Daxor Corp

NASDAQ:DXR

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Daxor Corp. Fiscal Year 2022 Financial Results and Corporate Update Conference call. At this time, all participants are in a listen-only mode. [Operator Instructions] A webcast replay of the call will be available approximately one hour after the end of the call at Daxor.com

I would now like to turn the call over to Scott Gordon, President of Core IR the company's Investor Relations firm. Please go ahead, sir.

Thank you, Shelby. Good afternoon, and thank you for participating in today's conference call. Joining me from Daxor's leadership team are Michael Feldschuh, Chief Executive Officer; and Robert Michel, Chief Financial Officer.

During this call, management will be making forward-looking statements, including statements that addressed Daxor's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Daxor's most recently filed annual report on Form N-CSR and subsequent periodic reports filed with the SEC, and Daxor's press release that accompanies this call, particularly precautionary statements in it.

The content of this call contains time sensitive information that is accurate only as of today, March 2nd, 2023. Except as required by law Daxor disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

It is now my pleasure to turn the call over to CEO, Michael Feldschuh. Michael, please go ahead.

Thank you very much, Scott. Good morning, everybody. To begin the call, I would like to invite Bob Michel, our Chief Financial Officer to give a presentation on the financial results that we just reported. Bob, good morning.

Good morning. Thanks, Michael. Good morning, everyone. Here's a summary of our fiscal year 2022 financial results. For the year ended December 31st, 2022, Daxor's net assets increased 37% to $28,969,469 or $6.75 per share as compared to $21,152,719, or $5.24 per share at end of December 31, 2022.

The value of the operating division increased $9.5 million to $26 million at December 31st, 2022 from $16,500,000 at December 31st, 2021. The increase during 2022 is based on the annual valuation performed for the year ended December 31st, 2022, utilizing a hybrid of methods of the income approach using the discounted cash flow method and a market approach utilizing a recent arm’s length transaction.

In November, 2022, approximately 221,000 Daxor treasury shares were sold at a price of $9.50. This recent arm’s length transaction was weighted more heavily in the valuation than in the past as this transaction was completed just prior to the measurement reporting date at December 31st, 2022.

Discount cash flow used a 40% waiting, and the income approach utilized 60% of the waiting for the year. End of December 31, 2022, Daxor had net dividend income of $223,916 and net realized gains on investment activity of $2,736,375.

There was a net decrease in the unrealized depreciation of investment options securities borrowed of $2,763,895. As we sold portions during the year 2022 and prior period, significant unrealized gains unwound into realized gains for the period. Included in an in the net increase in net assets -- resulting from operations of $5,178,133 is non-cash stock-based compensation expense of $786,642.

In efforts to provide incentives to employees, officers, agents, and consultants of the company, we utilize stock-based compensation incentive awards. There's a net realized loss of $3,264,419 from the operating division relating to investments in research and development sales overhead as the company continues to invest judiciously in research and development for our 2022 2023 product launch, ramping commercial sales teams as well as production facilities for our next generation of blood volume analyzers.

And would that, I'd like to turn the call back over to Michael for any other comments.

Wonderful, Bob, thank you very much and good morning, everybody. Fellow shareholders, it's my pleasure to report and comment on our progress as a company. For those of you who have had a chance to review our filing and the shareholder letter that's attached to it, you'll be aware that this is a pivotal period of time for Daxor as a company, we are on the brink of our product launch of our next-generation analyzer. It's the most important analyzer that we've ever created or launched. It's the most important product for us in a 20-year time period. But before getting into the details of that, I want to kind of step back for a moment and speak about the business and our strategy as a company as a whole. So, one of the things that I've spoken about in the past and about in the past to shareholders is that for us to succeed as a company, we have to really succeed at doing three things quite importantly and simultaneously.

First of all, we have to succeed at commercializing our existing product line and growing this business. And obviously that's something that we've place a great deal of emphasis on and I'll speak about in a moment. The second thing that we need to do is we need to further the clinical evidence around our novel diagnostic. One of the reasons why that's quite important is because unlike, let's say, a company that produces another version of a commonly used diagnostic that has some kind of marginal competitive advantage, often companies like that seek to take market share from an existing company, and then of course face the challenges of other competitors undercutting their innovation and doing the same.

We are pioneering the pivotal shift in fluid management by a direct accurate quantification of a patient's fluid levels. And the current state of the art is to use a variety of proxy measures, many of which are invasive, some which are quite costly, all of which are vastly inaccurate and suboptimal compared to our solution. So advancing the clinical evidence around, not only the superiority of our measure, but the implications that, that has for the clinical outcomes of the patients and the health economic implications of that is a crucial part of our gaining market share attention and recognition for our unique product line.

The third area that we have to focus on for us to be successful is for us to innovate into our next generation of analyzers. And so the area of analyzers that have existed prior to Daxor community distance were all quite slow cumbersome and difficult, -- store was the first company to innovate with a single dose preloaded syringe injection system for the qualification of blood volume. And when we did that, we were able to reduce the time that our blood volume analysis took, which was over 8 hours and quite cumbersome and something that made the test something that was not even viable to do outside of a research paradigm into something that could be administered bedside with results generally available within 60 to 90 minutes.

We endeavored to innovate from that mark to our next generation systems and that's what the company is focused in right now. So several years ago, we began our process of interacting with the United States Department of Defense and with the National Institutes of Health, and we received contract award, funding to create a portable rapid peptide analyzer that was ruggedized battery powered just as accurate as our current lab based system, but that could perform the analysis and [indiscernible] as with a cartridge system, that obviated the need for a modern complexity clear license.

