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 29, 2000
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 April 3, 2000
Common stock, $.01 Par Value 17,277,793
Transitional Small Business Disclosure Format (Check one):
Yes [] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BSD MEDICAL CORPORATION
Condensed Balance Sheets
(Unaudited)
Assets February 29,
------ 2000
------------
Current assets:
Cash and cash equivalents $ 837,533
Receivables 76,949
Inventories 1,418,863
Prepaid Expenses 10,250
Deposits 8,818
------------
Total current assets 2,352,413
------------
Property and equipment, net 89,028
Long-term trade receivables 12,740
Patents, net 13,655
------------
$ 2,467,836
------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 130,254
Accrued expenses 1,002,617
Current portion of long-term debt 6,780
Current portion of deferred revenue 64,026
Current portion on deferred gain on sale 61,416
- leaseback
------------
Total current liabilities 1,265,093
------------
Long term liabilities
Deferred revenue 10,322
Deferred gain on building 107,399
transaction
------------
Total liabilities 1,382,814
------------
Stockholders' equity:
Common stock, $.01 par value; authorized 169,257
20,000,000 shares; issued and
outstanding 16,919,349, shares
Additional paid-in capital 20,693,856
Deferred compensation (155,686)
Accumulated deficit (19,622,170)
Common stock in treasury 24,331 shares, (235)
at cost
------------
Net stockholders' equity 1,085,022
------------
$ 2,467,836
============
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Operations
(Unaudited)
Periods ended February 29, 2000 and February 28, 1999
Three Months Six Months
Ended: Ended:
-------------------------------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2000 1999 2000 1999
-------- -------- -------- --------
Product sales $ 87,320 119,915 $ 168,250 227,607
Grant and license revenue 20,538 23,780 132,574 23,780
-------- -------- -------- --------
Total revenues 107,858 143,695 300,824 251,387
-------- -------- -------- --------
Costs and expenses:
Cost of product sales 53,554 121,481 89,776 208,159
Research and development 146,029 117,603 271,080 228,596
Selling, general, and 235,292 148,882 562,575 289,348
administrative
-------- -------- -------- --------
Total costs and expenses 434,875 387,966 923,560 726,103
-------- -------- -------- --------
Operating loss (327,017) (244,271) (622,736) (474,716)
Other income (expense):
Interest income 14,809 24,950 32,601 56,506
Interest expense (235) (850) (519) (2,027)
Loss in joint venture (94,539) (166,313) (209,539) (288,545)
-------- -------- -------- --------
Total other income (expense) (79,965) (142,213) (177,457) (234,066)
-------- -------- -------- --------
Net loss before income taxes $(406,982) (386,484) $(800,193) (708,782)
Income tax expense - (32,827) - (32,827)
-------- -------- -------- --------
Net loss (406,982) (419,311) (800,193) (741,609)
======== ======== ======== ========
Net income (loss) per common and
common equivalent share $ (0.02) (0.03) $ (0.05) (0.05)
======== ======== ======== ========
Weighted average number of shares 16,919,000 16,680,000 16,919,000 16,680,000
outstanding ========== ========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Cash Flows (Unaudited)
Periods ended February 29, 2000 and February 28, 1999
Increase (Decrease) in Cash and Cash
Equivalents 2000 1999
- ------------------------------------ ----------- -----------
Cash flows from operating activities:
Net loss $ (800,193) (741,609)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 10,984 11,546
Deferred gain on sale of building (30,708) (30,708)
Deferred compensation 3,800 3,800
Sale of equipment - 1,201
(Increase) decrease in:
Receivables (17,683) 25,812
Inventories (510,622) (97,128)
Prepaid expenses and deposits 22,480 10,380
Increase (decrease) in:
Accounts payable 99,465 (8,893)
Accrued expenses 235,612 (68,105)
Deferred Income (36,700) (50,164)
Loss (income) from equity investment 209,538 288,545
----------- -----------
Net cash used in operating (814,027) (655,323)
activities ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (12,461) (27,968)
Purchase of patent license (13,928) -
Proceeds from exercise of stock 8,062 -
options ----------- -----------
Net cash used in investing (18,327) (27,968)
activities
Cash flows from financing activities:
Payments on short term notes payable - (14,221)
Principal payments on long-term debt (19,142) (15,098)
obligation ----------- -----------
Net cash used in financing activities (19,142) (29,320)
----------- -----------
Decrease in cash and cash equivalents $ (851,496) (712,610)
Cash and cash equivalents, beginning of 1,689,029 2,798,032
period ----------- -----------
Cash and cash equivalents, end of period $ 837,533 2,085,422
=========== ===========
Supplemental Disclosure of Cash Flow
Information
- ------------------------------------
Cash paid for interest during period $ 519 2,027
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Financial Statements
Note 1. Basis of Presentation
The Condensed Balance Sheet as of February 29, 2000 the
Condensed Statements of Operations for the three months ended
February 29, 2000 and February 28, 1999; the Condensed Statements
of Cash Flows for the six months ended February 29, 2000 and
February 28, 1999, 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 29, 2000 have been made. During the
period ended May 31, 1999, TherMatrx, Inc. received an additional
capital infusion from TherMatrx Investment Holdings, LLC
(assignee of Oracle Strategic Partners, L.P. and Charles Manker).
