The Mayo Clinic, which purchased the BVA-100 in 2003, has
reported that blood volume measurement can be helpful in defining therapy.

Anemia

Studies have been published
documenting the usefulness of the BVA-100 in diagnosing anemia in heart
failure, but the ability to accurately diagnose anemia has much wider
implications. Anemia is common in a wide number of conditions, including
chemotherapy for cancer, HIV and chronic fatigue syndrome. Frequently, the
presence of anemia is associated with poorer outcomes, and in some conditions
successful treatment of anemia leads to improved outcomes.

Clinical assessment with
physical examination and the use of surrogate tests such as hematocrit
measurement does not reliably detect anemia. In some cases a patient may have a
pseudoanemia, or a normal red cell volume with an expanded plasma volume. In
other cases, a patient may have a hidden anemia, in which both the red cell
and the plasma volume are low. A hematocrit or hemoglobin test would not
indicate the presence or the true severity of the patients anemia.

Epogen and Procrit can be
used to treat certain types of anemia. These medications are manufactured by
the Amgen Corporation, and Procrit is distributed by the Ortho Division of
Johnson & Johnson. Blood volume measurement can be a key test in determining
the need for and evaluating the effectiveness of these types of treatments.

7

Renal Dialysis

Renal dialysis patients
undergo major fluid shifts during dialysis. Anecdotal evidence suggests that
approximately 25% of dialysis patients experience significant episodes of
hypotension (sudden drop in blood pressure) during the course of treatment.
Hypotensive episodes may have consequences ranging from nausea and
lightheadedness to myocardial infarction and death.

Blood volume measurement may
be used as a way to establish a patients baseline blood volume; hematocrit
measurements can then be used to track fluid shifts during dialysis. This can
enable physicians to more precisely determine how much fluid can be safely
removed during dialysis.

The Company has discussed
the use of the BVA-100® with several dialysis centers. While some individual
patients undergoing dialysis receive blood volume measurement, no large-scale
agreement has yet been reached with any dialysis centers.

Blood Substitutes

Blood substitutes have been
proposed for over a decade as a desirable alternative to donor blood
transfusion. Ideally, blood substitutes would increase the oxygen carrying
capacity of blood without exposing the patient to the risks of donor blood
transfusion. They could have the added benefit of having longer shelf lives and
being sterilizable, and could be carried in emergency medical vehicles for
immediate availability in emergency situations.

Several manufacturers,
including Northfield Laboratories, Biopure, and Hemosol Corporation, have
tested different types of blood substitutes. To date, despite many attempts by
these companies, none have received FDA approval for these procedures. In blood
substitute studies, patients were treated without the treating physicians
knowing the patients blood volumes prior to or after administration of the
blood substitute. Even in standard transfusion situations, patient outcomes can
vary greatly depending on the need for transfusion and on whether an
appropriate amount of blood was transfused. Lack of this type of basic
information may obscure results on the effectiveness and safety of blood
substitutes and may be one of the factors behind the FDAs unwillingness over
the past 10 years to license any of these types of blood substitutes.

Additionally, blood
substitutes have a very short half life of 24-28 hours, as opposed to 20-30
days for transfused red blood cells. Thus, transfusion of a blood substitute
without follow-up blood management may only delay the consequences of lost
blood by a day or two. Blood volume measurement could also be helpful in
guiding longer-term blood management decisions.

The Company had extensive
discussions about incorporating blood volume measurement into blood substitute
studies with the Hemosol Corporation, and one of the medical directors had
indicated a willingness to use a Blood Volume Analyzer. However, the company
developed a financial crisis and was unable to continue their studies. The
company eventually discontinued almost all its operations. At the present time,
only Northfield Laboratories appears to be actively engaged in testing a blood
substitute.

SCIENTIFIC
MEDICAL SYSTEMS SUBSIDIARY (wholly owned by Daxor)

Scientific Medical Systems
is a subsidiary wholly owned by Daxor that engages in cryobanking of frozen
blood and semen (sperm). Idant is a division of the Scientific Medical Systems
subsidiary concerned with sperm banking.

Blood
Banking

The blood banking industry
is a group of for-profit and not-for-profit corporations whose total revenue is
estimated to exceed six billion dollars. Blood Banking services are provided by
a broad spectrum of organizations. Approximately one-half of the blood supply
used for transfusions is supplied by the American Red Cross and its affiliates.
The other portion is supplied by various other tax-exempt and for-profit
organizations. Some hospitals operate their own donor services but require the
services of outside vendors such as the Red Cross for adequate supplies of
blood products.

There are approximately
15-18 million blood transfusions administered annually to 4 million patients.
The present donor system of blood transfusions presents risks to individuals
receiving blood. Despite improved testing, infectious diseases such as HIV,
hepatitis, and West Nile Virus may be transmitted through donor blood. For HIV
and hepatitis, there is a window period of 3-6 months between initial
infection and when an individual develops detectable antibodies. The FDA is
particularly cautious and will not permit an individual who received a
transfusion to donate blood for up to one year following the transfusion.
Additional risks of donor blood include adverse reactions to incorrectly or
incompletely matched blood and suppression of the immune system.

In an effort to avoid the
risks of donor transfusion, physicians frequently withhold blood from severely
anemic patients. It is a common medical practice to replace the first three
pints of lost blood with three pints of sterile water or the equivalent. When
patients are under the stress of illness and surgery, they are even more
vulnerable to ill effects of decreased perfusion and oxygen delivery than
healthy individuals. Multiple studies have shown increased complications, such
as shock, kidney failure, myocardial infarction, and

8

death, in people undergoing
surgical procedures who develop extremely low hematocrits (red cell
concentration). The number of patients who suffer major complications,
including sudden death from under-transfusion, is unknown but significant. This
problem has not been brought to the publics attention, but it is widely known
among physicians who have treated patients who have lost blood.

Many risks from donor blood,
such as the risks of infectious disease transmission, can be avoided by
utilizing autologous (the patients own) blood. Additionally, physicians who
fear the complications of transfusion with donor blood may be more likely to
transfuse autologous blood as soon as it is needed, rather than withholding
transfusion until a patient is extremely anemic and at higher risk from
blood-loss-related complications.

In 1985, the Company
established the first facility in the United States for frozen long-term
autologous (self-storage) blood banking. The Companys frozen blood bank is the
only blood bank in New York that allows people to store their own blood for up
to ten years. Utilizing cryobiology technology, frozen blood has been shown to
be capable of being stored for up to 37 years; however, the current legal limit
is 10 years for red cell cryostorage.

The Company believes that an
educational process can establish the advantages of frozen autologous blood
storage. Education can also overcome opposition to any change in the current
blood banking system from established tax-exempt (non-profit) and profit-making
entities. The Company believes that it can work with some voluntary blood banks
and hospitals to establish joint marketing of long term frozen personal blood
storage programs. The Company is in the process of developing partnership
programs whereby corporations can provide frozen long-term blood storage as a
benefit to their employees.

Recent Improvements and Innovations

In 2005, the Company began
using a recently available, FDA-approved technology (manufactured by another
company) that extends the shelf life of thawed frozen blood from 24 hours to 14
days. This development greatly increases the flexibility with which frozen
blood can be used and greatly increases the number of situations in which
thawed frozen blood can be provided to patients as needed. As part of this
program the company has also purchased new freezers and equipment that
incorporate this technology. It has also installed a back-up liquid nitrogen
system at its headquarters so that in the event of electrical failure, the freezing
temperatures can be maintained. The previous system can theoretically withstand
more than 48 hours without electricity without irreversible loss of the frozen
blood. The new system provides for a 2  3 week frozen capability without
electricity.

The Company has recently
received a trademark for a proposed program of Quality Assured Blood (QAB).
This concept is similar to existing safety protocols used to ensure the safety
of frozen donor semen (see Idant Semen Banking) and is only possible because of
the unique advantages of frozen blood storage. Infectious diseases such as HIV
and Hepatitis have a window period of 3-6 months during which a donor may be
infected but has not yet produced the antibodies that are required for the
diseases to be detected. With Quality Assured Blood, a donor can be
tested, donate blood to be frozen, and then be retested after six months of the
donation. This blood can then be used as donor blood with markedly reduced risk
of infectious disease transmission. These types of safety procedures are
standard with frozen donor semen, which is much less infectious than blood. In
contrast, standard donor blood is tested only once, refrigerated, and used
within weeks of collection.

The Company has also
trademarked its Blood Optimization Program® (BOP) for maximizing blood safety
during surgery. The BOP uses a combination of blood volume measurement,
presurgical treatment of blood volume deficits, and frozen autologous blood
transfusion. The Company has applied for and received trademark protection for
the BOP name and is reviewing whether or not to apply for a methods patent for
the concept.

The underlying principal of
the BOP is to enable patients undergoing elective surgery to store frozen blood
in advance of surgery at a time and frequency that will be determined with the
help of blood volume measurement. If a patient does not donate his or her own
blood at all, then he or she faces the risks that come from donor transfusion.
The only truly safe blood is ones own blood. However, patients who donate
their own blood just prior to surgery are frequently anemic and at a higher
risk for complications than they would be had they not donated blood. Patients
who store blood 28 to 35 days prior to surgery may be able to restore one to
two pints of blood, but blood that is refrigerated for 28 to 35 days has been
shown to undergo significant deterioration, decreasing the effectiveness of
transfusion. Frozen blood does not suffer such deterioration and thus is more
effective than refrigerated blood that has been stored for several weeks.
Because of its reliable quality and improved safety, infants who require
transfusion usually receive only fresh frozen blood.

Under the Blood Optimization
Program, a patient can donate blood well in advance of surgery and store it in
a frozen state, with sufficient time to restore a normal amount of blood before
entering surgery. Additionally, blood volume measurement prior to surgery can
identify patients with existing blood volume deficits, which can be treated with
medications such as erythropoietin.

In addition to the desire to
provide improved patient care, hospitals may have a significant monetary
incentive to participate in the Blood Optimization Program. Surgical patients
who experience complications from undertransfusion or adverse donor transfusion
reactions require extended hospital stays, for which the hospitals are often
not reimbursed. Hospitals operate under a Diagnostic Regulatory Guideline (DRG)
system for reimbursement, which means that a hospital will be reimbursed
according to a diagnosis, not

9

according to the number of
days that a patient spends in the hospital. A low blood volume detection and
treatment program could significantly reduce complications and enable shorter
hospital stays.

Idant Semen (Sperm) Banking

Idant, a subdivision of the
wholly owned subsidiary Scientific Medical Systems, has been a pioneer in the
technology and commercial application of long-term cryopreservation of human
sperm. The division provides frozen semen services to physicians worldwide.
Idant holds approximately 50,000 human semen units in long-term storage at its
central New York City facility. The Company was the first semen bank in the
state of New York, out of more than 50 licensed banks, to be accredited by the
American Association of Tissue Banks.

Semen stored at -321 degrees
Fahrenheit (immersed in liquid nitrogen) has shown minimal change after as long
as 30 years of storage. Idant stores semen for donor insemination as well as
for personal storage by men facing infertility. The Company also provides, on
request, special screening for rare hereditary recessive genetic traits.

The company stores semen
from a large cross-section of anonymous donors and is able to offer semen from
donors with varying physical characteristics that meet our clients needs. The
Company maintains a complete physical description of each donor on file and can
match multiple physical characteristics and other desired special
characteristics to those of the sterile father. The increased likelihood of a
child who resembles his recipient father can make a child conceived via
artificial insemination much more psychologically acceptable to the father.

The Company also provides
cryostorage for later personal use. Semen storage may be desirable for men who
have been found to be marginally fertile and may attain improved fertility with
artificial insemination, who anticipate impaired fertility or sterility such as
may occur with chemotherapy or radiation for cancer treatment, or who are undergoing
a vasectomy but may wish to father children in the future. Cancer patients who
store semen are frequently in their teens or twenties; by utilizing
cryopreservation they will be able to father their own children in later years,
despite the high risk of sterility and birth defects associated with
treatments. The Company receives referrals for these services from multiple
sources, primarily physicians.

Idant has been a pioneer in
the safety of anonymous sperm donation. In 1985, Idant was the first semen bank
to institute an AIDS quarantine period for frozen semen. Viruses such as HIV
and Hepatitis B or C may be undetectable for up to six months in infected
individuals. By testing the donor prior to and then six months after donation,
the risk of Hepatitis and HIV transmission can be virtually eliminated. Four
years later, in 1989, New York and a number of other states enacted laws
requiring sperm banks to quarantine frozen sperm for a minimum of six months.

Idant utilizes the most
reliable, effective cryopreservation technology available. The FDA does not
currently have specific standards for reporting the effectiveness of semen
storage, so there is no assurance that a given semen bank uses the best
available technology to ensure the longest possible viability of frozen sperm.
The Company uses a customized carousel canister system in its sperm bank
storage system. This permits retrieval of specimens from lower levels without
removal of upper specimens, thereby avoiding any exposure of other specimens to
room temperature air. Even brief exposure to room temperature may result in
long-term loss of viability of frozen sperm. Most other banks use a rack and
cane pull-up system, which requires removal of upper specimens from the tank
to retrieve specimens at lower levels. In such a bank, a specimen may be
exposed to a temperature change from liquid nitrogen (-321oF) to room temperature
(72oF) more than 100 times during its storage lifetime. This will result in a
gradual degradation of the specimen. In the Idant system the specimen remains
immersed in liquid nitrogen almost continuously while in storage. The Company
is aware of only one other semen bank that uses the carousel system for
long-term storage of semen.

In 2004 Idant received
confirmation of two successful conceptions utilizing sperm stored at Idant for,
respectively, 21 and 29 years. This was the longest successful cryopreservation
of sperm in medical history. The case report was published in the October 2005
issue of Fertility
and Sterility, a major journal. The pregnancies were notable because
they were achieved by artificial insemination. The previous record was for 20
years and was achieved by the considerably more expensive in vitro
fertilization method. The Company believes that its unique storage system for
human sperm is responsible for this extraordinary success.

RESEARCH
AND DEVELOPMENT

Although blood volume
measurement has been available for over 50 years, the test was rarely performed
because of cumbersome requirements that made the procedure difficult. When
Daxor Corporation developed the first semi-automated system ever approved by
the FDA, it encountered a generation of physicians who had little or no direct
experience with blood volume measurements, with the exception of hematologists
who used the test for a single condition (polycythemia vera) and preferred to
use another method (Chromium 51) that measured red cell volume. That method
required several hours to perform and included re-transfusion of the patients
blood cells after they were tagged with Chromium 51. This technique exposed the
patient to the risk of a potential mismatched transfusion.

10

Daxor presumed that the
benefits of an automated system which involved no transfusion risks and
measured both red cell count and plasma volume would be readily and widely
accepted. However, key personnel at the first facilities to use the BVA-100
(Lutheran Medical Center, Maimonides Hospital, Englewood Hospital, Brooklyn
Hospital, Coney Island Hospital, and Long Island Jewish Hospital) returned the
system after performing beta testing because they could not convince
administration that the test was cost effective. A blood volume measurement can
cost the hospital $450 - $600 to perform. In contrast, a surrogate test such as
a hemoglobin or hematocrit, which can be quite inaccurate, can be performed for
$5 - $10. The company had and has to demonstrate that the savings in lives and
shortened hospital stays makes the test cost effective.

Until mid 2002 the company
employed a limited sales staff with heavy emphasis on scientific training.
Management then began to recruit a professional sales and marketing team. By
mid 2003, it became apparent from feedback from the new sales staff that in
addition to opposition to the instrument because of cost, there were additional
technical problems that needed to be overcome.

Among the major problems was
that the blood volume analyzer was functioning on a DOS operating platform that
dated from the mid 1980s. This placed a number of restrictions on the flexibility
of the system. For example, the system could not be altered to provide a
graphic display of the results in addition to numerical results. It also
prevented the incorporation of enhancements that potential users desired.
Another major problem was that all gamma counters in use at that time for
clinical measurement were considered high complexity instruments under the
Clinical Laboratory Improvement Act (CLIA). This meant that the instrument had
to be used by a facility headed by an individual with advanced specialized
background training.

In 2003, the company sold
only 5 instruments. It had become clear that major changes were needed. By
early 2004 the company had decided to expand its research and development
facilities in Oak Ridge, Tennessee, to develop a more advanced version of the
system, which would run on a Windows operating platform. The company developed
a new network of subcontractors, including a group of specialized computer
programmers, who were absorbed into the company as full time employees in
January, 2005. The Company also contracted with an original equipment
manufacturer (OEM) to build the instrument and to retain for itself the final
quality assurance testing operations.