I'm happy to report that in 2022, we successfully completed our army contract that provided funding for the creation of a working prototype model that was suitable for FDA submission and validation. Currently, the company has been governing to complete its validation process so that analyzer may be submitted for approval with the FDA. Now the application that Daxor is seeking is a so called dual 510 (k) CLIA waiver application. This application is something that we have been pursuing through a process of interacting with the FDA that began in the second quarter of 2022.

Daxor successfully had a so called pre-submission meeting with FDA officials in the third quarter of 2022, where the company received clarity on the form of a validation study and other metrics that FDA would seek to see in our package for submission that would allow for the approval of our system. Since that time, Daxor been undertaking the process of setting up and executing on this validation trial. And we are anticipating that we will submit our application and seek approval within a 90-day timeframe, which is the guidelines for 510 (k) submission, aim to achieve a mid-year approval for commercial launch of our next generation analyzer and systems.

Daxor and management are limited in what they can pay to clients at this time due FDA regulations regarding the inability of companies to market any sort of unapproved device and our disclosures to investors similarly are limited to the publicly available information that we've already shared and that are available through the contracting process. Switching gears for a moment to the commercialization plans of the company. Our commercial teams are led by our Senior Vice presidents of Commercialization, Jean Oertel. She is a veteran of both Medtronic and Senseonics, and she's been focused on recruiting top talent for our sales team and bolstering it with clinical support new territory managers in order to drive strong growth in our accounts.

As Bob Michel just noted, we've had strong increase in both revenue and kit sales for our company. Within the operating division, we reported a 59.5% increase in the kit sales which are single use disposable kits from 2022 compared to 2021. And we also reported a substantial increase in the total revenue of our operating company of over 20%.

I want to be clear that the increase in kit sales, while larger than the percentage increase in revenues does not imply a compression of our margins. Rather, our revenue from our division is a combination of U.S. military contracts along with our existing analyzer business. So it's worth remembering that we completed our U.S. Army contract in the middle of 2022, and we are now eligible for further Phase 3 funding and contract extension award from the U.S. Army and the U.S. Air Force. So that work is ongoing with the military and the company continues to contract with those different funding bodies of the DoD.

In terms of our strategy for achieving greater commercialization and uptake, the company has been focused on not only growing out our sales team and clinical support team, but also partnering with larger entities to gain the acceptance of our systems and to raise the clinical awareness. So specifically, Daxor is now corporate partners, both with the Heart Failure Society of America and the Society for Nuclear Medicine. Those are two very influential and important governing bodies that set standards for the clinical application of new technologies. And we've been able to leverage that relationship in order to gain significant equator profile of our technology amongst members.

We also entered into an important partnership with the MedAxiom Group last year. MedAxiom is a wholly owned subsidy of the -- subsidiary of the American College of Cardiology. It is a very important group, which is known for introducing best in care practices for their clinical members, which are amongst the leading hospital systems in the United States. So they're acting in many ways as an ambassador for Daxor technology, raising its awareness amongst their members. Daxor has actively participated in their conferences. We will participate in their Transform conference in the spring. We were part of their fall transform conference.

In addition, MedAxiom has issued a white paper which delineates the substantial clinical evidence and health economic benefit of Daxor's technology to its members and also hosted webinars on the topic. So this is all part of Daxor's strategy of raising clinical awareness, seeking guideline recognition for our technology, and raising the felt need amongst the administrators of leading hospital systems to take advantage of Daxor’s technology to both improve clinical outcomes, but also quite importantly to save costs.

Now that leads me to the third area that I wanted to touch on briefly with investors, which is what's going on with clinical research? One of the most important things that happened last year for Daxor was we participated in the Heart Failure Society of America's annual Society Meeting. In that meeting was a dedicated session that was focused on comparing the existing ways in which heart failure congestion is managed based upon pressure metrics, which are quite prevalent as compared to direct volume measurement. It's notable that at that session, Daxor is the only FDA approved technology globally that allows for a direct quantification of the patient's volume status, along with measured patient norms as well as information around the capillary permeability of those patients.

Now at that session, it was highlighted by a leading board of key opinion leaders that in fact, compared to pressure measures, volume measures are actually more clinically relevant, Jermaine and ultimately are the more promising area for the development of further direct targets for pharmaceutical companies. I was gratified to see this level of recognition in front of several hundred key opinion leaders and leading physicians from hospital systems around the country around the merit of Daxor source's technology and the importance of blood volume measurement. I think the blood volume measurement has become increasingly visible amongst clinicians.

We've seen it with the acceleration of our sales, but also we've seen it from the perspective of the large number of research publications which have been coming out supporting the validity of our technology and the value that it brings to clinical users. There were over a dozen publications in leading journals and conference presentations last year on Daxor technology, that's a substantial uptick in interest from independent researchers at hospital systems and leading academic medical centers across the country.

And just to highlight some of the important information that came out at the Heart Failure Society meeting, research was presented that showed that the use of our diagnostic for hospitalized heart failure patients upon admission reduced the total length of stay of those patients by a full two and a half days. Right now, within our hospital systems and accountable care organization's costs or paramount challenge, any kind of technology that could reduce the length of stay in our case as measured by this study by 55% or full two and a half days, represents a very substantial cost saving and opportunity for healthcare systems and becomes a key driver for those healthcare systems to adopt our technology.

