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, 2004
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
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(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 November 30, 2004
-------------------------------------- -----------------------------------
Common stock, $.001 Par Value 20,057,333
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Item 1. Financial Statements
BSD MEDICAL CORPORATION
Condensed Balance Sheet
(Unaudited)
Assets November 30,
------ 2004
-----------------
Current assets:
Cash and cash equivalents $ 9,025,386
Receivables, net 239,612
Related party receivables 71,594
Inventories 794,088
Other current assets 883,416
-----------------
Total current assets 11,014,096
-----------------
Property and equipment, net 151,567
Patents, net 24,537
-----------------
$ 11,190,200
-----------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 133,883
Accrued expenses 272,008
Current portion of deferred revenue 37,109
-----------------
Total current liabilities 443,000
-----------------
Long term liabilities
Deferred tax liability 51,000
-----------------
Total liabilities 494,000
-----------------
Stockholders' equity:
Preferred stock, .001 par value; 10,000,000
authorized, no shares issued and outstanding -
Common stock, $.001 par value; authorized
40,000,000 shares; issued 20,070,745 and
outstanding 20,057,333, shares
20,058
Additional paid-in capital 23,287,908
Deferred compensation (34,050)
Accumulated deficit (12,577,482)
Common stock in treasury 13,412 shares, at cost (234)
-----------------
Net stockholders' equity 10,696,200
-----------------
$ 11,190,200
=================
See accompanying notes to financial statements
1
BSD MEDICAL CORPORATION
Condensed Statements of Operations
(Unaudited)
Three Months
Ended:
----------------------------------------
November November
30, 2004 30, 2003
------------------ ------------------
Sales $ 250,779 $ 193,909
Sales to related parties 7,154 487,225
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Total revenues 257,933 681,134
------------------ ------------------
Costs and expenses:
Cost of product sales 266,063 123,450
Cost of sales to related parties 4,308 206,680
Research and development 182,513 162,558
Selling, general and administrative 380,500 212,575
------------------ ------------------
Total costs and expenses 833,384 705,263
------------------ ------------------
Operating loss (575,451) (24,129)
Other income (expense):
Interest income 70,592 101
Interest expense - (108)
Other income/expense 523 -
------------------ ------------------
Total other income 71,115 (7)
------------------ ------------------
Loss before taxes (504,336) (24,136)
------------------ ------------------
Income tax provision - -
------------------ ------------------
Net Loss $ (504,336) $ (24,136)
================== ==================
Net Loss per common share
Basic and diluted $ (.03) $ .00
------------------ ------------------
Weighted average number of shares outstanding 20,041,000 17,896,000
Basic
------------------ ------------------
Diluted 20,041,000 17,896,000
------------------ ------------------
See accompanying notes to financial statements
2
BSD MEDICAL CORPORATION
Condensed Statements of Cash Flows (Unaudited)
Three months ended November 30, 2004 and 2003
2004 2003
-----------------------------------
Cash flows from operating activities:
Net loss $ (504,336) $ (24,136)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 9,043 11,675
Stock compensation expense 30,000 12,000
Deferred compensation 9,508 7,858
(Increase) decrease in:
Receivables (51,902) 59,223
Inventories (53,672) 92,746
Prepaid expenses and deposits (3,350) 6,148
Increase (decrease) in:
Accounts payable 34,752 (59,943)
Accrued expenses (151,907) (177,321)
Deferred revenue (10,114) (14,877)
-----------------------------------
Net cash used in operating activities (691,978) (86,627)
-----------------------------------
Cash flows used in investing activities-
Purchase of property and equipment (21,040) -
-----------------------------------
Cash flows provided by financing activities-
Proceeds from sale of common stock 41,250 2,002,000
-----------------------------------
(Decrease) increase in cash and cash equivalents (671,768) 1,915,373
Cash and cash equivalents, beginning of period 9,697,154 136,003
----------------------------------
Cash and cash equivalents, end of period $ 9,025,386 $ 2,051,376
===================================
Supplemental Disclosure of Cash Flow Information
------------------------------------------------
o The Company paid no cash for interest and taxes for the period
ended November 30, 2004 and $108 for interest and no cash for
taxes during the period ended November 30, 2003.
o The Company issued 75,000 options for the periods ended November
30, 2004 and 2003, which resulted in an increase to Deferred
Compensation of $15,750 and $8,250 respectively.
