U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549




                                  FORM 10 - KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended August 31, 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, including area code:  (801) 972-5555

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

 Title of Each Class                   Name of Each Exchange on Which Registered
----------------------------           -----------------------------------------
Common Stock, $.01 Par Value                        Over-the-Counter

     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 by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

     Issuer's revenues for its most recent fiscal year:  $620,221

     The   approximate   aggregate   market   value  of  Common  Stock  held  by
non-affiliates,  computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock,  as of November 22, 1999, was
$6,512,884.

     As of November 22, 1999, there were 16,693,975  shares of Common Stock with
$0.01 par value outstanding.

     Documents Incorporated by Reference:  None

     Transitional Small Business Disclosure Format:  Yes  [  ]   No  [X]


<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL
-------

     BSD Medical Corporation (the "Company") was founded in 1978 to research the
demonstrated  ability of elevated heat  (hyperthermia)  to destroy cancer cells.
BSD was subsequently  successful in developing and commercializing  hyperthermia
treatment - a  break-through  treatment for both cancerous and benign  diseases.
The Company is currently engaged in the development,  production, marketing, and
servicing of heat therapy  (hyperthermia/thermotherapy)  equipment. Hyperthermia
literally means  "elevated  temperature",  and  hyperthermia  treatment  creates
fever, the body's natural mechanism to fight disease.  Hyperthermia equipment is
currently   marketed   for  the   application,   monitoring   and   control   of
electromagnetic  (microwave or radiofrequency) or ultrasound  generated heat for
the  treatment of  malignant  and benign  diseases.  BSD  currently  has 11 U.S.
patents,  8  foreign  patents,  and 5 patent  licenses  (which  cover all of its
current  applications  and  products  as well  as  additional  applications  and
devices).

     BSD was the first Company to obtain full PreMarket approvals (PMA) from the
Food and Drug Administration  (FDA) for a hyperthermia cancer therapy system and
the first Company to obtain Investigational Device Exemption (IDE) approval from
the  FDA for  thermotherapy  systems  for  the  treatment  of  Benign  Prostatic
Hyperplasia (BPH). BSD has developed second and third generation equipment,  and
the Company's  systems,  depending  upon  configuration  and options,  have list
prices ranging from approximately $100,000 to $1,100,000.

     The Company was  incorporated  under the laws of the State of Utah on March
17,  1978.  On July 31, 1986,  pursuant to a Plan and  Agreement of Merger dated
July 11, 1986, the Company was merged into a Delaware corporation,  changing the
Company's state of incorporation from Utah to Delaware. The Delaware Corporation
was the surviving  company.  At the time of the 1986 merger, the total number of
shares of all  classes of stock which the Company  shall have the  authority  to
issue was increased to 30,000,000,  of which 10,000,000  shares are of $1.00 par
value  per  share  and are of a class  designated  Preferred  Stock and of which
20,000,000  shares are of $.01 par value per share and are of a class designated
Common Stock. There are currently no preferred shares outstanding.

BSD'S PRODUCTS/THERAPIES
------------------------

     HYPERTHERMIA  AS A CANCER  TREATMENT.  There  are more than  eight  million
Americans  alive today who have a history of cancer.  Over 83  million,  half of
American men and one-third of American women,  will  eventually  develop cancer.
Over 564,800  people are expected to die of cancer this year;  and the incidence
of cancer is continuing to grow.  Hyperthermia is the process of applying energy
to elevate the  temperature  of the cancer cells - in order to destroy or damage
the tumor.  The  Company's  hyperthermia  equipment is used both in an effort to
cure cancer,  by destroying and eliminating  cancer cells, and, where curing the
cancer is not possible,  as  palliative  treatment  (the  shrinking of tumors in
order to reduce the pain and other side  effects of  cancer).  Hyperthermia  can
usually destroy cancerous cells without harming normal cells. There is also some
evidence that hyperthermia  increases the patient's immune system,  allowing the
patient's  own system to fight the  cancer as well as the side  effects of other
treatments.

     The Company's  hyperthermia  treatment can be used alone,  but is typically
used in conjunction with other therapies.  The primary advantage of hyperthermia
is that it can increase the effect of other therapies, such as radiation therapy
(radiotherapy) or chemotherapy,  while sometimes  reducing overall side effects.
Hyperthermia has been shown to double the effectiveness of radiation and provide
supra-additive  interactions  with  many  chemotherapeutic  drugs.  The  use  of
pre-surgical  hyperthermia  delivered  using BSD's  equipment  has been shown to
obviate the need for  amputation  of normal  tissues in some  sarcoma  patients.
BSD's systems have also been used pre-surgically to reduce the size of the tumor
prior to  surgery  and thus  make the tumor  more  easily  resectable  (surgical
removal) and increase the chances of obtaining clear surgical tumor margins, one
of the most significant prognostic factors in recurrence.  Published, randomized
clinical  studies  using  BSD's  equipment  have  shown  that  the  addition  of

<PAGE>

hyperthermia to other cancer  therapies can result in: increased tumor response;
increased  disease-free  survival  time;  and  improved  quality of life for the
patient.

     CANCER HYPERTHERMIA  PRODUCTS.  The Company's cancer hyperthermia  products
are designed to apply  electromagnetic  (i.e.,  microwave or  radiofrequency) or
ultrasonic  energy  to the  human  body in order  to  generate  temperatures  of
40(degree)C  to 60(degree)C  at the site of the tumor.  Thermometry  systems are
used to measure tumor and normal tissue  temperatures  during treatment in order
to assist in achieving and maintaining safe and optimal treatment  temperatures.
The  Company's  hyperthermia  systems are  designed to permit the  treatment  of
various tumor sizes, various tumor depths and various anatomical sites.

     Cancer Hyperthermia Systems. A hyperthermia system typically consists of an
integrated  computer  control  unit,  a fixed or variable  frequency  generator,
applicators,  and thermometry.  The Company's  computer  software is designed to
maximize the safety and  effectiveness  of the  treatment by providing  accurate
treatment  planning,  monitoring,  and recall. The treatment planning capability
utilizes  the  Company's  proprietary  algorithms  and  software  to  allow  the
physician  to  customize  hyperthermia   treatments  for  specific  tumors.  The
Company's  cancer  hyperthermia  system  product line includes  various  systems
designed to target specific markets.

     Cancer   Hyperthermia    Applicators.    Hyperthermia    applicators   emit
radiofrequency,  microwave or  ultrasonic  energy  directly  into the patient to
provide  tumor  heating.  The Company  has  developed  and  patented a number of
specially  designed  applicators for treating a particular tumor in a particular
location.

     Applicators   generally  fall  into  two   categories:   external   surface
applicators   (superficial   and  deep)  and   interstitial   (i.e.,   invasive)
applicators.  Superficial and external  applicators deliver externally generated
energy to  specific  sites on or slightly  below the  surface of the skin.  Deep
phased array  radiofrequency  applicators provide externally generated energy to
deep-seated tumors by combining  phase-aligned  beams from multiple  applicators
positioned around the body. Interstitial microwave applicators are antennae that
are implanted directly into the body for heating from within the tumor itself.

     Thermometry.  The Company manufactures the BSD Thermistor Probe, as well as
other thermistor based thermometry  probes. The Company has an exclusive license
for the manufacture and  distribution of the BSD Thermistor  Probe.  The Company
also manufactures and sells specially developed thermistor probes for ultrasound
treatments.

     THERMOTHERAPY AS A BPH TREATMENT. On November 24, 1997, BSD entered into an
agreement  with  Oracle   Strategic   Partners  to  form   TherMatrx,   Inc.,  a
jointly-owned   company  that  would  initially  focus  on  minimally   invasive
treatments of urological  diseases,  specifically  Benign Prostatic  Hyperplasia
(BPH), a market that is currently estimated to exceed $3 billion annually in the
United States alone.

     The partnership  allowed Oracle Strategic  Partners to invest an initial $3
million on closing and an additional $3 million upon the  achievement of certain
milestone  parameters.  Charles  Manker,  President  and CEO of  TherMatrx,  was
allowed to provide an initial  investment  of $250,000,  in addition to Oracle's
investment,  and another  $250,000  when  milestone  funding was  obtained  from
Oracle.  BSD contributed  certain assets that have  applicability in the urology
market, and agreed not to engage in BPH business. As part of the agreement,  BSD
is providing certain manufacturing and consulting services,  for which TherMatrx
compensates the Company.

     In April 1999,  TherMatrx  Investment  Holdings,  LLC  (assignee  of Oracle
Strategic  Partners,  L.P. and Charles Manker)  completed an additional  capital
infusion into TherMatrx, Inc. of $3.25 Million, 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% (see Note 1 to Financial  Statements).  After exercise
of all shares allocated for the Management Stock Purchase Plan, the Company will
retain a 30 percent interest on a fully diluted basis.

<PAGE>

     TherMatrx's  corporate  headquarters are in Chicago.  Dr. Gerhard Sennewald
serves as BSD's representative on TherMatrx's Board of Directors.

MARKETING AND SALES
-------------------

     The Company markets its cancer hyperthermia products primarily to radiation
oncology  departments  in the U.S.  and to radiation  oncology and  chemotherapy
oncology  departments  outside  the U.S. In the U.S.,  the  Company  markets its
equipment directly using its own sales and marketing staff.  International sales
are generally  accomplished  through  distributing  companies located in various
foreign countries.  BSD has not carried lease or rental equipment  contracts for
customers and therefore has no exposure to lease or rental contract cancellation
as a  result  of  customer  action.  The  Company's  marketing  efforts  include
participation at trade shows and symposia and development of product  brochures,
newsletters,  and other promotional  materials.  The Company also co-sponsors an
annual international BSD Users' Conference.

     Future  marketing  for current  cancer  products  may be expanded  into two
largely untapped  markets:  surgical and  chemotherapeutic  oncology.  These two
disciplines  control most cancer  patients  and  treatment  funds,  and clinical
evidence  of the  safety  and  efficacy  of  hyperthermia  in  conjunction  with
chemotherapy  and surgery has been  published.  The  Company  believes  that the
domestic  market  will  expand in the future  because of a renewed  interest  in
hyperthermia in the U.S. and evidence of increased  profits from the addition of
hyperthermia;  however,  there can be no assurance  that an increase in the U.S.
market will occur.

     For  the  year  ended  August  31,  1999,   two  customers   accounted  for
approximately  46% and 15%,  respectively,  of BSD's  net  sales.  The loss of a
significant  customer could have a material  detrimental impact on the Company's
operations.  Because only one  hyperthermia  machine is generally  required at a
treatment  facility,  BSD does not sell capital equipment to any one customer on
an ongoing basis.

     THIRD-PARTY  REIMBURSEMENT/MEDICAL COST CONTAINMENT.  In the United States,
the Company's products are purchased  primarily by medical  institutions,  which
then  bill  various  third-party  payers,  such  as  Medicare,  Medicaid,  other
government  programs,  and private insurance plans, for the health care services
provided to their patients, or by managed care organizations, which directly pay
for  services  provided to their  patients.  In December  1984,  the Health Care
Financing  Administration  ("HCFA" --- the agency  responsible for administering
the  Medicare and Medicaid  systems) and most of the private  medical  insurance
carriers in the U.S. approved reimbursement for hyperthermia in conjunction with
radiation   therapy  for  the  treatment  of  surface  and  subsurface   tumors.
Reimbursement  for services  rendered to Medicaid  beneficiaries  is  determined
pursuant to each state's  Medicaid  plan,  which is established by state law and
regulations, subject to requirements of Federal law and regulations.