For Daxor to place units at new hospital accounts and we did place and open up 18 new hospital accounts last year. Again, a substantial jump in sales not only of kit sales, but in opening up new accounts we've had to convince our customers that not only does our technology improve patient outcomes, it improves health economic outcomes and that it's also a viable technology to introduce into the pathway of care. That's one of the reasons why we're particularly excited about our next-generation analyzers because our next-generation analyzers promises to be several times faster than the current technology capable of being administered potentially by users beyond lab technicians, for example, nurses and doctors because it's a clear waiver status that we're seeking. And also something that can be performed and generate results directly at the bedside when within as little as potentially 15 to 17 minutes.

So this is something where when we look at our overall strategy for the acceleration and the adoption of our technology, the growth of our business across several sectors, what we are seeking to do is to combine clinical outcomes, which highlight the utility of our diagnostic to both cut the admissions, coupling to stay with substantially reduce mortality, combining that with the health economic implications that, that has.

A care pathway solution, which is easily adapted by care teams, such that they can put our diagnostic metric into their care pathway that could become part of their order set and then be protocolized as part of their standard way in which patients are treated, and then also simultaneously to achieve the kind of recognition and guideline recommendations that will drive adoption of our technology.

So with that being said, I do want to highlight that Daxor has faced certain headwinds. Just like every other company, we have also experienced inflationary pressures in terms of cost of our headcount and inputs into our process, we have been able to successfully respond to that, by raising our prices. Our single use injection kit was priced at $225 in 2020. We raised the price successfully to $355 last year and continue to see substantial uptake in terms of kit utilization at existing accounts as well as new accounts. So that price increase was absorbed and the company intends to further raise prices by an additional 9% to $385 effective at the end of Q1. So we have been in touch with our customers around that and continue to judiciously raise prices to offset the inflationary pressures that we have been seeing.

In terms of other pending items to cover before I open things up for questions and some final comments, I just wanted to point out that, Daxor continues to have a number of important randomized controlled trials underway that have been funded by the NIH. We have a inpatient prospective randomized controlled trial that's underway at the VA center, which we anticipate that a Phase I trial, which we anticipate will complete enrollment within Q2 and be subject for further extension for a much larger Phase II trial, which we will seek at approximately 10 VA hospitals.

We have an outpatient RCT, which is underway at Geisinger Medical Center. We have a multi-center prospective COVID trial, which has been underway for the past 18 months, which has been expanded to also include specialists’ patients as well. And that's actually a very important trial, because I want investors to be aware that it's not only the area of heart failure, but it's also in the areas of critical care that Daxor has found uptake for our diagnostic and substantial need.

There is a very large total addressable market in heart failure alone in the United States with over 6 million patients having heart failure, 1 million of whom are admitted every year for their decompensation and treatment. But also in the area of critical care, there are several million patients that are admitted for very costly critical care treatment in the United States. Volume management and fluid management for those patients is paramount both pre and post surgically and Daxor has been selected as an important technology, for example, by the sepsis alliance. And so we have a view that acceptance and critical care is going to be a very important market for us, particularly with our higher speed analyzer that can produce Baptist level tests. So our COVID multi-center trial has been expanded to also include not only COVID, but also [success] and these types of smaller trials basis from us larger trials, and also for partnerships with important government agencies and healthcare systems. So, in closing, I just want to say that the strong trend in healthcare is towards individualized care and cost effectiveness, combined with solutions that can be integrated into the care pathway of healthcare systems.

RB Diagnostic is non-invasive. It is compared to many other solutions, inexpensive. It is rapid and set to be become far quicker and easier to perform with our next generation analyzer. And it allows care teams to solve the significant challenge of accurately managing the fluid levels of patients. And that's true whether it's in heart failure for both inpatient and outpatient care, where I would like to add that the company has excellent reimbursement from both public and private insurance or in hospitalized patients, whether they're in the ICU or in the heart failure award.

The momentum around the company from the number of published studies and pending studies is quite significant, and I'm excited to see the outcomes that have been published and the support that we're getting from clinicians at centers across the country. Our goals are to help our clinical partners achieve their objectives, which are namely reducing the admissions mortality, lowering complications, lowering hospital resource use, length of stay, and achieving a level of inpatient and outpatient care that lowers the total cost of care, which is particularly important for accountable care organizations.

Our strategy is to combine our accelerating clinical momentum that we have with commercial momentum and next generation technology, which we feel will be quite transformative in terms of the speed of adoption by our clinical partners and our total addressable market. So with that, I would like to close my remarks for now, and open this up for some potential questions that investors may have.

[Operator Instructions] And we'll take our first question from Anthony Vendetti with Maxim Group.

I wanted to talk about the timeline for the new BVA fund shareholder letter. I knew, it was going to be a lot smaller than the affordable was going to be a lot smaller than the original. I didn't realize there was going to be a just one tent the size. So great job bringing that down to an easily portable, movable, between hospital rooms, device that hopefully can significantly increase adoption. I originally thought that maybe this would be submitted. The 510k application would be submitted by the end of ‘22. Can you give us, I know you mentioned some supply chain issues, I was wondering if that was a factor. It's just longer to put the submission together. Where are you with the -- and I know, you mentioned a couple things, but I just wanted to make sure I got the timeline right. What's the submission, what's the timeline before the 90-day clock starts for the FDA? And then is commercialization now second half ‘23? Is it -- and if so, is it the last the fourth quarter, third quarter? Any caller you can give on that would be helpful, Michael.