See accompanying notes to financial statements
3
BSD MEDICAL CORPORATION
Notes to Condensed Financial Statements
Note 1. Basis of Presentation
The Condensed Balance Sheet as of November 30, 2004 and the Condensed
Statements of Operations and the Condensed Statements of Cash Flow for the three
months ended November 30, 2004 and November 30, 2003, 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, 2004, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. The
results of operations for the period ended November 30, 2004, 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 November 30, 2004 and
2003, is based on the weighted average number of shares outstanding during the
respective periods. Diluted earnings per share is based upon the weighted
average share per common stock equivalent. When common stock equivalents are
anti dilutive they are not included.
Note 3. Related Party Transactions
During the periods ended November 30, 2004 and 2003, the Company had
sales to an unconsolidated affiliate and an entity controlled by a significant
stockholder of $7,154 and $487,225, respectively. These related party
transactions represents 3% and 72 % of total sales. Related party revenue from
TherMatrx was $0 in the period ended November 30, 2004 compared to $20,572 in
period ended November 30, 2003.
At November 30, 2004, receivables includes $71,594 due from an entity
controlled by a significant stockholder.
Note 4. Common Stock
During the period ended November 30, 2003, the Company completed the
sale of an aggregate of 1,820,000 shares of common stock to three institutional
investors. The shares of common stock were sold for cash consideration of $1.10
per share, or a total of $2,002,000, pursuant to the terms of the Securities
Purchase Agreement. These gross proceeds were off-set by $165,653 of accrued
offering costs and commissions. In connection with this sale the Company issued
a three-year warrant to the placement agent to purchase up to 91,000 shares of
the Company's common stock at an exercise price per share of $1.80 per share.
Note 5. Stock-Based Compensation
The Company accounts for stock options granted to employees under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations, and has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation." Accordingly, only the
intrinsic value has been recognized in the financial statements as expense. Had
the Company's options been determined based on the fair value method, the
results of operations would have been reduced to the pro forma amounts indicated
below for the three months ended November 30:
4
2004 2003
-------------------------------
Net loss - as reported $ (504,336) $ (24,136)
Add: Stock-based employee compensation
expense included in reported
net income, net of related tax effects 15,750 8,250
Deduct total stock based employee
compensation expense determined under
fair value based method for all awards,
net of related taxes (103,089) (33,250)
-------------------------------
Net loss - pro forma $ (591,675) $ (49,136)
-------------------------------
Basic and Diluted income (loss) per
share - as reported $ (.03) $ .00
-------------------------------
Basic and Diluted income (loss ) per
share - pro-forma $ (.03) $ .00
-------------------------------
The fair value of each option granted for the three months ended
November 30, 2004 and 2003 is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
----------------------------------
2004 2003
----------------------------------
Expected dividend yield $ - $ -
Expected stock price volatility 83% 114%
Risk-free interest rate 3.32% 4.2%
Expected life of options 10 years 5 years
The weighted average fair value of options granted during the three
months ended November 30, 2004 and 2003 were $1.20 and $.64, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this report contain forward-looking
statements that involve risks and uncertainties. Forward-looking statements can
also be identified by words such as "anticipates," "expects," "believes,"
"plans," "predicts," and similar terms. Forward-looking statements are not
guarantees of future performance and our actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such differences include, but are not limited to, those discussed in the
subsections entitled "Forward-Looking Statements" below. The following
discussion should be read in conjunction with our consolidated financial
statements and notes thereto included in this report. All information presented
herein is based on our quarter ended November 30, 2004. We assume no obligation
to revise or update any forward-looking statements for any reason, except as
required by law.
General
-------
We develop, manufacture, market and service systems that deliver
focused electromagnetic energy for use in a variety of medical therapies and
applications. Our objective is to commercialize our developed products and
further expand the application of our technology into new markets. We pioneered
the use of microwave thermal therapy for the treatment of the symptoms
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associated with enlarged prostate, and are responsible for much of the
technology that has created a substantial medical industry using that therapy.
Our longest-term development has been the application of focused electromagnetic
energy for the treatment of cancer.
One of our significant contributions to the advancement of medical
therapy has been our pioneering efforts in developing a new treatment for
conditions associated with enlargement of the prostate that afflicts most men as
they age. As the prostate enlarges it constricts urine flow. The condition is
known medically as benign prostatic hyperplasia or BPH. We developed a
technology that allows men to be treated for BPH through an outpatient procedure
as an alternative to surgery or a lengthy regimen of medication.
