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, 1995.
                              
               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  [  ] No  [X]

   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]

   State  issuer's  revenues for its most  recent  fiscal  year:
$1,148,656

   Indicate the aggregate market value of the voting stock  held
by  non-affiliates of the Registrant:  Not Available  (see  Part
II, Item 5).

   As  of  February  24, 1997, there were 16,176,980  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") is engaged  in  the
design,  development, production, marketing,  and  servicing  of
heat  therapy  (hyperthermia/thermotherapy) equipment  for  both
cancerous  and  benign diseases.  Hyperthermia is  used  in  the
application,   monitoring   and   control   of   electromagnetic
(microwave or radiofrequency) or ultrasound generated  heat  for
the  treatment of malignant and benign diseases.  BSD  pioneered
the  commercial  application  of this  technology  in  both  the
radiation  oncology and urology fields and has 18  current  U.S.
patents  (which  cover  all  of  its  current  applications  and
products as well as additional applications and devices).

  The Company was founded in 1978 by John E. Langdon as a result
of  research  which  demonstrated that high heat  could  destroy
cancer cells.  BSD continued this research and was successful in
pioneering,  developing, and commercializing this  break-through
cancer  treatment. The Company's first hyperthermia system,  the
BSD-1000,  was  developed and sold in 1979.  BSD was  the  first
Company  to obtain full PreMarket approvals (PMA) from the  Food
and  Drug  Administration (FDA) for hyperthermia cancer  therapy
systems   (in   1983)   and   the  first   Company   to   obtain
Investigational Device Exemption (IDE) approval from the FDA for
hyperthermia/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 $50,000 to $850,000.

   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 PRODUCTS/THERAPIES

  HYPERTHERMIA AS A CANCER TREATMENT.  There are more than eight
million  Americans alive today who have a history of cancer  and
over  83  million,  approximately four in  ten  Americans,  will
eventually  develop  cancer,  and the  incidence  of  cancer  is
expected to continue to grow.  Over 520,000 people will  die  of
cancer this year.  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).  The combination  of
differential heat sensitivity between cancerous and normal cells
and the inability of the cores of solid tumors to dissipate heat
as effectively as surrounding normal cells makes it possible, by
utilizing  the controlled application of high heat,  to  destroy
cancerous  tissues and cells without causing serious  damage  to
normal  tissues  and  cells.  Prospectively randomized  clinical
studies  using BSD's equipment have shown that the  addition  of
hyperthermia to other cancer therapies results in: faster  tumor
regression;  increased  tumor  response;  lower  relapse   rate;
increased  disease-free survival time; and improved  quality  of
life  for  the  patient - with no increase in side  effects  and
lower overall costs of patient care.  BSD is the world leader in
the  hyperthermia market and is considered the leading innovator
and developer.  The Company's equipment is most effective in the
treatment  of  solid  localized tumors and increases  long  term
control  of  these  tumors.  Inability to control  local  tumors
remains a significant obstacle to a cure for cancer, causes over
one-third of all cancer deaths, results in severe symptoms which
reduce quality of life, increase cost of care, and increases the
risk  of  metastatic disease.  BSD's hyperthermia equipment  has
been  shown to increase local tumor control without an  increase
in toxicity.

   The Company's hyperthermia equipment can be used alone but is
typically used in conjunction with other therapies and has  been
shown  to potentiate other cancer therapies, including radiation
therapy, chemotherapy and surgery.  Published, clinical  studies
using   the  Company's  systems  have  shown  that  hyperthermia
increases  the  efficacy  of radiation  and  chemotherapy  to  a
significant   degree   without   an   increase   in    toxicity.
Hyperthermia  delivery using the Company's  equipment  has  been
shown   to   provide  supra-additive  interactions   with   many
chemotherapeutic  drugs; to cause localized toxicity  of  heated
tumor  areas, while maintaining low levels of toxicity  to  non-
heated normal tissues; and to cause some chemotherapeutic agents
that   are  not  effective  at  normal  temperatures  to  become
effective   at   elevated   temperatures.    The   addition   of
hyperthermia  to  other  therapies  can  allow  a  reduction  in
chemotherapy   and/or   radiation  dose,   thus   reducing   the
debilitating  and  dangerous side effects of  these  treatments.
The  use  of  pre-surgical hyperthermia  delivered  using  BSD's
equipment  has been shown to obviate the need for amputation  of
normal  tissues  in 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.