The following is an
enumeration of a significant number of the engineering changes that were
included in converting the BVA-100D (DOS version) into BVA-100W (Windows
version).

Hardware


The computer interface was
  upgraded from a separate CPU, CRT monitor, and keyboard to a panel PC with a
  mouse and touch screen.
Color printers were
  installed.
A USB connection for the
  multi channel analyzer (MCA) was installed.
A new control data board
  was installed.
A new dust cover design
  resulted in a decreased height requirement.
The internal housing was
  redesigned.
New sky shield housing,
  with added finger guards, was added.
The carousel was changed
  from Plexiglas to metal.
A sample guide for the
  carousel (hub cap) was added.
A rear Plexiglas plate was
  added.
The manual sensor used to
  determine the position of the carousel was upgraded to an optical sensor.
The carousel advance
  button was moved to the rear of the instrument.
The motor was converted
  from AC to DC.
The electrical grounding
  was improved
All internal mechanical
  parts were re-engineered to a tolerance of 5/1000.
A new lead design with
  better tolerance was installed.Software


The system was designed to
  be both HIPPA and CLIA compliant.
The operating system was
  upgraded from DOS to Windows XP, using C-Sharp and Visual Basic, with over
  500,000 lines of code and an additional 750,000 lines of hidden code in
  Visual Basic.
Text commands in the DOS
  system were replaced with screen options and easy to use on-screen buttons,
  resulting in easier navigation.
A touch screen keyboard
  was added for easily entering patient demographics.
Software for calibrating
  and adjusting the sensitivity of the touch screen was installed.
User friendly instructions
  were added to guide the user through entering data and placing the samples
  into the instrument.
Warnings/flags were
  provided to inform users of errors or questionable data, thus helping the end
  user generate statistically accurate results.11


The time required for
  aberrant point elimination was reduced from over 25 minutes to 5 seconds.
  Instead of requiring the user to re-enter data and recalculate the entire
  blood volume, results are instantly recalculated with the erroneous point
  excluded.
A color screen and
  graphical software were added to graphically present results, including a bar
  graph of results and a color regression chart of blood volume points. A print
  screen function was added to enable color printing of results.
A 30 Gb hard drive, which
  can store a few hundred thousand patient tests and quality control tests, was
  added. This replaced a much smaller previous hard drive that could only store
  200 patient tests. Data can also be backed up on a CD and restored.
Options were added
  allowing results to be saved as HTML, PDF, ASCII, Word and Excel files.
Options were added
  allowing BVA tests to be sorted by 6 different fields, 2 of which are
  customizable by the end user, thus making it easier to find saved tests.
A program for daily
  Quality Control (QC) was installed that greatly simplifies and speeds up
  quality control1.
QC requires only two
  minutes of technician time and is completed in about 40 minutes.2.
Utilizes 4 barium
  sources that are at the nano curie level.-

Checks for background
  radiation.-

Checks each well for
  contamination.-

Compares and contrasts
  matched standards provided with the Volumex injection kit.-

Checks the gamma counter
  for centroid and full width half max (FWHM), the shape of the peak of the
  centroid, which cannot be to broad or too narrow.-

Checks for linearity of
  the system. Each barium source is at a decrease in strength and therefore
  each source has its own rate of counts per minute. The decreasing rate of
  counts should be proportional to the strength of the check source (the
  barium).
An automatic system for
  calibrating the gamma counter was added. The user pushes two buttons and
  enters his or her initials, and the system performs the calibration and
  prints out a final report.
New software decreased the
  time required to install software upgrades.
New software, which performs
  preventative maintenance and contains diagnostic features for service calls,
  was installed.
A new manual calibration
  screen for Daxor technicians was added.
Programming was added to
  automatically adjust for daylight savings time and leap years. A separate
  section was also included in which date and time corrections can be entered
  with the mouse.
Individually customized
  laboratory operations manual (Standard Operating Procedures Manual  SOPM)
  and laminated flip charts were designed and are provide to all users, along
  with the Quick Users Guide, an abbreviated laboratory operations manual.As a result of these
improvements, especially the upgrade to a Windows operating system, the new
BVA-100 system was categorized by CLIA as a medium complexity instrument,
enabling a wider range of facilities to utilize it. In addition, the many
improvements allow the system to better meet users needs. This upgrade was
essential to helping establish the necessity, reliability, and cost effectiveness
of accurate, rapid blood volume measurement. A primary goal of clinical
research studies is to provide evidence from peer review journals that will
support and document that blood volume measurement should be a standard of care
in specific conditions.

In addition to improving the
BVA-100 itself, the Company has dedicated considerable time and effort to
physician education. A limited number of account representatives work primarily
to educate physicians (clinicians) on how best to utilize the instrument. The
company also offers unlimited clinical assistance through the services of its
Chief Scientist and CEO, Dr. Joseph Feldschuh, as well as Dr. Gary Fischman,
PhD, Director of Research. Additional staff, including the Vice President of
Marketing and a full time medical writer and statistician, devote part or all
of their time to supporting the development, completion, and publication of
clinical studies. The Company continues to provide support for studies at
various institutions. Support may consist of free use of blood volume analyzer
equipment,Volumex kits, and support services from Daxor staff. The Company
expects that there will be additional studies published in 2006 on research
studies it has previously helped support. Previously published studies have
documented the benefit of blood volume measurement in the intensive care unit
and in cardiology. However, additional studies are needed for other
institutions to provide further backup. For example, heart failure studies are
continuing at Columbia Presbyterian Medical Center. The Company has unpublished
data documenting the benefit of blood volume measurement using the BVA-100 in
hypertension. Based on this data, we believe that African American patients, in
particular, will benefit from the use of blood volume measurement in
determining choice of therapy. Howard University in Washington, D.C. is
expected to be a prime location for such studies. (Refer to previous sections
on clinical conditions utilizing blood volume measurement.)

Blood Banking

The Scientific Medical
Systems blood bank devoted a significant amount of its resources in the past
year to improvements and upgrades. The Company installed a new system that
enables thawed frozen blood to be used for up to 14 days, as well as a new
freezer system that can maintain blood in a frozen state for 2-3 weeks without
electricity. The company has tested this system throughout 2005.

12

The Company also devoted a
significant amount of time to developing the Blood Optimization Program, a
method for using both autologous frozen blood and the BVA-100 to optimize
transfusion safety and minimize anemia during surgery (see Blood Banking).

MARKETING

The Companys marketing of
the blood volume analyzer can be divided roughly into three phases: initial
beta testing with local facilities, later beta testing at nationally recognized
institutions with an emphasis on developing studies for publication, and
marketing of the instrument for clinical use. During later beta testing and the
marketing phase, the instrument also underwent a number of major technical
improvements and alternations.

Initial Beta Testing (1999-2000)

After FDA approval for the
instrument and its associated kit, in 1999 the Company began beta testing the
BVA-100 at local hospitals. The Company had no prior experience in marketing a
medical instrument or device and relied on a limited number of sales staff who
had specialized technical knowledge and a background in physiology. From 1999
to 2000, the Company loaned the instrument and provided associated kits to a
number of local hospitals free of charge. In some cases, these hospitals also
received direct financial support for performing research studies. The
participating facilities included Lutheran Medical center, Maimonides Hospital,
Brooklyn Hospital, Coney Island Hospital, and Long Island Jewish Hospital.

Some hospitals, such as
Lutheran Medical Center, were able to publish results in peer reviewed
journals. Some of these early studies clearly demonstrated that invasive
techniques such as pulmonary artery catheterization were not as accurate as
direct measurement of blood volume for assessing a patients volume status. In
some cases, the hospitals performed studies but were unsuccessful in publishing
results.

After these facilities
completed their studies, they returned the instruments because they could not
convince their respective administrations that the test was cost effective.
During this time, the Company sold only a single Blood Volume Analyzer.

Later Beta Testing (2000-2002)

As a result of feedback from
the initial testing, the Company recognized that it was essential for the
instrument next to be placed in nationally recognized facilities. These
facilities, because they worked with more complex conditions and had wider name
recognition, were more likely to recognize the benefits of blood volume
measurement and to publish study results. Additionally, studies from these
prestigious institutions were more likely to be highly regarded by other
facilities. The Company arranged for the loan of an instrument to the Cleveland
Clinic, the Mayo Clinic, and NYU Medical Center. The US News and World Report
provides an annual ranking of 6200 Hospitals in the United States. The Mayo
Clinic and The Cleveland Clinic ranked respectively 2 and 3 in the annual
ranking of hospitals. The Cleveland Clinic Cardiovascular Department ranked
number 1 in the US. After trial periods lasting more than one year, these
facilities purchased their instruments and paid for kits as they continued to
utilize the Blood Volume Analyzer.

Despite the positive
response from these facilities, it became increasingly apparent that the
company needed significantly more studies to support the reliability, utility,
and cost effectiveness of blood volume measurement with the BVA-100®. It also
became clear that the original version of the BVA-100, which was based on a DOS
platform, needed to be markedly improved in order to provide sufficient
features and flexibility to meet users needs (see Research and Development).

It has been an ongoing goal
of the Company to partner with medical facilities to develop studies that will
result in publication in peer reviewed journals, with the intent of increasing
awareness and acceptance of the need for accurate, rapid blood volume
measurement. A number of studies initiated between 2000 and 2002 were published
in 2004 and later. In addition to the time needed to complete the study itself,
it can take a year or more from submission to final publication.

Marketing Phase (2002-present)

By 2002, the Company
recognized that it needed to recruit an experienced medical device marketing
staff. In September 2002 the Company hired a National Sales Manager and three
Regional Sales Managers with extensive experience in the medical device and
nuclear medicine field. Subsequently, several different sales programs were
tested. It was determined that the best program was a National Sales Manager
with regional sales representatives. John Reyes-Guerra, one of the original
regional vice presidents, was made Vice President of Sales and Marketing. The
sales staff was expanded to twelve sales personnel plus additional research
support personnel.

The marketing team has made
progress in identifying which facilities and departments are most able to
utilize the BVA-100 in a cost effective manner and has developed a repertoire
of educational and marketing material. Depending on a facilitys needs and its
ability to perform studies that are likely to increase widespread acceptance of
the BVA-100, the Company offers the Blood Volume Analyzer to potential users on
a sale, lease, or loan basis. Facilities that receive a loan of the instrument
for research pay for the Volumex® kits that are not used purely for research
purposes, which can provide a source of ongoing revenue for the Company.
Primarily, users are

13

expected to be hospitals,
surgery centers, and imaging centers (radiology). The Company also has been
demonstrating its equipment at major trade shows such as nuclear medicine,
surgical anesthesiology, and trauma conferences. The Companys website (http://
www.daxor.com) contains extensive detail about the BVA-100® Blood Volume
Analyzer as well as examples of actual cases (with patient identities removed).
The website permits rapid communication between researcher, marketing personnel,
and potential users prior to an onsite visit.

Despite its success with a
few key institutions, the BVA-100 continues to encounter some significant
obstacles to widespread acceptance. The Company has attempted to balance sales
efforts with education and the development and support of continued research.

One of the barriers to
acceptance of the BVA-100 is that, despite the fact that blood volume
measurement is important in so many different medical and surgical situations,
very few physicians have any previous experience utilizing direct blood volume
measurement. Instead, they have relied on surrogate tests such as hematocrit or
hemoglobin measurement, despite the proven inaccuracy of these tests. Even
among institutions that utilize the Blood Volume Analyzer, physicians
frequently have questions regarding the interpretation of blood volume results
and how to best use the results to guide treatment. The Company has instituted
a program of educational representatives to help educate physicians about the
use of blood volume measurement and to act as a liaison between the Company and
users of the BVA-100®. The Company also provides unlimited clinical assistance
through the services of its Chief Scientist and CEO, and its Director of
Research. The Companys Vice President of Marketing spends a significant
portion of time working with facilities to develop research projects, and the
Company employs a full time statistician to help with the interpretation of
research data and preparation of results for publication.

Another barrier is the
perceived cost effectiveness of the tests and the ability of hospitals to
obtain appropriate insurance reimbursement. Hospitals and health facilities are
exceedingly cost conscious in regard to acquiring additional medical technology.
Blood volume measurement is an approved and reimbursable Medicare test. The
Company expends great time and effort to ensure that insurance companies
reimburse hospitals correctly for the cost of the radiopharmaceutical kit as
well as for the performance of the test. The Company also provides assistance
to hospitals and physicians to utilize correct codes and indications for blood
volume measurement. Some of the research projects performed by the Companys
clients are focused on developing cost benefit analysis studies. Such studies
are particularly important to HMOs, which focus on avoiding hospitalization
when possible.

The Companys
representatives undergo a training program in basic medical physiology to
enable the to interact with both physicians and administrators to explain cost
benefit factors.

In 2004 the Company sold
four instruments. In 2005 the Company sold only a single Blood Volume Analyzer.
This was primarily due to the fact that in 2005 Medicare, which reimburses
hospitals separately for the cost of a kit, made an erroneous assessment of kit
costs. Medicare had developed a policy that any kits under $50 would have their
cost bundled into the reimbursement for the entire test, and it included the
Volumex® kits in this policy. However, each kit costs hospitals $280-$300. The
Company obtained legal experts on Medicare regulations and met with Medicare
officials to correct this problem. It took almost ten months before this
incorrect designation was corrected. In the last quarter of 2005, the Company
signed seven trial agreements, as compared to seven trial agreements for the
first nine months of 2005.

Blood Optimization Program

In 2005 the Company hired an
individual with marketing experience to work on a new program called the Blood
Optimization Program® (BOP). This program is intended to incorporate Daxors
BVA-100® Blood Volume Analyzer and its subsidiarys frozen autologous blood
banking, increasing awareness and utilization of both these technologies. This
individual has been meeting with administrative blood bank representatives to
develop strategies that would enable hospitals to utilize these technologies to
optimize blood volumes in patients undergoing surgery. The combination of blood
volume measurement and frozen blood banking provides the unique opportunity to
simultaneously minimize the consequences of blood loss by optimizing a
patients blood volume before surgery, and maximize transfusion safety by
making sure that a patients own blood is available if transfusion is required.
The Company believes that some agreements with hospitals will be implemented in
2006.

PATENT AND
COPYRIGHT PROTECTION

Existing
Patents

The Company has received
separate United States patents on its Blood Volume Analyzer BVA-100® and on its
Volumex® injection kit. These are the only US patents ever issued for an
automated instrument dedicated to the measurement of total human blood volume
for a specific individual. The Company received a European patent covering 12
countries and received the first patent ever issued in Japan for an instrument
to measure human blood volume.

The instrument is designed
to work with the Volumex® injection kit, which is manufactured by the Company.
It is theoretically possible to use the Blood Volume Analyzer without the kit
by preparing the reagents used for the test. However, the cost and time for

14

such preparations would be
uneconomical and it is unlikely that a purchaser of the instrument would use it
without purchasing the reagent kit. This is the first U.S. patent ever issued
for a system that permits a fixed quantitative amount of isotope to be injected
for diagnostic purposes. The injection system was specifically designed for use
with the BVA-100®. However, it can be used for other diagnostic test purposes
where a precise complete quantitative injection of a diagnostic reagent is
required.

The blood bank has received
two recent trademarks. One is for Quality Assured Blood, which would
incorporate the same type of double testing currently used to ensure the safety
of donated semen (see Blood Banking). The other is for the Blood Optimization
Program® (BOP), a method for maximizing blood safety during surgery using a
combination of blood volume measurement, presurgical treatment of blood volume
deficits, and frozen autologous blood transfusion. The Company has applied for
and received trademark protection for the BOP name and is reviewing whether or
not to apply for a methods patent for the concept (see Blood Banking).

Future Projects and Potential Patents

The Company expects to file
additional patents for tests associated with the BVA-100® in the near future.

Glomerular Filtration Rate

The Company is working on an
instrument will automate the measurement of glomerular filtration rate (GFR).
This GFR is a very important and sensitive test of kidney function. At the
present this test is infrequently performed because of the difficulty in the
current methodology. The Company believes that it can automate this process,
which will make it more feasible for regular medical use.