We determined early in our planning that we would treat our BPH
development as a spin-off business with the intent of providing an asset that
could help fund our other business plans. As a result, we introduced the
opportunity to investment groups and subsequently on October 31, 1997 entered
into an agreement with investors Oracle Strategic Partners, L.P. and Charles
Manker. Together we established a new company, TherMatrx, which was
independently managed.
On July 15, 2004, TherMatrx was sold to American Medical Systems, Inc.
(AMS). Our portion of the initial payment from this sale was nearly $9 million,
with additional payments contingent on the quarterly sales of TherMatrx through
the fourth calendar quarter of 2005. We have estimated that our portion of the
total payout from this sale will be approximately $40 million. If TherMatrx
sales exceed our projections, the maximum payout that we could receive from the
sale is $62.5 million. If TherMatrx sales fall under our projections, there is
no guarantee of any further payment beyond the initial payment, which is
non-refundable.
Since the inception of our company we have engineered systems designed
to increase the effectiveness of cancer treatment through the use of focused
electromagnetic energy. From this development our current BSD-500 and BSD-2000
systems have emerged. We have also developed enhancements to our BSD-2000
system, including the BSD-2000/3D that is designed to allow three dimensional
steering of deep focused energy and heat to targeted tumors and tissue and the
BSD-2000/3D/MR that includes an interface for magnetic resonance imaging. These
systems are sold with supporting software and may also be sold with support
services.
Our accumulated deficit since inception decreased from $20,570,242 as
of November 30, 2003 to $12,577,482 as of November 30, 2004 due to net income
recorded during our fiscal year ended August 31, 2004 as a result of our sale of
our interest in TherMatrx. We recorded a net loss for the first quarter of
fiscal 2005 of $504,336.
We recognize revenue from the sale of cancer treatment systems, the
sale of parts and accessories related to the cancer treatment systems, the sale
of software license rights, providing manufacturing services, training, and
service support contracts. Product sales were $215,458 and $633,820 for the
first quarters of fiscal 2005 and 2004, respectively. Service revenue was
$42,475 and $47,314 for the first quarters of fiscal 2005 and 2004,
respectively.
We derived $7,154, or 3%, of our revenue for the first quarter of
fiscal 2005, from sales to a related party, Medizin-Technik GmbH. Dr. Gerhard
Sennewald, one of our directors, is a stockholder, executive officer and a
director of Medizin-Technik GmbH.
In the first quarter of fiscal 2005, we derived $250,779, or 97%, of
our revenue from sales to unrelated parties. These revenues consisted of product
sales of approximately $207,000, consulting services of approximately $29,000,
service contracts of approximately $13,000, and other miscellaneous revenue of
approximately $2,000.
6
Cost of sales for the first quarter of fiscal 2005, included raw
material and labor costs. Research and development expenses include expenditures
for new product development and development of enhancements to existing
products.
Critical Accounting Policies and Estimates
------------------------------------------
The following is a discussion of our critical accounting policies and
estimates that management believes are material to an understanding of our
results of operations and which involve the exercise of judgment or estimates by
management.
Revenue Recognition. Revenue from the sale of cancer treatment systems
is recognized when a purchase order has been received, the system has been
shipped, the selling price is fixed or determinable, and collection is
reasonably assured. Most system sales are F.O.B. shipping point; therefore,
shipment is deemed to have occurred when the product is delivered to the
transportation carrier. Most system sales do not include installation. If
installation is included as part of the contract, revenue is not recognized
until installation has occurred, or until any remaining installation obligation
is deemed to be perfunctory. Some sales of cancer treatment systems may include
training as part of the sale. In such cases, the portion of the revenue related
to the training, calculated based on the amount charged for training on a
stand-alone basis, is deferred and recognized when the training has been
provided. The sales of our cancer treatment systems do not require specific
customer acceptance provisions and do not include the right of return except in
cases where the product does not function as guaranteed by BSD. We provide a
reserve allowance for estimated returns. To date, returns have not been
significant.
Revenue from manufacturing services is recorded when an agreement with
the customer exists for such services, the services have been provided, and
collection is reasonably assured. Revenue from training services is recorded
when an agreement with the customer exists for such training, the training
services have been provided, and collection is reasonably assured. Revenue from
service support contracts is recognized on a straight-line basis over the term
of the contract, which approximates recognizing it as it is earned.