     In  November  1995,  HCFA  authorized   Medicare   reimbursement   for  all
investigational  therapies and devices for which underlying  questions of safety
and   effectiveness   of  that  device  type  have  been   resolved,   based  on
categorization  by  FDA.  All  of  BSD's  investigational  (IDE)  equipment  and
protocols  have  been  placed  in this  category  by the  FDA,  and  thus may be
reimbursed by Medicare.

     Cost-containment  policies are impacting  the major cancer  markets such as
the U.S., Western Europe, and Japan, and these changes have negatively  impacted
the industry.  The Company is unable to predict the extent to which its business
may be affected by future legislative and regulatory developments.  There can be
no assurance that future health care reform  legislation or regulation  will not
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.  There can be no assurance that procedures  using the
Company's  products  will,  in  the  future,  be  considered  cost-effective  by
third-party payers, that reimbursement will be available or, if available,  that
payers'  reimbursement levels will not adversely affect the Company's ability to
sell its products.

<PAGE>

COMPETITION
-----------

     The Company  believes  that its  combination  of  technology,  performance,
quality,  reliability,  price,  and  breadth of product  line and  services  are
important  competitive  factors,  however,  competition in the medical  products
industry  is  intense,  both in the  United  States and  internationally.  BSD's
therapies are generally considered complementary to rather than competitive with
other  cancer  therapies,  such as radiation  and  chemotherapy.  However,  some
companies  that could be  competitors,  in that they are also  engaged in cancer
treatment businesses, have significantly greater financial,  technical, research
and  development,  engineering,  manufacturing,   distribution,  and  sales  and
marketing  resources than the Company.  Several  companies have received IDEs in
the United  States for certain  experimental  hyperthermia  systems  designed to
treat both  malignant  and  benign  diseases.  In  addition  to BSD,  four other
companies  have  received FDA  Pre-Market  Approval for the  commercial  sale of
certain  hyperthermia  equipment  for  the  treatment  of  cancer  in the  U.S.:
(Clinitherm - no longer in business); Labthermics; Celsion Corporation (formerly
Cheung Labs); and Cook Medical - no longer in the hyperthermia business.

     BSD  participates in the BPH market as an investor in TherMatrx,  Inc. (see
"Thermotherapy  as a BPH  Treatment",  Page 3). In the BPH  market,  competitive
companies  offering  products similar to TherMatrx's  products include EDAP TMS,
Urologix,  and  Dornier  (which  have PMA  approval  from the FDA),  VidaMed and
ArgoMed,  Inc.  (which have 510(k)  marketing  clearance from the FDA),  Thermal
Therapeutics,  and other  foreign  manufacturers.  In addition to  thermotherapy
equipment made by competitors,  there are many other competitive  treatments for
BPH [including various drug treatments,  surgical lasers,  ultrasound  ablation,
electro-cautery  surgery,   stents,   transurethral  incision  of  the  prostate
(T.U.I.P.), and balloon dilation] that are currently being developed, clinically
investigated and/or actively marketed.

     The  Company   believes  that  other   companies  may  consider   marketing
hyperthermia/thermotherapy   equipment  and   anticipates   possible   increased
competition in the United States and internationally.  There can be no assurance
that others will not develop products that would materially adversely affect the
ability of the Company to compete effectively. Further, the treatment of disease
with hyperthermia equipment, and with other methods, is subject to technological
change.  There can be no  assurance  that other forms of  treatment  will not be
developed which could be superior to the Company's hyperthermia systems.

     The  Company  expects to rely upon trade  secrets,  unpatented  proprietary
know-how and continuing technological innovation, as well as current patents and
new patent  applications,  in order to  maintain  and  improve  its  competitive
position.

PRODUCT SERVICE
---------------

     The Company  provides a 12-month  warranty  following  installation  on all
cancer treatment systems and a 90-day limited warranty on individual components.
BSD's  employees  install  and  service  the  hyperthermia  systems  it sells to
domestic  customers.  In  addition,  Company  personnel or  consultants  perform
technical and clinical training.  Subsequent to the applicable  warranty period,
the Company offers full or limited service contracts to its domestic customers.

     Generally,  the Company's  distributors install and service systems sold to
foreign  customers and are responsible for managing their own warranty  programs
for their customers,  including labor and travel expenses.  The Company provides
parts  repair/replacement  warranties  for 12 months for systems and for 90 days
for  individual   components.   Spare  parts  are  generally  purchased  by  the
distributors  and stored at the  distributors'  maintenance  facilities to allow
prompt repair.  Distributor  service  personnel are usually  trained at customer
sites and at the Company's facilities in Salt Lake City.

PRODUCTION
----------

     The Company  produces and tests its products at its facilities in Salt Lake
City,  Utah.  Some  purchased  components  are  modified by the  supplier or are
customized to the  Company's  specifications.  Key factors in the  manufacturing
process are assembly and testing.  Certain  components and processes used in the
manufacturing of the Company's  products are currently  provided or performed by
single-source  vendors.  Any supply  interruption  or yield  problems from these
vendors  would  have a  material  adverse  effect on the  Company's  ability  to
manufacture  its products  until a new source of supply were qualified and, as a

<PAGE>

result,  could  have  a  material  adverse  effect  on the  Company's  business,
financial condition and results of operations.

     In order to provide outside financial support for manufacturing  operations
and diversify the Company's services, the Company is providing manufacturing and
testing services under contract to other companies.

RESEARCH AND DEVELOPMENT
------------------------

     During the fiscal  years ended August 31,  1998,  and August 31, 1999,  the
Company  expended  $361,735,  and  $517,564   respectively,   for  research  and
development,  representing  22.72%,  and 83.45% of total revenues.  Research and
Development  expenditures  increased  in 1999 due to costs  associated  with the
development of the  BSD-2000o3D/MR  system and a new BSD-300-4 system,  combined
with costs associated with obtaining ISO 9001 and EN 46001  certification and CE
Marking for the BSD-2000o3D.

     BSD has  developed  the  BSD-2000o3D  - a new  generation  of deep regional
hyperthermia equipment funded in part by Phase I and II grants received from the
National Cancer Institute  (Grant No. CA61515).  The BSD-2000o3D can be modified
for  integration  with a magnetic  resonance  imaging  system,  and  becomes the
BSD-2000o3D/MR system. The BSD-2000o3D System integrates three-dimensional (3D),
"steerable",  focused  deep  regional  hyperthermia  with  3D  patient  specific
treatment planning.  This system is targeted for the treatment of large and deep
tumors; i.e., recurrent breast,  sarcoma,  lung,  colorectal,  liver,  cervical,
bladder,  stomach,  and  prostate.  The  first  BSD-2000o3D/MR  system  has been
installed and tested at a leading German oncological  research institution - the
Clinic of Medical  Oncology of the Klinikum  Gro(beta)hadern  Medical  School of
Ludwigs-Maximilians-Universitat  Munchen,  Munich,  Germany.  The Medical School
received funding from the Stiftung Deutsche  Krebshilfe e. V. (German Cancer Aid
Foundation)  for the  system  order.  The  BSD-2000o3D  has  been  sold and used
successfully  for some patient  treatments,  but there can be no assurance as to
the degree of its commercial success.

     The BSD-2000o3D/MR  System was designed to provide simultaneous heating and
non-invasive  measurement of treatment  parameters;  such as tumor  temperature,
tumor response,  tissue heat damage,  tissue blood-flow,  tissue pathology,  and
other  chemical and  biological  changes in the tissue.  Non-invasive  treatment
monitoring   has  the  potential  to  optimize  tumor  heating  and  thus  tumor
destruction.  (Currently  available  hyperthermia  equipment requires the use of
invasive  temperature  monitoring to control  heating  delivery and to determine
treatment effectiveness, which limits the commercial and clinical applications.)
The development of reliable  non-invasive  thermometry is the next required step
in the field of hyperthermia and has the potential to significantly increase the
clinical applications and commercial potential of hyperthermia;  however,  there
can  be no  assurance  that  this  system  will  provide  reliable  non-invasive
thermometry.  Preliminary  laboratory  testing has  demonstrated  the ability to
simultaneously heat and image with the MR portion of this system.

     Technological  changes play an  important  part in the  advancement  of the
hyperthermia  industry.   Thus,  the  Company  intends  to  continue  to  devote
substantial  sums to  research  and  development  in order to  improve  existing
products and develop new products.  The Company is also currently in discussions
with some  researchers and  institutions  regarding heat treatment  products and
treatments  that might increase the clinical  applications  for BSD's  products,
with a  focus  on deep  regional  hyperthermia,  which  would  include  ovarian,
colorectal,  uterine,  cervix,  and  bladder,  and the  treatment  of  prostatic
carcinoma and breast cancer.

PATENTS, INTELLECTUAL PROPERTY, LICENSING, AND ROYALTY AGREEMENTS
-----------------------------------------------------------------

     Because  of the  substantial  length of time and  expense  associated  with
bringing  new  products  through  development  and  regulatory  approval  to the
marketplace,  the medical  device  industry  places  considerable  importance on
obtaining patent and trade secret protection for new technologies,  products and
processes.  The  Company's  policy is to file  patent  applications  to  protect
significant  technology,   inventions  and  product  improvements.  The  Company

<PAGE>

currently has 11 patents in the United  States and 8 patents  outside the United
States.  [Four  patents  were  assigned  to  TherMatrx,  for which  the  Company
maintained  a license,  and one patent  license was obtained by the Company from
University  of California  San Francisco  (UCSF).]  Other  hyperthermia  related
patents  are  pending in the United  States,  Japan and  Europe,  and a European
patent for the  BSD-2000o3D  system has been  issued.  There can be no assurance
that the patents presently issued, or those applied for (if granted), will be of
significant  value to the  Company or will be held valid upon  judicial  review.
Successful  litigation  against  these  patents  by a  competitor  could  have a
material  adverse effect upon the Company's  business,  financial  condition and
results of  operations.  The  Company  believes  that it  possesses  significant
proprietary know-how in its hardware and software  capabilities.  However, there
can be no assurance that others will not develop, acquire or patent technologies
similar  or  superior  to  those  of the  Company  or that  secrecy  will not be
breached.

     In July 1979, the Company entered into an exclusive worldwide license for a
unique  temperature  probe (Bowman Probe).  The license will remain in effect as
long as the  technology  does not become  publicly  known as a result of actions
taken by the licensor.  The Company pays  royalties  based upon its sales of the
Bowman  Probe.  The  license  agreement  was  amended and renewed in 1987 and is
currently in effect.