Measurement of Total Body Albumin

The Company is planning to
file a patent for the measurement of total body albumin using measurements from
the Blood Volume Analyzer. Albumin is a major carrier of hundreds of vital
components within the circulation and is a key molecule responsible for
maintaining oncotic pressure. Abnormal total body albumin is common in many
disease states, such as heart failure, cancer, and diabetes. Burn patients in
particular experience serious loss of albumin, and replacement quantities may
be difficult to calculate. The ability to measure total body albumin accurately
would be expected to facilitate more precise therapy.

Needleless Injection System

The Company is reviewing an
alternative injection kit system that can be used without a needle. Some
intensive care units emphasize an elimination of needles wherever possible. The
Volumex® kit is injected into an intravenous system flowing into the patients
vein, rather than through a direct needle stick. A person using a kit who accidentally
stuck himself would not be exposed to the patients blood; nevertheless, we
think it would be an advantage if we can develop a needleless system.

Idant Semen Storage Client Identification

The Company is also
exploring the submission of a patent for methodology of improving client
identification in its semen bank. It is introducing additional patient
protection for stored donor semen, which may be eligible for patent protection.
In the 33 years of the Banks operations, it has never had a mix-up in any
stored specimen.

CUSTOMERS

In the Companys fiscal year
ended June 30th 2005 (Fiscal Year 2005) there were two customers
(hospitals) that accounted for 10% or more of the Companys total consolidated
sales. Management believes that the loss of any one customer would have an
adverse effect on Companys consolidated business for a short period of time.
These two hospitals have purchased their BVA-100 equipment. The Company has not
had any situations in which a hospital, after having purchased a blood volume
analyzer, discontinued purchasing Volumex kits. This suggests that, when more
hospitals purchase equipment, they will continue with ongoing purchase of
Volumex kits. The Company continues to seek new customers, so that any one
hospital will represent a smaller percentage of overall sales.

COMPETITION

BVA-100® Blood Volume
Analyzer

The medical technology
market is intensely competitive. However, there are no direct competing
instruments manufactured or marketed that perform rapid, accurate semi-automated
blood volume analysis, such as the BVA-100®. The Company believes that its
receipt of United States, European and Japanese patents for its Blood Volume
Analyzer provides significant protection against any future potential
competition in the blood volume analysis field.

The receipt of the U.S.
patent for the injection kit system provides significant additional protection,
as the Company believes that the

15

kits will be a major source
of ongoing revenue. The Company believes that its main hindrance to market
acceptability, rather than any specific competition, will be the need to
demonstrate that its blood volume measurement equipment is capable of producing
accurate data on a cost effective basis. There are several layers of acceptance
required for a sale to be completed. The hospital administration must first see
a need for the instrument, and then the nuclear medicine department must also
see this need and be willing to perform the tests. Physicians treating patients
with the conditions described previously must understand the need for, use of,
and possible interpretation of blood volume measurement for their patients.
Then the hospital administration must also accept the instrument on the basis
of pure cost effectiveness. The Company believes that the one-time cost of the
instrument and the ongoing costs of test kits are modest relative to the
benefits of the critical information derived from the test.

Blood
Banking

The Scientific Medical
Systems frozen blood bank is the only facility that provides long-term
personal frozen blood storage in the Northeastern United States. Multiple
companies that previously attempted to provide long-term personal blood storage
to members of the public were unsuccessful.

To date, the Company has not
made a profit from its blood banking services. A major disadvantage of the use
of frozen blood was that it had to be used within 24 hours after it was thawed.
Frozen blood can be stored for up to 10 years in contrast to refrigerated
blood, which has a maximum shelf life of 35 to 42 days. The requirement that
blood had to be used within 24 hours of thawing placed significant limitations
on the timing of transfusions. However, the Company has recently begun to
utilize a new FDA-approved technology, manufactured by another company, which
enables thawed frozen blood to be used up to 14 days after thawing. The Company
is not aware of any other facility in New York State that is using this
technology.

The Company believes that
this additional technology may enable frozen blood banking services to
eventually become financially self-sustaining and profitable. This technology
also opens up the potential for paid, double tested donors, in a similar
fashion to how sperm donors are tested before and then six months after initial
freezing and storage. This additional safety procedure is particularly
appropriate for donated blood, since transfused blood is more infectious for
many diseases than semen.

In the past, the Company has
experienced significant opposition from non-profit blood banking organizations
that viewed frozen autologous blood as a potential loss of income from their
operations. It is the Companys intention to form alliances with other
short-term donor blood banks to expand frozen personal blood storage services.
The Company views personal blood storage as a supplement to and not as
competition to other existing blood donor services.

Semen
Banking

There are at least 300 sperm
banks in the United States operated either by commercial entities or by
academic institutions. The Idant semen bank was the first semen bank in the
State of New York that was accredited by the American Association of Tissue
Banks. There are fewer than 9 semen banking organizations in the United States
that have achieved this accreditation.

The Company believes that
its unique storage system, coupled with clear documentation of a successful
conception occurring from the longest-term frozen stored semen in medical
history, will help it in expanding its marketing efforts.

The Company has developed a
web site (http: // www.Idant.com) that will be helpful for marketing purposes.

WARRANTEES

The Company generally
warrants its Blood Volume Analyzers against defects in material and workmanship
for a period of up to one year from the date of shipment, plus any extended
warrantee period purchased by the consumer. With respect to semen banking and
blood banking, the Company warrantees that its methods of storage are in
compliance with all existing federal and state regulations.

GOVERNMENT
REGULATION

The development, testing,
production and marketing of medical devices are subject to regulation by the
FDA under the Federal Food, Drug and Cosmetic Act, and may be subject to
regulation by similar agencies in various states and foreign countries.

The governing statutes and
regulations generally require manufacturers to comply with regulatory
requirements designed to assure the safety and effectiveness of medical
devices. The FDA clearance for marketing of the Blood Volume Analyzer, BVA-100,
and the associated quantitative injection kit marks one of the most important
milestones in the history of Daxor. The products manufactured by and for the
Company in regard to the BVA-100 are subject to continuing FDA regulations and
inspections.

The New York State
Department of Health regulates the Companys Idant Semen and Blood Bank within
New York State. The Idant Semen Bank and Blood Bank are divisions of Scientific
Medical Systems, which is a subsidiary wholly owned by the Daxor Corporation.
Scientific Medical Systems has its own separate directors. These facilities are
licensed and annually inspected by the

16

New York State Department of
Health.

PRODUCT LIABILITY EXPOSURE

The Companys business
involves the inherent risk of product liability claims. The Company currently
maintains general product liability insurance and an umbrella liability policy,
which the Company believes are sufficient to protect the Company from any
potential risks to which it may be subject. However, there can be no assurances
that product liability insurance coverage will continue to be available or, if
available, that it can be obtained in sufficient amounts or at a reasonable
cost.

ENVIRONMENTAL

The Company believes it is
in compliance with the current laws and regulations governing the protection of
the environment and that continued compliance would not have a material adverse
effect on the Company or require any material capital expenditures. Compliance
with local codes for the installation and operation of the Companys products
is the responsibility of the end user.

EMPLOYEES

On March 24, 2006, the
Company had a labor force of 46, all of which were leased through ADP
TotalSource. The Company maintains a work force at its main headquarters in the
Empire State Building in New York City, as well as a manufacturing division in
Oak Ridge, Tennessee, and a technology support group. The Company believes that
its labor force relations are good.

Item 1A. Risk Factors

The
Companys products may not be accepted by the marketplace.

Item 1B. Unresolved Staff Comments

The
Company received an inquiry from the SEC regarding its accounting reporting, as
well as questioning whether the companys activities with respect to its cash
management constituted a reason to designate it as an investment company. The
accounting changes did not result in any material changes with respect to the
companys total income, assets or revenues, but did result in a shift in
income. The company has an investment portfolio and a policy of cash management
which has been in place for over 20 years. The company is heavily dependent on
income from its investment activities. This issue of investment company was
raised in 1984/5, when the company had a secondary offering which raised
approximately $7 million. The issue was again raised in 1992 with no action
taken. In 2005 the issue was again raised.

There are a number of
criteria, including assets and income which could qualify a company as in
investment company or what is also termed an inadvertent investment company. Many
companies in their research and development phase become an inadvertent
investment company because they have almost no income from their products
except income derived from their capital. The Investment Company Act, however,
recognizes this and provides a number of Safe Harbor exemptions to avoid this
designation. These exemptions include (1) whether the company uses its
securities and cash to finance its research and development activities; (2)
whether the company has substantial research and development expenses and
insignificant investment-related expenses; (3) whether the company invests in
securities in a manner that is consistent with the preservation of its assets
until needed to finance operations. If a company satisfies these factors, the
remaining major factors of the traditional primary business test -- the
companys historical development, its public representations of policy, and the
activities of its officers and directors  are examined.: (taken from Section B
 Research and Development Companies from Release No. IC-26077; File No.
S7-47-02). Under rule 3a-8 as proposed, a company could rely on the rules
nonexclusive safe harbor if it (a) had research and development expenses that
were a substantial percentage of its total expenses for its last four fiscal
quarters combined and that equaled at least half of its investment revenues for
that period; (b) had investment-related expenses that did not exceed five
percent of its total expenses for its last four fiscal quarters combined; (c)
made its investments to conserve capital and liquidity until it used the funds
in its primary business; and (d) was primarily engaged, directly or through a
company or companies that it controls primarily, in a non-investment business,
as evidenced by the activities of its officers, directors and employees, its
public representation of policies, and its historical development. The company
believes it meets these last criteria.

One of the Safe Harbor
designations is to have 45% of liquid assets in government short term paper
such as T-bills. In the case of Daxor, the company has not used the T-bill Safe
Harbor designations. In Part II, Section 7A, we have provided a perspective of
what would have occurred had we, in 1993, decided to avail ourselves of Safe
Harbor provisions and invest the companys assets in T-bills. The company is
highly dependent on income from its investment portfolio. For the past 13 years
the company has experienced an operating deficit as it expanded its research
and development and marketing efforts. The company has had a firm policy of
operating so that it will not find itself in the sudden position of imminent
bankruptcy. From time to time the company has received offers of additional
financing. Such financing which has been offered has been at very deleterious
terms to existing shareholders. The

17

company believes that as
blood volume technology gains increasing acceptance, that it will be able to
raise additional capital on more reasonable terms. The company also believes
that the market for a safer alternative frozen blood banking system is very
large but in the initial phases such a system the company would operate at a
significant deficit for an indeterminate time. At the present time the company
is focusing its efforts primarily on the blood volume analyzer but will explore
opportunities for raising additional capital. The company is currently
expanding its expenditure on blood banking

To provide additional
understanding of what the Companys financial status would be had we elected to
utilize a Safe Harbor investment policy of T-bills, we have prepared a series of
graphs derived from information from previous 10K filings. Examination of the
graphs makes it apparent that the company would have been on the verge of
bankruptcy in 2006 had it instituted a T-bill policy The Companys current
investment policy does entail higher risks which were understood and approved
by the members of the Board of Directors. The results of this investment policy
have proven, over time, to be prudent. For 84 consecutive quarters the
Companys investment portfolio has always been above historical cost. If the
Company had not followed this course, there is a high likelihood that it would
have been bankrupt. We did not provide an analysis of what would have occurred
had we done that in prior years from 1985 on, but it is clear from this
analysis that the company would have already been bankrupt.

The most important issue
with respect to whether a company is an investment company is what the company
does with its earnings. In the case of Daxor, we utilize all our investment
income, plus retained earnings, for research and development and for operation
of the company. The companys investments are managed by the CEO, Dr.
Feldschuh, who spends approximately 15% of his time, 5  7 hours a week, on
investment activities. He is assisted by a single half-time employee. No other
member of the company has any role in these decisions. The portfolio has
certain parameters which are described elsewhere. The company has, in response
to the SEC inquiry, has made a number of changes and increased its disclosures.
The company has also provided a formal response in December 2005 to the SEC on
the question why it is an operating company and not an investment company.

Item 2. Properties

In December 2002, the
Company signed a new ten-year lease extension commencing January 1, 2003, for
its existing facility at the Empire State Building. The Company has occupied
this space since January 1992. The company currently occupies approximately
7,500 square feet. The lease has a two year option for renewal after ten years.
There are options for an additional 18,000 square feet of space. The Company
has a pilot manufacturing facility in Oak Ridge, Tennessee which is currently
manufacturing the BVA-100 Blood Volume Analyzers, and where R&D activities
are performed.

The Company subleases a
portion of its New York City office space to the President of the Company for 5
hours per week. This sublease agreement has no formal terms and is executed on
a month to month basis. The annual amount of rental income received in each of
the years ended December 31, 2005, 2004 and 2003 was $9,750.02.

Item 3. Legal Proceedings

The Company had a suit which
was filed in 2004 and dismissed in 2005. There are no other legal proceedings
outstanding.

Item 4. Submission of Matters to a Vote of Security
Holders.

No matters were submitted to
a vote of the stockholders during the fourth quarter of the fiscal year ended
December 31, 2005.

18

PART II

Item 5. Market for Registrants Common Equity,
Related
Stockholder Matters and Issuer Purchases of Equity Securities.

The common stock is traded
on the American Stock Exchange under the symbol DXR.

High

Low2005First
Quarter

$
23.44

$
20.00Second
Quarter

$
22.32

$
18.90Third
Quarter

$
19.25

$
15.00Fourth
Quarter

$
17.45

$
13.60High

Low2004First
Quarter

$
14.80

$
13.95Second
Quarter

$
21.85

$
14.37Third
Quarter

$
24.00

$
19.00Fourth
Quarter

$
24.60

$
20.25On March 31, 2006, the
Company had approximately 192 holders of record of the Common Stock. The
Company believes there are approximately 1,400 beneficial holders.

The Company paid a single cash
dividend of $.50 per share on the Common Stock in 1997. No dividends have been
declared or paid since 1997. Any future dividends will be dependent upon the
Companys earnings, financial condition and other relevant factors.

19

Item 6. Selected Financial Data.

The
following table sets forth certain selected financial data with respect to the
Company.

Operations Data:

Year Ended
  December 31,Restated

Restated2005

2004

2003

2002

2001Operating revenues

$
1,343,538

$
1,066,315

$
1,013,647

$
767,608

$
591,692Total revenues

$
1,343,538

$
1,066,315

$
1,013,647

$
767,608

$
591,692Costs and expenses:Operations of laboratories
& costs of production


1,321,564


810,967


1,387,264


805,985


814,657Selling, general and
administrative


4,937,167


3,797,214


2,705,778


2,050,546


1,482,438Total costs and
expenses


6,258,731


4,608,181


4,093,042


2,856,531


2,297,095Loss from operations


(4,915,193
)

(3,541,866
)

(3,079,395
)

(2,088,923
)

(1,705,403
)Other Income and
Expenses:Dividend income


2,511,054


1,990,669


1,897,669


1,858,025


1,860,289Gains on sale of
investments


1,515,653


989,599


238,550


40,610


97,719Mark to Market of Short
Positions


(204,225
)

266,807


115,871


0


0Other revenues


14,686


15,245


15,571


35,694


166,676Investment Recovery


75,000


0


0


0


0Admin Expense relating to
portfolio investments


(36,842
)

(1,126
)

0


0


0Interest expense, net of
Interest Income


(296,114
)

(108,950
)

(83,133
)

(39,257
)

(119,926
)Total Other Income and
Expenses


3,579,212


3,152,244


2,184,528


1,895,072


2,004,758Income (Loss) before income
taxes


(1,335,981
)

(389,622
)

(894,867
)

(193,851
)

299,355Provision for income
taxes


0


0


0


0


0Net income/(loss)

$
(1,335,981
)
$
(389,622
)
$
(894,867
)
$
(193,851
)
$
299,355Weighted average number of
common shares outstanding - basic and
  diluted


4,638,384


4,615,993


4,645,700


4,662,947


4,664,909Income (loss) per common
equivalent share - basic and diluted

$
(0.29
)
$
(0.08
)
$
(0.19
)
$
(0.04
)
$
0.06Selected Balance Sheet Data:

Year Ended
  December 31,Restated
  
  Restated2005
  
  2004
  
  2003
  
  2002
  
  2001Total assets
  
  
  59,565,053
  
  
  56,041,322
  
  
  48,001,783
  
  
  41,573,565
  
  
  43,540,153Total liabilities*
  
  
  20,820,252
  
  
  15,788,034
  
  
  11,841,383
  
  
  8,026,668
  
  
  8,211,186Stockholders
equity
  
  
  38,744,801
  
  
  40,253,288
  
  
  36,598,492
  
  
  35,546,897
  
  
  35,328,967Return on equity
  
  
  0.00
  %
  
  0.00
  %
  
  0.00
  %
  
  0.00
  %
  
  0.77
  %*
  Total
  liabilities include deferred taxes on unrealized gains.**
  Return on
  equity is calculated by dividing the Companys net income or loss for the
  period by the stockholders equity at the beginning of the period20

Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operation.