   In  the  past,  hyperthermia has been typically  used  almost
exclusively as a therapy for patients who have failed all  other
available   methods  of  treatment,  and  even   these   heavily
pretreated  patients  have responded well to  hyperthermia,  and
some patients are now being treated earlier with BSD's equipment
using combination therapy which includes hyperthermia.

  HYPERTHERMIA/THERMOTHERAPY AS A TREATMENT FOR BENIGN PROSTATIC
HYPERPLASIA  (BPH).   BPH, a condition in older  men  where  the
enlarged  prostate gland restricts urination, afflicts  millions
of  men  around  the  world.  Over 5 million American  men  meet
recently  released U.S. government guidelines for  treatment  of
BPH;  by  the  year  2020,  11 million  U.S.  men  will  require
treatment  for BPH.  Recently adopted World Health  Organization
BPH treatment guidelines are similar to the U.S. guidelines.  Of
the 5 million men in the U.S. currently in need of treatment for
BPH,  only  700,000  will  receive treatment  due  to  the  high
toxicities  of  available therapies.  The Company believes  that
many  of the 5 million men suffering with BPH would likely  seek
treatment  if  a  non-surgical,  low  toxicity  treatment   were
available.   A  treatment  alternative for  BPH  is  desperately
needed by all segments of this market: BPH patients need a  less
toxic  treatment alternative to surgery; urologists need a  less
invasive  non-pharmaceutical procedure to  offer  patients;  and
health  care  providers  need a less expensive  treatment.   BSD
designed  the  BSD-50  to  meet the needs  of  this  substantial
market.  The BSD-50 provides a low cost treatment which  can  be
administered in the physician's office, requires no  anesthetic,
and  has no significant acute or late side-effects.  There is  a
substantial market in disposable products associated  with  this
technology  which  will provide a self-perpetuating  market  and
revenue  stream.   Researchers have stated that BSD's  equipment
provides an effective, low cost, non-surgical treatment for  BPH
which allows the patient to resume normal activities immediately
following treatment.

   The  BSD-50  is a heat treatment (hyperthermia/thermotherapy)
system  which  has  been shown to provide a less  invasive,  low
toxicity  and low cost treatment for BPH.  Physicians throughout
the world have used the BSD-50, as well as BSD's other products,
to treat BPH.  Published clinical data using BSD's equipment for
transurethral microwave heat treatment of over 300 BPH  patients
has  shown significant benefits (an effectiveness level of  over
70%  which  has been sustained on follow-up of up to nine  years
for  some  patients) and only minor acute toxicity and  no  long
term side effects.  One small study evaluated patient acceptance
of  treatment, and 100% of the patients stated that  they  would
repeat  HT  treatment  with BSD's equipment  if  their  symptoms
recurred.

   Published  articles  have described  transurethral  microwave
heating  treatments  of BPH using BSD's PMA  approved  treatment
monitoring  and  control systems in conjunction with  BSD's  PMA
approved  microwave interstitial applicators which are  inserted
into  the  prostate  inside a urethral Foley catheter;  however,
this treatment is not covered by BSD's PMA approval and thus  is
defined  by  the  FDA  as  an "off label  treatment".   BSD  has
developed   an  integrated  helical  coil  microwave   radiating
applicator/catheter (MU-100) for BPH treatment.   BSD  initiated
clinical studies using the BSD-50 and MU-100 in Europe  in  1989
and began those studies at the University of Utah in 1994 and at
Barnes  Hospital, Washington University in St.  Louis  in  1995.
Commercial  sales of the BSD-50 in the United States  cannot  be
made  unless  and  until the FDA grants PMA  approval  for  this
product, which will likely not be granted until fiscal 1998,  if
at all.

   The  BSD-50  system is targeted to the field of  urology,  as
opposed  to the Company's traditional emphasis on sales  to  the
oncology market, and the BSD-50 Systems sold by the Company thus
far  have been purchased by foreign hospitals and clinics.   The
Company   estimates  that  BSD's  BPH  treatment   devices,   if
successful,  could  open  a large new market  for  the  Company.
There  can  be no assurance that the BSD-50 will be a successful
product,  but the Company is placing a significant  emphasis  on
development  of  this  product  because  of  the  large   market
potential.

    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 to 60 degrees 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.  A physician wishing
to  have full hyperthermia treatment capability must have a wide
variety of hyperthermia techniques and devices available.