This infusion was based on TherMatrx's achievement of key success
milestones in the clinical investigation of a new therapy to
treat BPH with microwave energy. This infusion decreased BSD's
ownership of TherMatrx from 54% to 34%. During the period ending
February 28, 1999, BSD presented consolidated financials;
however, BSD has become a minority shareholder in TherMatrx and
thus has changed the method of accounting from a consolidation
method to an equity method for the investment in TherMatrx. The
financial statements for February 29, 1999 have been restated to
reflect the 34% ownership.
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 29, 2000
are not necessarily indicative of the results to be expected for
the full year.
Note 2. Detail of Certain Balance Sheet Accounts
Inventories:
Raw Materials $ 557,588
Work in Process 861,275
----------
$1,418,863
==========
Accrued expenses:
Customer deposits $ 515,850
Accrued expenses 140,761
Investment in subsidiary 346,006
----------
$1,002,617
==========
Note 3. Net Loss Per Common Share
Net Loss per common share for the three and six months period
ended February 29, 2000, and February 28, 1999 are based on the
weighted average number of shares outstanding during the
respective periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Total assets decreased from $2,797,917 at August 31, 1999, to
$2,467,836 at February 29, 2000, a decrease of $330,081, or
11.8%, primarily due to a decrease in cash of $851,496 or 50.41%
that was used for operations.
Receivables increased by $17,683, a change of 29.84%, primarily
due to normal periodic business fluctuations. Total inventories
increased by $510,622, an increase of 56.22%, due to purchase of
materials for future shipments.
Total current liabilities increased by $503,169, an increase of
66.04%. This increase was primarily caused by increases in
accrued expenses, customer deposits, and accounts payable,
combined with the equity loss in TherMatrx, Inc.
The Company has long term receivables for field service
contracts of $12,740, as of February 29, 2000.
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 a year to year basis due to volatilities associated
with international operations; budgeting considerations of the
Company's customers; the nature of the medical capital equipment
market; the ability 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:
Six Months ended February 29, 2000
Product sales for the six months ended February 29, 2000,
decreased by $59,357, or 26.08% as compared to the six months
ended February 28, 1999. This decrease resulted from inability to
fulfill European orders due to delayed receipt of the CE Mark
approval on the new BSD-2000/3D system, now required for sales to
European Union (EU) countries. The Company announced receipt of
the CE Mark for this system January 27, 2000, too late in the
quarter to begin shipment of European orders, deferring them
beyond the second quarter accounting period. (As of February 29,
2000, BSD had a backlog of $1,816,553, compared to a backlog of
$539,750 as of February 28, 1999.)
Gross profit on product sales was $78,474 in the quarter ended
February 29, 2000, an increase of $59,026 of 303.51%, as compared
to $19,448 in the quarter ended February 28, 1999, as a result of
reduced material and indirect labor costs.
Selling, General and Administrative Expenses were $562,704 for
the six months ended February 29, 2000, an increase of $273,227
or 94.43%, as compared to $289,348 for the six months ended
February 28,1999, substantially due to increased sales and
marketing expenditures for promotion of new products, and also
due to higher personnel costs.
Research and Development Expenses increased to $271,080 in the
six months ended February 29, 2000 as compared to $228,596 for
the six months ended February 28, 1999, an increase of $42,484,
or 18.58%. The increase was due to accelerated use of resources
devoted to completion of the BSD-2000/3D system, development of
new products not yet announced for sale and the costs associated
with obtaining CE Marking approval.
The Total Costs and Expenses increased by $197,457, an increase
of 27.19%, primarily resulting from the aforementioned increases
in Selling, General and Administrative and Research and
Development Expenses.
Interest expense for the six months ended February 29, 2000 was
$519, compared to $2,027 of Interest Expense for the six months
ended February 28, 1999. The decrease was caused by the lower
interest costs associated with notes payable as the notes reach
maturity.
