U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1997.
Commission file number 0-10783
BSD MEDICAL CORPORATION
DELAWARE 75-1590407
(State of Incorporation) (IRS Employer Identification Number)
2188 West 2200 South
Salt Lake City, Utah 84119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (801) 972-5555
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. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of July 15, 1997
Common stock, $.01 Par Value 16,176,980
Transitional Small Business Disclosure Format (Check one): Yes[ ] No[X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BSD MEDICAL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
Assets May 31, Aug. 31,
1997 1996
Current assets: __________ __________
Cash and cash equivalents $ 146,841 $ 381,746
Receivables:
Trade accounts, net of allowance for doubtful 61,404 130,175
receivables of $10,000
Related party, net of allowance for doubtful - 23,054
receivables of $26,200
Other, net of allowance for doubtful receivables of 3,558 500,000
$20,494
__________ __________
Total net receivables 64,962 653,229
__________ __________
Inventories:
Raw materials 145,476 223,139
Work-in-process 351,064 233,856
Finished goods 74,117 74,071
__________ __________
Total inventories 570,657 531,066
__________ __________
Prepaid expenses and other assets 17,600 34,975
__________ __________
Total current assets 800,060 1,601,016
__________ __________
Property and equipment:
Furniture and fixtures 297,743 297,743
Equipment 525,573 473,099
Building, net of reserve for potential impairment of 233,766 233,766
$181,534
__________ __________
Total property and equipment 1,057,082 1,004,608
Less accumulated depreciation and amortization 770,435 752,205
__________ __________
Net property and equipment 286,647 252,403
__________ __________
Long-term receivables 121,010 106,820
Other assets, at cost, less accumulated
amortization of $209,903 at May 31, 1997, and 52,829 67,742
$194,990 at Aug. 31, 1996
__________ __________
$1,260,546 $2,027,981
========== ==========
<PAGE>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 0 $ 17,250
Current installments of obligation under capital lease 12,286 46,554
Current installments of obligation under long-term debt 6,673 25,817
Accounts payable 197,528 89,230
Accrued payroll and commissions 91,422 74,060
Customer deposits 3,454 141,871
Warranty reserves 29,397 36,524
Accrued expenses 38,731 107,490
Current income tax payable 70,000 70,000
__________ __________
Total current liabilities 449,491 608,796
__________ __________
Obligation under capital lease, excluding current 106,370 106,370
installments
Obligation under long-term debt, excluding current 64,162 64,162
installments
Deferred revenue 187,447 186,771
Related party deferred revenue 335,141 335,141
__________ __________
Total liabilities 1,142,611 1,301,240
__________ __________
Stockholders' equity:
Preferred stock, $1.00 par value; authorized 10,000,000
shares; none issued and outstanding (liquidation value
$100 per share) - -
Common stock, $.01 par value; authorized 20,000,000
shares; issued and outstanding 16,176,980 shares 161,770 161,770
Additional paid-in capital 20,430,243 20,341,418
Accumulated deficit (19,827,683) (18,912,164)
Common stock in treasury 64,428 shares, at cost (14,237) (14,867)
Deferred compensation (632,159) (849,416)
__________ __________
Net stockholders' equity 117,935 726,741
__________ __________
$1,260,546 $2,027,981
========== ==========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarters ended May 31, 1997 and May 31, 1996
Three Months Nine Months
Ended: Ended:
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
_________ _________ _________ _________
Product sales $ 34,690 194,430 $ 265,790 531,354
Grant and license revenue 70,947 133,551 355,127 324,332
_________ _________ _________ _________
Total revenues 105,636 327,981 620,917 855,686
Costs and expenses:
Cost of product sales 75,464 94,379 266,848 278,665
Research and development 167,282 143,363 345,443 305,219
Selling, general, and 369,407 130,642 926,647 336,812
administrative _________ _________ _________ _________
Total costs and expenses 612,152 368,384 1,538,938 920,696
_________ _________ _________ _________
Operating income (loss) (506,516) (40,403) (918,021) (65,010)
Other income (expense):
Interest income 1,402 265 10,511 566
Gain on settlement of accounts 225 - 8,742 -
payable
Interest expense (4,830) (10,877) (18,070) (32,097)
Other, net (867) 23,529 1,320 115,603
_________ _________ _________ _________
Total other income (expense) (4,070) 12,917 2,502 84,072
_________ _________ _________ _________
Net income (loss) $ (510,586) (27,486) $(915,519) 19,062
========= ========= ========= =========
Net income (loss) per common and
common equivalent share $ (0.029) (0.002) $ (0.053) 0.001
========== ========== ========== ==========