   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.  The  Company's  computer
software  provides accurate monitoring of temperature and  other
treatment parameters, and also pre-treatment planning,  display,
storage,  and  recall  of  patient  treatment  data.   The  pre-
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
many  system designations, depending upon the configuration  and
options.    The   most  significant  of  the  Company's   cancer
hyperthermia systems are discussed below.

   The  variable frequency BSD-1000 Hyperthermia System was  the
Company's first hyperthermia system.  The BSD-1000 has  received
FDA  PMA  approval for commercial sale in the United States  and
Japanese  Ministry  of Health approval for  commercial  sale  in
Japan.

   The  BSD-300  provides fixed frequency 915 MHz operation  for
superficial  external and interstitial treatments.  This  system
is  mobile and is PMA approved for commercial sale in the United
States.

   The  BSD-400  provides fixed frequency 915 MHz operation  for
superficial  external and interstitial treatments.  The  BSD-400
is  a  lower cost, simple to operate system which is well suited
for  small  volume  interstitial  or  intracavitary  treatments,
including  prostate heating.  This system is mobile and  is  PMA
approved for commercial sale in the United States.

   The  BSD-500  provides fixed frequency 915 MHz operation  for
superficial external and interstitial treatments.  The  computer
control  system, thermometry system, water cooling  system,  and
certain  other equipment components of the BSD-500 are  used  as
the basic components for other systems of this series (i.e., the
BSD-750, BSD-1500, and BSD-2000).  This system is mobile and  is
PMA approved for commercial sale in the United States.

   The  BSD-750 is essentially a BSD-500 with the addition of  a
BSD-250 for ultrasound hyperthermia capability.  This system  is
mobile.  The BSD-500 portion is PMA approved for commercial sale
and  the  BSD-250  portion  is under an  Investigational  Device
Exemption (IDE) from the FDA.

    The  BSD-1500  Deep  Local  Hyperthermia  System  uses   the
Single/Dual  Horn  variable frequency applicators  to  treat  to
greater  depths than the 915 MHz fixed frequency applicators  of
the  BSD-500.  Because of FCC regulations, the BSD-1500 requires
a  shielded room due to the variable frequency capability.   The
BSD-1500 has been granted an IDE by the FDA.

   The  variable frequency BSD-2000 is a deep local and regional
hyperthermia system which includes the "Sigma Treatment System."
This   applicator  system  combines  the  energy  from  multiple
applicators positioned around the patient to generate heat  deep
within the body.  The design features of the BSD-2000 provide  a
significant  improvement in patient handling.  The BSD-2000  has
been granted an IDE by the FDA.

  The UT-100 uses ultrasound hyperthermia to deliver deeper more
focused heating.  This system is mobile and has been granted  an
IDE by the FDA for investigational use.

  BSD is currently developing the BSD-2000-3D - a new generation
of  deep  regional hyperthermia equipment designed  by  BSD  and
funded  in  part  by  Phase I and II grants  received  from  the
National  Cancer Institute (Grant No. CA61515).   BSD  plans  to
complete development and install the first system in 1997.   The
BSD-2000-3D  can  be modified for integration  with  a  magnetic
resonance imaging system, and becomes the BSD-2000-3D/MR system.
The   BSD-2000-3D  System  integrates  state-of-the-art   three-
dimensional  (3D)  focused deep regional  hyperthermia  with  3D
patient  specific  treatment planning in  order  to  provide  3D
heating  pattern  steered focusing.  The Company  believes  that
this  system  may  be the technological breakthrough  needed  to
revolutionize deep hyperthermia treatment and increase  survival
and  quality of life for patients suffering from many large  and
deep  tumors  (for which there are few treatment  alternatives);
i.e.,   recurrent  breast,  sarcoma,  lung,  colorectal,  liver,
cervical,  bladder, stomach, and prostate.  BSD plans to  submit
to the FDA for an IDE for this equipment.

   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.   The Company's applicators are designed to facilitate
safety, effectiveness and comfort of treatment.

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

   The  Annular  Phased Array (APA) applicator is used  to  heat
solid   tumors  deep  in  the  body.   The  Sigma-60,  a  second
generation deep hyperthermia applicator, replaced the APA.

   The Mini Annular Phased Array (MAPA) applicator, designed  to
treat  deep  seated  tumors located in the  arms  and  legs,  is
similar  in  concept  to the APA applicator.   The  Sigma-30,  a
second  generation  deep hyperthermia applicator,  replaced  the
MAPA.