     On  September  15, 1996,  Medizintechnik  (a company  owned by Dr.  Gerhard
Sennewald,  a member of BSD's Board of Directors and a major  stockholder of the
Company)    obtained   a   worldwide   fully   paid   software    license   from
Konrad-Zuse-Zentrum   fur   Informationstechnik    (ZIB)   of   Berlin   for   a
three-dimensional  (3D) hyperthermia  treatment  planning software - HYPERPLAN -
developed  by ZIB.  On January 21,  1998,  BSD entered  into an  agreement  with
Medizintechnik wherein Medizintechnik  irrevocably assigned the worldwide rights
under the ZIB  software  license  agreement to BSD,  with the sole  exception of
Europe,  where  Medizintechnik  retained these rights. In consideration for this
assignment  of  rights,  BSD  agreed to  supply,  at no  charge,  one  Sigma-Eye
applicator (not an MR compatible version) to Medizintechnik,  which will forward
this  applicator  to  Strahlenklinik  and  Poliklinik,  Virchow-Klinikum  of the
Humboldt-Universitat  of Berlin.  BSD also agreed to inform  Medizintechnik on a
regular  basis  about  software  sales to final  customers  and to pay timely to
Medizintechnik the software license fee (8% of the sales price for the HYPERPLAN
software or a minimum of DM 6,000) that,  under the terms of the ZIB  agreement,
is due to ZIB for each software sale.

     In July  1996,  BSD  entered  into a license  agreement  and  granted  EDAP
Technomed, Inc., now EDAP TMS S.A., a non-exclusive, non-transferable license of
certain  rights to one of BSD's  patents.  In 1994,  BSD issued a  non-exclusive
license  to  Urologix  to  practice  some of its  patented  technology  for cash
payments and royalties on future sales;  in 1996,  the Company  terminated  this
license. This license became part of a lawsuit that was settled in May 1998. The
license is now fully paid and irrevocable (see Note 15 to Financial Statements).

     BSD has acquired from UCSF the exclusive patent license for small microwave
antennae  that can be inserted  into  cancerous  tumors to destroy them from the
inside. The innovative  microwave antenna design enables the therapeutic heating
length to be  tailored to match the tumor size.  Clinical  studies  have shown a
survival  improvement  when using this technology in combination  with radiation
brachytherapy. This technology has been shown to be effective for many cancerous
tumors, including brain tumors.

     There  has  been   substantial   litigation   regarding  patent  and  other
intellectual  property rights in the medical device  industry.  In the past, the
Company  has  filed  lawsuits  for  patent  infringement  against  three  of its
competitors and subsequently settled all three of those lawsuits.

     From time to time, the Company has had and may continue to have discussions
with other  companies,  universities  and  private  individuals  concerning  the
possible granting of licenses covering  technology and/or patents.  There can be
no assurance that such discussions  will result in any agreements.  In the past,
BSD has granted  non-exclusive  practice  licenses for a few selected patents to
three companies. One of these companies is no longer in business.

GOVERNMENT REGULATION
---------------------

     The medical  devices that have been and are being  developed by the Company
are subject to  extensive  and  rigorous  regulation  by  numerous  governmental
authorities,  principally  by the  United  States  Food and Drug  Administration
(FDA).  Pursuant to the Federal  Food,  Drug and Cosmetic Act (the FD&C Act), as
amended,  the FDA regulates and must approve the clinical testing,  manufacture,
labeling,  distribution,  and promotion of medical devices in the United States.

<PAGE>

This regulation has become stringent and the approval process expensive and time
consuming.  In  addition,  various  foreign  countries  in which  the  Company's
products are or may be sold, have regulatory requirements.

     Sales into the  European  Union (EU) are now governed by the need to obtain
ISO  certification  and a CE  Mark  and  the  requirement  to  comply  with  all
applicable  directives.  In June 1998,  the  Medical  Devices  Directives  (MDD)
requirements  went into  effect  for the EU.  Following  June  1998,  no medical
products  could be  marketed  in  Europe  without  obtaining  a CE Mark and thus
demonstrating  compliance  to MDD  requirements.  The Company has  obtained  ISO
certification of its quality,  development,  and manufacturing processes and has
successfully  completed the CE Mark testing and Annex II audit, which will allow
BSD to affix the CE Mark label on the BSD-2000o3D  system and deliver systems to
Europe.  However,  the Company  must  maintain  compliance  with all current and
future directives and requirements in order to maintain ISO certification and to
continue to affix the CE Mark,  and there can be no  assurance  that the Company
will  continue  to  maintain  compliance.  If BSD is  unable to  maintain  these
approvals,  it could have a significant  material effect on the Company's future
financial condition.

     The majority of the Company's  past and present  hyperthermia  systems have
required,  (and  future  systems,  if any,  would  likely  continue  to require)
Pre-Market  Approval  from  the FDA  instead  of the  simpler  510(k)  marketing
approval.  Pre-Market  Approval  requires  clinical testing to assure safety and
effectiveness  prior to  marketing  and  distribution  of medical  devices.  The
Company  intends  to  continue  to  make  improvements  in and  to its  existing
products.  Significant  product changes must be submitted to the FDA under IDEs,
510(k) PreMarket notifications or PMA supplements.

     All medical devices must be  manufactured  in accordance  with  regulations
specified in the FDA Quality  System  Regulation  (QSR) and in the ISO and other
applicable regulations. In complying with these regulations,  manufacturers must
continue  to  expend  time,  money and  effort  in the areas of design  control,
production,  and quality control to ensure full  compliance.  The Medical Device
Reporting regulation requires that the Company provide information to the FDA on
death or serious  injuries  alleged to have been  associated with the use of its
products, as well as information on product malfunctions that would likely cause
or contribute to a death or serious  injury if the  malfunctions  were to recur.
The MDD  vigilance  system  regulations  require  that  the  Company's  European
Representative  provide  information  to the  Competent  Authority  on  death or
serious  injuries  alleged to have been associated with the use of its products,
as well as  information  on  product  malfunctions  that would  likely  cause or
contribute to a death or serious injury if the malfunctions were to recur.

     International sales of unapproved medical devices are subject to FDA export
requirements,  unless these products have been previously approved by one of the
countries  specified by the FDA. Failure to comply with regulatory  requirements
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations. Although the Company believes that it is in
material compliance with all applicable  manufacturing and marketing regulations
of the FDA and other regulatory bodies with respect to its existing products,  a
determination  that the Company is in  material  violation  of such  regulations
could lead to the  imposition  of penalties,  including  fines,  recall  orders,
product  seizures,  and criminal  sanctions.  In addition,  current  regulations
depend heavily on administrative  interpretation,  and there can be no assurance
that future  interpretations  made by the FDA or other regulatory  bodies,  with
possible retroactive effect, will not adversely affect the Company.

     International  sales are subject to the regulatory and safety  requirements
of the country into which the sale occurs. There can be no assurance that all of
the necessary  approvals will be granted on a timely basis or at all.  Delays in
receipt of or failure to receive such  approvals  could have a material  adverse
effect on the Company's financial condition and results of operations.

     The Federal  Communications  Commission  (FCC) regulates the frequencies of
microwave and radiofrequency emissions from medical and other types of equipment
to  prevent   interference  with  commercial  and  governmental   communications
networks.  BSD's fixed frequency  systems and applicators  emit 915 MHz for U.S.
and some European installations and 433.92 MHz for some European  installations,
which  is  approved  by the FCC for  medical  applications.  Accordingly,  these
systems do not require shielding to prevent  interference  with  communications.

<PAGE>

BSD's  variable-frequency  generators and  applicators  require  electromagnetic
shielding.  Ultrasound  hyperthermia  systems can be operated without  shielding
because the applicators emit acoustic rather than electromagnetic energy.

PRODUCT LIABILITY EXPOSURE
--------------------------

     The manufacturing and marketing of medical devices involve an inherent risk
of product liability.  Because the Company's products are intended to be used in
hospitals on patients who may be physiologically  unstable and severely ill, the
Company is exposed to potential product liability claims.  The Company presently
carries product liability insurance. However, there can be no assurance that the
product  liability  insurance will provide adequate  coverage against  potential
claims that might be made against the Company.  No product  liability claims are
presently pending against the Company;  however,  there can be no assurance that
product liability claims will not be filed in the future.

EMPLOYEES
---------

     As of August 31, 1999,  the Company had 27 employees;  22 of them were full
time  employees.  None of the  Company's  employees  is covered by a  collective
bargaining agreement.  The Company considers its relations with its employees to
be  satisfactory.  The  Company  is  dependent  upon  a  limited  number  of key
management, manufacturing, and technical personnel. The Company's future success
will depend in part upon its ability to retain these highly qualified employees.


ITEM 2.  PROPERTIES

     The office,  production and research  facilities of the Company are located
in Salt Lake City,  Utah.  The complete  headquarters  and  production  facility
occupies  approximately  20,000 square feet. The Company leases the building for
an annual rental  expense of $78,396 (see Note 5 to Financial  Statements).  The
Company has an option to purchase the building.  The building lease is accounted
for as an operating  lease for  financial  statement  purposes.  The building is
currently in good  condition;  is adequate for the Company's  needs; is suitable
for all Company functions;  and provides room for future expansion.  The Company
believes that it carries adequate insurance on the property.


ITEM 3.  LEGAL PROCEEDINGS

None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

<PAGE>




                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock trades publicly on the OTC Bulletin Board under
the  symbol  "BSDM".  The  following  table  sets  forth  the  high  and low bid
transactions,  as provided by the OTC Bulletin Board, for the quarters in fiscal
year 1998 and 1999.  The amounts  reflect  inter-dealer  prices,  without retail
mark-up, markdown or commission, and may not represent actual transactions.


                                                        Bid
                                             ---------------------------
        Quarter Ended:                            High          Low
        ----------------------------------------------------------------

        November 30, 1997.................        3/4          1/4
        February 28, 1998.................       13/16         3/8
        May 31, 1998......................        7/16         1/4
        August 31, 1998...................        7/16         1/4

        November 30, 1998.................        3/8          .19
        February 28, 1999.................        9/16         3/16
        May 31, 1999......................        1/2          .26
        August 31, 1999...................        .45          5/16


     As of August 31, 1999,  there were  approximately  640 holders of record of
the Common  Stock.  The  Company has not paid any cash  dividends  on its Common
Stock since its  inception  and has no intention  of declaring  any Common Stock
dividends in the foreseeable future.

ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS
---------------------

     The balance sheet as of August 31, 1999,  and the statements of operations,
statements  of cash flow and  statements of  stockholders'  equity for the years
ending August 31, 1998, and 1999, and the  independent  auditors report thereon,
are  included  elsewhere  in  this  report.  The  following  selected  financial
information  should be read in  conjunction  with the financial  statements  and
notes thereto included  elsewhere in this report.  At August 31, 1998, BSD had a
fifty-four  percent  interest in a subsidiary,  TherMatrx,  thus,  the financial
statements for the two companies were consolidated. During the year ended August
31,  1999,  the  Company's  interest  in the  subsidiary  was reduced to 34% and
consolidation was no longer required.  Therefore, the financial statements as of
August 31, 1998, and the year ended August 31, 1999, have been restated with the
Company's  investment in TherMatrx  recorded using the equity method (see Note 1
to Financial Statements).

     FISCAL YEAR ENDED AUGUST 31,  1999.  Revenues for the year ended August 31,
1999, totaled $620,221,  as compared to $1,592,316 for the year ended August 31,
1998, a decrease of $972,095, or 61.05%, primarily due to a delay in receipt and
processing  of  European  orders  because  the  Company  did not have CE Marking
approval on the new BSD-2000o3D  system,  now required for sales to all European
Union (EU) countries. The Company has successfully completed the CE Mark testing
and  Annex II audit,  which  will  allow  BSD to affix the CE Mark  label on the
BSD-2000o3D  system and deliver  systems to Europe.  (The Company plans to start
shipping European systems currently on order in January.)

