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 November 30, 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 January 5, 1998
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 Nov. 30, Aug. 31,
____________________________________________ 1997 1997
Current assets: ---------- ----------
Cash and cash equivalents $ 363,259 $ 43,681
Receivables 188,893 406,874
Inventories 536,379 542,226
Prepaid expenses 15,375 20,500
Deposits 11,490 6,850
---------- ----------
Total current assets 1,115,396 1,020,131
Property and equipment, net 274,601 280,396
Long-term trade receivables 68,480 68,480
---------- ----------
$ 1,458,477 $ 1,369,007
Liabilities and Stockholders' Equity
_____________________________________________
Current liabilities:
Current portion of long-term debt $ 74,136 $ 251,723
Current portion of deferred revenue 62,801 82,850
Accounts payable 297,835 323,918
Accrued expenses 395,079 207,913
---------- ----------
Total current liabilities 829,851 866,404
---------- ----------
Long-term debt 69,648 89,697
Deferred revenue 124,782 104,733
---------- ----------
194,430 194,430
---------- ----------
Total liabilities 1,024,281 1,060,834
---------- ----------
Stockholders' equity:
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 20,413,575 20,413,575
Accumulated deficit (19,662,466) (19,784,689)
Deferred compensation (459,446) (463,246)
Less 234,928 shares of treasury stock, at cost (19,237) (19,237)
---------- ----------
Total stockholders' equity 434,196 308,173
---------- ----------
$ 1,458,477 $ 1,369,007
========== ==========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarters ended November 30, 1997 and 1996
Nov. 30 Nov. 30
1997 1996
---------- ----------
Product sales $ 575,530 73,051
Grant and license revenue 67,863 118,666
---------- ----------
Total revenues 643,393 191,717
---------- ----------
Costs and expenses:
Cost of product sales 201,263 93,565
Research and development 66,539 99,035
Selling, general, and administrative 249,438 334,761
---------- ----------
Total costs and expenses 517,240 527,361
---------- ----------
Operating income (loss) 126,153 (335,644)
Other income (expense):
Interest income 758 5,735
Gain on settlement of accounts payable - 4,738
Interest expense (4,738) (6,764)
Other, net 50 301
---------- ----------
Total other income (expense) (3,930) 4,010
---------- ----------
Net income (loss) 122,223 (331,634)
========== ==========
Net income (loss) per common and
common equivalent share $ 0.01 (.02)
========== ==========
Weighted average number of shares outstanding 17,314,726 17,297,067
========== ==========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Quarters ended November 30, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalents Nov. 30 Nov. 30
___________________________________________________ 1997 1996
Cash flows from operations activities: ---------- ----------
Net income (loss) $ 122,223 (331,634)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 5,794 163,678
Deferred compensation 3,800 -
Gain on settlement of accounts payables - (4,738)
(Increase) decrease in:
Receivables 217,981 492,905
Inventories 5,847 (12,266)
Prepaid expenses and other assets 485 9,075
Increase (decrease) in:
Accounts payable (26,083) 43,558
Accrued expenses 187,166 (137,869)
Deferred revenue (20,049) -
---------- ----------
Net cash (used in) provided by
operations activities 497,164 222,709
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment - (46,150)
---------- ----------
Cash flows from financing activities:
Net proceeds from (payments on) short-term
notes payable (158,103) (5,626)
Principal payments on capital lease obligation (12,659) (11,160)
Principal payments on long-term debt obligation (6,824) (6,239)
---------- ----------
Net cash used in financing activities (177,586) (23,025)
---------- ----------
Increase (decrease) in cash and cash equivalents $ 319,578 153,533
Cash and cash equivalents, beginning of period 43,681 381,746
---------- ----------
Cash and cash equivalents, end of period $ 363,259 535,279
========== ==========
Supplemental Disclosure of Cash Flow Information
___________________________________________________
Cash paid during the period for interest $ 4,738 6,764
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The Condensed Consolidated Balance Sheet as of November 30,
1997, and the Condensed Consolidated Statements of Operations and
the Condensed Consolidated Statements of Cash Flow for the
quarters ended November 30, 1997, and November 30, 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 November 30, 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 November 30, 1997,
are not necessarily indicative of the results to be expected for
the full year.
Note 2. Net Income (Loss) Per Common Share
Net Income (Loss) per common share for the quarters ended
November 30, 1997, and November 30, 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
November 30, 1997, financial statements because of the reduction
in the valuation allowance for deferred taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Total assets increased from $1,369,007 at August 31, 1997, to
$1,458,477 at November 30, 1997, an increase of $89,470, or
6.53%, due to an increase in cash. Cash increased by $319,578,
an increase of 731.62%, primarily caused by collection on
accounts receivable and deposits on future orders.
Receivables decreased $217,981, a decrease of 53.57%, caused by
collection on accounts receivable and periodic business
fluctuations. Total inventories decreased by $5,847, a slight
decrease of 1.08%, due to periodic business fluctuations.
Total current liabilities decreased by $36,553, a decrease of
4.22%. The decrease was primarily caused by normal periodic
fluctuations.
The Company has long term receivables for field service
contracts, as of November 30, 1997, of $68,480.