   The  Sigma-60  is part of the Sigma Treatment  System.   This
System  includes  a treatment base and couch,  patient  handling
system and water cooling system and permits easy installation of
phased array applicators of different aperture sizes.  The Sigma-
60 (60 cm diameter) was designed to provide the ability to focus
and  steer  the heating pattern for the treatment of widespread,
large,  and/or  deep  tumors  in  adults.   The  deep  treatment
capability  is  provided through the use  of  applicators  which
surround  the patient and radiate radiofrequency energy directly
into  the  tumor.  The Sigma-30 (30 cm diameter) is designed  to
treat  deep seated tumors located in the arms and legs in  order
to  prevent  amputation;  the Sigma-30  can  also  be  used  for
regional treatment of infants.  The Sigma-40 (40 cm diameter) is
designed  to  treat children suffering from pediatric  cancerous
tumors.   The  Company has been granted an IDE by  the  FDA  for
clinical investigations using the BSD-2000 with the Sigma-60 and
Sigma-30  Applicators.  The Sigma-40 is an export  only  device.
The  Company  has  no current plans to pursue  approval  in  the
United States because the potential U.S. market does not justify
the time and  cost to obtain approval from the FDA.

   The Sigma Eye is a new deep hyperthermia applicator used with
the  Sigma  Treatment System.  The Sigma Eye  is  an  elliptical
shaped   phased  array  applicator  which  contains  24   energy
radiators,  as compared to the 8 energy radiators in the  Sigma-
60, Sigma-40, and Sigma-30.  The Sigma Eye is capable of dynamic
three  dimensional energy steering and heating pattern focusing.
The development of this applicator and control system was funded
in  part by National Cancer Institute (NCI) Phase I and Phase II
grants,  and NCI has approved additional funding for a Phase  II
project  to  allow BSD to complete the design and testing  of  a
modified  BSD-2000  control system; the modified  BSD-2000  will
provide  3D focal energy steering when used in conjunction  with
the  new  Sigma  Eye.   NCI funding also  includes  support  for
clinical  evaluation of the new Sigma Eye and  BSD-2000  control
system   and   the   clinical  application  of  the   innovative
capabilities   of  this  applicator.   Independent,   published,
laboratory analysis has predicted that this design will  provide
a  significant  improvement in the treatment dose  delivered  to
deep  tumors,  with  no impact on tissues  located  outside  the
treatment  area and thus significantly improve clinical  results
and  provide  an effective treatment for large and deep  tumors,
for which there are few if any treatment alternatives.

   The Microwave Interstitial module (which includes the MA-250
and  MA-251 applicators) has PMA approval, can be used with all
of  the Company's cancer hyperthermia systems, and permits  the
physician   to   treat  tumors  accessible  by  catheter   with
interstitial  antenna  applicators and  customize  hyperthermia
treatments  to a specific patient's tumor and physiology.   The
Microwave   Interstitial  module  allows  heat   delivery   and
temperature monitoring in the same catheter used for  radiation
therapy.    Interstitial   applicators   can   be   used    for
intracavitary  or  interstitial  heating  using  transurethral,
transrectal,  or  percutaneous insertion, or a  combination  of
these    methods.     BSD's    products    currently    include
catheters/accessories   for   insertion   and   placement    of
temperature  probes  and  interstitial  applicators   for   the
intracavitary treatment of malignant tumors; e.g.,  esophageal,
prostatic,    and   rectal.    BSD's   Microwave   Interstitial
Pretreatment  Planning  Program can  be  used  to  improve  the
planning,  placement, and heating of MA-250 and  MA-251  arrays
for  intracavitary as well as interstitial treatments.  The MA-
251  Interstitial Applicator has been granted PMA approval  for
commercial sale.  The MA-250 Interstitial Applicator  has  been
granted PMA approval for commercial sale.

   The MA-100, MA-150 and MA-151 External Applicators, which are
used  to  treat surface and subsurface tumors, are PMA  approved
for  commercial sale.  The MA-120 external microwave applicator,
used  to  treat chest wall tumors, has been granted PMA approval
for  commercial sale.  Ultrasound applicators are available with
the  BSD-250,  BSD-750  and UT-100 systems.   These  applicators
provide  a uniform heating pattern and are small and lightweight
for  ease  of  use.   The  SA-115 and SA-812  Spiral  (external)
applicators  radiate electromagnetic energy from  spiral  shaped
conductors  etched  onto plastic substrates.  These  applicators
are  currently export only devices.  The Company has no  current
plans  to  pursue  approval  in the United  States  because  the
potential  U.S. market does not justify the time  and   cost  to
obtain approval from the FDA.