Yeah, absolutely. So, just to clear up a few things, we met with the FDA in the third quarter of 2022 for our so-called pre-submission meeting. And you don't really know what you're going to get from the FDA until you have those sorts of meetings. And then the reviewers make it clear what they want to see in the package. This type of application is not just a 510 K application. It's actually a 510 K slash clear determination application. And our current device is a moderate complexity device. And what that means is that you have to have a clear license in order to perform our test. And the test, while it's administered at the bedside. The blood samples are then taken back to the clear certified lab for analysis.

Now, when we spoke to FDA, you can actually do your application in two ways. One way that you can do it is you can submit your 510 K application, which is a 90 day window, and then you can ask for a clear determination afterwards. So that's technically quicker, but it's slower because until you have your clear determination, they just assume that you have essentially a moderate to extremely complex device and therefore it's, you're not allowed to really utilize it at the bedside unless you're alia trained operator for strategic purposes. And after speaking to the FDA, we decided that the, and this is the FDA recommendations to do a dual 510 k clear determination study that entails slightly more complexity for us, but in fact it's faster because the aim of this sort of pathway is that they both approve our next generation analyzer and give us a waiver for the performance of the test. And that's what we're seeking from them in our application.

So we'd hope to complete the 510 k application package by the end of the year. We're actually now still doing the validation process. And in terms of a commercialization timeline, it's looking like the second half of 2023. We're hoping that that's going to be able to take place in Q3, we have working prototypes of this when we completed our Army contract in 2022. Part of that was showing the army the equivalence between our new prototype device and our pass device. So we know from our existing contract work that we have something that meets the specifications of the Army. And it's worth remembering. This small portable ruggedized device is not just for civilian use. It was something that was determined to be of military importance as well for combat casualty care, trauma care critical care use. So our device is designed actually to be sold both into a military channel and then also into a civilian channel.

So we're doing the work carefully and as quickly as possible in order to get that application completed. And then from there, the FDA has a 90 day clock to review it. So for us to be able to hit that Q3 launch, that means that we would hope to get our package submitted to FDA within approximately the next 45 to 60 days and give them a 90 day review period in which to be able to determine that we've satisfied all of their requirements. It's always challenging, of course, to accept specific timeline goals because we don't control what the FDA does, et cetera. But we are really trying very hard to get it right the first time and that's why we participated in a very thorough pre-submission process with them. I hope that answers the question. Anthony, is there anything that clarify?

No, that's great. And then just moving to some stats for the quarter, do you have the number of accounts currently using the BVA, and out of those accounts or some of the new accounts you are speaking to, what has been the reception for the new portable device?

Great question. So I don't have the current active account number in front of me. I can't give you more clarity. We reported that, we have 18 new accounts opened in 2022 with five more pending or in process this quarter or this year. And those accounts are a mixture of some accounts, which analyzers on-site and some of which are using our so called reference lab service. So our reference lab service works in that, we ship them are our test kit, they collect the patient blood samples and then they FedEx sends us and at our own CLIA certified labs we give them the results generally within 24 hours. So there are certain stable ambulatory patients working with 24 hour test turnaround and time is not a problem. Many, many medical tests obviously, they draw blood and then the doctor calls you the next day or whatever with the results. So there is a certain number of accounts that are starting with that so called reference lab and then switching over to hopefully in the future having analyzers on-site and to be able to to do that quicker. I know that was 1 part of your question, but there's a second part. I'm sorry that I...

Yeah. That's right. Okay. And then have you had conversations with some of these clients about the new portable device and what has that perception been so far?

Correct. So thank you for that. So because of FDA's limitations, we are fared from speaking to clients about our next generation analyzer, because that would be considered marketing of an unapproved device. So even though our current analyzer is, of course, approved and we can speak to them about that, we are not allowed to say to a prospective account, for example, like hey, start using DBA and by the way, coming soon is going to be a transformatively easier, quicker, device going to allow for much easier work, both of what we have right now. We are just not allowed to say that, not some clients that follow our company and look at our press releases are aware of the next generation analyzer that some of the academic researchers that we have been working with and for some of our grant applications that work they are very much aware of it and they are -- the reception amongst those clinicians has been one of extreme interest and excite that.

Taking the test that can take an hour and hour and a half and then requires people to move the samples from the bedside to the lab, et cetera. And then turning that into something where a nurse could let's grab a dose of our inject tape, put it into the patient at 15 minutes later to know the volume of the patient, the red blood volume, the plasma volume, the potentially the capillary wall status, those are exciting metrics for care teams to have and workflow really matters a lot. So I would love to be able to go out to our existing client base and of course our newer clients with it, but we are not allowed to get.

One thing I would like say though is that, for our existing clients based upon our market research, we do anticipate that there will be a substantial incentive for them to switch to our new system. Not only will they saved substantially on labor time, for example, not tying up a tech for an hour or an hour and a half, but only a fraction of that. But also, the lower footprint of our device and the fact that it's portable and can be moved from room to room, and it doesn't even have to sit in the Medicine lab anymore, means that it'll free up space. It'll lower their regulatory headaches around having a clear license, and it will increase the total number of tests that they can perform in a day, which will therefore increase a lot of the revenue that they can generate from our tests. So we think there's a great value proposition for our existing clients to switch to this, but we just can't go to them yet with it.

Understood. And then on the usage between the new accounts, your established base plus the ones that will send it, you'll send the kits to, and then they'll send it into your clear certified labs. What kind of metrics or usage trends can you provide?

So, the usage trend that I can point to is that we had this 59.5% year-over-year increase in the single use test kits. That's a good marker for utilization. We're really focused actually on two things. Not only opening up new accounts, but actually driving increased utilization at our existing accounts. We're actually in the process, I'm actually in Oak Ridge right now, where we're headquartered for our national sales meeting, and I've made it a clear priority that we want to increase the utilization rate at our existing accounts.

