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, 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 May 31, 2000
Common stock, $.01 Par Value 17,423,692
Transitional Small Business Disclosure Format (Check one): Yes [] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BSD MEDICAL CORPORATION
Condensed Balance Sheet
(Unaudited)
Assets May 31,
2000
------------- ---------------
Current assets:
Cash and cash equivalents $ 443,400
Receivables 439,427
Inventories 1,359,068
Prepaid Expenses 5,125
Deposits 29,568
---------------
Total current assets 2,276,587
---------------
Property and equipment, net 87,752
Long-term trade receivables 12,740
Patent, net 13,450
---------------
$ 2,390,530
Liabilities and Stockholders' Equity
--------------------------------------
Current liabilities:
Current portion on deferred gain on sale 61,416
-leaseback
Current portion of long-term debt 1,715
Current portion of deferred revenue 41,946
Accounts payable 41,736
Accrued expenses 446,231
Equity investment 495,193
---------------
Total current liabilities 1,088,237
---------------
Long-term debt -
Deferred gain on building transaction 92,045
Deferred revenue 10,322
---------------
Total liabilities 1,190,604
---------------
Stockholders' equity:
Common stock, $.01 par value; authorized
20,000,000 shares; issued and
outstanding 17,423,692, shares 174,237
Additional paid-in capital 20,715,359
Accumulated deficit (19,677,963)
Deferred compensation (7,606)
Stock subscription receivable (3,867)
Less 24,331 shares of treasury stock,
at cost <234>
---------------
Net stockholders' equity 1,199,926
---------------
$ 2,390,530
===============
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Operations
(Unaudited)
Periods ended May 31, 2000 and May 31, 1999
Three Months Nine Months
Ended: Ended:
-------------- --------------
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales $ 830,978 81,086 $ 999,228 308,693
Grant and license revenue 34,099 - 166,674 23,780
---------- ---------- ---------- ----------
Total revenues 865,077 81,086 1,165,902 332,473
---------- ---------- ---------- ----------
Costs and expenses:
Cost of product sales 294,598 138,572 384,374 346,732
Research and development 175,871 141,789 446,951 370,384
Selling, general, and 309,164 407,969 871,870 741,313
administrative
---------- ---------- ---------- ----------
Total costs and expenses 779,633 688,330 1,703,195 1,458,429
---------- ---------- ---------- ----------
Operating income (loss) 85,444 (607,244) (537,293) (1,125,956)
---------- ---------- ---------- ----------
Other income (expense):
Equity Earnings in TherMatrx, (149,188) (120,046) (358,726) (408,591)
Interest income 8,255 20,515 40,856 77,023
Interest expense (121) (404) (640) (2,432)
---------- ---------- ---------- ----------
Total other expense (141,054) (99,935) (318,510) (334,000)
---------- ---------- ---------- ----------
Net loss $ (55,610) (707,179) $ (855,803) (1,459,956)
========== ========== ========== ==========
Net loss per common and common
equivalent share, basic and $ (.00) (.04) $ (.05) (.09)
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding,
basic and diluted 17,322,000 16,661,000 16,909,000 16,661,000
See accompanying notes to financial statements.
<PAGE>
BSD MEDICAL CORPORATION
Condensed Statements of Cash Flows (Unaudited)
Nine Months ended May 31, 2000, and May 31, 1999
May 31, May 31,
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $ (855,803) (1,459,956)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 16,857 17,674
Deferred compensation 151,880 151,880
Stock issued for compensation 12,000 145,489
Deferred gain on sale of asset (46,062) (46,062)
(Increase) decrease in:
Receivables (380,161) 230,920
Inventories (450,827) (311,476)
Prepaid expenses and deposits 6,855 16,406
Increase (decrease) in:
Accounts payable 10,947 3,000
Accrued expenses 25,226 137,556
Deferred income (58,774) (71,875)
Loss from equity investment 358,726 408,591
----------- -----------
Net cash used in operating (1,209,136) (777,853)
activities ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (17,038) (35,151)
Cash in unconsolidated subsidiary - (3,593,083)
Purchase of patent license (13,928) -
----------- -----------
Net cash used in investing (30,966) (3,628,234)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 18,680 -
Principal payments on long-term debt
obligation (24,207) (43,404)
----------- -----------
Net cash used in financing
activities (5,527) (43,404)
----------- -----------
Decrease in cash and cash equivalents $(1,245,629) (4,449,491)
Cash and cash equivalents, beginning of
period 1,689,029 6,391,115
----------- -----------
Cash and cash equivalents, end of period $ 443,400 1,941,624
=========== ===========
Supplemental Disclosure of Cash Flow
Information
------------------------------------
Cash paid for interest during period $ 640 2,432
Supplemental Non-cash
----------------------
Investment in entity $ - 409,985
Inventories - (32,983)
Other Assets - (2,781)
Property and equipment - (116,517)
Accounts payable - 13,329
Accrued expenses - 172,104
Minority interest - 3,149,946
----------- -----------
Total Non-cash - 3,593,083
Less cash in unconsolidated subsidiary - 3,593,083
----------- -----------
- 0
During the nine months ended May 31, 2000, the Company issued common stock
in exchange for a stock subscription receivable of $3,867.