     During  fiscal  years 1996  through  1999,  the  Company  devoted  time and
resources  to  completion  of a new product line - the  BSD-2000o3D/MR  - and to
establishing the  manufacturing  capabilities  and support  functions needed for

<PAGE>

this new product line.  The first  BSD-2000o3D/MR  was installed in August 1997,
and the first MR portion of this system was  installed in August  1998.  BSD has
received orders totaling  $3,240,353 for purchases of this new product,  and, as
of October 1999, has a back-log of $1,608,750 in sales for the new product line,
which will be delivered in fiscal 2000.

     The Company's  revenues  from  products and services in the U.S.  decreased
from  $493,857  in fiscal  1998 to  $326,171  in fiscal  1999.  The  market  for
hyperthermia  equipment  in  the  U.S.  continues  to be  sluggish  due  to  low
reimbursement  levels and cost  containment  efforts.  The Company is  currently
taking  actions to increase U.S.  sales,  including  hiring of a new Director of
Sales, and some of these actions may improve the U.S. market, however, there can
be no assurance that U.S. sales will increase in the future.

     Product  sales  decreased  from  $1,459,143  in 1998 to $596,441 in 1999, a
decrease of $862,702,  or 59.12%,  as a result of the above  mentioned  delay in
receipt and processing of European orders.

     Gross loss on product  sales was $36,064,  as compared to a gross profit of
$751,744 for fiscal 1998, due to above mentioned decrease in sales.

     Selling,  General and Administrative Expenses for 1999 totaled $944,756, as
compared to $992,972 in 1998, a decrease of $48,216, or 4.86%, primarily because
of a reduction in legal costs due to  settlement  of the lawsuit  with  Urologix
(see  Note 15 to  Financial  Statements),  partially  offset by an  increase  in
deferred  compensation  expense for  amortization  of options and stock  awards.
Selling,  General and Administrative  Expenses may increase in the future as the
Company intends to expand its marketing and sales efforts.

     Research and Development Expenses for 1999 totaled $517,564, as compared to
$361,735 in 1998, an increase of $155,829 or 43.08%,  due to  development  costs
associated  with the  BSD-2000o3D/MR  system  and with a new  BSD-300-4  system,
combined  with  costs   associated   with   obtaining  ISO  9001  and  EN  46001
certification and CE Marking for the BSD-2000o3D.

     Total Costs and Expenses for 1999 were $2,094,825,  an increase of $32,719,
or 1.59%,  as compared to $2,062,106  for fiscal 1998 due to the  aforementioned
increase in Research and Development Expenses.

     Interest  Expense in 1999  decreased  to $3,630,  as  compared to $8,373 in
1998. The decrease was caused  primarily by lower interest costs associated with
notes payable as they reach maturity and typical periodic business fluctuations.

     During fiscal 1999, the Company  experienced a Net Loss of  $1,928,050,  of
which $546,452 was attributable to TherMatrx, compared to a Net Income in fiscal
1998 of $2,890,579 [primarily due to the aforementioned  decrease in revenues in
fiscal 1999 and receipt in fiscal 1998 of $2,950,000  from the grant of a patent
license  to  Urologix  pursuant  to  settlement  of a  lawsuit  (see  Note 15 to
Financial Statements)].

     RISKS  ASSOCIATED  WITH  INTERNATIONAL   OPERATIONS.   International  sales
accounted for 75.30% and 47.59% of the Company's  total product sales during the
fiscal  years ended  August 31, 1998,  and August 31,  1999,  respectively.  The
Company  expects  that   international   sales  will  continue  to  represent  a
significant  portion of its total sales. The Company has successfully  completed
the CE Mark  testing  and Annex II audit,  which  will allow BSD to affix the CE
Mark label on the BSD-2000o3D system and deliver systems to Europe.  However, an
inability  to maintain the  necessary  approvals  could have adverse  effects on
future sales of products to EC countries (see  Government  Regulation,  page 7).
The  Company  is  subject  to  risks  generally  associated  with  international
operations,  including  the  establishment  by foreign  regulatory  agencies  of
product  standards  different from, and in some cases more stringent than, those
in the United  States.  Although the  Company's  sales are  denominated  in U.S.
dollars,  its  international  business  may be  affected  by  changes  in demand
resulting  from   fluctuations  in  currency   exchange  rates.   The  Company's
international  sales may also be adversely  affected by tariff  regulations  and
export license requirements.  Possible  governmental,  legislative and political
actions that may be taken by the United States in order to reduce the balance of
payments deficit may result in retaliatory actions by foreign governments.  Such
actions  could have  adverse  effects  upon sales of the  Company's  products in

<PAGE>

certain foreign markets.  In addition,  the laws of certain foreign countries do
not protect the Company's  intellectual property rights to the same extent as do
the laws of the United States.

     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,  the European Union countries,  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.

     LIQUIDITY AND CAPITAL  RESOURCES.  Total assets  decreased to $2,797,917 in
1999, a decrease of $1,510,943,  as compared to 1998. The decrease was primarily
due to decreases in cash and accounts receivable.  Cash decreased to $1,689,029,
as  compared  to  $2,798,032  in 1998,  primarily  as a result of using cash for
operating  expenses.  Accounts  receivable  decreased to $59,266,  a decrease of
$270,072, or 82.0%,  primarily due to a delay in European orders pending receipt
of the CE  Mark.  Total  inventories  increased  to  $908,241,  an  increase  of
$283,966,  or 45.49%,  primarily due to anticipation  of future orders.  Current
liabilities increased to $761,924, an increase of $268,069, or 54.29%, primarily
due to an increase in customer deposits, combined with BSD's portion of the loss
incurred by TherMatrx,  decreases in accounts payable, and other normal periodic
fluctuations.

MANAGEMENT DISCUSSION AND CURRENT STATUS OF FINANCIAL CONDITION.
----------------------------------------------------------------

     BSD  management  believes that the primary  deficit of the Company has been
weakness  in sales and  marketing  skills.  The  Company  therefore  hired a new
President  experienced in sales and managing turnaround situations (August 1999)
and a new Director of Sales  experienced in aggressive  sales in medical markets
(November  1999).  BSD has  subsequently  intensified  its marketing  efforts to
create  patient  awareness of  hyperthermia  through the addition of new patient
brochures,  the internet and targeted television broadcasting about hyperthermia
and plans aggressive sales and marketing efforts to the medical community in the
coming fiscal year.

     Management  believes that the current projected sales will be sufficient to
meet the  Company's  operating  cash  requirements  through  fiscal  year  2000,
including  its  aggressive  marketing  and  research  and  development  efforts.
However, if sales are not sufficient to meet operating needs, management intends
to use its current cash position to meet operating  requirements.  The Company's
backlog of unfilled  customer  orders was $476,064,  as of August 31, 1999,  and
$1,608,750 as of November 1999. The Company also had long term  receivables  due
for field service contracts of $12,740, as of August 31, 1999.

     In 1996,  BSD received the first  purchase order for its new, deep regional
hyperthermia system - the BSD-2000o3D System. The first  BSD-2000o3D/MR has been
installed  and  initial  lab  testing  has  been  completed.   BSD  has  started
collaborative  developments  for clinical  application of this  technology.  The
Company  anticipates  that the  BSD-2000o3D  System may increase the  commercial
market in  hyperthermia  throughout  the world.  As of  November  1999,  BSD had
received   cumulative   orders   totaling   $3,240,353   for  purchases  of  the
BSD-2000o3D/MR product line.

     On  November  14,  1997,  BSD signed an  agreement  with  Oracle  Strategic
Partners  (OSP) to form  TherMatrx,  Inc., a  jointly-owned  company  which will
initially focus on minimally invasive treatments of benign urological  diseases,
specifically  Benign  Prostatic  Hyperplasia  (BPH). BSD participates in the BPH
market through  TherMatrx;  the BPH market is currently  estimated to be over $3
billion  annually in the U.S.  alone.  The Company  continues to provide certain
manufacturing  and consulting  services,  for which  TherMatrx  compensates  the
Company.

<PAGE>

     The Company is seeking other strategic  partnerships  for marketing,  sales
and distribution of the Company's current products;  collaborative  arrangements
for the  development  of new product  lines;  as well as  alliances  for product
development and manufacturing of the companies' product.

     Management is expanding  worldwide  marketing for current  cancer  products
into  two  new  markets:  surgical  and  chemotherapeutic  oncology.  These  two
disciplines  control most cancer  patients  and  treatment  funds,  and clinical
evidence  of the  safety  and  efficacy  of  hyperthermia  in  conjunction  with
chemotherapy  and surgery has been published.  However,  these efforts will take
time to develop.

     The Company's  revenues  from  products and services in the U.S.  decreased
from  $493,857  in fiscal  1998 to  $326,171  in fiscal  1999.  The  Company  is
currently implementing methods to increase U.S. sales, which include development
of a low-cost  PC-based  device  (BSD-300-4)  targeted  for the U.S.  market and
hiring a new Director of Sales who will focus on U.S. sales.

     BSD plans further support of R & D for current products to improve function
and reduce  cost.  Some  funding of R & D will come from  government,  strategic
partnerships,  and foundation sources.  Product improvements on existing product
lines will be supported by current  product  sales.  The Company also intends to
expand  marketing and product  applications  into the oncology area. In order to
utilize BSD's manufacturing  expertise, the Company has expanded its business to
include contract manufacturing.

     Management has implemented  programs to increase  profitability  and expand
BSD's  business;  however,  there can be no assurance  that  management  will be
successful in achieving  improved  operating  results and there are certain risk
factors that may impact the Company's  ability to fund its cash needs. Such risk
factors include  uncertainties  as to the Company's  ability to achieve adequate
sales,  general economic  conditions,  possible unforeseen and/or  non-recurring
expenses, and the availability of outside financing. The Company's backlog as of
any particular date may not be indicative of the Company's  actual sales for any
fiscal  period.  In  addition,  the  Company's  ability to produce  and ship its
products  depends  upon  its  production  capacity,   manufacturing  yields  and
component  availability,  among  other  factors.  The  U.S.  market  for  cancer
hyperthermia  equipment  has been  severely  adversely  impacted  as a result of
Medicare  and other  third-party  reimbursement  policies  and  procedures.  The
positive  clinical  results from European  studies,  recent  changes in Medicare
reimbursement  policy, and the Company's new reimbursement program may stimulate
the U.S. market; however, there is no assurance of influence on the U.S. market.

     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  has been  talking to vendors  and  customers  but has not yet
determined  the Y2K  readiness  of  these  entities.  However,  the  Company  is
monitoring the Y2K progress of its vendors,  customers,  and payors to determine
the potential impact to the Company.

     FORWARD  OUTLOOK  AND RISKS.  From time to time,  the  Company  may publish
forward-looking  statements  relating to such matters as  anticipated  financial

<PAGE>

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-KSB   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-KSB, 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.

ITEM 7.  FINANCIAL STATEMENTS

     Pursuant to Rule 12b-23,  the financial  statements  set forth on pages F-1
through F-18 attached hereto are incorporated by reference.