We think that there's a lot of headway that we can make just without even opening further accounts, but going to hospitals where they're not necessarily at capacity in terms of their utilization and driving further adoption of the technology within different departments within the hospital. So what I can say is that we feel that our utilization rate at some accounts is that the capacity of the lab to keep up with the orders, but certainly not at all of them.

And so, we think that there's substantial utilization opportunity by increasing use at our existing accounts, as well as opening new accounts as well. And then of course, that utilization rate should go up substantially with a new system that allows them to cut down on the tech time required to do the test. So, for example, with our new system, we think we could do three blood volumes in the time that it currently takes to do one. So at some of these hospitals, they'll say, well, look, we only have enough time to do two tests a day. We just can't tie up our tests for more time than that.

That means that those hospitals that are capacity limited by their nuclear medicine department could go from 2 to 6 or even more, especially if non-MedTech’s can perform the test. So that means that doctors and nurses in the wards could perform the test. It has potentially substantial implications for the utilization of our technology at some of our hospital accounts.

Yes. Good. So not only is it, is it one 10th the size, but it could do three tests versus what it would take to do one with your system?

Correct. And but also importantly, the operators who could do it, if we receive our clear waiver as we're submitting, it means that you wouldn't have to wait for a tech to come from the lab to perform the test. A trained nurse or physician could perform the test at the Baptist and get the results immediately. That opens it up to let's say a critical care ward, where they might want to run a test in the middle of the night or on the weekends. Times when the lab is generally not necessarily available. So it really means that there are certain departments at hospitals where they'll say, well, we just need the test to be more available or more rapid for us to adopt it. And we think that the new analyzer is going to open up a world of possibilities in that way. And of course, hospitals will be incentivized to order multiple units instead of having one unit or two units in the lab, they could order units for the heart failure clinic, for the emergency department, for the critical care area, et cetera. I think, when you start to think about the implications for our business model, you understand why I wrote that this is the single most important pot launch that our company has had in over 20 years.

And then the last question is on the, I know we spoke about this, but maybe if you can, I think every investor, we'd probably like to know this, when do you think you can start, start reporting as an operating company versus a 50 ACT financial company as you are right now? And what specifically has to happen is this -- can only happen at the end of the year audit. And then it what's the metric the SEC is using? Is it the -- does the operating company have to be greater than 50% of the assets? Or are there other metrics the SEC uses to make that determination? And then I'll hop back in.

Yeah, of course. So I'll just say strategically, we reported as a 34 ACT company until 2011. We've always considered ourselves an operating company, not a financial company. The S e c for its own purposes change that determination in 2011. And we have been trying to get them to change since. I want to actually turn the answer to that question around the specifics over to Bob Michelle, our CFO, because Bob has been interacting heavily with our SEC attorney on this question, and we have been getting closer to that, Mark.

Bob, would you like to answer Mr. Vendetti question around the transition from 40 to 35 statu to your knowledge?

Yes. It is a percentage of the assets, it's not a specific number. There is a general like guideline that's used in the between the 20% and 30% range of the assets. Now, since this year end, our operating division has been valued substantially higher than in the past. We see that it is probably a good time to address this situation with the SEC and we are you now that the audit's over and the statements are filed we can address that and get a much better feel for the timeline of moving back to a 34 hour company.

And just to clarify, so now that you -- the audit's done, you're, you can have the conversations with the SEC, does, let's say they hypothetically say, okay, well you're close, but we're not going to allow you to go back to a 34 ACT. Now do you - is it generally mean you have to wait another year? Or can you revisit it sooner? -- does that work?

Yeah. I don't think that there's any stipulation of waiting to the next annual reporting period. I can, I could address that with my securities council. I don't see that there would be a roadblock in waiting to the next year. If you -- at the end of a quarter, it's determined that we can move to the 34 ACT. We would file the right paperwork and forms and file a 10-Q for that quarter.

It would just entail quite a substantial shift once we would get the green light from the S sec. There's a substantial amount of work that we have to do on our audit side and accounting side in order to affect that change just based upon the history of when they made us switch over in 2011. Unfortunately, we are just one of the dozen companies that the SEC has historically done this too. So there isn't a lot of precedent that we can reliably rely on for guidance exactly and what this process looks like moving between the two. And I will just say in a final way that, the SEC has been frustratingly slow at responding to questions from us at times. Perhaps they are very tied up with other regulatory challenges that they have. But when it comes to an obscure question around 34 to 40 act switching status, et cetera, these things generally just sort of go into the queue of questions. They will answer them, but they are not nearly as responsive as we wish that they would be and that has added to our frustration. Management, we sued the SEC in 2011 to stop them from making us report as a -- company. We spent actually over $1 million on legal fees, fighting them, and then still at the end of the day, we are told that the regulators are going to do what the regulators are going to do. So we are at their mercy. We are trying to affect this change. But there isn't clear statutory guidance on the process for this. So there is just a certain amount of uncertainty around it.

Our next question will take Leo [Carpio] with [indiscernible].

Hi. Good morning gentlemen. I have actually three questions. The first question is regarding the post-pandemic hospital spending environment. Is that being helpful or favorable for sales activity for your product? And then the second question with that is, where does BVA fall? Is in hospital, cap spending or operating spending priorities? Is it in the top of the list or something to be considered? Or is it in the middle with other devices? And then the last question, is your current sales force sufficient to support the sales plan or do you need to add or build? Can you add more members to your team? Thanks.