Weighted average number of
shares outstanding 17,314,726 17,226,226 17,308,107 17,203,497
========== ========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months ended May 31, 1997, and May 31, 1996
Increase (Decrease) in Cash and Cash Equivalents May 31, May 31,
1997 1996
___________________________________________________ __________ __________
Cash flows from operating activities:
Net income (loss) $ (915,519) 19,062
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 339,226 30,240
Gain on settlement of accounts payables (8,742) -
Issuance of treasury stock as bonus 630 4,200
Write-off of expired reserves - (88,220)
Changes in assets and liabilities:
Receivables 574,077 (12,575)
Inventories (39,591) 32,197
Prepaid expenses and other assets 17,375 14,624
Accounts payable 117,040 59,922
Accrued payroll and commissions 17,361 34,877
Customer deposits (138,417) 41,988
Warranty reserves (7,127) (7,652)
Accrued expenses (68,759) (55,939)
Deferred Income 676 11,100
__________ __________
Net cash provided by operating activities (111,769) 83,824
__________ __________
Cash used in investing activities:
Additions to property, plant, and equipment (52,474) (2,414)
__________ __________
Net cash used in investing activities (52,474) (2,414)
__________ __________
Cash flows from financing activities:
Net proceeds from (payments on) short-term
notes payable (17,250) (45,121)
Principal payments on capital lease obligation (34,268) (12,377)
Principal payments on long-term debt obligation (19,144) (17,581)
__________ __________
Net cash used in financing activities (70,662) (75,079)
__________ __________
Increase in cash and cash equivalents $ (234,905) 6,331
Cash and cash equivalents, beginning of period 381,746 46,124
__________ __________
Cash and cash equivalents, end of period $ 146,841 52,455
========== ==========
Supplemental Disclosure of Cash Flow Information
________________________________________________
Cash paid during the period for interest $ 18,070 32,097
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The Condensed Consolidated Balance Sheet as of May 31, 1997,
and the Condensed Consolidated Statements of Operations and the
Condensed Consolidated Statements of Cash Flow for the quarters
ended May 31, 1997, and May 31, 1996, have been prepared by the
Company without audit. In the opinion of management, all
adjustments to the books and accounts (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations, and changes in financial
position of the Company as of May 31, 1997, have been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The results of operations for the period ended May 31, 1997, are
not necessarily indicative of the results to be expected for the
full year.
Note 2. Net Income (Loss) Per Common Share
Net loss per common share for the quarters ended May 31, 1997,
and May 31, 1996, are based on the weighted average number of
shares outstanding during the respective periods.
Note 3. Federal Income Taxes
No provision has been made for income tax expense in the May
31, 1997, financial statements because of the utilization of
operating loss carry forwards.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
________________________________
Total assets decreased from $2,027,981 at August 31, 1996, to
$1,260,546 at May 31, 1997, a decrease of $767,435, or 37.84% due
to the following decreases. As of May 31, 1997, other
receivables totaled $3,558, a decrease of $496,442 from August
31, 1996, due to receipt of $500,000, included as a receivable at
August 31, 1996. The $500,000 cash received was used to pay
accrued debts and to finance increased operating expenses
required to build and support new product lines and to support
the efforts on the Small Business Innovation Research (SBIR)
grant project funded by the National Cancer Institute (NCI).
Cash decreased from $381,746 at August 31, 1996, to $146,841 at
May 31, 1997, a decrease of $234,905, or 61.53%, primarily caused
by reduced sales and increased expenses due to allocation of
resources to completion of new product line. The first BSD-
2000-3D System is scheduled for shipment in July and the second
for shipment in August.
Trade accounts receivable decreased from $153,229 at August 31,
1996, to $61,404 at May 31, 1997, a decrease of $91,825, or
59.93%, caused by a reduction in sales and receipt of prior
receivables. Total inventories increased from $531,066 at August
31, 1996, to $570,657 at May 31, 1997, an increase of $39,591, or
7.46%, due to periodic business fluctuations.
Total current liabilities decreased from $608,796 at August 31,
1996, to $449,491 at May 31, 1997, a decrease of $159,305, or
26.17%. The decrease was primarily caused by decreases in
customer deposits, accrued expenses, notes payable, and current
obligations, following receipt of funds in 1996 from a patent
license fee.