Our revenue recognition policy is the same for sales to both related
parties and non-related parties. We provide the same products and services under
the same terms for non-related parties as with related parties. Sales to
distributors are recognized in the same manner as sales to end-user customers.
Deferred revenue and customer deposits payable include amounts from service
contracts as well as cash received for the sales of products, which have not
been shipped.
Inventory Reserves. As of November 30, 2004, we had recorded a reserve
for potential inventory impairment of $80,000. We periodically review our
inventory levels and usage, paying particular attention to slower-moving items.
If projected sales for fiscal 2005 do not materialize or if our hyperthermia
systems do not receive increased market acceptance, we may be required to
increase the reserve for inventory in future periods. We have projected no
orders to be placed with us for TherMatrx systems, and do not project a
requirement for any inventory impairment based on this decline. In the past we
have purchased inventory only after receiving orders for TherMatrx systems, and
only in quantities sufficient to fulfill those orders. We have no inventory for
TherMatrx systems that is currently at risk, whether or not future orders are
placed with us for TherMatrx systems.
Product Warranty. We provide product warranties on our BSD-500 and
BSD-2000 systems. These warranties vary from contract to contract, but generally
consist of parts and labor warranties for one year from the date of sale. To
date, expenses resulting from such warranties have not been material. We record
a warranty expense at the time of each sale. This reserve is estimated based on
prior history of service expense associated with similar units sold in the past.
Allowance for Doubtful Accounts. We provide our customers with payment
terms that vary from contract to contract. Our allowance for doubtful accounts
at November 30, 2004 was $0. Bad debt expense for the quarter ended November 30,
7
2004 was approximately $9,000. We perform ongoing credit evaluations of our
customers and maintain allowances for possible losses. Allowance estimates are
recorded on a customer-by-customer basis and are determined based on the age of
the receivable, compliance with payment terms, and prior history with existing
clients. The non-payment of a receivable related to the sale of a BSD-500 or
BSD-2000 could have a material adverse impact on our results of operations.
Results of Operations
---------------------
Three Months Ended November 30, 2004 compared to the Three Months Ended November
30, 2003
Revenue. Revenue for the first quarter of fiscal 2005 was $257,933
compared to $681,134 for the first quarter of fiscal 2004, a decrease of
$423,201, or approximately 62%. The decrease in total revenue was primarily due
to a decrease in sales to related parties. Sales to Medizin-Technik totaled
$7,154 in the first quarter of fiscal 2005 compared to $466,633 in the first
quarter of fiscal 2004. Dr. Gerhard Sennewald, one of our directors, is a
stockholder, executive officer and a director of Medizin-Technik GmbH. Sales to
Medizin-Technik may fluctuate significantly depending on Medizin-Technik's
anticipated sales and ability to place orders in Europe. Our revenue can
fluctuate significantly from period to period because we have historically sold
relatively few BSD-2000 and BSD-500 systems as these systems are expensive.
Sales of a few systems can cause a large change in the revenue from period to
period as noted in the decrease in sales to Medizin-Technik from the first
quarter of fiscal 2004 to the first quarter of fiscal 2005. Product sales
decreased to $215,458 in the first quarter of fiscal 2005 from $633,820 in the
first quarter of fiscal 2004, a decrease of $418,362, or 66%.
Related Party Revenue. We derived $7,154, or 3%, of our revenue in the
first quarter of fiscal 2005 from sales to related parties as compared to
$487,225, or 72%, in the first quarter of fiscal 2004. All of the related party
revenue in the 2005 period was from sales of component parts to Medizin-Technik.
During the 2004 period, $466,633 of the related party revenue was from sales to
Medizin-Technik. The remaining amount of related party revenue in the 2004
period was from services provided to TherMatrx. Since the sale of TherMatrx in
July 2004, TherMatrx is no longer considered a related party. The significant
decrease in sales to Medizin-Technik in the first quarter of fiscal 2005 was due
to the sale of one BSD-2000 system in the 2004 period compared to none in the
2005 period. Sales to Medizin-Technik may fluctuate significantly from period to
period due to the high cost of a BSD-2000 or BSD-500 system. Sales increases of
one or two systems can have a material effect on our revenue.
Non-related Party Revenue. In the first quarter of fiscal 2004, we
derived $250,779, or 97%, of our total revenue as compared to approximately
$193,909, or 29%, for the first quarter of fiscal 2004 from non-related party
sales. Our first quarter of fiscal 2004 non-related party revenue consisted of
product sales of approximately $207,000. The balance of our non-related party
revenue consisted of consulting services of approximately $29,000, service
contracts of approximately $13,000, and miscellaneous other revenue of
approximately $2,000.