<PAGE>
BSD MEDICAL CORPORATION
Notes to Condensed Financial Statements
Note 1. Basis of Presentation
The Condensed Balance Sheet as of May 31, 2000; the Condensed
Statements of Operations for the three and nine months ended May
31, 2000, and May 31, 1999; the Condensed Statements of Cash
Flows for the nine months ended May 31, 2000, and May 31, 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 May 31, 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%. Since BSD has become a minority shareholder in
TherMatrx, the method of accounting has changed from a
consolidation method to an equity method.
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, 2000, are
not necessarily indicative of the results to be expected for the
full year.
Note 2. Net Loss Per Common Share
Net loss per common share for the quarters ended May 31, 2000,
and May 31, 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
$2,390,530 at May 31, 2000, a decrease of $407,387, or 14.56%
primarily due to a decrease in cash of $1,245,630, or 73.75%,
that was used for working capital.
Receivables increased $380,161, an increase of 600.41%,
primarily due to an increase in sales. Total inventories
increased by $450,827, an increase of 49.64% due to purchase of
materials for future shipments.
Total current liabilities increased by $326,313, an increase of
42.83%. The increase was primarily caused by decreases in long
term debt and deferred revenue and an increase in accrued
expenses combined with the equity loss in TherMatrx, Inc.
The Company has long term receivables for field service
contracts, as of May 31, 2000, of $12,740.
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 risks 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 price 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:
Nine Months ended May 31, 2000
Product Sales increased from $308,693 in the nine months ended
May 31, 1999, to $999,228 in the nine months ended May 31, 2000,
an increase of $690,535, or 223.70%, as the Company began to ship
sales to Europe, as a result of the CE Mark, as well as receiving
additional new orders from U.S. customers.
Gross profit on product sales increased from a loss of $38,039
in the nine months ended May 31, 1999, to $614,854 in the nine
months ended May 31, 2000, as a result of efficiencies from
increased sales and high margins on sales fulfilled.
Selling, General and Administrative Expenses increased from
$741,313 in the nine months ended May 31, 1999, to $871,870 in
the nine months ended May 31, 2000, an increase of $130,557 or
17.61% due to an increased emphasis on sales and marketing.
Research and Development Expenses increased from $370,384 for
the nine months ended May 31, 1999, to $466,951 in the nine
months ended May 31, 2000, an increase of $76,567, or 20.67%, due
to increased resources devoted to completion of the BSD-
2000/3D/MR system, development of new products not yet announced
for sale and the costs associated with obtaining CE Marking
approval.
Total Costs and Expenses for the nine months ended May 31,
2000, increased by $244,766, an increase of 16.78%, primarily
resulting from the aforementioned increases in Selling, General
and Administrative and Research and Development Expenses.
Interest Expense in the nine months ended May 31, 2000, was
$640, compared with $2,432 of Interest Expense in the nine months
ended May 31, 1999. The decrease was caused by the lower
interest costs associated with notes payable as the notes reach
maturity.
The Net Loss for the nine months ending May 31, 2000, was
$855,803 as compared with a Net Loss of $1,459,956 for the nine
months ending May 31, 1999. The primary reasons for this
decrease are sharply increased sales, and a much lower percentage
cost of sales.
Three Months ended May 31, 2000
Product Sales increased from $81,086 in the three months ended
May 31, 1999, to $830,978 for the three months ended May 31,
2000, an increase of $749,892, or 925.00%. This increase was due
to processing of European orders after the Company obtained CE
Marking approval on the new BSD-2000/3D system, now required for
sales to all European Union (EU) countries.
Gross profit increased from a loss of $57,486 in the quarter
ended May 31, 1999, to $536,080 in the quarter ended May 31,
2000, as a result of the aforementioned increase in sales and the
low cost of goods sold for the quarter.
Selling, General and Administrative Expenses decreased from
$407,969 in the quarter ended May 31, 1999, to $309,164 for the
quarter ended May 31, 2000, a decrease of $98,805, or 24.22%.
The decrease was primarily caused by internal budgeting controls
and lower compensation expense associated with the issuance of
common stock.
Research and Development Expenses increased by $34,082, an
increase of 24.04%, due to increased resources devoted to
completion of the BSD-2000/3D/MR system, and development of new
products not yet announced for sale.
Total Costs and Expenses increased by $91,303 an increase of
13.26%, as compared with the corresponding three months in the
previous fiscal year. This increase was primarily caused by the
aforementioned increases in Selling, General and Administrative
expenses and Research and Development expenses.
Interest Expense in the three months ended May 31, 2000, was
$121, as compared with $404 of Interest Expense in the three
months ended May 31, 1999. The decrease was caused by the lower
interest costs associated with notes payable as the notes reach
maturity.
The Net Loss for the quarter ended May 31, 2000, was $55,610,
as compared with the Net Loss of $707,179 for the quarter ending
May 31, 1999. The primary reason for this decrease was the
aforementioned increase in product sales, and decreases in
Selling, General and Administrative expenses.
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 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 17, 2000 /s/ Hyrum A. Mead
---------------- ---------------------
Hyrum A. Mead
President