BSD MEDICAL CORPORATION
Financial Statements
August 31, 1999 and 1998






<PAGE>



                                                         BSD MEDICAL CORPORATION
                                                   Index to Financial Statements


--------------------------------------------------------------------------------




                                                                         Page
                                                                         ----

Report of Tanner + Co.                                                   F-1


Balance Sheet                                                            F-2


Statement of Operations                                                  F-3


Statement of Stockholders' Equity                                        F-4


Statement of Cash Flows                                                  F-5


Notes to Financial Statements                                            F-6


<PAGE>



                                                    INDEPENDENT AUDITORS' REPORT








To the Board of Directors and Stockholders
of BSD Medical Corporation


We have audited the balance sheet of BSD Medical Corporation (the Company) as of
August 31, 1999, and the related statements of operations, stockholders' equity,
and cash flows for the years  ended  August 31, 1999 and 1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of BSD Medical  Corporation as of
August 31,  1999,  and the  results of their  operations  and cash flows for the
years  ended  August 31, 1999 and 1998 in  conformity  with  generally  accepted
accounting principles.

As  discussed  in note 1 to the  financial  statements,  the  Company  no longer
consolidates with a subsidiary.








Salt Lake City, Utah
October 6, 1999

                                                                             F-1

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                                   Balance Sheet

                                                                 August 31, 1999
--------------------------------------------------------------------------------



              Assets

Current assets:
     Cash and cash equivalents                               $        1,689,029
     Receivables                                                         59,266
     Inventories                                                        908,241
     Prepaid expenses                                                    20,905
     Deposits                                                            20,643
                                                             ------------------

                  Total current assets                                2,698,084

Property and equipment, net                                              87,093
Long-term trade receivables                                              12,740
                                                             ------------------

                                                             $        2,797,917
                                                             ------------------

--------------------------------------------------------------------------------

              Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                        $           30,789
     Accrued expenses                                                   557,472
     Current portion of long-term debt                                   25,922
     Current portion of deferred revenue                                 86,325
     Current portion of deferred gain on sale - leaseback                61,416
                                                             ------------------

                  Total current liabilities                             761,924
                                                             ------------------

Deferred revenue                                                         24,717
Deferred gain on sale - leaseback                                       138,107
                                                             ------------------

                  Total liabilities                                     924,748
                                                             ------------------

Commitments and contingencies                                                -

Stockholders' equity:
     Common stock, $.01 par value; authorized 20,000,000
       shares; issued and outstanding 16,693,975 shares                 166,940
     Additional paid-in capital                                      20,688,109
     Deferred compensation                                             (159,486)
     Accumulated deficit                                            (18,822,160)
     Less 13,412 shares of treasury stock, at cost                         (234)
                                                             ------------------

                  Total stockholders' equity                          1,873,169
                                                             ------------------

                                                             $        2,797,917
                                                             ------------------


--------------------------------------------------------------------------------
                                                                             F-2

See accompanying notes to financial statements.


<PAGE>
<TABLE>
<CAPTION>


                                                                                   BSD MEDICAL CORPORATION
                                                                                   Statement of Operations

                                                                                    Years Ended August 31,
----------------------------------------------------------------------------------------------------------




                                                                             1999              1998
                                                                       -----------------------------------
<S>                                                                    <C>                <C>
Revenues:
     Sales                                                             $         596,441  $      1,459,143
     Grants and licenses                                                          23,780           133,173
                                                                       -----------------------------------

                                                                                 620,221         1,592,316
                                                                       -----------------------------------

Costs and expenses:
     Cost of sales                                                               632,505           707,399
     Research and development                                                    517,564           361,735
     Selling, general, and administrative                                        944,756           992,972
                                                                       -----------------------------------

                                                                               2,094,825         2,062,106
                                                                       -----------------------------------

                  Operating loss                                              (1,474,604)         (469,790)

Other income (expense):
     Interest income                                                              96,636            38,096
     Interest expense                                                             (3,630)           (8,373)
     Litigation settlement                                                             -         2,970,661
     (Loss) income of joint venture                                             (546,452)          409,985
                                                                       -----------------------------------

                  Net (loss) income before income taxes                       (1,928,050)        2,940,579

Provision for income taxes - current                                                   -           (50,000)
                                                                       -----------------------------------

                  Net (loss) income                                    $      (1,928,050) $      2,890,579
                                                                       -----------------------------------

(Loss) earnings per common share - basic                               $            (.12) $            .18
                                                                       -----------------------------------

(Loss) earnings per  common share - diluted                            $            (.12) $            .17
                                                                       -----------------------------------




----------------------------------------------------------------------------------------------------------
                                                                                                       F-3
</TABLE>

See accompanying notes to financial statements.


<PAGE>
<TABLE>
<CAPTION>


                                                                                   BSD MEDICAL CORPORATION

                                                                         Statement of Stockholders' Equity

                                                                      Years Ended August 31, 1999 and 1998
----------------------------------------------------------------------------------------------------------





                            Common Stock        Additional   Deferred                   Treasury Stock
                        ---------------------   Paid-In      Compen-   Accumulated  ----------------------
                          Shares     Amount     Capital      sation      Deficit      Shares     Amount
                        ----------------------------------------------------------------------------------

<S>                      <C>        <C>       <C>           <C>         <C>             <C>     <C>

Balance,
  September 1, 1997      16,176,980 $ 161,770 $  20,413,575 $ (463,246) $ (19,784,689)  234,928 $  (19,237)

Amortization of deferred
  compensation                    -         -             -    151,880             -          -          -

Donated shares                    -         -             -          -             -      5,412          -

Treasury stock issued for
  services                        -         -        51,913          -             -   (226,928)    19,003

Common stock issued
  for services              193,072     1,931        66,479          -             -          -          -

Net income                        -         -             -          -      2,890,579         -          -
                        ----------------------------------------------------------------------------------

Balance,
  August 31, 1998        16,370,052   163,701    20,531,967   (311,366) $ (16,894,110)   13,412       (234)

Amortization of deferred
  compensation                    -         -             -    151,880             -          -          -

Common stock issued
  for services              323,923     3,239       156,142          -             -          -          -

Net loss                          -         -             -          -     (1,928,050)        -          -
                        ----------------------------------------------------------------------------------

Balance,
  August 31, 1999        16,693,975 $ 166,940 $  20,688,109 $ (159,486) $ (18,822,160)   13,412 $     (234)
                        ----------------------------------------------------------------------------------




----------------------------------------------------------------------------------------------------------
                                                                                                       F-4

</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>


                                                                                   BSD MEDICAL CORPORATION
                                                                                   Statement of Cash Flows

                                                                                    Years Ended August 31,
----------------------------------------------------------------------------------------------------------



                                                                             1999              1998
                                                                       -----------------------------------

<S>                                                                    <C>                <C>

Cash flows from operating activities:
     Net (loss) income                                                 $    (1,928,050)   $    2,890,579
     Adjustments to reconcile net (loss) income to net
       cash (used in) provided by operating activities:
        Depreciation and amortization                                           23,854            19,089
        Provision for losses on receivables                                        (30)               -
        Deferred gain on sale of building                                      (61,416)          (46,061)
        Loss (gain) on disposal of property and equipment                        1,203           (18,154)
        Deferred compensation                                                  151,880           151,880
        Stock compensation expense                                             159,381           139,326
        (Increase) decrease in:
            Receivables                                                        304,848            98,530
            Inventories                                                       (283,966)          (82,049)
            Prepaid expenses and other assets                                  (10,580)           (3,618)
        Increase (decrease) in:
            Accounts payable                                                   (51,520)         (241,610)
            Accrued expenses                                                   196,491            16,602
            Deferred revenue                                                   (83,288)           87,968
            Loss (income) from equity investment                               546,452          (409,985)
                                                                         -------------------------------

                Net cash (used in) provided by
                operating activities                                        (1,034,741)        2,602,497
                                                                         -------------------------------

Cash flows from investing activities:
    Purchase of property and equipment                                         (43,374)          (22,601)
    Proceeds from sale of building                                                   -           446,545
                                                                         -------------------------------

                Net cash (used in) provided by
                investing activities                                           (43,374)          423,944
                                                                         -------------------------------

Cash flows from financing activities-
    payments on long-term debt                                                 (30,888)         (272,090)
                                                                         -------------------------------

(Decrease) increase in cash and cash equivalents                            (1,109,003)        2,754,351

Cash and cash equivalents, beginning of year                                 2,798,032            43,681
                                                                         -------------------------------

Cash and cash equivalents, end of year                                 $     1,689,029    $    2,798,032
                                                                         -------------------------------



--------------------------------------------------------------------------------------------------------
                                                                                                     F-5
</TABLE>


See accompanying notes to financial statements.


<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements

                                                        August 31, 1999 and 1998
--------------------------------------------------------------------------------


1.   Organization and Significant Accounting Policies

Organization

BSD Medical Corporation (the Company) develops,  produces, markets, and services
systems used for the treatment of cancer and other  diseases.  These systems are
sold worldwide.  In addition,  the Company  currently has a thirty-four  percent
interest in  TherMatrx,  Inc.  (TherMatrx)  a corporate  joint  venture  that is
engaged in the manufacture and sale of medical equipment.


Principles of Presentation

At August 31,  1998,  the Company  owned a  controlling  interest in  TherMatrx.
Accordingly,  the  financial  statements  originally  issued  for the year ended
August 31, 1998, included consolidated  balances.  All significant  intercompany
balances had been eliminated from the August 31, 1998 financial statements.


During the year ended  August 31,  1999,  the Company  reduced  its  interest in
TherMatrx  below the level of control,  and, as a result,  consolidation  was no
longer required. Accordingly, the financial statements for the year ended August
31, 1999, do not include consolidated  balances.  Moreover,  as a result of this
change in reporting entity, all information related to the year ended August 31,
1998, has been restated to show financial  information  for the Company with the
investment in TherMatrx recorded on the equity method.


Cash and Cash Equivalents

Cash  and  cash  equivalents  consist  of cash  and  investments  with  original
maturities to the Company of three months or less.


Inventories

Raw  material  inventories  are stated at the lower of cost or  market.  Cost is
determined using the average cost method. Work-in-process and finished goods are
stated at the lower of the accumulated manufacturing costs or market.


Property and Equipment

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation and amortization is determined using the straight-line  method over
the  estimated  useful lives of the assets.  Expenditures  for  maintenance  and
repairs are expensed when incurred and  betterments are  capitalized.  Gains and
losses on sale of property and equipment are reflected in operations.


--------------------------------------------------------------------------------
                                                                             F-6

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



1.   Organization and Significant Accounting Policies Continued

Income Taxes

The Company  accounts  for income  taxes using the asset and  liability  method.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax bases.  Deferred tax assets and  liabilities  are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date.


Earnings (Loss) Per Common Share

The  computation  of basic  earnings  (loss)  per  common  share is based on the
weighted average number of shares outstanding during each year.

The  computation  of diluted  earnings per common share is based on the weighted
average  number of shares  outstanding  during the year,  plus the common  stock
equivalents  that would arise from the  exercise of stock  options and  warrants
outstanding,  using the treasury  stock method and the average  market price per
share during the year.  Common stock equivalents are not included in the diluted
earnings (loss) per share calculation when their effect is antidilutive.


