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 February 28, 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 March 28, 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 Feb. 28, Aug. 31,
1997 1996
Current assets: __________ __________
Cash and cash equivalents $ 342,347 $ 381,746
Receivables:
Trade accounts, net of allowance for doubtful 78,953 130,175
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 43,457 500,000
$20,494
__________ __________
Total net receivables 122,410 653,229
__________ __________
Inventories:
Raw materials 157,691 223,139
Work-in-process 320,665 233,856
Finished goods 74,101 74,071
__________ __________
Total inventories 552,457 531,066
__________ __________
Prepaid expenses and other assets 28,252 34,975
__________ __________
Total current assets 1,045,466 1,601,016
__________ __________
Property and equipment:
Furniture and fixtures 297,743 297,743
Equipment 523,158 473,099
Building, net of reserve for potential impairment of 233,766 233,766
$181,534
__________ __________
Total property and equipment 1,054,667 1,004,608
Less accumulated depreciation and amortization 764,074 752,205
__________ __________
Net property and equipment 290,593 252,403
__________ __________
Long-term receivables 125,380 106,820
Other assets, at cost, less accumulated
amortization of $199,961 at Feb. 28, 1997, and 57,800 67,742
$194,990 at Aug. 31, 1996
__________ __________
$1,519,239 $2,027,981
========== ==========
See accompanying notes to financial statements.
<PAGE>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 5,875 $ 17,250
Current installments of obligation under capital lease 24,212 46,554
Current installments of obligation under long-term debt 13,198 25,817
Accounts payable 87,467 89,230
Accrued payroll and commissions 50,727 74,060
Customer deposits 3,371 141,871
Warranty reserves 32,314 36,524
Accrued expenses 55,367 107,490
Current income tax payable 70,000 70,000
__________ __________
Total current liabilities 342,531 608,796
__________ __________
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 196,187 186,771
Related party deferred revenue 335,141 335,141
__________ __________
Total liabilities 1,044,391 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 (19,317,097) (18,912,164)
Common stock in treasury 67,428 shares, at cost (14,867) (14,867)
Deferred compensation (785,201) (849,416)
__________ __________
Net stockholders' equity 474,848 726,741
__________ __________
$1,519,239 $ 2,027,981
========== ==========
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarters ended February 28, 1997 and February 29, 1996
Three Months Six Months
Ended: Ended:
Feb. 28 Feb. 29 Feb. 28 Feb. 29
1997 1996 1997 1996
__________ __________ __________ __________
Product sales $ 158,048 225,234 $ 231,100 336,922
Grant and license revenue 165,515 83,073 284,181 190,782
__________ __________ __________ __________
Total revenues 323,563 308,307 515,281 527,704
Costs and expenses: __________ __________ __________ __________
Cost of product sales 97,819 87,765 191,384 189,265
Research and development 79,127 78,930 178,162 161,856
Selling, general, and 222,478 96,682 557,240 206,884
administrative __________ __________ __________ __________
Total costs and expenses 399,424 263,377 926,786 558,005
__________ __________ __________ __________
Operating income (loss) (75,861) 44,930 (411,505) (30,301)
Other income (expense):
Interest income 3,373 107 9,108 301
Gain on settlement of accounts 3,779 - 8,517 -
payable
Write-off of expired reserves - 63,664 - 63,664
Interest expense (6,476) (20,018) (13,240) (21,220)
Other, net 1,887 (4,190) 2,187 28,410
__________ __________ __________ __________
Total other income 2,563 39,563 6,572 71,155
__________ __________ __________ __________
Net income (loss) $ (73,298) 84,493 $ (404,933) 40,854
========== ========== ========== ==========
Net income (loss) per common and
common equivalent share $ (0.004) 0.005 $ (0.023) 0.002
=========== =========== =========== ===========
Weighted average number of 17,314,726 17,226,226 17,305,848 17,203,497
shares outstanding =========== =========== =========== ===========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months ended February 28, 1997, and February 29, 1996
Increase (Decrease) in Cash and Cash Equivalents Feb. 28 Feb. 29
________________________________________________ 1997 1996
__________ __________
Cash flows from operating activities:
Net income (loss) $ (404,933) 40,854
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 174,851 27,240
Gain on settlement of accounts payables (8,517) -
Issuance of treasury stock as bonus - 4,200
Write-off of expired reserves - (63,664)
Changes in assets and liabilities:
Receivables 512,259 (7,151)
Inventories (21,390) (3,373)
Prepaid expenses and other assets 6,722 4,901
Accounts payable 6,754 (10,782)
Accrued payroll and commissions (23,333) 37,090
Customer deposits (138,500) 80,068
Warranty reserves (4,210) (4,769)
Accrued expenses (52,123) (49,662)
Deferred Income 9,416 -
__________ __________
Net cash provided by operating activities 56,996 54,952
__________ __________
Cash used in investing activities - additions to