Great. So I'll start at the first question. You might have to refresh me of the subsequent questions after I answer. What I'll say is that, the overall environment right now for healthcare spending in the post-pandemic world is favorable for us. And the reason for that is that there is tremendous focus on value and value-based care. Starting several years back, the Medicare CMS started the so called HRRP program, the Hospitalization Readmission Reduction Program. And a tremendous amount of focus has been brought to bear on the health economic metrics and the impacts of different interventions in terms of the cost of care. So our diagnostic allows care teams to quickly and accurately see what the problem is with the patient. And heart failure management overwhelmingly had a lot of post-surgical care and IC care, overwhelmingly is informed by the question of optimizing the patients fluid data and their blood volume. And the reason for that is very simple. The blood is what carries oxygen to the tissues and it is vital for the immunity and for the nutritional needs of the patient, et cetera. Making sure that the patient has an optimal bloodline is crucial.

So if they are relying on a set of proxy measures or inaccurate or invasive tools right now, which they are, and that lead to a greater length of stay for the patient every day that they spend in the ICU or in the heart failure ward is very, very costly. So when we go to the value analysis committees at the various hospitals that we talk to about bringing in the technology, we start by saying, what is your priority? The priority is less about whether a specific capital equipment pieces, and the number 1 thing that they ask us is essentially is what will be the impact of this financially on our operations to bring the technology in? And the answer to that really comes in the form of a few different features.

First of all, number 1, our diagnostic. And one of the first questions I'll ask you is, does your product have reimbursement? Number 1, because if you don't have reimbursement, whether it's for a drug or for a device, you're really not getting so very far in the healthcare world of today, because the bottom line is really paramount.

Fortunately, Daxor has actually excellent reimbursement for our diagnostic or outpatient use within the hospital setting. It also has reimbursement in the ambulatory surgical setting as well as physician offices as well. So we have strong reimbursement. And for hospitals, there is a very good cashflow positive model for using this test to treat outpatient heart failure patients. And that has a twofold benefit to them. Not only is there a revenue side to it, but patients with heart failure on an outpatient basis that are treated with our diagnostic are much less likely to become readmissions, which are costly for that same hospital system.

So, we're working with heart failure outpatient clinics at our existing heart failure hospitals in order to ensure that the metric is used on a outpatient basis for the inpatient side. I pointed out earlier that the research that was published last year that showed that the utilization of our diagnostic at the beginning of the care of pathway lowers the length of, say, by 55% for [Indiscernible] heart failure patients.

So if you can save two and a half days from a patient's hospital, say each one of those days in the hospital costs the hospital several thousand dollars, now they receive only a single bundled payment under the DRG system for treating that heart failure patient. So they're going to get $15,000 for that patient, whether they say two and a half days, or five days, or eight days. So the hospitals are very, very concerned about making sure that they get these patients treated, and get them out of the hospital as quickly as possible. And also, because the [HRRP] program that they don't readmit within that 30-day window.

So our diagnostics really exciting because what it tells care teams from the beginning is exactly what's wrong with the volume of these patients. And right now, they're guessing a lot of the times with very imprecise information, and they often go down the wrong roadway. We talk about this idea that it's sort of like having GPS in your car. You don't, you switch the GPS on as soon as you leave your driveway, you can go straight to your destination. Well, if you run a blood volume analysis on a heart failure patient, as soon as they present, exactly what's wrong with them and which drugs and interventions they need in order to optimize their outcomes.

So, when we talk to these hospitals from a capital spending point of view, or from a priority point of view, everything is about improving their financial performance, because the COVID epidemic has put tremendous financial pressures on them. So are they willing to spend capital to bring our systems in or to lease our systems or rent our systems? The answer is yes, because we have a very strong proforma model that we present to them at their value analysis committee level. So in order to bring a system in, you need to get clinical buy-in. The clinicians have to be excited about it, but really the administrators are going to be the ones that are going to be the final harvesters about whether we get adoption into our system.

Leo, does that answer your question, and what follow up you have?

Yes, it does. And actually the follow-up was regarding -- when you have these conversations with the hospitals and with these committees.

On these capital planning committees, what type of, or what other technologies are you often find yourself competing against in terms what other priorities are they looking at that, and that you find yourself secondary technologies or other technologies that you are trying to advocate and trying to gain a sale versus whatever else they're looking at that moment?

So, what's exciting is that we're the only game in town when it comes to direct volume measurement. We are to consider the gold standard. And we have the greatest amount of clinical evidence over 140 published peer reviewed papers and presentations on our technology from meeting academic medical centers and a long history of relationships with these hospitals. So when they're looking at us, they're really saying, why should we shift from the standard of care that we use now, which could be pressure measures or clinical exam. What evidence do you have that if we bring this technology in and put into our care pathway that we're going to get specific benefits? And so that's when we talk about things like lowered readmissions, shorter length of stay, and then on the patient side that patients have a substantially lower mortality when they're treated with BBA and they're going to have a higher quality of life.

So, peer reviewed, published studies have shown, for example, a 56% reduction in 30 day readmissions, which is something that gets penalized, well, 55% shorter length of stay, also an 82% reduction in mortality on a 30 day basis, and an 86% reduction in 365 day mortality. So when we go to them, we say, look, you're going to get your patients treated faster out of the hospital, less likely to readit, they're much less likely to die, they'll have much higher quality of life as a result of having optimal treatment. So really what BVA does, it takes their existing treatments and it makes them so much more effective because they apply the right treatment to the right patient at the right time because the BVA test tells them something that no other test have access to does.