   The  Single/Dual Horn Applicators (MA-200/MA-201) operate  at
lower   frequencies  and  higher  powers  than  other   external
superficial  applicators, which results in  deeper  penetration.
These  horn shaped external applicators were designed  to  treat
larger,  deeper  tumors  by external application  of  transverse
electromagnetic  ("TEM") energy, which  reduces  the  hot  spots
which  sometimes occur with other applicators.   The  Dual  Horn
applicator is two smaller applicators (MA-200s).  The  clinician
can  use the MA-201 for a larger, deeper heating pattern, or the
two applicators can be disconnected and utilized separately (MA-
200)  for  a  smaller, more shallow heating  pattern.   The  MA-
200/201 applicators have been used clinically to treat 452 tumor
sites  (primarily  breast  tumors) in  374  patients.   BSD  has
applied for PMA approval of these applicators.

   Thermometry.  In order to monitor and control the heating  of
tumors,  thermometry  systems that are  accurate,  reliable  and
suitable  for use in clinical hyperthermia must be  included  in
hyperthermia   systems.   The  Company  manufactures   the   BSD
Thermistor  Probe, as well as other thermistor based thermometry
probes.   Independent testing by hyperthermia quality  assurance
groups  has  shown  the  BSD Thermistor Probe  to  be  the  most
reliable  and accurate thermometry probe commercially available.
The  Company  has  an exclusive license for the manufacture  and
distribution of the BSD Thermistor Probe.

   The  primary thermometry system used in all of the  Company's
electromagnetic  hyperthermia systems is  a  multi-probe  system
which interfaces with BSD Thermistor Probes.  A thermistor  type
sensor  has  also  been  integrated  into  some  models  of  the
microwave interstitial applicators manufactured by the Company.

   The  BSD  Thermistor Probe can be used with the  proprietary,
computer  controlled BSD Thermal Mapping System  which  provides
temperature  information throughout the tumor volume.   The  BSD
Thermal Mapping System is a sophisticated, automated thermometry
system  that,  under  computerized control, periodically  shifts
thermometry  probes  to  multiple  locations  within   implanted
catheters during treatment and automatically records temperature
data along the catheter lengths.  The BSD Thermal Mapping System
has  received PMA approval for commercial sale and is an  option
for  the  BSD-500, BSD-750 and BSD-1500 systems and is  standard
with the BSD-2000 system.

   The  Company also manufactures and sells specially  developed
thermistor probes for ultrasound treatments.

  The BSD-100 Thermometry System is offered as an option for the
Company's  systems.   This thermometry system  can  be  used  in
combination with the primary thermometry system as an additional
aid  in  monitoring temperature distributions during  treatment.
The  BSD-100 is purchased from another company.  BSD anticipates
a  continuous  supply  of this product;  however,  the  loss  of
availability  of this product would have no material  impact  on
the Company.

   In  1991,  the  Company  introduced the  BSD-500TMS  (Thermal
Mapping  System) also referred to as the "TMS-480" as  a  stand-
alone  thermal  mapping  system.  The  BSD-500TMS  provides  the
ability  to  measure large temperature fields in  heated  tissue
equivalent media.  The principal potential markets for the  BSD-
500TMS  are  bioelectromagnetic research centers and engineering
laboratories.  The BSD-500TMS is the BSD-500 thermometry  system
and has PMA approval status.

   The  BSD-2000-3D/MR  System  is  being  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, which  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
breakthrough 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.