RECENT DEVELOPMENTS

During fiscal years 2005 and
2004, Daxor made major changes in the blood volume analyzer. It expanded its
research and development staff (see R&D section). In January, 2005, it
hired, on a permanent basis, the employees of Tennessee Valley Software, and
leased a second site in Oak Ridge, Tennessee. Because of the ongoing changes
the Company will be first ready to obtain an Underwriters Laboratories and a CE
mark which is required for marketing in Europe in the second quarter of 2006.
The Company has also recognized that it needs to expand research projects that
will provide validation on a cost benefit basis for the blood volume analyzer.

In the Year 2005, the
Company obtained new equipment approved by the FDA which enables frozen blood
to be used for up to 14 days after thawing. The Company has purchased this
equipment and has been testing it for the past year using purchased blood. The
Company is in the process of negotiating with several hospitals for a Blood
Optimization Program which will enable individuals to freeze their own blood
months in advance of surgery. This program is coupled with the use of the blood
volume analyzer so as to prevent patients from donating excessive amounts of
blood and entering surgery in a blood depleted state. Because of the Companys
limited resources, the Company will devote a larger portion of its efforts
towards the blood volume analyzer. Daxor has continued to expand its research
and marketing staff. The Company intends to increase its marketing efforts to
add to its operational income. Some of the steps the Company had undertaken,
such as consolidating certain manufacturing facilities at Oak Ridge, Tennessee
and simultaneously contracting with an Original Equipment Manufacturer (OEM)
will permit greater economies of scale. The Companys primary focus will be to
increase operating revenues even if this initially results in increasing
losses.

RESULTS OF OPERATIONS

Operating
Revenues

In 2005 revenue from
operations was $1,343,538.vs. 2004 revenue from operations was $1,066,315, for
an increase of 26%. In 2003, operating revenues were $1,013,647. The figures
for 2004 and 2003 have been restated.

Idant Laboratories
subsidiary contributed 44.0%, 48.5%, and 45.0% of operating revenues in 2005,
2004 and 2003 respectively. Equipment sales and kit sales increased from
$643,592 to $751,071. In 2005 the Company sold only a single blood volume
analyzer because hospitals which had equipment on trial delayed making a
commitment because Medicare had made an error on reimbursement. This error was
not corrected for 10 months. Despite this, kit sales increased 45% over 2004.
Kit sales in 2004 increased 35% over 2003, and kit sales in 2003 increased 6%
over 2002. 2,132 patients, utilizing the BVA-100, had blood volume measurements
in 2005 vs. 1,474 in 2005, and 1,094 in 2003. The American College of
Cardiology in its most recent update of Guidelines for Treating Congestive
Heart Failure (2005), for the first time specifically referenced studies
partially supported by Daxor on the treatment of congestive heart failure.
These studies from Columbia Presbyterian Medical Center demonstrated that the
goal of achieving normal blood volume resulted in a much higher survival rate
as compared to patients who remained in a hypervolemic state (expanded blood
volume). The studies further demonstrated that physicians using the standard
clinical and laboratory techniques to evaluate blood volume were only correct
51% of the time, and incorrect 49% of the time. These studies, which are
further described elsewhere in this report, were very important to the Company
in its goal of achieving blood volume measurement as a standard of care in
treating heart failure. At the present time, the Company considers itself to
still be in the earliest stages of achieving this goal. The Companys
operations in semen banking and blood banking (laboratories) have received
limited promotion; however, the Company has taken steps to increase awareness
of these services. The potential market for the Blood Volume Analyzer is
significantly larger than the Companys current operations. The Company
anticipates that proceeds from Daxors Blood Volume Analyzer will be the
primary source of revenue in the immediate future. The Company believes that
the potential market for blood volume measurement and analysis is between 15-20
million tests per year. Successful penetration of even a small fraction of the
market would significantly change the Companys structure.

Dividend Income

Dividend income earned on
the Companys securities portfolio was $2,511,054 vs. $1,990,669 reported in
2004, for an increase of $520,385, or 26.1%. $402,896 of the increase was due
to a one-time special stock dividend related to a utility company merger. In
2003, dividend income was $1,897,669.

Investment Gains

21

Gains on the sale of
investments were $1,515,653 in 2005 vs. $989,599 in 2004, and $238,550 in 2003.
The sum of dividend income plus investment gain from sale of securities was
$4,026,707 in 2005, $2,980,268 in 2004, and $2,136,219 in 2003.

Operating Expenses

YEAR ENDED DECEMBER 31, 2005 AS COMPARED TO DECEMBER 31, 2004
vs. DECEMBER 31, 2003 OPERATING EXPENSES

Daxors expenses from
operations totaled $6,258,731 in 2005; the loss from operations was $4,915,193
for 2005. In 2004 expenses from operations totaled $4,608,181; the loss from
operations was $3,541,866 In 2003, expenses from operations totaled $4,093,042;
the loss from operations totaled $3,079,395. The increase in operating costs in
2005 was due to increased hiring of personnel related to expanded research and
development expenses, as well as expanded marketing related to the Blood Volume
Analyzer. The Company had a major change in its blood volume analyzer (see
Research and Development). The Company intends to continue to expand its
Research and Development efforts as well as its marketing efforts. The Company
anticipated these increased operating expenses and intends to continue
expanding its research and marketing staff. The Company experienced the largest
operating loss in its history. These losses were only partially offset by
investment company income. The Company has expanded its research staff in Oak
Ridge, Tennessee and currently has a pilot manufacturing facility. In 2005 the
Company reviewed plans for building a full scale manufacturing facility in Oak
Ridge, Tennessee, which would enable it to manufacture both its own Volumex
kits as well as build other advanced medical instruments such as an instrument
to automate the glomerular filtration test. It was decided that the timing of
the implementation of this plan would depend on the rate of acceptance of the
blood volume analayzer by the medical community.

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.

At December 31, 2005, the
Company had $20,820,252 in short-term debt vs. $15,788,034 in 2004. At year-end
2005, stockholders equity was $38,744,801 at year-end 2005 vs. total
shareholder equity was $40,253,288; at year-end 2004,. At December 31, 2005 the
Companys security portfolio had a market value of $57,246,006 vs. $54,806,400
in 2004. In 2005, the Companys total liabilities and stockholders equity were
$59,565,053 vs. $56,041,322 in 2004.. Operating revenues increased to
$1,343,538 in 2005 from $1,066,315 in 2004.

Income from the Companys
security portfolio is a major asset for the Company as it expands its research
and marketing staff. Year-end 2005 finds the
Company in a satisfactory financial position with adequate funds available for
its immediate and anticipated needs. The Company plans its budgetary outlays on
the assumption that the raising of additional financial capital may be difficult
in the next 2 to 4 years. The Company believes that its present liquidity and
assets are adequate to sustain the additional expenses associated with an
expanding sales and marketing program.

CRITICAL ACCOUNTING POLICIES

Managements Discussion and
Analysis of Financial Condition and Results of Operations discusses the
Companys condensed consolidated financial statements, which have been prepared
in accordance with US GAAP. The Company considers the following accounting
policies to be critical accounting policies.

Available-for-Sale Securities

Available-for-sale
securities represent investments in debt and equity securities (primarily
common and preferred stock of utility companies) that management has determined
meet the definition of available-for-sale under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Accordingly, these
investments are stated at fair market value and all unrealized holding gains or
losses are recorded in the Stockholders Equity section as Accumulated Other
Comprehensive Income (Loss). Conversely, all realized gains, losses and
earnings are recorded in the Statement of Operations under Other Income
(Expense).

The
company will also engage in the short selling of stock. When this occurs, the
short position is marked to the market and this adjustment is recorded in the
Statement of Operations. Any gain or loss is recorded for the period presented

Historical
cost is used by the Company to determine all gains and losses, and fair market
value is obtained by readily available market quotes on all securities.

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

1.
The Companys investment
  goals are capital preservation and maintaining returns on this capital with a
  high degree of safety22

2.
The Company maintains a
  diversified securities portfolio comprised primarily of electric utility
  preferred and common 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 will engage in short position up to 5% of the value
  of its portfolio. The Companys investment policy is to maintain a minimum of
  80% of its portfolio in electric utilities. Investments in utilities are
  primarily in electric companies. Investments in non-utility stocks will not
  exceed 15% of the portfolio.3.
Investment in speculative
  issues, including short sales, maximum of 5%.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 which can be written. The amount of the
  portfolio on which options are actually written is usually between 3-10% of
  the portfolio. In actual practice, more than 90% of the options that are
  written expire unexercised. The actual turnover of the portfolio is such
  that the average holding period is in excess of 5 years.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. The use of put options is
  a conservative strategy which enables the company to buy stocks at a lower
  price than the prevailing market. If the stock does not go to the put
  exercise price, then the company receives the unexercised option price. If
  the put is exercised, the company obtains its stock at a lower price and has
  the additional benefit of a lower basis cost because the option price is
  incorporated into the cost basis. For example, if a stock is selling at $23
  per share and the company sells a put for $0.80 at $20.00, if the stock drops
  to $19.75, the exercise price is $20.00, the effective cost to the company,
  however, is only $19.20 per share. The company may or may not sell Calls
  against a stock it has acquired this way, or it may retain the stock. In
  either case, the company benefits by acquiring the stock at a lower price
  than prevailed at the time it indicated an interest in this particular stock.c.
Speculative Short
  Sales/Short Options.
  The company limits its speculative transaction to 5% of the portfolio value
  of the assets. The company may sell uncovered calls on certain stocks. If the
  stock price does not rise to the price of the calls, the option is not
  exercised, and the company receives the income from the call. If the call is
  exercised, the company is then short the stock. The company then has the
  choice of covering the short stock, or selling a put against its short stock.
  If the put is exercised, then the short sale is covered. The companys
  current accounting policy is to mark to the market each quarter any short
  positions, and include it in the income statement. While the company may have
  so-called speculative positions equal to 5% of its accounts, in actual
  practice there are most quarters where short stock positions account for less
  than 1% of the assets of the company.The income derived from
these investments has been essential to 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 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 covered a
significant portion of the Companys continuing losses from operations.
Investment policy is reviewed at least once yearly by the Board of Directors
and the Audit Committee. Individual investment decisions are made solely by Dr.
Joseph Feldschuh, CEO, who devotes approximately 10 to 15% of his time 7 to 7.5
hours per week to this activity. He is assisted by a single half-time employee.
No other member of the Company is involved in individual investment decisions.

Revenue Recognition

The
Company recognizes operational revenues from several sources. The first source
is the outright sale of equipment, the Blood Volume Analyzer, to customers. The
second source is the sale and associated shipping revenues of single-use
radioisotope doses (Volumex) that are injected into the patient and measured by
the Blood Volume Analyzer. The third source of revenue is service contracts on
the Blood Volume Analyzer, after it has been sold to a customer. The fourth
source of revenue is the storage fees associated with cryobanked blood and
semen specimens. The fifth is lab revenues from laboratory services, and the
sixth is revenue from semen sales.

The
Company currently offers three different methods of purchasing the Blood Volume
Analyzer equipment. A customer may purchase the equipment directly, lease the
equipment, or rent the equipment on a month-to-month basis. The revenues
generated by a direct sale or a monthly rental are recognized as revenue in the
period in which the sale or rental occurred. If a customer is to select the
lease option, the Company refers its customer to a third party finance
company with which it has established a relationship, and if the lease is
approved, the Company receives 100% of the sales proceeds from the finance
company and recognizes 100% of the revenue. The finance company then deals
directly with the customer with regard to lease payments and related
collections. Daxor Corporation does not guarantee payments to the leasing
company.

23

The
sales of the single-use radioisotope doses (Volumex) that are used in
conjunction with the Blood Volume Analyzer are recognized as revenue in the
period in which the sale occurred.

When
Blood Volume Analyzer equipment has been sold to a customer, the Company offers
a one year warranty on the product, which covers all mechanical failures. This
one year warranty is effective on the date of sale of the equipment. After the
one year period expires, customers may purchase a service contract through the
Company, which is usually offered in one-year, three year or five year
increments. Prior to Q3 2005, these service contracts were recorded by the
Company as deferred revenue and were amortized into income in the period in
which they apply. Currently, all service contracts, regardless of length of
term, are billed quarterly in the period in which the revenue is earned.

The
storage fees associated with the cryobanked blood and semen samples are
recognized as income in the period for which the fee applies. The Company
invoices customers for storage fees for various time periods. These time
periods range from one month up to one, two or three years. The Company will
only recognize revenue for those storage fees that are earned in the current
reporting period, and will defer the remaining revenues to the period in which
they are earned. Effective October, 2005, the Company has altered our billing procedure
as such that clients will only be billed on a quarterly basis. Therefore,
future revenue recognition will not include deferred revenue on the storage
fees, but rather will be earned in the same period in which the invoices are
generated.

Comprehensive Income (Loss)

The
Company reports components of comprehensive income under the requirements of
SFAS No. 130, Reporting Comprehensive Income. This statement establishes rules
for the reporting of comprehensive income and requires certain transactions to
be presented as separate components of stockholders equity. The Company
currently reports the unrealized holding gains and losses on available-for-sale
securities, net of deferred taxes, as accumulated other comprehensive income
(loss).

Product Warrantees and Related Liabilities

The
Company offers a one year warranty on the Blood Volume Analyzer equipment. This
warranty is effective on the date of sale and covers all mechanical failures of
the equipment. All major components of the equipment are purchased and
warranteed by the original 3rd party manufacturers.

Once
the initial one year warranty period has expired, customers may purchase annual
service contracts for the equipment. These service contracts warranty the
mechanical failures of the equipment that are not associated with normal
wear-and-tear of the components.

To
date, the Company has not experienced any major mechanical failures on any
equipment sold. In addition, the majority of the potential liability would
revert to the original manufacturer. Due to this history, a liability has not
been recorded with respect to product / warranty liability.

Use of Estimates

The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
as of the dates of the financial statements and the results of operations
during the reporting periods. These also include management estimates in the
calculation of pension liabilities covering discount rates, return on plan
assets and other actuarial assumptions. Although these estimates are based upon
managements best knowledge of current events and actions, actual results could
differ from those estimates

Income Taxes

The
Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes. This pronouncement requires recognition of
deferred tax assets and liabilities for the estimated future tax consequences
of event 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.

