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, 1999
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 11, 2000
Common stock, $.01 Par Value 16,698,975
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 November 30,
------ 1999
Current assets: -----------
Cash and cash equivalents $ 1,402,841
Receivables 81,410
Inventories 1,139,393
Prepaid Expenses 15,375
Deposits 17,342
-----------
Total current assets 2,656,361
-----------
Property and equipment, net 92,423
Long-term trade receivables 12,740
Patents, net 13,860
-----------
$ 2,775,384
-----------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 93,545
Accrued expenses 905,752
Current portion of long-term debt 11,730
Current portion of deferred revenue 71,712
Current portion on deferred gain on 61,416
sale-leaseback -----------
Total current liabilities 1,144,155
-----------
Long term liabilities
Deferred revenue 24,717
Deferred gain on building transaction 122,753
-----------
Total liabilities 1,291,625
-----------
Stockholders' equity:
Common stock, $.01 par value; authorized 166,940
20,000,000 shares; issued and
outstanding 16,693,975, shares
Additional paid-in capital 20,688,109
Deferred compensation (155,686)
Accumulated deficit (19,215,370)
Common stock in treasury 13,412 shares, (234)
at cost -----------
Net stockholders' equity 1,483,759
-----------
$ 2,775,384
===========
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Operations
(Unaudited)
Periods ended November 30,
1999 1998
---------- ----------
Product sales $ 80,930 $ 107,692
Grant and license revenue 112,036 -
---------- ----------
Total revenues 192,966 107,692
---------- ----------
Costs and expenses:
Cost of product sales 36,223 86,678
Research and development 125,051 105,693
Selling, general, and 327,411 230,443
administrative ---------- ----------
Total costs and expenses 488,685 338,135
---------- ----------
Operating loss (295,719) (230,444)
Other income (expense):
Interest income 17,792 31,556
Interest expense (284) (1,178)
(Loss) income in joint venture (114,999) (122,231)
---------- ----------
Total other income (expense) (97,491) (91,853)
---------- ----------
Net loss $ (393,210) $ (322,296)
========== ==========
Basic net income (loss) per
common and common equivalent $ (.02) $ (.02)
share ---------- ----------
Diluted net income (loss) per
common and common equivalent $ (.02) $ (.02)
share ---------- ----------
Weighted average number of
shares outstanding
Primary 16,694,000 16,370,000
---------- ----------
Diluted 16,694,000 16,370,000
---------- ----------
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Cash Flows (Unaudited)
Three Months ended November 30,
Increase (Decrease) in Cash and Cash
Equivalents 1999 1998
- -------------------------------------- ---------- ----------
Cash flows from operating activities:
Net loss $ (393,210) (322,296)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,178 4,634
Deferred gain on sale of building (15,354) (15,354)
Deferred compensation 3,800 3,800
(Increase) decrease in:
Receivables (22,144) (4,251)
Inventories (231,152) (53,076)
Prepaid expenses and deposits 8,831 7,625
Increase (decrease) in:
Accounts payable 62,756 29,598
Accrued expenses 233,281 (92,816)
Deferred Income (14,613) 14,340
Loss (income) from equity investment 114,999 122,231
---------- ----------
Net cash used in operating (247,628) (305,565)
activities ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (10,439) (10,689)
Purchase of patent license (13,929) -
---------- ----------
Net cash used in investing (24,368) (10,689)
activities
Cash flows from financing activities:
Principal payments on long-term debt (14,192) (15,560)
obligation ---------- ----------
Net cash used in financing (14,192) (15,560)
activities ---------- ----------
Decrease in cash and cash equivalents $ (286,188) (331,815)
Cash and cash equivalents, beginning of 1,689,029 2,798,032
period ---------- ----------
Cash and cash equivalents, end of period $1,402,841 2,466,217
========== ==========
Supplemental Disclosure of Cash Flow
Information
- --------------------------------------
Cash paid for interest during period $ 284 1,178
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Financial Statements
Note 1. Basis of Presentation
The Condensed Balance Sheet as of November 30, 1999; the
Condensed Statements of Operations for the three months ended
November 30, 1999, and 1998; the Condensed Statements of Cash
Flows for the three months ended November 30, 1999, and 1998,
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, 1999,
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 November 30, 1998, 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
November 30, 1998, 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 November 30, 1999,
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, 1999, and November 30, 1998, 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
$2,775,384 at November 30, 1999, a decrease of $22,533, or .008%,
primarily due to a decrease in cash. Cash decreased by $286,188,
a decrease of 16.94%, primarily due to use of cash for working
capital.