And then the last question is, if the BBA product development timeline unfolds as you are predicting in 2023, is your current sales force sufficient for supporting sales activity or do you need to add more sales people? Any particular skills that need to be added or broadened?

Well, so what we see is that the current sales force, we focused on judiciously expanding them and upgrading them in terms of their capabilities. Their clinical acumen is very high compared to sales teams that we have in the past. The tools that they have are much better. So, we have white papers, proformas, we have a remote learning management system that we implemented in the second half of last year that allows clinicians to train with videos online, for example, and to take quizzes in order to gain proficiency with our system. So we've been leveraging technology, in order to have zoom calls, grand rounds, conferences, et cetera. And all of that has shown that those are the things that need to happen in order to increase clinician awareness and utilization of our tests.

I think that the focus of management right now has been to increase the productivity per territory manager. So in other words, if a territory manager is selling X into their hospital accounts, we want that number to go up by two or three X. And we want to deploy the resources that we have, and the best practices that we're learning from different accounts in order to drive utilization and to increase per rev productivity that sets the stage for us to substantially increase the Salesforce. So, some companies, for example, try to grow their revenues by just throwing more people at the problem. They're like, well, if our revenues are X and we want our revenues to go to three x, then let's triple our sales Salesforce. The problem with that is that over time, yes, they drive increasing revenue, but often they widen their operating loss as a result.

And so instead of focusing on individual rep productivity, they just focus on some kind of top-line revenue number. I think that, that can be a highly value destructive process, because it's easy to hire people, it's easy to throw more troops at the problem, but that's not necessarily a very good thing for your business model. So for us, we are seeing a substantial rise in sales, but without massively increasing our sales force. Now with our next generation analyzer driving things forward, I anticipate that, that productivity per rep and per territory is going to increase significantly and that will set the stage for us to expand our sales force. But right now, with our sales force large enough to look at our total addressable market, not even close. It's not even 1% of what it could be to address the total market, because the total addressable market just in the United States, and we are not even talking about internationally, represents a market of over 5,000 hospitals that could benefit from having 1 of our analyzers there to help to treat patients. So there is a massive market potential here. We are driving the business model forward and getting productivity up and that sets the stage for us to expand the sales force is, what I was saying. Does that answer your question?

Yes, it does. Thanks.

And we'll take our next question from John [Wendell] with JPC Partners.

Yes. Good morning, Michael. As I've told you, time after time, you have done a a pretty job in 3 years and your father who was very fond of did in -- so I applaud you for what you are doing. But I also wanted to say that, people that aren't any stock buy because of appreciation that they hope. And what you have forecast and talked about, I think, is remarkable. And what I don't understand is, if this was a division and came out with your analysis is with the Boston Scientific or Medtronic. I think the street or the analysts that focus on those companies would underline, what is happening with the BVA and the potential everything that is legal that they can say. I can not understand being a longtime shareholder and involved with everything that you have said and done about. The stock continues to make new lows.

Now we all know that it's very thin, but that's not a major problem. It is for any kind of sizable institution to own it, but there are plenty of them like ourselves that you can own a small amount. But when we see every day a little low, you scratch your head and wonder what is it that I'm missing on this. And I've often said that money I know is a real commodity to you, but you would think after a time, you would get somewhat disgusted and say, you know what? We think the stock is an x plus y eventually. And I agree, but time is also pretty important that, you say, I'm going to buy in stock. And you might say, well, we need the money for our research. I understand that, but you did a secondary here recently, I think at 950. I don't know whether that was a retail, which I suspect where it didn't go up. Their sellers, it's not the strong hands, but I mystified about the action of the stock. I've been there when I've seen the stock, and this is before anybody on this line knows when I was running a fund, that it had gone from $6.5, $7 to $37 in less than two weeks.

Now, was that because of shorts trying to cover or was it enthusiasm from someone that really believed now was well before any other new technologies that you have been able to implement your time now? So I'm really, scratching my head on this one.

As I said, we know then this is a great deal of the cause, but then this could also be a part of being able to accumulate stock. So having a new low is not something that gives people a lot of encouragement. I think, everything that you spoke about is legitimate. And the last thing I want to ask, you had mentioned at one point, I believe, and please correct me, that Army, had circled or thought about 2000. I think, that was the number of the portable BVA devices. Let's just do for first grade arithmetic, if 2000 devices were ordered not so ship, but just ordered from the Army, what are we talking about gross dollars?

Okay. So, you've touched on a few things. So let me start at the top. So as it regards to share price, management controls what we do as a company, and Wall Street and buyers and sellers decide what our stock is worth. I can say that our stock has, and you are correct, our stock is very closely held by management. I'm one of the largest shareholders of the company personally. I think, most of our shareholders know that I take a de minimis annual salary from the company, because I believe so strongly in our long-term prospects. And management is hyper-focused on creating shareholder value. Now obviously, the price of its a stock trades in any particular moment is a function of the perception of the value of the company along with the macro environment as well.

I don't think it's a secret that as the Fed has tightened and as interest rates have gone up, growth and technology companies have struggled in the midst of it in terms of valuations, but also there's a lot of volatility. So do I personally, am I think about the share price? I don't think about the share price the way that a trader might think about the share price. I think, about the share price as in what do we as a company need to do to create substantial value? Because, I believe from a very fundamental gram and good way of thinking about things, that the share price will reflect the intrinsic value of the stock. I know that sometimes shareholders actually don't always have the visibility into the operating companies that we wish that they could have because of our reporting status.