Impact
of restatements for 2004 and 2003

As a result of the audit a
number of changes were made with respect to balance sheet, profit and loss, and
summary. The changes that were made, effective for 2003 through to the present,
pertained to three areas:

24

1)
Change in revenue
  recognition for cryobanking from cash to accrual method.2)
Change in valuation of
  certain investments (options and shorts)  from cost to mark-to-market, with
  the Fair Market Value adjustment on the options and shorts running through
  the Statement of Operations.3)
Change in the method of
  accounting for the blood volume analyzer equipment that is out on
  loan/rental. We now capitalize and depreciate the equipment instead of
  expensing it directly to cost of goods. The following tables provide the
  numerical impact of these changes:2004





2003As








AsOriginally


As


Increase


Originally


As


IncreaseReported


Restated


(Decrease)


Reported


Restated


(Decrease)Current AssetsCash and cash
equivalents


5,079


5,079





3,324


3,324Available for sale
securities


54,806,400


54,806,400





47,399,159


47,399,159Other receivableAccounts
receivable


202,649


156,387





137,008


210,900Inventory


139,338


139,338





146,185


146,185Prepaid Expenses and Other
Current Assets


453,284


453,284





242,215


242,215Total Current
Assets


55,606,750


55,560,488


(46,262
)

47,927,891


48,001,783


73,892Property and equipment,
net


290,572


448,676


158,104


303,373


368,824


65,451Other Assets


32,158


32,158





69,268


69,268Total Assets


55,929,480


56,041,322


111,842


48,300,532


48,439,875


139,343Current
LiabilitiesAccounts Payable and accrued
liabilities


89,162


89,162





183,052


183,052Loans Payable


4,113,285


4,113,285





2,502,106


2,502,106Deferred Option
Premiums






585,142










144,175Other
liabilities


982,718


14,898





667,123


407,077Deferred revenue


17,465


140,016









73,892Deferred Taxes


10,845,531


10,845,531





8,531,081


8,531,081Total Current Liabilities and
Total Liabilities


16,048,161


15,788,034


(260,127
)

11,883,362


11,841,383


(41,979
)STOCKHOLDERS
EQUITYCommon stock


53,097


53,097





53,097


53,097Additional Paid in
Capital


9,821,563


9,821,563





9,801,548


9,801,548Accumulated Other
Comprehensive Income


21,053,089


21,053,089





16,560,334


16,560,334Retained
Earnings


14,589,699


14,961,668





15,169,967


15,351,289Treasury Stock


(5,636,129
)

(5,636,129
)




(5,167,776
)

(5,167,776
)Total Stockholders
Equity


39,881,319


40,253,288


371,969


36,417,170


36,598,492


181,322Total Liabilities and
Stockholders Equity


55,929,480


56,041,322


111,842


48,300,532


48,439,875


139,34325

CONTRACTUAL OBLIGATIONS

In December 2002, the
Company signed a new ten-year lease commencing January 1, 2003, for its
existing facility at the Empire State Building. The Company has occupied this
space since January 1992. The company currently occupies approximately 7,500
square feet. The lease has a two year option for renewal after ten years. There
are options for an additional 18,000 square feet of space. The Company has a
pilot manufacturing facility in Oak Ridge, Tennessee which is currently
manufacturing the BVA-100 Blood Volume Analyzers, and where R&D activities
are performed.. The Company also signed a contract with an Original Equipment
Manufacturer (OEM) for manufacturing the BVA-100. The Companys Volumex
syringes are filled by an FDA licensed radiopharmaceutical manufacturer under
contract with Daxor.

TABULAR DISCLOSURE OF CONTRACTUAL
OBLIGATIONS

Payments
  Due By PeriodContractual 
  Obligations

Total

1 Year

2  3 
  Years

4  5 
  Years

More Than 5
  years(Long-Term
  Debt Obligations)


0


0


0


0


0(Capital
  Lease Obligations)1


0


0


0


0


0(Operating
  Lease Obligations)

$
2,740,560


274,056


548,112


548,112


1,370,280(Purchase
  Obligations)


0


0


0


0


0(Other
Long-Term Liabilities Reflected on
  the Registrants Balance Sheet under GAAP)


0


0


0


0


0Total

$
2,740,560

$
274,056


548,112

$
548,112

$
1,370,2801  This amount
  represents a total monthly rental fee of $22,838 paid for our New York
  facilities; Base rent of $22,167, addl. space at 350 5th Avenue
  at $671. It does not include the monthly rent paid in Tennessee, as these
  facilities are rented on a month-to-month basis and can be terminated at any
  time.RECENT ACCOUNTING PRONOUNCEMENTS

Although we have not yet
determined whether the adoption of SFAS 123R will result in amounts that are
similar to the current pro forma disclosures under SFAS 123, we are evaluating
the requirements under SFAS 123R and do not expect the adoption to have a
significant impact on our statements of operations.

Item 7A.
Quantitative
  and Qualitative Disclosures About Market Risk.Item 7A.
Quantitative and
Qualitative Disclosures About Market Risk.In light of the Safe Harbor
provisions so that a company could not be considered an investment company, we
have done an analysis of what would have occurred if the company had elected to
use a Safe Harbor provision instead of the cash management program that it
developed which utilizes dividend paying utilities combined with option
sales.  It should be noted that it is
not mandatory to utilize T-bills, only that it is a Safe Harbor provision,
where one is not required to explain or justify that one is an operating
company rather than in investment company.
We elected to augment the companys revenue rather than accept the Safe
Harbor T-bill scenario.  We understood
that there were risks, and the concept was approved by the Board of Directors
of Daxor before this policy was inaugurated.
The original concept was suggested to us by a broker who has had a
relationship with the company for over 30 years.

The Board of Directors
  reviews and approves the investment policy at least once a year.  The policy is: 1) the primary investments
  are in electric utilities; no more than 5% of the companys assets can be in
  shorts at any one time; 2)the company can continue to sell covered call
  options; sell naked put options on securities it is willing to own; 3)
  concentration of no more26

than 10% of any one stock
  in the portfolio; 4) if a stock were to grow to more than 10% due to natural
  increase in value, it is exempt from the 10% concentration rule.
  All individual investment decisions are made by Dr. Joseph
  Feldschuh.  Dr. Feldschuh spends
  approximately 10  15% of his time (approximately 5  7.5 hours per week) on
  reviewing information relative to investment decisions, as well as transmitting
  instructions concerning these decisions.
  A single half-time administrative employee provides assistance to Dr.
  Feldschuh.  No other employee is
  involved in investment making decisions.
  The Company subscribes to two independent investment/economic newsletters
  and three financial newspapers.  The
  Company also receives free investment analysis from the two primary brokerage
  houses where it has corporate accounts.The Company has always had
on its Board of Directors, for at past the last twenty years, at least one
person who could be considered an expert on investing accounting policy with
Wall Street experience.

In 1992, the Company had its
cash management investment policies questioned by the SEC and no action was
taken against the Company.  The following
graphs illustrate what would have happened to the company if the Company had
chosen at that time, beginning in 1993, to undertake a so-called Safe Harbor
policy.  Two separate T-bill rates were
used for this analysis; one for an average rate of approximately 2%, and one
for an average rate of approximately3%. The 2% and 3% scenarios are reasonable
approximations of which the Company might have encountered during this
time.   During this time period T-bill interest
rates fluctuated between approximately 1% and 5%.

Graph 1: Comparison of Net Earnings with Hypothetical
Earnings That Would Have Resulted Had the Company Invested in Treasury Bills
from 1993 to 2005 and Received a 2% Interest Rate

[GRAPH]

Graph 1 illustrates three
sets of data from 1993 to 2005: 1) the companys reported net income from all
sources, 2) the companys operation income minus operating expenses, and 3) a
hypothetical net income calculated assuming that, rather than following its
existing investment policy, the Company had invested in Treasury Bills and
received an interest rate of 2%.

From 1993 to 1995, the
company reported a net profit despite increasing losses from operations. As can
be seen, from 1993 through 1995, operating revenues did not cover expenses.
From 1996-2002, despite heavy operating losses, the company was close to
breaking even. In 2003-2005 the company lost between $389,622 and $1,335,981
each year despite supplemental revenue from investments.

Had the company invested in
Treasury Bills and received a 2% interest rate, all years would have shown a
loss. From 1996-2002, the company would have lost approximately $2 million each
year.  In 2003, the company would have
lost nearly $3 million, in 2004 over $3 million, and in 2005 (approximately)
over $5 million.

Graph 2: Comparison of Net Earnings with Hypothetical
Earnings That Would Have Resulted Had the Company Invested in Treasury Bills
from 1993 to 2005 and Received a 3% Interest Rate

27

[GRAPH]

Graph 2 shows the same basic
scenario as Graph 1, except that the hypothetical net income was calculated
assuming a 3% interest rate from Treasury Bills. The results are similar to
those from Graph 1, but the loss is slightly lower because of the 1% higher
interest rate.

Graph 3: Hypothetical Change in Company Assets that Would
Have Occurred Had Persistent Losses from Investment in Treasury Bills with a 2%
Rate of Interest Forced the Company to Cover Losses by Liquidating Sections of
its Portfolio

[GRAPH]

Graph 3 compares the
Companys marketable securities at cost with a hypothetical value of
securities. This hypothetical value was calculated assuming that the Company
had begun investing in Treasury Bills in 1993 and received a 2% interest rate.
The marketable securities at cost approximately represent the amount of money
the Company has available, or its approximate assets. Using our existing
investment policy, the value of our marketable securities at cost has slowly
decreased over the last 12 years but has begun to slowly increase since 2001.

Had the company invested in
Treasury Bills, because of the continuing net loss (as demonstrated in Graph
1), the Company would have been forced to steadily sell investment capital to
cover those losses. The calculations take this dwindling supply of capital into
account. Lost capital would only have been partially replaced by interest on
the Treasury Bills, and the amount of investment income would have declined as
the amount of capital decreased. By year end 2004, the value of the
Companys securities would have dwindled to approximately $7 million, from a
starting point of over $27 million. By year end 2005, the estimated value of
the securities would have fallen to approximately $2 million. The company would
be facing potential bankruptcy in 2006.

Graph 4: Hypothetical Change in Company Assets that Would
Have Occurred Had Persistent Losses from Investment in Treasury Bills with a 3%
Rate of Interest Forced the Company to Cover Losses by Liquidating Sections of
its Portfolio

28

[GRAPH]

Graph 4 illustrates the same
scenario as Graph 3, but assuming a 3% interest rate from Treasury Bills. The
loss is somewhat less in this scenario, but by year end 2004, securities would
have fallen to approximately $10 million, and the estimated value of the
securities by 2005 would have been approximately $5 million.

Graph 5: Loans Payable per Year

[GRAPH]

Graph 5 illustrates the
Companys loans payable at December 31 from 1993 to 2005. From 1993 to 1995,
the amount of loans payable decreased sharply, and then stayed in a narrow
range from 1995 to 2001, remaining below $3 million and reaching a low of $1
million at December 31, 2001. After 2001, because of the companys expanded
research and development, the amount of loans began to increase steadily until
December 31, 2005, when they exceeded the 1993 amount. Had the company invested
in Treasury Bills, this would have led by year end 2005 to a combination of
depleted capital, increased debt, and looming bankruptcy.

29

Graph 6: Operating Revenues
and Total Expenses from 1993 to 2005

[GRAPH]

Graph 6 illustrates
operational revenues and total expenses from 1993 to (estimated) 2005.
Operational revenues dropped sharply between 1995 and 1996. Between 1998 and
1999, operational revenues began to recover, but they have not yet reached
pre-1995 levels. Expenses were fairly constant between 1993 and 2001, but they
have increased since 2001 because of the expansion in research, development,
and marketing. Throughout the entire twelve years, operating expenses have
consistently exceeded operating revenues.

Graph 7: Marketable Securities at Cost Compared to the Rate
of Return

[GRAPH]

Graph 7 shows the cost of
securities compared with rate of return (investment income/cost of securities)
from 1993 to 2005. The rate of return includes dividends and net profits from
security sales, but it does not include unrealized profits. Had these been
included, the rate of return would have been higher.

The actual rate of return is
more than three times the rate of return that the company would have received
if the Company had invested exclusively in Treasury Bills.  The
Company, therefore, has benefited from the cash management policy of the past
12 years.

Item 8.
Financial
  Statements and Supplementary Data.Index to
  Consolidated Financial StatementsReport of Independent
  Auditors  December 31, 2005, 2004 and 2003Consolidated Balance
  Sheets - December 31, 2005, 2004 and 2003Consolidated Statements of
  Operations for the years ended December 31, 2005, 2004 and 2003Consolidated Statements of
  Stockholders Equity and Comprehensive Income for the years ended December
  31, 2005, 2004 and 2003Consolidated Statements of
  Cash Flows for the years ended December 31, 2005, 2004 and 2003.Notes to Consolidated
  Financial Statements30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and
Board of Directors of Daxor Corporation

We have audited the
accompanying consolidated balance sheets of Daxor Corporation and subsidiary
(the Company) as of December 31, 2005, 2004 and 2003, and the related
consolidated statements of operations, stockholders equity and comprehensive
income (loss), and cash flows for the three years then ended. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of the Company as of December 31,
2005, 2004 and 2003, and the consolidated results of its operations and its
cash flows for the three years then ended, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 1, the
Company restated its 2004 and 2003 consolidated financial statements.

/s/ Rotenberg Meril Solomon
Bertiger & Guttilla, P.C.

Saddle Brook, NJ

April 3, 2006

31

DAXOR
CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS

DAXOR CORPORATIONCONSOLIDATED BALANCE SHEETS

RESTATED

RESTATEDDecember
  31,
  2005

December
  31,
  2004

December
  31,
  2003ASSETSCURRENT ASSETSCash and cash
equivalents

$
93,003

$
5,079

$
3,324Available-for-sale
securities


57,246,006


54,806,400


47,399,159Other Receivables


1,018,936


0


0Accounts receivable, net of
$41,300 in 2005, and 0 in 2004 and 2003.


131,592


156,387


210,900Inventory


191,861


139,338


146,185Prepaid expenses and other
current assets


230,632


453,284


242,215Total Current Assets


58,912,030


55,560,488


48,001,783Property and equipment,
net


620,865


448,676


368,824Other Assets


32,158


32,158


69,268Total Assets

$
59,565,053

$
56,041,322

$
48,439,875LIABILITIES AND
STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued
liabilities

$
512,024

$
89,162

$
183,052Loans payable


7,083,372


4,113,285


2,502,106Deferred option
premiums


772,803


585,142


144,175Other liabilities


1,302,797


14,898


407,077Deferred revenue


90,468


140,016


73,892Deferred taxes


11,058,788


10,845,531


8,531,081Total Current Liabilities and
Total Liabilities


20,820,252


15,788,034


11,841,383STOCKHOLDERS
EQUITYCommon stock, $.01 par
valueAuthorized - 10,000,000
sharesIssued - 5,309,750
sharesOutstanding - 4,630,426,
4,610,826 and 4,639,026 shares, respectively


53,097


53,097


53,097Additional paid in
capital


10,303,969


9,821,563


9,801,548Accumulated other comprehensive
income


20,537,750


21,053,089


16,560,334Retained earnings


13,625,687


14,961,668


15,351,289Treasury stock, at
cost


(5,775,702
)

(5,636,129
)

(5,167,776
)Total Stockholders
Equity


38,744,801


40,253,288


36,598,492Total Liabilities and
Stockholders Equity

$
59,565,053

$
56,041,322

$
48,439,875See accompanying notes to
consolidated financial statements.

32

DAXOR CORPORATION AND
SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

2005

RESTATED2004

RESTATED2003Revenues:Operating Revenues - Equipment
sales and related services

$
751,071

$
643,593

$
(a)Operating Revenues -
Cryobanking and related services


592,467


422,722


(a)Total Revenues


1,343,538


1,066,315


1,013,647Costs of Sales:Costs of equipment sales and
related services


998,840


520,350


(a)Costs of cryobanking and
related services


322,724


290,617


(a)Total Costs of Sales


1,321,564


810,967


1,387,264Selling, General &
Administrative:Selling, general, and
administrative; equipment sales and related
  services


4,731,822


3,587,319


(a)Selling, general &
administrative; cryobanking and related
  services


205,345


209,895


(a)Total Selling, General &
Adminstrative


4,937,167


3,797,214


2,705,778Loss from Operations


(4,915,193
)

(3,541,866
)

(3,079,395
)Other income
(expenses):Dividend income 
investment portfolio


2,511,054


1,990,669


1,897,669Gains on sale of
securities, net


1,515,653


989,599


238,550Mark to market of short
positions


(204,225
)

266,807


115,871Other revenues


14,686


15,245


15,571Investment recovery


75,000Interest expense, net of
interest income


(296,114
)

(108,950
)

(83,133
)Administrative expenses
relating to portfolio investments


(36,842
)

(1,126
)Total Other Income, net


3,579,212


3,152,244


2,184,528Loss Before Income
Taxes

$
(1,335,981
)
$
(389,622
)
$
(894,867
)Provision for income
taxes


0


0


0Net Loss

$
(1,335,981
)
$
(389,622
)
$
(894,867
)Weighted average number of
shares outstanding  basic and diluted


4,638,384


4,615,993


4,645,700Net loss per common equivalent
share  basic and diluted

$
(0.29
)
$
(0.08
)
$
(0.19
)(a)
Segment data not availableSee accompanying notes to
condensed consolidated financial statements

33

DAXOR
CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

December 31,
  2005

Restated
  December 31,
  2004

Restated
  December 31,
  2003CASH FLOWS FROM OPERATING
ACTIVITIES:Net loss

$
(1,335,981
)
$
(389,622
)
$
(894,867
)Adjustments to reconcile net
loss to net
  cash used in operating activities:Depreciation
& amortization


112,813


98,889


83,738Provision for
Bad Debt


41,300


0


0Value of
Shares Received as a Dividend


(402,896
)

0


0Gains on sale
of investments


(1,515,653
)

(989,599
)