Fluctuations in Operating Results
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 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. For
these and other reasons, the results of operations for a
particular fiscal period may not be indicative of results for any
other period.
Results of Operations:
Three Months ended November 30, 1997
Net Sales for the three months ended November 30, 1997,
increased by $502,479, an increase of 687.85% as compared with
the three months ended November 30, 1996, due to increased orders
for the Company's new product line, the BSD-2000-3D/MR. (The
first BSD-2000-3D was installed in August 1997. BSD is
completing the modifications required for the installation of the
MR portion of this system, which is projected for installation in
February or March 1998.) BSD has received total orders of
$1,631,978 for sales of this new product line, and, as of
November 30, 1997, has a remaining back-log of $672,604 for the
new product.
Gross profit was $374,267 in the quarter ended November 30,
1997, as compared to a loss of $20,514 in the quarter ended
November 30, 1996, as a result of the above referenced increase
in sales.
Selling, General and Administrative Expenses decreased by
$85,323, a decrease of 25.49%, as compared with the corresponding
three months in the previous year. The decrease was primarily
caused by a significant decrease in deferred compensation related
to vesting of stock options, as compared to the same quarter last
year.
Research and Development Expenses decreased by $32,496, a
decrease of 32.81%. The decrease was caused by completion of the
BSD-2000-3D product line and near completion of the MR portion of
this sytem.
Total Operating Expenses decreased by $10,121, a decrease of
1.92%, as compared with the corresponding three months in the
previous fiscal year. This decrease was primarily caused by the
aforementioned decreases in Research and Development and Selling,
General and Administrative expenses.
The Operating Income for the three months ended November 30,
1997, was $126,153, as compared with the Operating Loss of
$335,644 for the corresponding three months in the previous
fiscal year. This increase was primarily caused by the
aforementioned increase in sales and decrease in operating costs.
Interest Expense in the three months ended November 30, 1997,
was $4,738, as compared with the $6,764 of Interest Expense in
the three months ended November 30, 1996. The increase was
caused by typical periodic business fluctuations.
The Net Income for the quarter ending November 30, 1997, was
$122,223, as compared with the Net Loss of $331,634 for the
quarter ending November 30, 1996. The primary reason for this
increase was the aforementioned increase in sales and decrease in
operating costs.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
UROLOGIX, INC. VS. BSD MEDICAL CORPORATION, United States District
Court for the District of Minnesota, Civil Action No. 4-96-647.
On December 22, 1997, the United States District Court for the
District of Minnesota issued a significant ruling in the litigation
between BSD Medical Corporation and Urologix, Inc. (At Urologix'
request, the lawsuit is under seal by the Court; therefore, only
limited information about the litigation and the Court's ruling can
be provided.) The litigation concerns the continued validity of
the non-exclusive license (to practice certain patents) granted by
BSD to Urologix in settlement of prior patent infringement
litigation. In its counterclaim against Urologix, BSD alleged that
Urologix breached a confidentiality provision of the license
agreement and that the Company's termination of the license
agreement was therefore proper (see Part I, Item 3, August 31,
1997, 10-KSB). The counterclaim also seeks recovery of significant
damages caused to BSD as a result of Urologix' breach. In ruling
on the parties' cross-motions for summary judgment, the District
Court denied Urologix' motion and granted BSD's motion, finding
that Urologix had breached the license agreement. The remaining
issues in the case are set to go to trial on or after February 16,
1998, at which time BSD will pursue recovery of the damages caused
to it by Urologix' breach of the confidential agreement.
ITEM 5. OTHER INFORMATION
Dr. Michael Nobel has accepted a position as a member of the
Board of Directors of the Company. Dr. Nobel is currently CEO of
the MRAB group, which provides diagnostic imaging services, and
is either chairman or a member of the board of five international
companies involved in medical diagnostics and treatment. Dr.
Nobel participated in the introduction of magnetic resonance
imaging (as European Vice President for Fonar Corporation) and
has worked in that field since 1980. Dr. Nobel is the Chairman
of the Board of the Nobel Family Society and is a great-
grandnephew of Alfred Nobel. He has served as a consultant to
Unesco in Paris and the United Nations Social Affairs Division in
Geneva and is Chairman of the American Non-Violence Project Inc.
On December 5, 1997, the Company signed a new lease agreement
for the Company's facilities with a new owner. The new owner
paid $700,000 to BSD for the Company's option to purchase the
building. As part of the agreement, the Company will lease the
building from the new landlord for an annual rental expense of
$78,396. The Company also has an option to purchase the building
after 18 months for $775,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are 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: January 13, 1998 by: /s/ Paul F. Turner
Paul F. Turner
Chairman of the Board, Acting President,
and Senior Vice President of Research
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<ALLOWANCES> (10,000)
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<CURRENT-ASSETS> 1,115,396
<PP&E> 1,057,082
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<BONDS> 194,430
0
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<COMMON> 161,770
<OTHER-SE> 272,426
<TOTAL-LIABILITY-AND-EQUITY> 1,458,477
<SALES> 575,530
<TOTAL-REVENUES> 643,393
<CGS> 201,263
<TOTAL-COSTS> 517,240
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<INTEREST-EXPENSE> 4,738
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<INCOME-TAX> 0
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