Revenue Recognition

Sales for  products  are  recorded  when  products  are  shipped.  Revenue  from
long-term service contracts is recognized on a straight-line basis over the term
of the contract,  which  approximates  recognizing it as it is earned.  Deferred
revenue includes amounts from service contracts as well as revenue from sales of
products which have not been shipped.


Research and Development Costs

Research and development costs are expensed as incurred.


--------------------------------------------------------------------------------
                                                                             F-7

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



1.   Organization and Significant Accounting Policies Continued

Concentration of Credit Risk

Financial  instruments that potentially  subject the Company to concentration of
credit risk  consists  primarily of trade  receivables.  In the normal course of
business, the Company provides credit terms to its customers.  Accordingly,  the
Company  performs  ongoing  credit  evaluations  of its  customers and maintains
allowances for possible losses which, when realized,  have been within the range
of management's expectations.


The Company has cash in bank and  short-term  investments  that,  at times,  may
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.  The Company believes it is not exposed to any significant credit
risk on cash and short-term investments.


Use of Estimates in the  Preparation of Financial  Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.


Reclassifications

Certain  accounts in the 1998 financial  statements  have been  reclassified  to
conform with the current year presentation.


2.  Detail of Certain Balance Sheet Accounts

Details of certain balance sheet accounts are as follows:


Receivables:
    Trade receivables                               $         52,219
    Other receivables                                         17,017
    Less allowance for doubtful
      accounts                                                (9,970)
                                                    ----------------

                                                    $         59,266
                                                    ----------------



--------------------------------------------------------------------------------
                                                                             F-8

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



2.  Detail of Certain Balance Sheet Accounts Continued

Inventories:
    Parts and supplies                              $        433,455
    Work-in-process                                          256,681
    Finished goods                                           218,105
                                                    ----------------

                                                    $        908,241
                                                    ----------------




Accrued expenses:
    Customer deposits                               $        301,653
    Accrued expenses                                         119,352
    Investment in subsidiary                                 136,467
                                                    ----------------

                                                    $        557,472
                                                    ----------------



3.  Property and Equipment

Property and equipment consists of the following:


Equipment                                           $        476,142
Furniture and fixtures                                       297,741
                                                    ----------------

                                                             773,883

Less accumulated depreciation
  and amortization                                          (686,790)
                                                    ----------------

                                                    $         87,093
                                                    ----------------




--------------------------------------------------------------------------------
                                                                             F-9

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------




4.  Long-term Debt

Long-term debt consists of the following:


Note payable to an insurance company, due in
monthly installments of $2,125, including interest
at 9.4%                                             $         20,500

Note payable to a vendor, due in monthly
installments of $2,742, including interest at 9%               5,422
                                                    ----------------

                                                              25,922

Less current portion                                         (25,922)
                                                    ----------------

                                                    $            -
                                                    ----------------



5.  Deferred Gain

During the year ended August 31, 1998, the Company entered into a sale-leaseback
on its building.  The  sale-leaseback  resulted in a gain of $325,513,  of which
$307,000  was  deferred  and  is  being  credited  to  income  as  rent  expense
adjustments  over the term of the lease.  The lease requires monthly payments of
$6,533 through November 2002.


Future minimum payments at August 31, 1999, are as follows:


Years Ending August 31,                                  Amount
                                                    ----------------

                        2000                        $         78,396
                        2001                                  78,396
                        2002                                  78,396
                        2003                                  19,599
                                                    ----------------

                                                    $        254,787
                                                    ----------------

Rent  expense on this  operating  lease for the years ended  August 31, 1999 and
1998, amounted to approximately $78,000 and $59,000, respectively.



--------------------------------------------------------------------------------
                                                                            F-10

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



6.  Income Taxes

The Income tax benefit  (provision)  differs from the amount computed at federal
statutory rates as follows:


                                               Years Ended
                                                August 31,
                                     -------------------------------
                                          1999            1998
                                     -------------------------------

Income tax benefit (provision) at
  statutory rate                     $       655,000   $  (1,000,000)
Change in valuation allowance               (655,000)        950,000
                                     -------------------------------

                                     $            -    $     (50,000)
                                     -------------------------------



Deferred tax assets (liabilities) are comprised of the following:


Net operating loss carryforwards                    $      2,502,000
General business and AMT credit carryforwards                173,000
Accrued expenses and deposits                                138,000
Capital loss carryforwards                                    86,000
Inventory                                                      7,000
Allowance for bad debts and reserves                           3,000
Depreciation                                                 (14,000)
Deferred compensation expense                               (105,000)
                                                    ----------------

                                                           2,790,000

Valuation allowance                                       (2,790,000)
                                                    ----------------

                                                    $             -
                                                    ----------------



--------------------------------------------------------------------------------
                                                                            F-11

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



6.  Income Taxes Continued

At August 31, 1999,  the Company has net operating  losses  (NOL),  research and
experimentation  tax credit (RETC), and investment tax credit (ITC) available to
offset future taxable income and taxes payable as follows:


  Expiration
     Date            NOL               RETC              ITC
--------------------------------------------------------------------

2001          $                -   $             -   $         2,000
2002                   1,999,000             8,000                 -
2003                   2,122,000            41,000                 -
2005                   1,270,000            72,000                 -
2007                     190,000                 -                 -
2008                     100,000                 -                 -
2009                     671,000                 -                 -
2010                     170,000                 -                 -
2012                     837,000                 -                 -
              ------------------------------------------------------

              $        7,358,000   $       121,000   $         2,000
              ------------------------------------------------------

The Company  has  experienced  a greater  than 50 percent  change of  ownership.
Consequently,  use of the Company's  carryovers against future taxable income in
any one year may be limited and these  carryovers  may expire  unutilized due to
the limitation imposed by the change of ownership rules.


7.  Stock Options and Warrants

Stock Options

The  Company's  1998  Employee  Stock  Option Plan  authorizes  the  granting of
incentive  stock options to certain key employees and  nonemployees  who provide
services to the  Company.  The Plan  provides for the granting of options for an
aggregate  of  2,000,000  shares.  The  options  vest  subject  to  management's
discretion. Under this plan, 319,000 options were granted, 5,500 options vested,
and 50,000 options were canceled for the year ended August 31, 1999.


--------------------------------------------------------------------------------
                                                                            F-12

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



7.  Stock Options and Warrants Continued

Stock Options - Continued

The Company's 1998 Director Stock Plan authorizes granting a total of $12,000 in
cash and options to each nonemployee director.  The Plan allows for an aggregate
of 1,000,000 shares to be granted.  The options vest according to a set schedule
over a five-year period and expire upon the director's termination, or after ten
years from the date of grant.  Under this plan, 100,000 options were granted and
25,000 shares were canceled for the year ended August 31, 1999.


A schedule of the options and warrants are as follows:



                                                          Price Per
                                   Options    Warrants      Share
                                 ------------------------------------

Outstanding at September 1,
  1997                              1,107,746    242,655 $ .10 to .20
                        Granted        27,500          -          .25
                                 ------------------------------------

Outstanding at August 31, 1998      1,135,246    242,655 $ .10 to .25
                        Granted       419,000          -   .24 to .45
                        Canceled      (75,000)         -   .24 to .35
                                 ------------------------------------

Outstanding at August 31, 1999      1,479,246    242,655 $ .10 to .45
                                 ------------------------------------


The Company has issued  options to purchase  shares of common stock to employees
and nonemployees, at an exercise price of $.10 per share. For options granted to
employees,  the Company has recorded as deferred  compensation the excess of the
market value of common stock at the date of grant over the exercise price.


--------------------------------------------------------------------------------
                                                                            F-13

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



7.  Stock Options and Warrants Continued

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards (SFAS) No. 123,  Accounting for Stock-Based  Compensation.
Accordingly,   no  compensation  cost  has  been  recognized  in  the  financial
statements  for  employees,  except when the exercise  price is below the market
price of the stock on the date of grant. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the grant date for
awards in 1999 and 1998  consistent  with the  provisions  of SFAS No. 123,  the
Company's  net (loss)  earnings  and  earnings per share would have been the pro
forma amounts indicated below:


                                                    Years Ended
                                                    August 31,
                                        --------------------------------
                                              1999            1998
                                        --------------------------------

Net (loss) income - as reported         $     (1,928,050)  $   2,890,579
Net (loss) income - pro forma           $     (1,956,532)  $   2,883,894
Diluted (loss) earnings per share - as
   reported                             $           (.12)  $         .17
Diluted (loss) earnings per share -
  pro forma                             $           (.12)            .17
                                        --------------------------------



The fair value of each option  grant is estimated in the date of grant using the
Black-Scholes option pricing model with the following assumptions:


                                                   August 31,
                                        --------------------------------
                                              1999            1998
                                        --------------------------------

Expected dividend yield                 $         -        $        -
Expected stock price volatility                124%              139%
Risk-free interest rate                        5.6%              5.6%
Expected life of options                     5 years          5 years
                                        --------------------------------


The weighted  average fair value of options and warrants granted during 1999 and
1998 are $.31 and $.22, respectively.


--------------------------------------------------------------------------------
                                                                            F-14

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



7.  Stock Options and Warrants Continued

The  following  table  summarizes  information  about stock options and warrants
outstanding at August 31, 1999:


                                                  Options and Warrants
              Options and Warrants Outstanding        Exercisable
            ------------------------------------------------------------
                          Weighted
                           Average
               Number    Remaining    Weighted     Number     Weighted
  Range of  Outstanding Contractual   Average   Exercisable   Average
  Exercise       at         Life      Exercise       at       Exercise
   Prices     8/31/99      (Years)     Price      8/31/99      Price
------------------------------------------------------------------------
$ .10 - .24    1,452,901    5.5     $     .12     1,452,901     $    .12
  .37 - .45      269,000    9.8           .39       269,000          .39
------------------------------------------------------------------------

$ .10 - .45    1,721,901    6.2     $     .17     1,721,901     $    .17
------------------------------------------------------------------------



8.  Foreign Customer and Major Customer

Sales to foreign customers are as follows:


                                               Years Ended
                                                August 31,
                                    --------------------------------
                                          1999            1998
                                    --------------------------------

Europe                              $        290,551  $      903,849
Far East                                           -         194,824
                                    --------------------------------

                                    $        290,551  $    1,098,673
                                    --------------------------------



During the years  ended  August 31,  1999 and 1998,  the  Company had sales to a
major customer that amounted to $285,000 and $888,000, respectively.


9.  Related Party Transactions

During the years  ended  August 31,  1999 and 1998,  the  Company had sales to a
stockholder of approximately $285,000 and $888,000.

During the year ended  August 31, 1999 the  Company  had sales of  approximately
$96,000 to an unconsolidated subsidiary.


--------------------------------------------------------------------------------
                                                                            F-15

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------




10. Supplemental Cash Flow Information

During the year ended August 31, 1998,  the Company sold a building  with a book
value of $213,259, debt of $93,741, and recognized a deferred gain of $307,000.