(238,550
)Marked to
Market adjustments on options
  & shorts


204,225


(266,807
)

(115,871
)Investment
Recovery


(75,000
)

0


0Change in operating assets and operating liabilities:(Increase)/decrease in accounts receivable


(16,505
)

54,513


1,079(Increase)
decrease in prepaid expenses
  & other current assets


222,652


(211,069
)

(26,527
)(Increase)
decrease in inventory


(52,523
)

6,847


3,040Decrease in
other assets


0


37,110


2,333Increase
(decrease) in accounts payable
  and accrued liabilities


422,862


(93,890
)

70,571Increase
(decrease) in other liabilities


1,287,900


(392,179
)

300,637Increase in
deferred income


(49,548
)

66,124


73,892Net cash used in operating
activities


(1,156,354
)

(2,079,683
)

(740,525
)CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and
equipment


(285,002
)

(178,741
)

(113,687
)Unsettled trades
receivable


(1,018,936
)

0


0Purchase of
investments (1)


(26,490,629
)

0


(664,468
)Sales of investments (1)


25,999,407


123,176


0Proceeds from Margin
loans (1)


5,530,857


1,011,179


868,060Repayment of Margin
loans (1)


(2,950,144
)

0


0Proceeds from deferred
option premiums
  not closed


115,892


974,161


682,304Net cash provided by investing
activities


901,445


1,929,775


772,209CASH FLOWS FROM FINANCING
ACTIVITIES:Proceeds from bank
loan


0


600,000


200,000Purchase of treasury
stock


(219,020
)

(474,334
)

(272,131
)Proceeds from sale of treasury
stock


561,853


25,597


30,736Net cash provided by (used in)
financing
  activities


342,833


151,663


(41,395
)Net increase (decrease) in cash
and cash
  equivalents


87,924


1,755


(9,711
)Cash and cash equivalents at
beginning of
  period


5,079


3,324


13,035Cash and cash equivalents at
end of period

$
93,003

$
5,079

$
3,324(1)
For the
  years ended December 31, 2004 and 2003, the purchases and sales of
  investments, and proceeds from and repayments of margin loans, have not been
  disaggregated and have been shown net.See accompanying notes to
condensed consolidated financial statements

34


DAXOR CORPORATION
STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)

|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------ | - | ------------------------------ |  | ----------------------------------------- | ---------- | ------------------- | - | -------------- | - | ----- | ---------- | ------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  | Common Stock                     |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |           
|                                                                            |  | Number
  of Shares
  Outstanding |           | Amount |   | Additional
  Paid In
  Capital |  | AccumulatedOther
  Comprehensive
  Income |            | Retained
  Earnings |   | Treasury Stock |   | Total |            | ComprehensiveIncome(Loss) |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |  
|Balances, December 31,
2002                                                 |  |                                  | 4,656,784 |        | $ | 53,097                         |  | $                                         | 9,798,232  |                     | $ | 12,372,477     |   | $     | 16,246,156 |                           | $ | (4,923,065 | ) | $ | 33,546,897 |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Change in unrealized gain on
securities,
  net of $2,157,380 deferred taxes |  |                                  |           |        |   |                                |  |                                           |            |                     |   | 4,187,857      |   |       |            |                           |   |            |   |   | 4,187,857  |   | $ | 4,187,857  |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Net loss                                                                    |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       | (894,867   | )                         |   |            |   |   | (894,867   | ) |   | (894,867   | )
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Sale of Treasury
Stock                                                      |  |                                  | 2,142     |        |   |                                |  |                                           | 3,316      |                     |   |                |   |       |            |                           |   | 27,420     |   |   | 30,736     |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Purchase of treasury
stock                                                  |  |                                  | (19,900   | )      |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   | (272,131   | ) |   | (272,131   | ) |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Balances, December 31, 2003, as
restated                                    |  |                                  | 4,639,026 |        |   | 53,097                         |  |                                           | 9,801,548  |                     |   | 16,560,334     |   |       | 15,351,289 |                           |   | (5,167,776 | ) |   | 36,598,492 |   | $ | 3,292,990  |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Change in unrealized gain on
securities,
  net of $2,314,450 deferred taxes |  |                                  |           |        |   |                                |  |                                           |            |                     |   | 4,492,755      |   |       |            |                           |   |            |   |   | 4,492,755  |   | $ | 4,492,755  |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Net loss                                                                    |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       | (389,622   | )                         |   |            |   |   | (389,622   | ) |   | (389,622   | )
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Sale of treasury
stock                                                      |  |                                  | 2,000     |        |   |                                |  |                                           | 20,015     |                     |   |                |   |       |            |                           |   | 5,982      |   |   | 25,997     |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Purchase of treasury
stock                                                  |  |                                  | (30,200   | )      |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   | (474,335   | ) |   | (474,335   | ) |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Balances, December 31, 2004, as
restated                                    |  |                                  | 4,610,826 |        | $ | 53,097                         |  | $                                         | 9,821,563  |                     | $ | 21,053,089     |   | $     | 14,961,668 |                           | $ | (5,636,129 | ) | $ | 40,253,288 |   | $ | 4,103,133  |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Change in unrealized gain on
securities,
  net of $213,257 deferred taxes   |  |                                  |           |        |   |                                |  |                                           |            |                     |   | (515,339       | ) |       |            |                           |   |            |   |   | (515,339   | ) | $ | (515,339   | )
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Net loss                                                                    |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       | (1,335,981 | )                         |   |            |   |   | (1,335,981 | ) |   | (1,335,981 | )
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Sale of treasury
stock                                                      |  |                                  | 27,500    |        |   |                                |  |                                           | 482,406    |                     |   |                |   |       |            |                           |   | 79,447     |   |   | 561,853    |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Purchase of treasury
stock                                                  |  |                                  | (7,900    | )      |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   | (219,020   | ) |   | (219,020   | ) |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  
|Balances, December 31,
2005                                                 |  |                                  | 4,630,426 |        | $ | 53,097                         |  | $                                         | 10,303,969 |                     | $ | 20,537,750     |   | $     | 13,625,687 |                           | $ | (5,775,702 | ) | $ | 38,744,801 |   | $ | (1,851,320 | )
|                                                                            |  |                                  |           |        |   |                                |  |                                           |            |                     |   |                |   |       |            |                           |   |            |   |   |            |   |   |            |  

35

---



DAXOR
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BUSINESS
AND SIGNIFICANT ACCOUNTING POLICIES Business 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 of an instrument that rapidly and accurately measures human
blood volume. This instrument is used in conjunction with a single use diagnostic
injection and collection kit. Significant Accounting Policies Principles of Consolidation The
consolidated financial statements include the accounts of Daxor Corporation and
Scientific Medical Systems Corp, a wholly-owned subsidiary. All significant inter-company
transactions and balances have been eliminated in consolidation. Use of Estimates The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Segment Information The Company
has two operating segments, one of which is comprised of the sale of blood
volume analysis equipment and related services; the other segment is the
cryobanking business conducted under a wholly-owned subsidiary, Scientific
Medical Systems. This segment encompasses semen banking services, related
testing, and long-term storage of frozen blood, primarily autologous blood for
individual use. Cash and Cash Equivalents The Company
considers cash equivalents to be all highly liquid investments purchased with
an original maturity of 90 days or less. Fair Value of Financial Instruments Carrying
amounts of certain financial instruments of the Company, including cash and
cash equivalents, accounts receivable and payable, accrued liabilities deferred option premiums and
short term debt (loans payable and short positions on securities) approximate
fair value because of their short maturities. Available-for-Sale Securities Available-for-sale
securities represent investments in debt and equity securities (primarily
common and preferred stock of utility companies)that management has determined
meet the definition of available-for-sale under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Accordingly, these
investments are stated at fair market value and all unrealized holding gains or
losses are recorded in the Stockholders Equity section of the Balance Sheet as
Accumulated Other Comprehensive Income (Loss). Conversely, all realized gains,
losses and earnings are recorded in the Statement of Operations under Other
Income (Expense). Historical
cost is used by the Company to determine all gains and losses, and fair market
value is obtained by readily available market quotes on all securities. Investment Goals, Strategies & Policies The Companys
investment goals, strategies and policies are as follows: 1.
The
  Companys investment goals are capital preservation and maintaining returns
  on this capital with a high degree of safety2.
The Company
  maintains a diversified securities portfolio comprised primarily of electric
  utility preferred and common 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 will engage in short position up to 5% of
  the value of its portfolio. The Companys investment 36   policy is to
  maintain a minimum of 80% of its portfolio in electric utilities. Investments
  in utilities are primarily in electric companies. Investments in non-utility
  stocks will not exceed 15% of the portfolio.3.
Investment
  in speculative issues, including short sales, maximum of 5%.4.
Limited use
  of options to increase yearly investment income.d.
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 which can be written. The amount of the
  portfolio on which options are actually written is usually between 3-10% of
  the portfolio. In actual practice, more than 90% of the options that are
  written expire unexercised. The actual turnover of the portfolio is such
  that the average holding period is in excess of 5 years.e.
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. The use of put options is
  a conservative strategy which enables the company to buy stocks at a lower
  price than the prevailing market. If the stock does not go to the put
  exercise price, then the company receives the unexercised option price. If
  the put is exercised, the company obtains its stock at a lower price and has
  the additional benefit of a lower basis cost because the option price is
  incorporated into the cost basis. For example, if a stock is selling at $23
  per share and the company sells a put for $0.80 at $20.00, if the stock drops
  to $19.75, the exercise price is $20.00, the effective cost to the company,
  however, is only $19.20 per share. The company may or may not sell Calls
  against a stock it has acquired this way, or it may retain the stock. In
  either case, the company benefits by acquiring the stock at a lower price
  than prevailed at the time it indicated an interest in this particular stock.f.
Speculative
  Short Sales/Short Options. The company limits its speculative
  transaction to 5% of the portfolio value of the assets. The company may sell
  uncovered calls on certain stocks. If the stock price does not rise to the
  price of the calls, the option is not exercised, and the company receives the
  income from the call. If the call is exercised, the company is then short the
  stock. The company then has the choice of covering the short stock, or
  selling a put against its short stock. If the put is exercised, then the
  short sale is covered. The companys current accounting policy is to mark to
  the market each quarter any short positions, and include it in the income
  statement. While the company may have so-called speculative positions equal
  to 5% of its accounts, in actual practice there are most quarters where short
  stock positions account for less than 1% of the assets of the company.The income
derived from these investments has been essential to 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 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 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 Dr. Joseph Feldschuh, CEO, who devotes approximately 10 to
15% of his time 7 to 7.5 hours per week to this activity. He is assisted by a
single half-time employee. No other member of the Company is involved in
individual investment decisions.

Accounts Receivable

Accounts
receivable are reviewed by the Company at the end of each reporting period to
determine the collectibility based upon the aging of the balances and the
history of the customer. As of December 31, 2005, the Company determined that a
reserve of $41,300 should be placed against the outstanding receivable balance
of $178,892. For the years ended December 31, 2004 and 2003, there was no reserve
against the outstanding receivable balance.

Inventory

Inventory is
stated at the lower of cost or market, using the first-in, first-out method
(FIFO), and consists primarily of finished goods.

Prepaid Expenses and Other Current Assets

Prepaid
expenses and other current assets generally consist of prepayments for future
services and corporate capital base/personal holding taxes. Prepayments are
expensed when the services are received or as the prepaid capital base/personal
holding taxes are offset by the related tax liability. All prepaid expenses and
taxes are expensed within one year of the Balance Sheet date and are thus
classified as Current Assets.

Property and Equipment

Property and
Equipment is stated at cost and consists of BVA equipment, laboratory and
office equipment, furniture and fixtures, and

37

leasehold
improvements. These assets are depreciated under the straight-line method, over
their estimated useful lives, which range from 5 to 39 years.

Amounts spent
to repair or maintain these assets arising out of the normal course of business
are expensed in the period incurred. The cost of betterments and additions are
capitalized and depreciated over the life of the asset. The cost of assets
disposed of or determined to be non-revenue producing, together with the
related accumulated depreciation applicable thereto, are eliminated from the
accounts, and any gain or loss is recognized.

In accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, management reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Currently, there is no impairment of any long-lived assets.

Revenue Recognition

The Company
recognizes operational revenues from several sources. The first source is the
outright sale of equipment, the Blood Volume Analyzer, to customers. The second
source is the sale of single use tracer doses supplied as Volumex kits that are
injected into the patient and measured by the Blood Volume Analyzer. The third
source of revenue is service contracts on the Blood Volume Analyzer, after it
has been sold to a customer. The fourth source of revenue is the storage fees
associated with cryobanked blood and semen specimens, and associated laboratory
tests.

The Company
currently offers three different methods of purchasing the Blood Volume
Analyzer equipment. A customer may purchase the equipment directly, lease the
equipment, or rent the equipment on a month-to-month basis. The revenues
generated by a direct sale or a monthly rental are recognized as revenue in the
period in which the sale or rental occurred. If a customer is to select the
lease option, the Company refers its customer to a third party finance company
with which it has established a relationship, and if the lease is approved, the
Company receives 100% of the sales proceeds from the finance company and
recognizes 100% of the revenue. The finance company then deals directly with
the customer with regard to lease payments and related collections.

The sales of
the single-use radioisotope doses (Volumex) that are used in conjunction with
the Blood Volume Analyzer are recognized as revenue in the period in which the
sale occurred.

When Blood
Volume Analyzer equipment has been sold to a customer, the Company offers a one
year warranty on the product, which covers all mechanical failures. This one
year warranty is effective on the date of sale of the equipment. After the one
year period expires, customers may purchase a service contract through the
Company, which is usually offered in one-year increments. These service
contracts are recorded by the Company as deferred revenue and are amortized
into income in the period in which they apply. As at December 31, 2005 and
2004, deferred revenue pertaining to these service contracts was $ 6,583 and
$17,465, respectively.

The storage
fees associated with the cryobanked blood and semen samples are recognized as
income in the period for which the fee applies. Although the Company
historically offered annual storage fee contracts, effective October 1, 2005,
the Company only offers 3 month storage terms.

Income Taxes

The
Company accounts for income taxes under the provisions of SFAS No. 109, Accounting
for 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.

Comprehensive Income (Loss)

The Company
reports components of comprehensive income under the requirements of SFAS No.
130, Reporting Comprehensive Income. This statement establishes rules for the
reporting of comprehensive income and requires certain transactions to be
presented as separate components of stockholders equity. The Company currently
reports the unrealized holding gains and losses on available-for-sale
securities, net of deferred taxes, as accumulated other comprehensive income
(loss).

Product Warranties and Related Liabilities

The Company
offers a one year warranty on the Blood Volume Analyzer equipment. This
warranty is effective on the date of sale and

38

covers all
mechanical failures of the equipment. All major components of the equipment are
purchased and warranteed by the original 3rd party manufacturers.

Once the
initial one year warranty period has expired, customers may purchase annual
service contracts for the equipment. These service contracts warranty the
mechanical failures of the equipment that are not associated with normal
wear-and-tear of the components.

To date, the
Company has not experienced any major mechanical failures on any equipment
sold. In addition, the majority of the potential liability would revert to the
original manufacturer. Due to this history, a liability has not been recorded
with respect to product / warranty liability.

Research and Development

Costs
associated with the development of new products are charged to operations as
incurred.

Advertising Costs

Advertising
expenditures relating to the advertising and marketing of the Companys
products and services are expensed in the period incurred.

Earnings Per Share

The Company
computes earnings per share in accordance with SFAS No. 128, Earnings Per
Share. Basic earnings per common share is computed by dividing income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per common share is based
on the average number of common shares outstanding during each period, adjusted
for the effects of outstanding stock options.

In 2005, 2004,
and 2003, stock options were not included in the computation of diluted loss
per common share due to their anti-dilutive effect given the net loss for each
of those years. The number of anti-dilutive stock options excluded from the
computation of diluted loss per common share was 78,100, 87,500, and 62,800,
respectively.

Leased Employees

The Company
has entered into an agreement with ADP TotalSource, whereby the Company leases
its employees from ADP. The agreement requires the Company to reimburse ADP for
all employee wages, related taxes, employee benefit costs and human resource
fees.

The Company
records these payments using the same classifications for which the
reimbursement is made. (i.e. Wage reimbursements are recorded as wage expense.)