The Company has historically expended more cash in the course
of its business than it has generated from operations and has had
to rely primarily upon cash provided by private placements of its
equity securities to meet cash requirements. Even though the
market for BSD's cancer hyperthermia equipment has been severely
adversely impacted as a result of factors discussed in the fiscal
1996 10-KSB, the Company anticipates a change to stable
profitability in the future (see Part II, Item 6, Management
Discussion and Current Status of Financial Condition, 1996 10-
KSB).
The Company's current backlog of unfilled customer orders as of
May 31, 1997, was $850,000. A $335,000 deposit has already been
collected by the Company for this backlog. (The backlog at
November 30, 1996 of $1,225,141 was reduced to $850,000 as of
February 28, 1997, due to cancellation of an order from Dr.
Sennewald Medizin Technik GmbH for a BSD-2000 in anticipation of
this order being replaced by an order for the BSD-2000-3D
following shipment of the first BSD-2000-3D system.) The Company
also has long term receivables for field service contracts, as of
May 31, 1997, of $121,010.
Fluctuations in Operating Results
__________________________________
Due to risks associated with international operations,
budgeting considerations of the Company's customers, the nature
of the medical capital equipment market, the inability of the
Company to predict the timing of various approvals required from
the Food and Drug Administration and other governmental agencies,
the relatively large per unit sales prices of the Company's
products, the typical fluctuations in the mix of orders for
different systems and system configurations, the limited unit
sales volumes, the Company's limited cash resources, changes in
Medicare and other third-party reimbursement policies,
competition, and other factors, the Company's sales and operating
results historically have varied (and will likely continue to
vary) greatly on a quarter-to-quarter and year-to-year basis.
For these and other reasons, the results of operations for a
particular fiscal period may not be indicative of results to be
expected for any other period.
Results of Operations:
_______________________
Nine Months ended May 31, 1997
Product Sales decreased from $531,354 in the nine months ended
May 31, 1996, to $265,790 in the nine months ended May 31, 1997,
a decrease of $265,564, or 49.98%. During fiscal years 1996 and
1997, BSD dedicated time and resources to completion of the new
product line, the BSD-2000-3D. The first BSD-2000-3D System is
scheduled for shipment in July and the second for shipment in
August. Management expects sales to increase following the
shipment in July, as some European orders are pending based on
delivery of the first BSD-2000-3D System.
Gross profit on product sales decreased from $252,689 in the
nine months ended May 31, 1996, to a loss of $1,058, in the nine
months ended May 31, 1997, primarily caused by the vesting of
options issued to employees to purchase shares of the Company's
common stock (which have been recorded as deferred compensation
and amortized over the vesting period of the options), as well as
the ongoing typical fluctuations in costs required to prepare
equipment for sales.
Selling, General and Administrative Expenses increased from
$336,812 in the nine months ended May 31, 1996, to $926,647 in
the nine months ended May 31, 1997, an increase of $589,835, or
175.12%. The increase was primarily caused by the aforementioned
vesting of options to employees and advisors; increases in sales
and marketing staff; fees involved with BSD obtaining additional
funding and strategic partnerships (see Part II, Item 5, Other
Information, November 30, 1996, 10-QSB); and legal fees (see Part
I, Item 3, Urologix, Inc. vs. BSD Medical Corporation, 1996 10-
KSB).
Research and Development Expenses increased from $305,219 for
the nine months ended May 31, 1996, to $345,443 in the nine
months ended May 31, 1997, an increase of $40,224, or 13.18%.
The increase was caused by higher costs required to support the
efforts on the Research and Development SBIR grant project funded
by NCI and the aforementioned vesting of options issued to
employees to purchase shares of the Company's common stock.
Total Operating Expenses increased from $920,696 in the nine
months ended May 31, 1996, to $1,538,938 in the nine months ended
May 31, 1997, an increase of $618,242, or 67.15%. This increase
was primarily caused by the aforementioned increases in Selling,
General and Administrative expenses.
The Operating Loss increased from $65,010 in the nine months
ended May 31, 1996, to $918,021 in the nine months ended May 31,
1997, an increase of $853,011, or 1,312.12%. This increase was
primarily caused by the aforementioned factors and use of
resources devoted to completion of a new line of cancer products
and introduction of a new line of prostate treatment products.
Interest Expense in the nine months ended May 31, 1997, was
$18,070, as compared with the $32,097 of Interest Expense in the
nine months ended May 31, 1996. The decrease was caused by
typical periodic business fluctuations.