property, plant, and equipment (50,059) (2,414)
__________ __________
Cash flows from financing activities:
Net proceeds from (payments on) short-term
notes payable (11,375) (32,708)
Principal payments on capital lease obligation (22,342) (25,547)
Principal payments on long-term debt obligation (12,619) (15,194)
__________ __________
Net cash used in financing activities (46,336) (73,449)
__________ __________
Increase in cash and cash equivalents $ (39,399) (20,911)
Cash and cash equivalents, beginning of period 381,746 46,124
__________ __________
Cash and cash equivalents, end of period $ 342,347 25,213
========== ==========
Supplemental Disclosure of Cash Flow Information
________________________________________________
Cash paid during the period for interest $ 13,240 21,220
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The Condensed Consolidated Balance Sheet as of February 28,
1997, and the Condensed Consolidated Statements of Operations and
the Condensed Consolidated Statements of Cash Flow for the
quarters ended February 28, 1997, and February 29, 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 February 28, 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 February 28, 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 February 28,
1997, and February 29, 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
February 28, 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
$1,519,239 at February 28, 1997, a decrease of $508,742, or
25.09% due to the following decreases. Other Receivables as of
February 28, 1997, totaled $43,457, a decrease of $456,543 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 (see below) and to finance increased
operating expenses required to build, ship, 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 $342,347 at February 28, 1997, a decrease of
$39,399, or 10.32%, primarily caused by periodic business
fluctuations.
Trade accounts receivable decreased from $153,229 at August 31,
1996, to $78,953 at February 28, 1997, a decrease of $74,276, or
48.47%, caused by a reduction in sales and receipt of prior
receivables. Total inventories increased from $531,066 at August
31, 1996, to $552,457 at February 28, 1997, a slight increase of
$21,391, or 4.03%, due to periodic business fluctuations.
Total current liabilities decreased from $608,796 at August 31,
1996, to $342,530 at February 28, 1997, a decrease of $266,266,
or 43.74%. The decrease was primarily caused by decreases in
customer deposits, accrued expenses, accrued payroll, 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. However, BSD has
not had an outside capital infusion since 1989. 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
February 28, 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
February 28, 1997, of $125,380.
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:
______________________
Six Months ended February 28, 1997
Product Sales decreased from $336,922 in the six months ended
February 29, 1996, to $231,100 in the six months ended February
28, 1997, a decrease of $105,822, or 31.41%. During fiscal 1996,
the Company devoted time and resources to restructuring and
rebuilding the Corporation, which included the design and
implementation of a new marketing strategy, evaluation of current
distributors, laying the groundwork for future strategic
partnerships, and developing a new product line - the BSD-2000-
3D. These efforts have shown results in many areas - granting of
a patent license; receipt of a Phase II NCI SBIR grant; approval
from the Food and Drug Administration to proceed with a new
Investigational Device Exemption study on the treatment of benign
prostatic hyperplasia (BPH); completion of a new line of cancer
products and introduction of a new line of prostate treatment
products; and receipt of a purchase order for the new cancer
product line. Management expects sales to increase in the last
part of the 1997 fiscal year, as some European orders are pending
based on delivery of the first BSD-2000-3D System, which is
projected to ship in June 1997.
Gross profit on product sales decreased from $147,657 in the
six months ended February 29, 1996, to $39,716 in the six months
ended February 28, 1997, as a result of a decrease in product
sales, as well as the ongoing typical fluctuations in costs
required to refurbish equipment for sales of refurbished systems.
Selling, General and Administrative Expenses increased from
$206,884 in the six months ended February 29, 1996, to $557,240
in the six months ended February 28, 1997, an increase of
$350,356, or 169.35%. The increase was primarily caused by the
vesting of options, in the first fiscal quarter, issued to
employees and non-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); 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 $161,856 for
the six months ended February 29, 1996, to $178,162 in the six
months ended February 28, 1997, an increase of $16,306, or
10.07%. The increase was caused by slightly higher personnel
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 $558,005 in the six
months ended February 29, 1996, to $926,786 in the six months
ended February 28, 1997, an increase of $368,781, or 66.09%.