Actual amounts paid for interest and income taxes are as follows:


                                                Years Ended
                                                 August 31,
                                    --------------------------------
                                          1999            1998
                                    --------------------------------

Interest expense                    $          3,631  $      8,373
                                    --------------------------------

Income taxes                        $         32,827  $          -
                                    --------------------------------



11. Significant Unconsolidated Affiliates

Summarized financial information for the significant unconsolidated affiliate of
the Company at  September  30, 1999 and 1998 (the  affiliates's fiscal year runs
from October 1, through September 30,) are as follows:


                                              September 30,
                                    --------------------------------
                                          1999            1998
                                    --------------------------------

Result for year:
    Gross revenues                  $         -       $          -
    Gross profit                    $         -       $          -
    Net loss                        $ (1,476,223)     $  (2,204,656)

Year-end financial position:
    Current assets                  $  5,432,408      $   3,782,614
    Non-current assets              $  2,935,308      $     304,025
    Current liabilities             $     72,372      $     514,335
    Non-current liabilities         $         -       $     304,568




--------------------------------------------------------------------------------
                                                                            F-16

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



12. Commitments and Contingencies

The  Company  has an  employment  agreement  with the  Chairman  of the Board of
Directors of the Company.  The agreement provides that the Chairman of the Board
of  Directors's  salary  will  be  based  upon a  reasonable  mutual  agreement.
Additionally, in the case of nonvoluntary termination, the acting president will
receive severance pay for a six month period, which includes an extension of all
employee rights, privileges, and benefits,  including medical insurance. The six
month  severance  pay  would  be the  salary  at the  highest  rate  paid to the
president prior to such a nonvoluntary termination.  The agreement also requires
the Company to pay the acting  president  for any accrued  unused  vacation  and
bonuses.


The Company has an exclusive  worldwide license for a unique  temperature probe.
The  license  will  remain in effect as long as the  technology  does not become
publicly  known as a result of actions taken by the  licensor.  The Company pays
royalties based upon its sales of this probe. Royalties accrued as of August 31,
1999 and 1998,  are  approximately  $6,000  and  $1,000,  respectively.  Royalty
expense amounted to  approximately  $5,000 and $9,000 for the years ended August
31, 1999 and 1998, respectively.


13. Fair Value of Financial Instruments

None of the Company's financial  instruments are held for trading purposes.  The
Company estimates that the fair value of all financial instruments at August 31,
1999 and 1998, does not differ materially from the aggregate  carrying values of
its  financial  instruments  recorded in the  accompanying  balance  sheet.  The
estimated fair value amounts have been determined by the Company using available
market  information  and  appropriate  valuation   methodologies.   Considerable
judgement is  necessarily  required in  interpreting  market data to develop the
estimates of fair value,  and,  accordingly,  the estimates are not  necessarily
indicative  of the amounts that the Company  could  realize in a current  market
exchange.



--------------------------------------------------------------------------------
                                                                            F-17

<PAGE>


                                                         BSD MEDICAL CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



14. Earnings Per Share

Financial  accounting  standards require companies to present basic earnings per
share (EPS) and diluted  earnings per share along with additional  informational
disclosures. Information related to earnings per share is as follows:



                                            Years Ended December 31,
                                        --------------------------------
                                              1999            1998
                                        --------------------------------

Basic EPS:
  Net (loss)income available to
     common stockholders                $     (1,928,050)  $   2,890,579
                                        --------------------------------

  Weighted average common shares        $     16,468,000   $  16,214,000
                                        --------------------------------

  Net (loss)  income per share          $           (.12)  $         .18
                                        --------------------------------


Diluted EPS:
  Net income (loss) available to
     common stockholders                $     (1,928,050)  $   2,890,579
                                        --------------------------------

  Weighted average common shares        $     16,468,000   $  17,174,000
                                        --------------------------------

  Net (loss) income per share           $           (.12)  $         .17
                                        --------------------------------



15.  Litigation Settlement

During 1998,  the Company  settled  litigation  with  Urologix.  Pursuant to the
settlement  agreement,  Urologix  paid an aggregate  total of  $5,000,000 to the
Company and its subsidiary.  As part of the settlement,  Urologix  maintains its
non-exclusive license to certain patents.

--------------------------------------------------------------------------------
                                                                            F-18

<PAGE>

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     None.


<PAGE>



                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

     Information regarding directors of the Company are contained under Election
of Directors in the  registrant's  1998 Proxy  Statement,  which is incorporated
herein by reference.  The current directorship positions resulted from vacancies
and were filled by a majority of the directors then in office, and the directors
so chosen  hold  office  until  their  successors  have been  duly  elected  and
qualified. The Company does not presently have a nominating committee. Executive
officers of the Company are appointed by the Board of Directors and serve at the
discretion of the Board.  There are no family  relationships  between any of the
directors  or  executive  officers of the Company and none of these  individuals
have been involved in any reportable legal proceedings.

     The following table sets forth certain information concerning the directors
and executive officers of the Company.

<TABLE>
<CAPTION>
                                                                                                        Initial Date as
         Name                            Age                          Position                        Officer or Director
--------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>      <C>                                                          <C>

Paul F. Turner                           52       Chairman of the Board, Senior Vice President, and            1986
                                                    Chief Technology Officer

Hyrum A. Mead                            52       President and Member of the Board of Directors               1999

Dixie Toolson Sells                      49       Vice President of Regulatory Affairs and Corporate           1987
                                                    Secretary

Ray Lauritzen                            49       Vice President of Field Service                              1988

Gerhard W. Sennewald, Ph.D.              63       Member of the Board of Directors                             1994

J. Gordon Short, M.D.                    68       Member of the Board of Directors                             1994

Michael Nobel, Ph.D.                     59       Member of the Board of Directors                             1997

--------------------------------------------------------------------------------------------------------------------------
</TABLE>


     Mr.  Turner  has been with BSD for 21 years.  He served as Staff and Senior
Scientist  from 1978 to  September  1986;  as Vice  President  of Research  from
September  1986, to January 1989;  and as Senior Vice President of Research from
January 1989, to October  1993.  In October  1993,  Mr. Turner  resigned as Vice
President of Research,  and he served as Senior  Scientist  from October 1993 to
December  1994. In December  1994,  Mr. Turner was  re-appointed  as Senior Vice
President  of Research and was elected to the Board of  Directors.  From October
1995, to August 1999, Mr. Turner served as Acting President.  Since August 1999,
Mr. Turner has served as Senior Vice President and Chief Technology Officer.

     Mr. Mead was  appointed as President  and elected to the Board of Directors
in August 1999. He has served as VP of Business  Development at ZERO Enclosures,
a  leading  manufacturer  in  the  telecommunications,  computer  and  aerospace

<PAGE>

industry  and as  President  of Electro  Controls,  a  manufacturer  of computer
controlled power systems that have significant  technological  overlaps with the
BSD systems. Mr. Mead began his career in sales and marketing with IBM.

     Ms.  Sells  has been with BSD for 20 years.  She  served as  Administrative
Director  from 1978 to 1984;  as Director  of  Regulatory  Affairs  from 1984 to
September 1987; and as Vice President of Regulatory Affairs from September 1987,
to October  1993.  In October  1993,  Ms.  Sells  resigned as Vice  President of
Regulatory  Affairs,  and she served as  Director  of  Regulatory  Affairs  from
October 1993 to December 1994. In December 1994, Ms. Sells was  re-appointed  as
Vice President of Regulatory Affairs and was appointed as Corporate Secretary by
the Board of  Directors.  Ms. Sells also serves on the Board of Directors of the
Utah Intermountain Biomedical Association.

     Mr.  Lauritzen  has been with BSD for 16 years.  He served as Field Service
Manager  from  1982 to  January  1988 and as Vice  President  of  Field  Service
Operations since January 1988.

     Dr. Gerhard Sennewald was appointed to BSD's Board of Directors in December
1994. He has been the key BSD European  representative  and  distributor  for 14
years and has been  instrumental  in  obtaining  the  majority of BSD's  foreign
sales.  Dr.   Sennewald  is  the  President  and  Chief  Executive   Officer  of
Medizin-Technik GmbH of Munich, Germany.

     Dr. J. Gordon  Short was  appointed to BSD's Board of Directors in December
1994,  after  extensive  participation  in the  initial  development  and market
establishment of the Company's  products as Medical Director for BSD, as well as
previous service on the Company's Medical Advisory Board. Dr. Short is President
and Chief Executive  Officer of Brevis  Corporation,  a medical products company
that specializes in consumable specialty supplies.

     Pursuant to Section  16(a) of the  Securities  Act of 1934,  the  Company's
directors,  executive officers,  and any persons holding more than 10 percent of
the Company's  stock,  are required to report their ownership and any changes in
beneficial  ownership  of the  Company's  stock to the  Securities  and Exchange
Commission. To the Company's knowledge,  based solely on review of the copies of
such  reports  furnished to the  Company,  all of such persons  subject to these
reporting  requirements filed the required reports with respect to the Company's
most recent fiscal year.


ITEM 10.  EXECUTIVE COMPENSATION

     The  following   tables  set  forth  certain   information   regarding  all
compensation earned during the last three fiscal years and fiscal year-end stock
option  values for the person  acting in a similar  capacity to chief  executive
officer of the  Company  in the fiscal  year  ended  August 31,  1999.  No stock
options were granted to or exercised by the Acting  President during fiscal year
1998. No other executive officers of the Company received compensation exceeding
$100,000.

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE


                                                                               Long Term
                                          Annual Compensation             Compensation Awards
------------------------------------------------------------------------------------------------------------------------
                                                           Other
                                                          Annual      Restricted                       All Other
       Name and        Fiscal       Salary      Bonus     Compen-       Stock                          Compen-
       Position          Year        ($)         ($)      sation ($)   Awards ($)       Options(#)     sation($)
------------------------------------------------------------------------------------------------------------------------
<S>                     <C>          <C>         <C>          <C>            <C>         <C>              <C>

Hyrum A. Mead,          1999           $5,689     -0-         -0-            -0-         200,000          -0-
President (1)
------------------------------------------------------------------------------------------------------------------------

Paul F. Turner,         1999         $140,000    $100         -0-            -0-           -0-            -0-
Sr. VP and Chief        1998         $128,543     -0-         -0-            -0-           -0- (2)        -0-
Technology Officer      1997         $115,000     -0-         -0-            -0-           -0-            -0-

------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Mr. Mead began employment with BSD as of August 10, 1999.
(2)  During fiscal 1998, TherMatrx approved the grant of an option to Mr. Turner
     to purchase 1% of  outstanding  shares of common stock in  TherMatrx,  Inc.
     (strike price and total number of outstanding  shares to be determined at a
     later date by TherMatrx's Board of Directors).