Gross Profit. Gross profit for the first quarter of fiscal 2005 was
$(12,438), or (5)%, as compared to $351,004, or 52%, of total product sales for
the first quarter of fiscal 2004. The decline in gross profit margin was
primarily due to the cost of excess production employees resulting from the
decrease in sales. Because we have not had employee layoffs and because of the
fixed costs associated with production, as our sales declined, it resulted in
the costs of sales exceeding the sales during the first quarter of fiscal 2005.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $380,500 in the first quarter of fiscal
2005, from $212,575 for the first quarter of fiscal 2004 an increase of $167,925
or 79%. This increase was primarily due to higher sales and marketing costs due
to greater emphasis on marketing, higher legal and accounting costs, higher
consulting costs related to marketing and preparation of FDA submissions and an
increase in payroll costs.
8
Research and Development Expenses. Research and development expenses
were $182,513 for the first quarter of fiscal 2005, as compared to $162,558 for
the first quarter of fiscal 2004 an increase of $19,955, or 12%, primarily due
to an increase in payroll and consulting costs. Research and development
expenses for the first quarter of fiscal 2005 related primarily to the
conversion of systems software to foreign languages for international use and to
new developments in the areas of thermal therapy and thermal ablation.
Interest income. Interest income increased to $70,592 for the first
quarter of fiscal 2005 as compared to $101 for the first quarter of fiscal 2004
due to the significantly higher levels of cash resulting from the sale of
TherMatrx.
Net loss. The net loss for the first quarter of fiscal 2005, was
$504,336 as compared with a net loss of $24,136 for the first quarter of fiscal
2004. The increase in the net loss was primarily due to lower sales volume and
an increase in the general and administrative expenses as described above.
Fluctuation in Operating Results. Our results of operations have
fluctuated in the past and may fluctuate in the future from year to year as well
as from quarter to quarter. Revenue may fluctuate as a result of factors
relating to the demand for thermotherapy systems and component parts supplied by
us to TherMatrx, market acceptance of our BSD hyperthermia systems, changes in
the medical capital equipment market, changes in order mix and product order
configurations, competition, regulatory developments and other matters.
Operating expenses may fluctuate as a result of the timing of sales and
marketing activities, research and development and clinical trial expenses, and
general and administrative expenses associated with our potential growth. For
these and other reasons described elsewhere, our results of operations for a
particular period may not be indicative of operating results for any other
period.
Liquidity and Capital Resources
-------------------------------
Our accumulated deficit since inception decreased from $20,570,242 as
of November 30, 2003 to $12,577,482 as of November 30, 2004 due to net income
recorded during our fiscal year ended August 31, 2004 as a result of our sale of
our interest in TherMatrx. We have historically financed our operations through
cash from operations, licensing of technological assets and issuance of common
stock and through the sale of our TherMatrx shares. We have projected
substantial payments yet to be made to us as a result of the sale of our
TherMatrx shares. However, these payments are contingent on the product sales
that TherMatrx achieves through December 31, 2005. We believe these payments, if
received, will contribute significantly to our future capital resources.
We used $691,978 in cash from operating activities during the first
quarter of fiscal 2005 compared to $86,827 for the first quarter of fiscal 2004.
Cash flow from operating activities decreased for the quarter of fiscal 2005
primarily because of lower sales volume compared to the prior year period. Our
investing activities for the first quarter of fiscal 2005 resulted in net cash
used of $21,040 relating to the purchase of certain property and equipment.
Total cash decreased from $9,697,154 at August 31, 2004 to $9,025,386 at
November 30, 2004.
We expect to use the payments from the sale of our TherMatrx shares,
including any contingent payments, for general corporate purposes, including the
sales and marketing effort for our FDA approved cancer therapy products,
supporting the FDA application for our cancer therapy products under
investigational status, the development of new products used in medical therapy
and the possibility of acquiring new companies or technology.