This increase was primarily caused by the aforementioned
increases in Selling, General and Administrative expenses.
The Operating Loss increased from $30,301 in the six months
ended February 29, 1996, to $411,505 in the six months ended
February 28, 1997, an increase of $381,204, or 1,258.06%. 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 six months ended February 28, 1997, was
$13,240, as compared with the $21,220 of Interest Expense in the
six months ended February 29, 1996. The decrease was caused by
typical periodic business fluctuations.
The Net Loss for the quarter ending February 28, 1997, was
$404,933, as compared with the Net Income of $40,854 for the
quarter ending February 29, 1996. The primary reasons for this
increase were the aforementioned increase in operating expenses,
decrease in product sales, and use of resources for completion of
a new line of cancer products and introduction of a new line of
prostate treatment products.
Three Months ended February 28, 1997
Product Sales decreased from $225,234 in the three months ended
February 29, 1996, to $158,048 for the three months ended
February 28, 1997, a decrease of $67,186, or 29.83%. During
fiscal 1996, the Company devoted time and resources to
restructuring and rebuilding the Corporation, which included the
design and implementation of a new marketing strategy, evaluation
of current distributors, laying the groundwork for future
strategic partnerships, and developing a new product line - the
BSD-2000-3D. These efforts have shown results in many areas -
granting of a patent license; receipt of a Phase II NCI SBIR
grant; approval from the Food and Drug Administration to proceed
with a new Investigational Device Exemption study on the
treatment of BPH; completion of a new line of cancer products and
introduction of a new line of prostate treatment products; and
receipt of a purchase order for the new cancer product line.
Management expects sales to increase in the last part of the 1997
fiscal year, as some European orders are pending based on
delivery of the first BSD-2000-3D System, which is projected to
ship in June 1997.
Gross profit on product sales decreased from $137,469 in the
three months ended February 29, 1996, to $60,229 in the three
months ended February 28, 1997, as a result of a decrease in
product sales, 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
$96,682 in the three months ended February 29, 1996, to $222,478
in the three months ended February 28, 1997, an increase of
$125,796, or 130.11%. The increase was primarily caused by
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 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 $78,930 in the
three months ended February 29, 1996, to $79,127 in the three
months ended February 28, 1997, an increase of $197, or 0.25%, an
insignificant increase.
Total Operating Expenses increased from $263,377 in the three
months ended February 29, 1996, to $399,424 in the three months
ended February 28, 1997, an increase of $136,047, or 51.65%.
This increase was primarily caused by the aforementioned
increases in Selling, General and Administrative expenses.
Operating Income was $44,930 in the three months ended February
29, 1996, as compared with the Operating Loss of $75,861 in the
three months ended February 28, 1997. This change was primarily
caused by the aforementioned increases in Selling, General and
Administrative expenses.
Interest Expense in the three months ended February 28, 1997,
was $6,476, as compared with the $20,018 of Interest Expense in
the three months ended February 29, 1996. The decrease was
caused by typical periodic business fluctuations.
The Net Loss for the quarter ending February 28, 1997, was
$73,298, as compared with the Net Income of $84,493 for the
quarter ending February 29, 1996. The primary reason for this
increase was the aforementioned increase in operating expenses.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is filed as part of this report:
Exhibit
Number Description
________ ___________
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: March 28, 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> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 342,347
<SECURITIES> 0
<RECEIVABLES> 88,953
<ALLOWANCES> (10,000)
<INVENTORY> 552,457
<CURRENT-ASSETS> 1,045,466
<PP&E> 1,054,667
<DEPRECIATION> (764,074)
<TOTAL-ASSETS> 1,519,239
<CURRENT-LIABILITIES> 342,531
<BONDS> 106,370
0
0
<COMMON> 161,770
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,519,239
<SALES> 158,048
<TOTAL-REVENUES> 323,563
<CGS> 97,819
<TOTAL-COSTS> 399,424
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,476
<INCOME-PRETAX> (73,298)
<INCOME-TAX> 0
<INCOME-CONTINUING> (73,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (73,298)
<EPS-PRIMARY> (0.004)
<EPS-DILUTED> 0
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