The Net Loss for the six months ending February 29, 2000 was
$800,193 as compared to $741,609 for the six months ended
February 28, 1999. This loss was principally the result of delay
in processing of European orders while the Company was obtaining
the CE Mark for the new BSD-2000/3D system, and its holdings in
TherMatrx as an investment.
Three Months ended February 29, 2000
Product Sales were $87,320 for the three months ended February
29, 2000, a decrease of $32,595, or 27.18%, as compared to
$119,915 for the three months ended February 28, 1999 primarily
due to a delay in processing of European orders while the Company
was obtaining the CE Marking approval on the new BSD-2000/3D
system. The CE Marking is now required for sales to all European
Union (EU) countries. The Company announced receipt of the CE
Mark approval for its new system January 27, 2000. (As of
February 29, 2000, BSD had a backlog of $1,816,553, compared to a
backlog of $539,750 as of February 28, 1999.)
Gross profit on product sales increased to $33,766 for the
three months ended February 29, 1999, as compared to a loss of
$1,566 for the three months ended February 29, 1999 as a result
of reduced material and indirect labor costs.
Selling, General and Administrative Expenses were $235,292 for
the three months ended February 29, 2000, an increase of $86,410,
or 58.04%, as compared to $148,882 for the three months ended
February 28, 1999, primarily as a result of increased sales and
marketing expenditures to promote new products.
Research and Development Expenses increased to $146,029 for the
three months ended February 29, 2000, as compared to $117,603 for
the three months ended February 2, 1999, an increase of $28,426,
or 24.17%. The increase was due to accelerated use of resources
devoted to completion of the BSD-2000/3D system, development of
new products not yet announced for sale and the costs associated
with obtaining CE Mark approval.
Total Costs and Expenses increased by $46,909, an increase of
12.09%, primarily caused by the aforementioned increases in
Selling, General and Administrative and Research and Development
Expenses.
Interest Expense for the three months ended February 29, 2000
was $235, as compared to $850 of Interest Expense for the three
months ended February 28, 1999. The decrease was caused by the
lower interest costs associated with notes payable as the notes
reach maturity.
The Net Loss for the three months ending February 29, 2000, was
$406,982, as compared with a Net Loss of $419,311 for the three
months ending February 28, 1999. This loss was principally the
result of delay in processing of European orders while the
Company was obtaining the CE Mark for the new BSD-2000/3D system,
and its holdings in TherMatrx as an investment.
YEAR 2000 COMPLIANCE. BSD Medical's administrative computers
were Year 2000 (Y2K) compliant prior to January 1, 2000, and
experienced no disruption on the new year rollover. Software
upgrades making BSD products Year 2000 (Y2K) compliant were
developed by BSD, released for sale, and have been installed as
individually arranged by customers. In the event that customers
elect not to purchase the updated software, those systems can
still be safely operated by making a one-time entry of a year
between 1985 and 1999. The system operations and calculations do
not include any date driven functions, and therefore the systems
do not exhibit any change in performance due to the arrival of
the year 2000; rather the date is used only as a method to
identify the treatment record. Thus, the use of an invalid date
does not create any material risks. These systems are not
connected to any other computer systems, as they are stand-alone
systems.
FORWARD OUTLOOK AND RISKS. From time to time, the Company may
publish forward-looking statements relating to such matters as
anticipated financial performance, business prospects,
technological development, new products, research and development
activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-
looking statements. In order to comply with the terms of the
safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations
expressed in any of the Company's forward-looking statements.
This form 10-QSB contains and incorporates by reference certain
"forward-looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act with
respect to results of operations and businesses of the Company.
All statements, other than statements of historical facts,
included in this Form 10-QSB, including those regarding market
trends, the Company's financial position, business strategy,
projected costs, and plans and objectives of management for
future operations, are forward-looking statements. These forward-
looking statements are based on the Company's current
expectations. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will
prove to be correct.
CHANGING REGULATORY ENVIRONMENT. The Company's business is
subject to extensive federal, state and local regulation.
Political, economic and regulatory influences are subjecting the
health care industry in the United States to fundamental change.
See "Government Regulation" in the Company's fiscal 1999 10-KSB.
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: April 13, 2000 /s/ Hyrum A. Mead
------------------
Hyrum A. Mead
President
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<RECEIVABLES> 86,918
<ALLOWANCES> (9,969)
<INVENTORY> 1,418,863
<CURRENT-ASSETS> 2,352,413
<PP&E> 786,344
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0
0
<COMMON> 169,257
<OTHER-SE> 915,765
<TOTAL-LIABILITY-AND-EQUITY> 2,467,836
<SALES> 168,250
<TOTAL-REVENUES> 300,824
<CGS> 89,776
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