<TABLE>
<CAPTION>



            OPTION/SAR GRANTS IN LAST FISCAL YEAR - Individual Grants

                                                              Percent of Total
                                                             Options Granted to   Exercise or
                  Name and                       Options     Employees in Fiscal   Base Price
                  Position                         (#)              1999             ($/Sh)      Expiration Date
---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>               <C>        <C>

Hyrum A. Mead,                                   200,000            62.70%            $.37       August 10, 2009
President
---------------------------------------------------------------------------------------------------------------------
</TABLE>




               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>

                        Shares                   Number of Securities                   Value of Unexercised
                      Acquired on      Value    Underlying Unexercised                   In-the-Money Options
      Name and         Exercise       Realized   Options at FY-end (#)                    at FY-end ($)
      Position            (#)           ($)      Exercisable      Unexercisable     Exercisable     Unexercisable
----------------------------------------------------------------------------------------------------------------------
<S>                       <C>           <C>           <C>              <C>              <C>               <C>

Hyrum A. Mead,            -0-           -0-             0              200,000             0              $92,660
President
----------------------------------------------------------------------------------------------------------------------

Paul F. Turner,           -0-           -0-           178,187            2,766          $82,554           $1,281
Sr. VP and Chief
Technology Officer
----------------------------------------------------------------------------------------------------------------------

</TABLE>


COMPENSATION OF DIRECTORS
-------------------------

     The 1998 Director Stock Plan provides for annual compensation in the amount
of $12,000  for each  non-employee  director - $4,000 to be paid in cash and the
balance  of the  retainer  to be paid in the form of  restricted  shares  of BSD
Common  Stock.  In  addition  to the  annual  compensation  to  directors,  each
Non-Employee  Director  shall  receive  an  annual  option  to  purchase  25,000

<PAGE>

restricted  shares of BSD Common  Stock at a  purchase  price of 85% of the Fair
Market  Value at the date the Option is granted.  The options  vest over 5 years
and expire in 10 years.  On September 1, 1998,  S. Lewis Meyer,  Michael  Nobel,
Gerhard W.  Sennewald,  and J. Gordon Short were each awarded  25,000 options to
purchase the Company's  restricted  common stock at $.24 per share.  On March 1,
1999, S. Lewis Meyer, Michael Nobel,  Gerhard W. Sennewald,  and J. Gordon Short
were each paid $2,000 and awarded  10,240  shares of  restricted  common  stock,
based on service to the Company for the prior six months.  On September 1, 1999,
Michael  Nobel,  Gerhard W.  Sennewald,  and J. Gordon  Short were each  awarded
25,000  options to purchase the  Company's  restricted  common stock at $.39 per
share.  These  directors  were also paid  $2,000,  and awarded  8,633  shares of
restricted  common  stock  based on  service  to the  Company  for the prior six
months.  On  September  1, 1999,  S. Lewis  Meyer was  awarded  2,065  shares of
restricted  common  stock and paid  $478.26 for his service to the Company  from
March 1, 1999, through April 13, 1999, when he resigned from his position on the
Board of Directors.

EMPLOYMENT CONTRACTS
--------------------

     The Company has an employment  contract with the President,  Mr. Mead, that
was signed August 10, 1999. This agreement  provides that Mr. Mead shall receive
a base salary of  $125,000,  which  shall be  reviewed  annually by the Board of
Directors.  Additionally,  in the case of  non-voluntary  termination,  Mr. Mead
shall receive all  compensation  for a period of six months,  which  includes an
extension of all  benefits and  perquisites.  The six month  severance  shall be
salary at the highest  rate paid to Mr. Mead prior to such  termination  and the
total amount of bonuses  paid or payable  during the  preceding  12 months.  The
agreement also requires the Company to vest any options  granted to Mr. Mead for
the  purchase  of the  Company's  stock  with a 90 day period to  exercise  such
options.  Mr. Mead's agreement includes a period of non-competition for one year
following termination of employment.

     The Company has an employment  contract with the Senior Vice  President and
Chief  Technology  Officer,  Mr. Turner that was signed  November 2, 1988.  This
agreement  provides  that Mr.  Turner's  salary will be based upon a  reasonable
mutual agreement.  Additionally,  in the case of non-voluntary termination,  Mr.
Turner will  receive  severance  pay for a one-year  period,  which  includes an
extension of all employee rights,  privileges,  and benefits,  including medical
insurance.  The one-year severance pay will be an average of Mr. Turner's salary
for the immediate  twelve-month period prior to termination.  The agreement also
requires the Company to pay Mr. Turner any accrued  unused  vacation at the time
of  termination.  BSD is  also  obligated  to pay  Mr.  Turner  $1,000  (or  the
equivalent  value in stock options) for newly issued patents (this  compensation
is halved if multiple inventors are involved). Mr. Turner's agreement includes a
period of non-competition for one year following termination of employment. This
non-competition  agreement may be extended by BSD for up to an  additional  four
years  by  written  notification  and  continuing  severance  payments  for  the
additional   years  of  extension  (as  defined  for  the  first  year)  if  the
non-competition obligation is extended.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain  information as of November 1, 1999,
with respect to the beneficial  ownership of the outstanding Common Stock by (i)
each person known to management of the Company to own beneficially  more than 5%
of the outstanding Common Stock, (ii) all directors and named executive officers
of the Company, and (iii) all officers and directors as a group:

<PAGE>

<TABLE>
<CAPTION>

Name and Address of                               Shares of Common Stock            Percentage of Common Stock
Beneficial Owner                                  Beneficially Owned (1)                  Ownership (2)
--------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                                 <C>

Dr. Gerhard W. Sennewald                                  6,757,819(3)                        40.25%
   c/o Medizin-Technik GmbH
   Augustenstrasse 27
   D-80333 Munich, Germany

Paul F. Turner                                            1,993,105(4)                        11.81%
   762 Lacey Way
   North Salt Lake, UT  84054

John E. Langdon                                           1,300,010(5)                        7.79%
   2501 Parkview Drive, Suite 500
   Fort Worth, TX  76102

Hyrum A. Mead                                                     0                             *
   202 Coventry Lane
   North Salt Lake, UT  84054

Michael Nobel                                                48,873(6)                          *
   P.O. Box 30043
   S-10425 Stockholm, Sweden

J. Gordon Short, M.D.                                       103,873(7)                          *
   c/o Brevis Corporation
   3310 South 2700 East
   Salt Lake City, UT  84109

All officers and directors as                             9,553,836(8)                        55.64%
   a group (7 persons)

</TABLE>


*    Less than 1.0%.

(1)  Unless  otherwise  noted and  subject to  community  property  laws,  where
     applicable,  the persons  named in the table above  possess sole voting and
     investment power with respect to all shares shown to be beneficially  owned
     by them.

(2)  Shares not outstanding but deemed beneficially owned by virtue of the right
     of a person or member of a group to acquire them within 60 days are treated
     as outstanding  only when  determining the amount and percent owned by such
     person or group.

(3)  Includes 95,065 shares subject to options.  Does not include 500,000 shares
     held   by   Dr. Sennewald's   spouse, for   which  he  disclaims beneficial
     ownership.

(4)  Includes 178,187 shares subject to options.

(5)  Includes 403,525 shares owned directly by Mr. Langdon. The remaining shares
     are held in trusts  for which Mr.  Langdon  is  Trustee.  Does not  include
     50,000  shares  held  by Mr.  Langdon's  spouse,  for  which  he  disclaims
     beneficial ownership.

(6)  Includes 5,000 shares subject to options.

(7)  Includes 33,000 shares subject to options.

(8)  Includes 476,926 shares subject to options.

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

     The  following  exhibits  are filed as part of this  report  or are  hereby
incorporated by reference as indicated:


Exhibit
Number                              Description
-------                             -----------

3.1         Certificate of  Incorporation.  Incorporated by reference to Exhibit
            3.1 of the BSD Medical  Corporation  Registration  Statement on Form
            S-1, filed October 16, 1986.

3.2         By-Laws. Incorporated by reference to Exhibit 3.2 of the BSD Medical
            Corporation  Registration  Statement on Form S-1,  filed October 16,
            1986.

4.1         Specimen  Common  Stock  Certificate.  Incorporated  by reference to
            Exhibit 4 of the BSD Medical Corporation  Registration  Statement on
            Form S-1, filed October 16, 1986.

10.1        Transfer of Trade Secrets  Agreement  dated December 7, 1979,  among
            BSD Medical Corporation,  Vitek,  Incorporated and Ronald R. Bowman.
            Incorporated  by  reference  to  Exhibit  10.6  of the  BSD  Medical
            Corporation  Registration  Statement on Form S-1,  filed October 16,
            1986.

10.2        Volume Purchase  Agreement  dated June 6, 1986,  between BSD Medical
            Corporation  and Luxtron  Corporation.  Incorporated by reference to
            Exhibit 10.9 of the BSD Medical Corporation  Registration  Statement
            on Form S-1, filed October 16, 1986.

10.3        Second  Addendum to Exclusive  Transfer of Trade  Secrets  Agreement
            dated April 2, 1987.  Incorporated by reference to Exhibit 10 of the
            BSD Medical Corporation Form 10-K, filed April 8, 1988.

10.4        License   Agreement   between  BSD  Medical   Corporation  and  EDAP
            Technomed,  Inc.,  dated July 3, 1996.  Incorporated by reference to
            Exhibit 10 of Form 8-K, filed August 7, 1996.

10.5        Terms of  Engagement  between  BSD Medical  Corporation  and Ambient
            Capital  dated  November  26,  1996.  Incorporated  by  reference to
            Exhibit 10 of Form 10-QSB filed February 27, 1997.

10.6        Stock  Purchase  Agreement  dated  October  31,  1997,  by and among
            TherMatrx, Inc., BSD Medical Corporation, Oracle Strategic Partners,
            L.P., and Charles Manker.

10.7        BSD Medical  Corporation  1998 Director Stock Plan.  Incorporated by
            reference to Exhibit A of the BSD Medical Corporation  Schedule 14A,
            filed July 27, 1998.

10.8        BSD Medical  Corporation 1998 Stock Incentive Plan.  Incorporated by
            reference to Exhibit B of the BSD Medical Corporation  Schedule 14B,
            filed July 27, 1998.

16          Letter  on  changes  in  certifying   accountant.   Incorporated  by
            reference to Exhibit 16 of the BSD Medical  Corporation  Form 8-K/A,
            filed September 23, 1997.

<PAGE>

27          Financial Data Schedule.

99          The  financial  statements  for the fiscal year ended  September 30,
            1999, of TherMatrx,  Inc., a significant  subsidiary reported on the
            equity  method,  and the  report  of  independent  certified  public
            accountants.

 (b)  Reports on Form 8-K

      During the last quarter of fiscal year 1999,  the Company filed no reports
on Form 8-K.


<PAGE>


SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                 BSD MEDICAL CORPORATION


Date: November 24, 1999                         By:  /s/   Hyrum A. Mead
      ------------------------------            --------------------------------
                                                     Hyrum A. Mead
                                                     President and Member of the
                                                     Board of Directors



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


Date: November 24, 1999                         By:  /s/   Paul F. Turner
      ------------------------------            --------------------------------
                                                     Paul F. Turner
                                                     Chairman of the Board,
                                                     Chief Technology  Officer,
                                                     and Senior Vice President
                                                     of Research


Date: November 24, 1999                         By:  /s/   Hyrum A. Mead
      ------------------------------            --------------------------------
                                                     Hyrum A. Mead
                                                     President and Member of the
                                                     Board of Directors


Date: November 24, 1999                         By:  /s/   Gerhard W. Sennewald
      ------------------------------            --------------------------------
                                                     Dr. Gerhard W. Sennewald
                                                     Member of the Board of
                                                     Directors


Date: November 24, 1999                         By:  /s/   J. Gordon Short
      ------------------------------            --------------------------------
                                                     Dr. J. Gordon Short
                                                     Member of the Board of
                                                     Directors


Date: November 24, 1999                         By:  /s/   Michael Nobel
      ------------------------------            --------------------------------
                                                     Dr. Michael Nobel
                                                     Member of the Board of
                                                     Directors