But that being said, yes, our stock has range traded between I don't know, 8.5 and 15 or something like that over the last 18 months something like that, but really the question is, is what are we doing as a company that is going to garner substantial value going forward? And I think executing on all of the things that we've outlined is the way for us to create that kind of value. And of course, to capture those substantial earnings, I do take some comfort from the fact that I look at Tesla, which Elon Musk, Graham from 2012 to 2017, and the stock was essentially flat over a five year time period. But while that was going on, Tesla as a company underneath it, was doing profoundly, substantially important things to create value. They were innovating their battery technology and their manufacturing process and their design and their navigation systems that put them 10 years in front of all of their competitors.

But Wall Street didn't really reward the stock for that. Wall Street doesn't always reward the company for doing the important technological breakthrough. What Wall Street rewards is the revenues and the growth that come from the implementation and adoption of that technology. So towards that end, management feels very strongly that we are creating the most value, medium and long term for our shareholders by doing the things that we've outlined here. That means the next generation analyzers, the clinical outcomes, the increase in commercialization, adoption, sharpening, sales force, driving forward in terms of revenue growth, et cetera. And the share price is going to reflect what it does.

If you don't believe in that, then you shouldn't own our stock. If you do believe in that, and if you do believe in the outline of what we're doing, if you do think that our company is valued at a relatively poultry amount compared to our prospects, our technology, our clinical outcomes, our addressable market, and a low share price should mean that it's essentially a buying opportunity for you. It's a chance to own a company with a stock that has FDA approval around its technology. Terrific reimbursement, excellent evidence, clinical outcomes, growing partnerships with the US military with the NIH with various different societies like, the Met Aian partners through the ACC or the Heart Failure Society, et cetera. So, I think investors have to look fundamentally at what we're doing and try to forecast from there whether or not we're doing the thing that's going to create the creation.

As a the CEO of the company, I'm not interested in the stock going from 8 to 16 because that only represents an increase in the company's value from 40 million to 80 million or whatever the exact number is, et cetera. I think the prospects for our company are orders of magnitude, at least in order of magnitude greater than that. So I'm focused with the rest of my management team on executing on that and creating the value that comes from that.

Now, as far as the second part of your question, the assertion around the Army, et cetera, we received contract funding from the Army to create a portable, rapid ruggedized battery powered analyzer. That's what we have right now that we've successfully completed that we're submitting to the FDA for approval. We also received contract funding from the Air Force to create an innovative non-isotopic plus marker for use in the Air Force chain, potentially of combat casualty care. Now, we've completed Phase 2 work, on that for the Army, and then that opens up Phase 3, which is Phase 2, extension of Phase 3. And Phase 3 is generally contracting award. I cannot comment on what the potential army order would be where they could give us one for phase three award. That information is not public. I don't believe I've ever commented on the total addressable market size by the Army in the past. And we will make the plans of the DOD, available to shareholders as soon as they are within the public.

So thank you for your question. Next question?

Thank you. We will take our next question from Evan Greenberg with Legend Cap Opportunity Fund.

I'm sorry. I'm on speaker, but for some reason, I can't get off speaker. Anyway, I wanted to get an idea in terms of pricing of the kits. You said you had -- was that the first price increase in years? It's traditionally been around $325 has it been creeping up over the past couple of years. And then I wanted to know, there should be price elasticity. It's a very reasonably price test. So do you have room to go more if need be?

So great question. So yes, our price was at $325 for a number of years. And then, we looked at the elasticity and we realized that we were really under pricing in our products. And so we increased our price from $325 to $355 dollars last year. And what we found was actually our kit sales increased substantially over that time period, not because of the price increase, but I'll say, despite the price increase. That reflects the fact that we didn't lose a single account over that price difference. We didn't hear anything from any of our customers, because prices have generally been rising. And our prices have been extremely cheap for years. We just announced and we sent out a letter to our customers informing them that, we are increasing the price again this year from 355 to 385. So we will have increased our price of our product by $60 over the -- which is, I don't know, about 18% or so, over a two year period. And again, we are not seeing any pushback from our customers, who receive those letters around the new price level.

I think there is substantial value here. And I think there is substantial room for us to grow, our pricing judiciously overtime because of what we are showing is the value of the product. If you can show an administrator and a set of clinicians that you can lower their length of stay by 2.5 days and save thousands of dollars, and that they don't have to use existing diagnostics that are less accurate than ours. So for a substitution cost, remember, you don't do the anti BNP, pro-BNP measurement, instead you run the BVA test, for example, then really there is a lot of value to be unlocked there.

And also on the reimbursement side, our reimbursement has been increasing because our pricing has gone up and that's how Medicare determined that. So we have been able to get good movement on the pricing, which has helped to improve our margins and to cover some of the inflationary pressures that we have been taking. So that's what's -- those are nice questions.

Thank you. I think anything sub 500 dollars is a no-brainer?

Yes. Our market research certainly bears out that there is a lot of value there. Now you don't want to give people a price shock, right? You don't want to double the price of what you have overnight, but there certainly has been good responses to our price increases. And again, that's helping us to drive revenue.

And I'm showing we have no more questions in the queue at this time. I will now turn the call over to Michael Feldschuh for any closing remarks.

All right. I will say that I appreciate everyone's participation in this conference call. Daxor will continue to keep shareholders update, I would refer people to our filing for my investor letter which is attached to be and to which contains more details of any of the topics we touched out today. Thank you very much and it completes our call.