Receivables increased by $22,144, an increase of 37.36%,
primarily due to normal periodic business fluctuations. Total
inventories increased by $231,152, an increase of 25.45%, due to
purchase of materials for future shipments.
Total current liabilities increased by $382,231, an increase of
50%. This increase was primarily caused by increases in accrued
expenses, principally customer deposits, and increases in
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 November 30, 1999.
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:
- ----------------------
Three Months ended November 30, 1999
Product Sales were $80,930 for the three months ended November
30, 1999, a decrease of $26,761, or 24.85%, as compared to
$107,692 for the three months ended November 30, 1998, primarily
due to a delay in processing of European orders while the Company
obtains 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 anticipates receipt of CE Mark approval
by the end of January 2000. (As of January 11, 2000, BSD has a
backlog of $1,747,750.)
Gross profit on product sales increased to $44,707 for the
three months ended November 30, 1999, as compared to $21,014 for
the three months ended November 30, 1998, as a result of reduced
material and indirect labor costs and an adjustment in the
manufacturing rate for labor and overhead.
Selling, General and Administrative Expenses were $327,411 for
the three months ended November 30, 1999, an increase of $95,211,
or 41.32%, as compared to $230,443 for the three months ended
November 30, 1998, primarily as a result of increased sales and
marketing expenditures.
Research and Development Expenses increased to $125,051 for the
three months ended November 30, 1999, as compared to $105,693 for
the three months ended November 30, 1998, an increase of $19,358,
or 18.32%. The increase was due to increased resources devoted
to completion of the BSD-2000/3D system and the costs associated
with obtaining CE Marking approval for this system.
Total Costs and Expenses increased by $148,792, an increase of
44%, primarily caused by the aforementioned increases in Selling,
General and Administrative and Research and Development Expenses.
Interest Expense for the three months ended November 30, 1999,
was $284, as compared to $1,178 of Interest Expense for the three
months ended November 30, 1998. 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 November 30, 1999, was
$393,210, as compared with a Net Loss of $322,296 for the three
months ending November 30, 1998. The primary reason for this
decrease was the decrease in product sales, increase in selling,
general and administrative expenses, and the equity loss in
TherMatrx.
YEAR 2000 COMPLIANCE. All of BSD Medical's systems are fully
Year 2000 (Y2K) compliant, with the exception of the BSD-500 and
some BSD-2000 systems. To make these systems Y2K compliant and
permit unrestricted use, the Company has rewritten the software
for the BSD-2000 and BSD-500 systems, which is available for
purchase. The cost to BSD Medical to address this issue is not
material - less than $10,000. In the event that a customer
elects not to purchase the updated software, their system can
still be 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 will
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.
The Company has installed software upgrades for its accounting
and manufacturing systems that are warranted by the vendors to be
Y2K compatible. The Company is currently evaluating its other
computerized systems. The aggregate costs to upgrade systems for
Y2K compliance appear to be below $13,000, and these costs will
be amortized over five years. There do not appear to be any
other material internal issues at this time. The Company is
unaware of any problems with its computerized systems after the
occurrence of Y2K.
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 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 11, 2000 /s/ Hyrum A. Mead
-----------------------
Hyrum A. Mead
President
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<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 1,402,841
<SECURITIES> 0
<RECEIVABLES> 91,380
<ALLOWANCES> (9,970)
<INVENTORY> 1,139,393
<CURRENT-ASSETS> 2,656,361
<PP&E> 784,391
<DEPRECIATION> (691,968)
<TOTAL-ASSETS> 2,775,384
<CURRENT-LIABILITIES> 1,144,155
<BONDS> 0
0
0
<COMMON> 166,940
<OTHER-SE> 1,316,819
<TOTAL-LIABILITY-AND-EQUITY> 2,775,384
<SALES> 80,930
<TOTAL-REVENUES> 192,966
<CGS> 36,223
<TOTAL-COSTS> 488,685
<OTHER-EXPENSES> 97,207
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284
<INCOME-PRETAX> (393,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (393,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (393,210)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
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