We expect to incur additional expenses related to the commercial
introduction of our BSD-500 systems, which will precede any revenue from the
sale of such systems. Due to additional participation at trade shows,
expenditures on publicity, additional travel, higher sales commissions and other
related expenses, we project that our sales and marketing expenses will be
approximately $500,000 higher in fiscal 2005 than in the prior year to support
the commercial introduction of the BSD-500 systems. In addition, we anticipate
that we will incur expenses of approximately $200,000 related to governmental
9
and regulatory, including FDA, approvals during fiscal 2005 in excess of fiscal
2004. We are making these investments in sales and marketing and on government
and regulatory activities to increase our revenue from sales of our BSD-500
system and, upon receipt of FDA approval, from the sale of our BSD-2000 system
in the United States. These increased marketing and regulatory expenses are an
investment in generating offsetting revenue against the decline in TherMatrx
sales that we have projected, and to provide future revenue growth over the long
term. We also project that we will incur approximately $250,000 in additional
new development expenses associated with developments for the treatment of
non-cancerous diseases and medical conditions.
We believe any cash shortfall during fiscal 2005 that results from a
decrease in revenues and increase in expenses can be covered through the cash
raised in our November and December 2003 private placements and with the cash
from the sale of our TherMatrx shares. We believe we can cover any cash
shortfall with cost cutting or available cash. If we cannot cover any such cash
shortfall with cost cutting or available cash, we would need to obtain
additional financing. We cannot be certain that any financing will be available
when needed or will be available on terms acceptable to us. Insufficient funds
may require us to delay, scale back or eliminate some or all of our programs
designed to facilitate the commercial introduction of our systems or entry into
new markets.
FORWARD-LOOKING STATEMENTS
With the exception of historical facts, the statements contained in
sections entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which reflect our current
expectations and beliefs regarding our future results of operations, performance
and achievements. These statements are subject to risks and uncertainties and
are based upon assumptions and beliefs that may or may not materialize. These
forward-looking statements include, but are not limited to, statements
concerning:
o our anticipated financial performance and business plan;
o our expectations regarding the commercial introduction of the
BSD-500 system;
o our expectations and efforts regarding receipt of FDA approvals
relating to the BSD-2000 system;
o our technological developments to the BSD-500 and BSD-2000
systems;
o our ability to successfully develop our technology for new
applications and the expense of such developments;
o our development or acquisition of new technologies;
o our expectation that sales to TherMatrx may decline to zero in
future periods;
o the amount of expenses we will incur for the commercial
introduction of the BSD-500 system;
o the amount of expenses we will incur for governmental and
regulatory, including FDA, approvals;
o our expectation that related party revenue will continue to be a
significant portion of our total revenue;
o our belief that sales of BSD-500 and BSD-2000 systems will
increase through our future sales and marketing efforts;
o our belief that our current working capital and cash from
operations will be sufficient to fund our anticipated operations
for fiscal 2005;
o our assumption that we will receive contingent payments, and the
amount of such payments, in connection with the sale of our
ownership in TherMatrx to AMS; and
o our anticipated use of proceeds from the sale of our ownership in
TherMatrx to AMS.
10
We wish to caution readers that the forward-looking statements and our
operating results are subject to various risks and uncertainties that could
cause our actual results and outcomes to differ materially from those discussed
or anticipated, including the factors set forth in the section entitled "Risk
Factors" included in our Annual Report on Form 10-KSB for the year ended August
31, 2004 and our other filings with the Securities and Exchange Commission. We
also wish to advise readers not to place any undue reliance on the
forward-looking statements contained in this report, which reflect our beliefs
and expectations only as of the date of this report. We assume no obligation to
update or revise these forward-looking statements to reflect new events or
circumstances or any changes in our beliefs or expectations, other than as
required by law.
Item 3. Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based upon that
evaluation, the principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective and adequately designed to
ensure that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms.
During the quarter ended November 30, 2004, there has been no change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
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PART ii - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3: Defaults Upon Senior Securities
None.
Item 4: Submission of Matters to a Vote of Security Holders
None.
Item 5: Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of this report:
Exhibit No. Description of Exhibit
----------- ----------------------
31.1 Certification Required Pursuant to Section 302 of the Serbanes-
Oxley Act of 2002
31.2 Certification Required Pursuant to Section 302 of the Serbanes-
Oxley Act of 2002
32.1 Certification Required Pursuant to Section 902 of the Serbanes-
Oxley Act of 2002
32.2 Certification Required Pursuant to Section 902 of the Serbanes-
Oxley Act of 2002
12
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 14, 2005 /s/ Hyrum A. Mead
-----------------------------------------
President (principal executive officer)
Date: January 14, 2005 /s/ Dennis E. Bradley
-----------------------------------------
Controller (principal financial officer)
13