The Net Loss for the quarter ending May 31, 1997, was $915,519,
as compared with the Net Income of $19,062 for the quarter ending
May 31, 1996. The primary reasons for this increase were the
aforementioned factors.
Three Months ended May 31, 1997
Product Sales decreased from $194,430 in the three months ended
May 31, 1996, to $34,690 for the three months ended May 31, 1997,
a decrease of $159,740, or 82.16%. During fiscal years 1996 and
1997, BSD dedicated time and resources to completion of the new
product line, the BSD-2000-3D. The first BSD-2000-3D System is
scheduled for shipment in July and the second for shipment in
August. Management expects sales to increase following the
shipment in July, as some European orders are pending based on
delivery of the first BSD-2000-3D System.
Gross profit on product sales decreased from $100,051 in the
three months ended May 31, 1996, to a loss of $40,774 in the
three months ended May 31, 1997, primarily as a result of the
vesting of options issued to employees to purchase shares of the
Company's common stock (which have been recorded as deferred
compensation and amortized over the vesting period of the
options), as well as the ongoing typical fluctuations in costs
necessary to refurbish equipment for sales of refurbished
systems.
Selling, General and Administrative Expenses increased from
$130,642 in the three months ended May 31, 1996, to $369,407 in
the three months ended May 31, 1997, an increase of $238,765, or
182.76%. The increase was primarily caused by increases in fees
involved with BSD obtaining additional funding and strategic
partnerships (see Part II, Item 5, Other Information, November
30, 1996, 10-QSB); and an increase in legal fees (see Part I,
Item 3, Urologix, Inc. vs. BSD Medical Corporation, 1996 10-KSB).
Research and Development Expenses increased from $143,363 in
the three months ended May 31, 1996, to $167,282 in the three
months ended May 31, 1997, an increase of $23,919, or 16.68%.
The increase was caused by higher costs required to support the
efforts on the Research and Development SBIR grant project funded
by NCI and the aforementioned vesting of options issued to
employees to purchase shares of the Company's common stock.
Total Operating Expenses increased from $368,384 in the three
months ended May 31, 1996, to $612,152 in the three months ended
May 31, 1997, an increase of $243,768, or 66.17%. This increase
was primarily caused by the aforementioned increases in Selling,
General and Administrative expenses.
Operating Loss was $40,403 in the three months ended May 31,
1996, as compared with the Operating Loss of $506,516 in the
three months ended May 31, 1997. This change was primarily
caused by the aforementioned factors.
Interest Expense in the three months ended May 31, 1997, was
$4,830, as compared with the $10,877 of Interest Expense in the
three months ended May 31, 1996. The decrease was caused by
typical periodic business fluctuations.
The Net Loss for the quarter ending May 31, 1997, was $510,586,
as compared with the Net Loss of $27,486 for the quarter ending
May 31, 1996, an increase of $483,100, or 1,757.62%. The primary
reason for this increase was the aforementioned factors.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
BSD Medical Corporation stock quotes are now available through
the NASD over-the-counter Bulletin Board. BSD's symbol "BSDM"
began appearing on the Bulletin Board May 22, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
The following exhibit is filed as part of this report:
Exhibit Description
Number
________ ______________________________
27 Financial Data Schedule.
b) Reports on Form 8-K -- During the quarter, no reports on Form
8-K were filed by the Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, BSD Medical Corporation, the registrant, has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BSD MEDICAL CORPORATION
Date: July 15, 1997 by: /s/ Paul F. Turner
Paul F. Turner
Chairman of the Board, Acting
President, and Senior Vice President
of Research
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 146,841
<SECURITIES> 0
<RECEIVABLES> 74,962
<ALLOWANCES> (10,000)
<INVENTORY> 570,657
<CURRENT-ASSETS> 800,060
<PP&E> 1,057,082
<DEPRECIATION> 770,435
<TOTAL-ASSETS> 1,260,546
<CURRENT-LIABILITIES> 449,491
<BONDS> 170,532
0
0
<COMMON> 161,770
<OTHER-SE> (43,834)
<TOTAL-LIABILITY-AND-EQUITY> 1,260,546
<SALES> 265,790
<TOTAL-REVENUES> 620,917
<CGS> 266,848
<TOTAL-COSTS> 1,538,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,070
<INCOME-PRETAX> (915,519)
<INCOME-TAX> 0
<INCOME-CONTINUING> (915,519)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (915,519)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> 0
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