Stock Options

The Company
applies the intrinsic-value-based method of accounting prescribed by Accounting
Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations including Financial Accounting Standards
Board, or FASB, Interpretation No. 44, Accounting for Certain Transactions
involving Stock Compensation, an Interpretation of APB Opinion No. 25, issued
in March 2000, to account for its stock options. Under this method,
compensation expense is recorded on the date of the grant only if the current
market price of the underlying stock exceeded the exercise price. SFAS No. 123,
Accounting for Stock Based Compensation, established accounting and disclosure
requirements using a fair-value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company has
elected to continue to apply the intrinsic-value-based method of accounting
described above, and has adopted only the disclosure requirements of SFAS No.
123. The following table illustrates the effect on the net loss if the
fair-value-based method has been applied to all outstanding and unvested awards
in each period.

2005
  
  2004
  
  2003Restated
  
  RestatedNet loss, as reported
  
  $
  (1,335,981
  )
  
  (389,622
  )
  $
  (894,867
  )Deduct total
  stock-based employee compensation expense determined under fair-value-based
  method, net of tax
  
  
  (82,790
  )
  
  (26,229
  )
  
  (33,581
  )Proforma net income (loss)
  
  $
  (1,418,771
  )
  $
  (415,851
  )
  $
  (928,448
  )Pro forma net income
  (loss) per common share: basic and diluted
  
  $
  (.31
  )
  $
  (.09
  )
  $
  (.20
  )In 2005 and
2004 a total of 25,000 and 25,700, respectively, of stock options were issued
to various employees under the 2004 Stock Option Plan. No stock options were
granted to employees in 2003. The weighted-average fair value per stock option
granted in 2005 and 2004 was $3.40 and $2.96, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 2005 and 2004: no dividend yield, expected volatility of 28.65% and
22.74%, respectively, risk-free interest rates of 3.32% and 1.91%, respectively
and an expected life of 2 and 1/4 years for 2005 and 3 years for 2004.

Recent Accounting Pronouncements

In December
2004, the FASB revised SFAS No. 123 (FAS 123R), Share-Based Payment, which
requires companies to expense the estimated fair value of employee stock
options and similar awards. The accounting provisions of FAS 123R will be
effective for the third quarter of fiscal 2005.

The Company
will adopt the provisions of FAS 123R using a modified prospective application.
Under modified prospective application, FAS 123R, which provides certain
changes to the method for valuing stock-based compensation among other changes,
will apply to new awards and to awards that are outstanding on the effective
date and are subsequently modified or cancelled. Further compensation expense
for outstanding awards for which the requisite service had not been rendered as
of the effective date will be recognized over the remaining service period
using the compensation cost calculated for pro forma disclosure purposes under
FAS 123. The Company is in the process of determining how the new method of
valuing stock-based compensation as prescribed in FAS 123R will be applied to
valuing stock-based awards granted after the effective date and the impact the
recognition of compensation expense related to such awards will have on its
consolidated financial statements.

Reclassifications and Restatements

For purposes
of financial statement presentation in this Form 10-K, the Company has
retroactively corrected three reporting errors that were previously reported and
has effected these corrections (restatements) as of January 1, 2003 through to
present. These errors occurred as a result of misapplication of generally
accepted accounting principles.

39

The first
change in accounting principle is the appropriate valuation and classification
of options and short sale activities. Per SFAS No. 133  Accounting for Derivate Instruments and
Hedging Activites, the cost of these transactions have been
marked-to-market and the adjustment has been reflected in the Statement of
Operations. Under previous reporting, these option and short sale positions
were not marked up/down to the fair market value at the time of financial
reporting, but rather were carried at cost until the positions were closed.

The second
change in accounting principle is the appropriate capitalization and valuation
of equipment that has been placed with customers as either a loan or
rental. The Company has properly capitalized these equipment costs and
correspondingly, depreciated them over the estimated useful life of the
equipment. Under previous reporting, the Company expensed the cost of the
equipment as the equipment was manufactured.

The third and
final accounting principle change related to Revenue Recognition. Previously,
the Company reported its cryobanking revenue under the cash method. As
restated, these revenues are now appropriately reported under the accrual
method, giving rise to a deferred income account, and proper matching of income
and expense.

The net effect
of these restatements to the years ended December 31, 2004 and 2003 are
summarized as follows:

2004

2003Balance SheetIncrease (Decrease) in Current Assets

$
(46,262
)
$
73,892Increase in Other Assets


158,104


65,451Increase in Total Assets


111,842


139,343Decrease in Current Liabilities

$
(260,127
)
$
(41,979
)Increase in Stockholders Equity


371,969


181,322Increase in Total Liabilities and Stockholders Equity

$
111,842

$
139,343Statement of OperationsDecrease in Operating Revenues

$
(152,091
)
$
Decrease in Operating Expenses


(93,779
)

(65,451
)Increase (Decrease) in Loss from Operations


58,312


(65,451
)Increase in Other Income


248,959


115,871Decrease in Loss before Income Taxes


190,647


(181,322
)Increase in Provision for Income Taxes





Decrease in Net Loss

$
(190,647
)
$
(181,322
)Decrease in Loss Per Common Share - Basic & Diluted(0.04
)

(0.04
)40

The Balance
Sheet and Statement of Operations, as originally filed and as restated, are as
follows:

BALANCE SHEETS

2004

2003As
  Originally
  Reported

As
  Restated

As
  Originally
  Reported

As
  RestatedCurrent
  AssetsCash and cash
  equivalents

$
5,079

$
5,079

$
3,324

$
3,324Available for
  sale securities


54,806,400


54,806,400


47,399,159


47,399,159Other
  receivableAccounts
  receivable


202,649


156,387


137,008


210,900Inventory


139,338


139,338


146,185


146,185Prepaid
  Expenses and Other Current Assets


453,284


453,284


242,215


242,215Total Current
  Assets


55,606,750


55,560,488


47,927,891


48,001,783Property and
  equipment, net


290,572


448,676


303,373


368,824Other Assets


32,158


32,158


69,268


69,268Total Assets

$
55,929,480

$
56,041,322

$
48,300,532

$
48,439,875Current
  LiabilitiesAccounts
  Payable and accrued liabilities

$
89,162

$
89,162

$
183,052

$
183,052Loans Payable


4,113,285


4,113,285


2,502,106


2,502,106Deferred
  Option Premiums





585,142





144,175Other
  liabilities


982,718


14,898


667,123


407,077Deferred
  revenue


17,465


140,016





73,892Deferred
  Taxes


10,845,531


10,845,531


8,531,081


8,531,081Total Current
  Liabilities and Total Liabilities


16,048,161


15,788,034


11,883,362


11,841,383STOCKHOLDERS
  EQUITYCommon stock


53,097


53,097


53,097


53,097Additional
  Paid in Capital


9,821,563


9,821,563


9,801,548


9,801,548Accumulated
  Other Comprehensive Income


21,053,089


21,053,089


16,560,334


16,560,334Retained
  Earnings


14,589,699


14,961,668


15,169,967


15,351,289Treasury
  Stock


(5,636,129
)

(5,636,129
)

(5,167,776
)

(5,167,776
)Total
  Stockholders Equity


39,881,319


40,253,288


36,417,170


36,598,492Total
  Liabilities and Stockholders Equity

$
55,929,480

$
56,041,322

$
48,300,532

$
48,439,87541

STATEMENTS OF OPERATIONS

2004

2003As



AsOriginally

As

Originally

AsReported

Restated

Reported

RestatedRevenues:Operating
  Revenues

$
1,218,406

$
1,066,315

$
1,013,647

$
1,013,647Operating
  Expenses:Operations of
  laboratories & costs of production


1,241,589


810,967


1,489,264


1,387,264Selling,
  general and administrative


3,460,370


3,797,214


2,669,229


2,705,778Total
  Operating Expenses


4,701,959


4,608,181


4,158,493


4,093,042Loss from
  operations


(3,483,553
)

(3,541,866
)

(3,144,846
)

(3,079,395
)Other income
  (expenses):Dividend
  income


1,990,669


1,990,669


1,897,669


1,897,669Gain on sale
  of securities, net


989,599


989,599


238,550


238,550Mark to
  Market of Short Positions





266,807





115,871Other
  revenues


31,967


15,245


15,571


15,571Interest
  expense, net of interest income


(108,950
)

(108,950
)

(83,133
)

(83,133
)Administrative
  expenses relating to portfolio investments





(1,126
)Total Other
  Income


2,903,285


3,152,244


2,068,657


2,184,528Loss
  before Income Taxes


(580,268
)

(389,622
)

(1,076,189
)

(894,867
)Provision for
  Income Taxes











Net Loss

$
(580,268
)
$
(389,622
)
$
(1,076,189
)
$
(894,867
)Weighted average number of
shares
  outstanding- Basic & Diluted


4,615,159


4,615,993


4,645,700


4,645,700Loss per common share - Basic
& Diluted

$
(0.13
)
$
(0.08
)
$
(0.23
)
$
(0.19
)42

The impact of
these changes for each quarter ended in 2004 and 2003 are not currently
available, and are therefore not presented in this financial statement
presentation. However, the Company is currently in the process of restating the
quarterly reporting for 2004 and 2003 and will release this information as soon as available.

(2)
AVAILABLE-FOR-SALE SECURITIES

Upon adoption
of SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, management has determined that the companys portfolio is best
characterized as Available-For-Sale. SFAS No. 115 requires these securities
to be recorded at their fair market values, with the offsetting unrealized
holding gains or losses being recorded as Comprehensive Income (Loss)in the
Equity section of the Balance Sheet. The adoption of this pronouncement has
resulted in an increase in the carrying value of the companys
available-for-sale securities, as at December 31, 2005 and December 31, 2004,
of approximately 123.19%and 139.25% %, respectively, over its historical cost.

In accordance
with the provisions of SFAS No. 115, the adjustment in stockholders equity has
been recorded net of the tax effect had these gains been realized.

The Company
uses the historical cost method in the determination of its realized and
unrealized gains and losses. The following tables summarize the Companys
investments as of:

December 31, 2005

Unrealized

UnrealizedType of security


Cost

Fair Value

holding
  gains

holding
  lossesEquity

$
25,497,586

$
57,148,830

$
32,435,561

$
(784,317
)Debt


151,881


97,176


4,570


(59,275
)Total

$
25,649,467

$
57,246,006

$
32,440,131

$
(843,592
)December 31, 2004

Unrealized

UnrealizedType of security


Cost

Fair Value

holding gains

holding lossesEquity

$
22,802,568

$
54,741,650

$
32,125,500

$
(186,417
)Debt


105,212


64,750


7,792


(48,255
)Total

$
22,907,780

$
54,806,400

$
32,133,292

$
(234,672
)43

At December
31, 2005, the securities held by the Company had a market value of $57,246,006
and a cost basis of $25,649,467 resulting in a net unrealized gain of
$31,596,539 or 123.19% of cost.

At December
31, 2004, the securities held by the Company had a market value of $54,806,400
and a cost basis of $22,907,780 resulting in a net unrealized gain of
$31,898,620 or 139.25% of cost.

At December
31, 2005 and December 31, 2004, marketable securities, primarily consisting of
preferred and common stocks of utility companies, are valued at fair value.
Debt securities consist of Corporate Bonds. As at December 31, 2005, the
Company held $97,176 in bonds from a major utility at various rates and
maturities.

44

(3) PROPERTY
AND EQUIPMENT

Property and
equipment as at December 31, 2005 and 2004, respectively, consist of:

2005
  
  Restated
  2004
  
  Restated
  2003Machinery and equipment
  
  $
  1,297,120
  
  $
  976,237
  
  $
  829,689Furniture and fixtures
  
  
  330,593
  
  
  329,050
  
  
  325,635Leasehold improvements
  
  
  295,530
  
  
  295,530
  
  
  295,5301,923,243
  
  
  1,600,817
  
  
  1,450,854Accumulated depreciation
  
  
  (1,302,378
  )
  
  (1,152,141
  )
  
  (1,082,030
  )Property and equipment, net
  
  
  620,865
  
  $
  448,676
  
  $
  368,824For the years
ended December 31, 2005, 2004 and 2003, depreciation expense for the above
listed assets was $ 112,813, $98,889, and $83,738  respectively.  .

(4) OTHER
ASSETS

At December
31, 2003, included in Other Assets was an intangible asset (Customer List) that
was being amortized over its estimated useful life of 15 years. The asset was
recorded at its original cost of $35,000 and had accumulated amortization of
$6,222 at December 31, 2003. Amortization expense was $2,333 for the year ended
December 31, 2003.

At December
31, 2004, the Customer List was deemed to have no value and the impairment of
the asset was recognized, in full, in 2004. This impairment totaled $28,778.
The net book value of this asset at December 31, 2003 was $28,778, which was
reclassified to amortization expense for the year ended December 31, 2004, and
is included in the Depreciation and Amortization expense account.

At December
31, 2005 and 2004, the Company had no intangible assets.

In accordance
with SFAS No. 142, Goodwill and Other Intangible Assets, management
periodically reviews the assets value for potential impairment.

(5) LOANS
PAYABLE

As at December
31, 2005, 2004 and 2003, the Company has a note payable of $1,500,000,
$1,500,000 and $900,000 respectively, with a bank. The note matures each year, with an
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 in the initial year of borrowing, depending
on the individual amount of each borrowing and the date each borrowing is made.
Upon renewal of the note at year end, the interest rate is renewed at the
banks prime lending rate.

The loans bear
interest at approximately 3.0% at December 31, 2005 and 2004, respectively.
These loans are secured by certain marketable securities of the Company.

Short term
margin debt due to brokers, secured by the Companys marketable securities,
totaled $5,583,372 at December 31, 2005, $2,613,285 at December 31, 2004 and $1,602,106 at December 31, 2003.

45

SHORT-TERM
BORROWINGSYears Ended
December 31, 2005 and 2004

Column
  A
  
  Column B
  
  Column C
  
  Column D
  
  Column E
  
  Column FCategory
  of
  aggregate
  short-term
  borrowings
  
  Balance at
  the end of
  period
  
  Weighted
  average
  interest
  rate at end
  of the
  period
  
  Maximum
  amount
  outstanding
  during this
  period
  
  Average
  amount
  outstanding
  during the
  period
  
  Weighted
  average
  interest
  rates during
  the period2005Banks
  
  $
  1,500,000
  
  
  4.28%
  
  $
  1,500,000
  
  $
  1,389,041
  
  
  
  4.28
  %Brokers
  
  $
  5,583,372
  
  
  6.49%
  
  $
  6,536,003
  
  $
  4,506,053
  
  
  
  5.46
  %All Categories
  
  $
  7,083,372
  
  
  5.92%
  
  $
  8,036,003
  
  $
  5,895,094
  
  
  
  5.18
  %2004Banks
  
  $
  1,500,000
  
  
  3.00%
  
  $
  1,500,000
  
  $
  1,449,041
  
  
  
  3.00
  %Brokers
  
  $
  2,613,285
  
  
  4.07%
  
  
  3,058,894
  
  
  2,167,566
  
  
  
  3.56
  %All Categories
  
  $
  4,113,285
  
  
  3.63%
  
  $
  4,558,894
  
  $
  3,616,607
  
  
  
  3.34
  %2003Banks
  
  $
  900,000
  
  
  3.00%
  
  $
  900,000
  
  $
  883,014
  
  
  
  3.07
  %Brokers
  
  $
  1,602,106
  
  
  3.00%
  
  
  2,345,940
  
  $
  1,343,335
  
  
  
  3.87
  %All Categories
  
  $
  2,502,106
  
  
  3.00%
  
  $
  3,245,940
  
  $
  2,226,349
  
  
  
  3.55
  %The average
borrowings were determined on the basis of the amounts outstanding at each
month-end. The weighted interest rate during the year was computed by dividing
actual interest expense in each year by average short-term borrowings in such
year.

(6) SHORT SALES OF SECURITIES

At December
31, 2005, 2004, and 2003 the Company maintained short positions
in certain marketable securities. The liability for short sales of securities is included in Other Liabilities
in the accompanying balance sheets. These short positions were sold for
$1,316,289, $4,930 and $370,489 at December 31, 2005, 2004 and  2003  respectively,
and had respective market values of $1,302,789, $6,341 and $403,420 resulting in mark to
market adjustments of $13,491, ($1,411) and $(32,931) at December 31, 2005, 2004, and 2003 respectively.



(7) STOCK OPTIONS 

In June 2004,
the Company created the 2004 Stock Option Plan in an effort to provide
incentive to employees, officers, agents, consultants, and independent
contractors through proprietary interest. The Board of Directors shall act as the
Plan Administrator, and may issue these options at its discretion. The maximum
number of shares that may be issued under this Plan are the greater of 200,000
or 5% of the Companys outstanding shares. Prior to June 2004, the Company
issued options to various employees under the previous Stock Option Plan that
was also administered by the Board of Directors. All issuances have varying
vesting and expiration timelines. As at December 31, 2005, 2004 and 2003,
67,100, 36,800 and 37,800 of the outstanding options were exercisable,
respectively.

Details of
employee option activity are as follows:

Number of
  Shares
  
  Weighted
  Average
  Exercise PriceOutstanding,
  December 31, 2002
  
  
  58,800
  
  $
  15.47Granted
  
  
  
  
  
  Exercised
  
  
  (1,000
  )
  
  10.00Cancelled/Expired
  
  
  (20,000
  )
  
  15.20Outstanding,
  December 31, 2003
  
  
  37,800
  
  $
  15.76Granted
  
  
  25,700
  
  
  20.10Exercised
  
  
  (1,000
  )
  
  10.00Cancelled/Expired
  
  
  
  
  
  Outstanding,
  December 31, 2004
  
  
  62,500
  
  $
  17.64Granted
  
  
  25,000
  
  
  23.96Exercised
  
  
  (3,200
  )
  
  15.73Cancelled/Expired
  
  
  (6,200
  )
  
  21.36Outstanding,
  December 31, 2005
  
  
  78,100
  
  $
  19.44Options Outstanding
  
  Options ExercisableRange of
  Exercise Prices
  
  Number
  Outstanding
  at
  December 31,
  2005
  
  Weighted-
  Average
  Remaining
  Contractual
  Life
  
  Weighted-
  Average
  Exercise
  Price
  
  Number
  Exercisable
  December 31,
  2004
  
  Weighted-
  Average
  Exercise
  Price$13.01 - $15.60
  
  
  20,000
  
  
  1.75
  years
  
  $
  15.20
  
  
  20,000
  
  $
  15.20$15.61 - $18.20
  
  
  23,300
  
  
  2.03
  years
  
  $
  17.23
  
  
  22,300
  
  $
  17.20$18.21 - $20.80
  
  
  300
  
  
  3.35
  years
  
  $
  19.25
  
  
  300
  
  $
  19.25$20.81 - $22.40
  
  
  19,500
  
  
  3.75
  years
  
  $
  22.18
  
  
  13,500
  
  $
  22.23$23.41 and above
  
  
  15,000
  
  
  2.08
  years
  
  $
  24.98
  
  
  11,000
  
  $
  24.9078,100
  
  
  2.40
  years
  
  $
  19.44
  
  
  67,100
  
  $
  18.89In addition to
the employee options described above, the Company issued 25,000 options to a
non-employee consultant on March 1, 2002 at an exercise price of $21.00. These
options were exercised during 2005.


(8) CURRENT
INCOME TAXES

The following
is a reconciliation of the federal statutory tax rate of 35% for 2005, 2004 and
2003, with the provision for income taxes:

2005
  
  2004
  
  2003Statutory tax rate
  
  
  (35
  ) %
  
  (35
  ) %
  
  (35
  ) %Loss not subject to taxation
  
  
  35
  %
  
  35
  %
  
  35
  %Provision for income taxes
  
  
  0
  
  
  0
  
  
  0Effective federal tax rate
  
  
  0
  %
  
  0
  %
  
  0
  %The Company,
due to current losses and loss carry forwards from previous years, has not
accrued or paid taxes based on income. It

46

has, however,
paid State and City taxes which were assessed on its Capital Base and/or
personal holdings in that jurisdiction. In accordance with SFAS No. 109,
Accounting for Income Taxes, these Capital Base assessments were not classified
as income taxes.

(9) DEFERRED
INCOME TAXES

Deferred
income taxes result from differences in the recognition of gains and losses on
marketable securities, as well as operating loss carry forwards, for tax and
financial statement purposes. The deferred income tax results in a liability
for the marketable securities, while the operating loss carry forwards result
in a deferred tax asset.

A valuation
allowance has been recorded for the entire deferred tax asset as a result of
uncertainties regarding the realization of the asset balance due to the history
of losses and the variability of operating results. These net operating losses
and corresponding expiration dates are as follows:

Net Operating Loss
  
  
  Expiration Date  December
31;$
  235,136
  
  
  
  2015$
  1,587,180
  
  
  
  2016$
  1,640,538
  
  
  
  2017$
  1,637,963
  
  
  
  2018$
  1,388,852
  
  
  
  2019$
  1,335,707
  
  
  
  2020$
  1,004,363
  
  
  
  2021$
  1,478,897
  
  
  
  2022$
  2,384,043
  
  
  
  2023$
  2,045,087
  
  
  
  2024$
  2,000,000
  
  
  
  2025The deferred
tax liability that results from the marketable securities does not flow through
the Statement of Operations due to the classification of the marketable
securities as available-for-sale. Instead, the deferred tax liability is
recorded against the Accumulated Other Comprehensive Income, in the
Stockholders Equity section of the Balance Sheet.

The deferred
tax computations, computed at federal statutory rates of 35% in 2005 and 34% in
2004, are as follows:

2005
  
  2004Deferred
  tax assets:Net
  operating loss carry forwards
  
  $
  5,858,218
  
  $
  5,010,840Valuation
  allowance
  
  
  (5,858,218
  )
  
  (5,010,840
  )Total
  deferred tax assets
  
  
  0
  
  
  0Deferred
  tax liabilities:Fair
  market value adjustment for available-for-sale securities
  
  $
  11,058,788
  
  $
  10,845,531(10)
CONCENTRATION OF CREDIT RISK

Financial
instruments which potentially subject the Company to concentrations of credit
risk consist primarily of marketable securities. The Company maintains its
investments in four difference brokerage accounts, all of which are insured by
Securities Investor Protection Corporation (SIPC). The limits of this insurance
are up to $100,000 for the total amount of cash on deposit with each Broker,
and up to $500,000 for the total amount of securities held by each Broker. Each
of these brokerage houses is well known in the industry and management does not
believe that these securities bear any risk of loss over and above the basic
risk that a security bears through the normal activity of the securities
markets. However, as at December 31, 2005, the fair market value of securities
in excess of the SIPC insured limit is $57,246,005, while there is no cash on
deposit in excess of the insured limit.

(11) RELATED
PARTY TRANSACTIONS

The Company subleases a portion
of its New York City office space to the President of the Company for 5 hours
per week. This sublease agreement has no formal terms and is executed on a
month to month basis. The annual amount of rental income received in each of
the years ended December 31, 2005, 2004 and 2003 was $9,600.

47

(12) RESEARCH
AND DEVELOPMENT EXPENSES

All research
and development costs are expensed in the period they are incurred. Research
and development costs for the year ended December 31, 2005 were $ 2,152,261,
and appear as components of both the cost of sales and selling, general &
administrative expenses in the Statement of Operations. The research and
development costs for the years ended December 31, 2004 and 2003 are not
currently available, as the Company is re-examining the methodology used in determining
these figures. As previously reported, the figures for 2004 and 2003 were not
derived from the criteria listed in SFAS No. 2  Accounting for Research and Development
Costs. The Company will release this information as soon as it is available.

(13) INTEREST
EXPENSE AND INCOME

Interest
expense was $319,145, $111,745, and $86,675, and interest income was $23,031,
$2,795, and $3,542 in 2005, 2004, and 2003 respectively.

(14) COMMITMENTS
AND CONTINGENCIES

(A) Operating
Leases

The Company
leases office and laboratory space in both New York City and Tennessee. The
lease agreement for the New York City facility is a non-cancelable lease,
subject to annual increases based on the Consumer Price Index, and will expire
on December 31, 2015. The Tennessee facility is currently leased on a
month-to-month basis.

The Company
subleases space in its New York facility to a related party and a third party.
Both subtenants lease on a month to month basis with no formal agreement. The
amount of rental income received for the years ended December 31, 2005, 2004
and 2003 was $14,686, $15,245 and $15,571 and is classified as other income in
the Statement of Operations.

Future minimum
rental payments under the non-cancelable operating lease, exclusive of future
cost of living and tax escalation increases, are as follows:

2005

$
284,1472006

$
284,1472007

$
284,1472008

$
284,1472009

$
284,147Thereafter

$
1,293,151Rent expense for
all non-cancelable operating leases was $284,147, $262, 916, and $281,506 for
the years ended December 31, 2005, 2004 and 2003 respectively.

(B) Contingent
Liabilities

The Company
has incurred several claims in the normal course of business. None of these
claims had a material effect on the financial statements. At the present time
there are no pending legal claims.

The Company
was involved in a dispute with its landlord in New York City. This dispute
arose out of a rental rate dispute. In February 2005, the dispute was settled
and the Company voluntarily agreed to pay the landlord approximately $45,000 in
additional rent. This $45,000 liability was accrued at December 31, 2004 and
2003, and recorded in Accounts Payable and Accrued Liabilities.

(15) SELECTED
FINANCIAL DATA

As stated in Footnote #1, under Reclassification and
Restatement, the
Company has not yet determined the effects of the restatement on the quarterly activity for 2004
and is therefore unable to currently comply with the Supplementary Financial
Data as required by Article 3 of Regulation S-X. The Company will release this
information as soon as it is available. However, in an
effort to provide historical data, the Company is listing the Selected
Financial Data, as prescribed by Item 301 of Regulation S-K, for the past 5
calendar years.

The consolidated statements of operations data for
the years ended December 31, 2005, 2004 and 2003 are derived from our audited
consolidated financial statements that are included herein. The consolidated statements of operations data
for the years ended December 31, 2002 and 2001 are
derived from our audited financial statements that are not included in this
Form 10-K. Those statements were audited by Frederick A.
Kaden & Company and are not covered by the report of the independent registered
 accounting firm included herein.

Operations
Data:

48

Year Ended
  December 31,Restated

Restated2005

2004

2003

2002

2001Operating
revenues

$
1,343,538

$
1,066,315

$
1,013,647

$
767,608

$
591,692Total
revenues

$
1,343,538

$
1,066,315

$
1,013,647

$
767,608

$
591,692Costs and
expenses:Operations
of laboratories & costs of
  production


1,321,564


810,967


1,387,264


805,985


814,657Selling,
general and administrative


4,937,167


3,797,214


2,705,778


2,050,546


1,482,438Total costs
and expenses


6,258,731


4,608,181


4,093,042


2,856,531


2,297,095Loss from
operations


(4,915,193
)

(3,541,866
)

(3,079,395
)

(2,088,923
)

(1,705,403
)Other
Income and Expenses:Dividend
income


2,511,054


1,990,669


1,897,669


1,858,025


1,860,289Gains on
sale of investments


1,515,653


989,599


238,550


40,610


97,719Mark to
Market of Short Positions


(204,225
)

266,807


115,871


0


0Other
revenues


14,686


15,245


15,571


35,694


166,676Investment
Recovery


75,000


0


0


0


0Admin
Expense relating to portfolio
  investments


(36,842
)

(1,126
)

0


0


0Interest
expense, net of Interest Income


(296,114
)

(108,950
)

(83,133
)

(39,257
)

(119,926
)Total Other
Income and Expenses


3,579,212


3,152,244


2,184,528


1,895,072


2,004,758Income
(Loss) before income taxes


(1,335,981
)

(389,622
)

(894,867
)

(193,851
)

299,355Provision
for income taxes


0


0


0


0


0Net
income/(loss)

$
(1,335,981
)
$
(389,622
)
$
(894,867
)
$
(193,851
)
$
299,355Weighted
average number of common shares
  outstanding - basic and diluted


4,638,384


4,615,993


4,645,700


4,662,947


4,664,909Income
(loss) per common equivalent share -
  basic and diluted

$
(0.29
)
$
(0.08
)
$
(0.19
)
$
(0.04
)
$
0.06Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None
to report.

Item 9A.
Controls and Procedures

Evaluation
of Disclosure Controls and Procedures

Within the 90
days prior to the date of this report, the Company carried out an evaluation,
under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer, 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.

During the
calendar year ended December 31, 2005, we had insufficient numbers of internal
personnel possessing the appropriate knowledge, experience and training in
applying US GAAP and in reporting financial information in accordance with the
requirements of the Commission. Insufficient controls over dissemination of
information regarding non-routine and complex transactions to our

49

accounting
staff by our management, as well as incorrect treatment and lack of proper
analysis of such transactions by our accounting staff resulted. This weakness
resulted in material adjustments proposed by our independent registered
accountants with respect to our financial statements for our calendar years
ended December 31, 2005, 2004 and 2003.

In late 2005,
the Company hired a CPA to oversee the accounting department and coordinate the
efforts of analysis and dissemination. It is managements intention to address
accounting issues on a timely basis, and prevent misstatement based on errors
and/or lack of understanding.

Our management
and our board of directors are fully committed to the review and evaluation of
our procedures and policies designed to assure effective internal control over
financial reporting. We feel that the additions to our accounting staff will
improve the quality of future period financial reporting.

PART III

Item 10.
Directors and Executive Officers of the Registrant.

The
information required by item 10 is incorporated by reference to our proxy
statement for our 2006 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2005 year end.

Item 11.
Executive Compensation.

The
information required by item 11 is incorporated by reference to our proxy
statement for our 2006 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2005 year end.

Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.

This
information required by item 12 is incorporated by reference to our proxy
statement for our 2006 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission within 120 days after the close of our
2005 year end.

Item 13.
Certain Relationships and Related Transactions.

Jonathan
Feldschuh, age 41, is the co-inventor of the BVA-100 Blood Volume Analyzer. He
is the son of Dr. Joseph Feldschuh. He is a Suma Cum Laude graduate in Physics
from Harvard University. His primary occupation is a computer programmer for a
major brokerage firm. In 2005 he provided specialized consulting services with
respect to the blood volume analyzer for which he received a salary of $18,720
plus benefits. He is expected to provide a limited amount of consultative help
in the filing of the additional patents in 2006. He has received 5,000 options.

There are no
relationships or related transactions beyond those which have been disclosed in
the 10-K.

Item 14.
Principal Accounting Fees and Services.

Audit Fees

Fees for audit
services totaled approximately $61,000in2005 and $40,000 in 2004,
including fees associated with the annual audit and the reviews of the
Companys quarterly reports on Forms 10-Q.

Tax Fees

Fees for tax
services, including tax compliance, tax advice and tax planning, totaled
approximately $5,000in2005 and $5,000 in 2004.

All Other Fees

Rotenberg Meril Solomon
Bertiger & Guttilla, P.C. did not provide any services not described above
in 2005 and 2004.

50

Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Auditors

The Audit
Committee pre-approves all audit and permissible non-audit services provided by
the independent auditors. These services may include audit services, audit-related
services, tax services and other services. The Audit Committee has adopted a
policy for the pre-approval of services provided by the independent auditors.

PART IV

Item 15. Exhibits, Financial Statement
Schedules.

SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.

DAXOR
CORPORATION

by:
  /s/ Joseph FeldschuhJoseph
  Feldschuh, M.DPresident
  and PrincipalExecutive
  OfficerChairman
  of the BoardDated:
  April 17, 2006
Pursuant to
the requirements of the Securities and Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

Signature

Title

Date/s/ Joseph Feldschuh

President and Director

April 17, 2006Principal Executive OfficerJoseph Feldschuh, M.D./s/ Stephen Feldschuh

Vice President of Operations

April 17, 2006& Principal Accounting OfficerStephen Feldschuh/s/ Gary Fischman, PhD

Vice President

April 17, 2006Gary Fischman, PhD/s/ David Frankel

Corporate Treasurer

April 17, 2006David Frankel/s/ Diane M. Meegan

Corporate Secretary

April 17, 2065Diane M. Meegan/s/ Robert Willens

Director

April 17, 2006Robert Willens51

/s/ James Lombard

Director

April 17, 2006James Lombard/s/ Martin Wolpoff

Director

April 17, 2006Martin Wolpoff/s/ Stephen Valentine

Director

April 17, 2006Stephen ValentineBoard of Directors:

Name

TitleDr. Joseph Feldschuh

Chairman, President, & CEOJames Lombard

DirectorMartin Wolpoff

DirectorRobert Willens

DirectorStephen Valentine

DirectorPhilip HudsonDirector52