   PROSTATE  HEATING  PRODUCTS (BPH AND  PROSTATIC  CARCINOMA).
Intracavitary   heat  treatment  of  the  prostate   has   been
established  as  an  important  adjuvant  treatment  for   many
patients  with  prostate carcinoma and is  rapidly  becoming  a
major  nonsurgical  treatment  for  patients  with  BPH.   Many
published   articles  have  described  transurethral  microwave
heating  treatments  of BPH using BSD's PMA approved  treatment
monitoring and control systems (BSD-300, BSD-400, BSD-1000, and
BSD-500) in conjunction with the PMA approved MA-251 and MA-250
microwave interstitial applicators which are inserted into  the
prostate  inside  a urethral Foley catheter.  BSD  Medical  has
various  PMA approved control systems, applicators,  catheters,
and  accessories which can be used for microwave heating of the
prostate.   BSD has also developed an integrated  helical  coil
microwave  radiating  applicator/catheter  (MU-100)   for   BPH
treatment.    The   MU-100   is   currently   undergoing    IDE
investigations    utilizing   the   BSD-50   Control    System.
Independent published comparative studies have shown  that  the
heating patterns from the MA-250 and MA-251 applicators  placed
inside  a  Foley  catheter  are  basically  identical  to   the
integrated    applicator/catheter   MU-100.    The    use    of
transurethral  microwave  heating for  treatment  of  prostatic
carcinoma   has  most  often  utilized  concomitant   radiation
therapy;  however,  published studies  have  reported  efficacy
using   hyperthermia/thermotherapy  alone  delivered  by  using
simultaneous transurethral and transrectal heating.  BSD  plans
to  market  and  supply  both  the capital  equipment  and  the
disposable applicator required for each patient treatment;  the
market   for   hyperthermia/thermotherapy  disposables   is   a
substantially  larger  market  than  the  market  for   capital
equipment and provides a self-perpetuating revenue stream.
   
MARKETING AND SALES

   In  the  U.S.,  the  Company sells its  cancer  hyperthermia
products  primarily  to  radiation  oncology  departments  and,
outside  the  U.S.,  to  radiation  oncology  and  chemotherapy
oncology  departments.   The  Company  currently  markets   its
products  in the United States directly through its  own  sales
and  marketing staff.  International sales of both  cancer  and
BPH  products  are generally accomplished through  distributing
companies  located in various foreign countries.  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.

   BSD  is  developing  comprehensive  promotional  and  public
relations  programs  and  is  supporting  additional   clinical
testing,  which  will  provide additional clinical  safety  and
efficacy  data and cost-effectiveness evidence for  support  of
the   marketing  effort.   Current  marketing  efforts  include
education,  training, and dissemination of information  on  the
effectiveness and benefits of BSD's equipment and therapy.  BSD
also  plans to do advertising in appropriate trade publications
and  in  mass media publications to increase patient  education
and demand.

   Leading research centers in Europe, who use BSD's equipment,
have   recently  published  long  term  evidence  proving  that
hyperthermia is effective, safe, and cost effective.   Many  of
these  studies were sponsored by the European Union  (EU),  the
Dutch  government, the German government, and leading  European
oncology  associations.  This recently  published  data  should
allow BSD to increase sales throughout the world.

   The  Company is implementing a strategic plan to  reactivate
domestic  sales of the cancer product lines.  Future  marketing
for   current  cancer  products  will  be  expanded  into   two
previously  unexplored 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.  Recently published data  provides
the  level  of  proof  for hyperthermia which  is  required  in
today's  medical  markets.   Prospectively  randomized  studies
using   BSD's  equipment  have  shown  that  the  addition   of
hyperthermia to other cancer treatment modalities  results  in:
faster  tumor  regression;  increased  tumor  response;   lower
relapse  rate;  increased  disease  free  survival  time;   and
improved  quality of life for the patient.  Health care  reform
and the increasing trend toward managed care facilities provide
a  new  opportunity for the mass marketing of  BSD's  therapies
(which provide reduced patient care costs while increasing  the
efficacy  of  other modalities) and BSD plans  to  target  this
market  segment. The Company believes that the domestic  market
will begin to slowly expand in the future because of the recent
publication of randomized studies showing the effectiveness  of
hyperthermia and a renewed interest in hyperthermia in the U.S.

   BSD  is  seeking an investor/partner to provide the  capital
needed  to  implement  and  accelerate  current  corporate  and
marketing  opportunities.  BSD's therapies  and  equipment  are
favorably  poised to take advantage of a number  of  alliances,
including  strategic marketing alliances, which may  allow  the
Company  to  expand  and grow more quickly.   Negotiations  are
currently  underway, and it may be feasible for the Company  to
form   strategic   alliances  with  other  companies,   private
treatment  centers  and  managed health  care  providers.   The
Company   is   actively  seeking  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.   A  report  on  the
medical  industry by Frost and Sullivan, the leading  worldwide
publisher  of  high-technology research  reports,  predicted  a
seven percent annual growth in medical equipment markets and an
increase in the worldwide market for cancer diagnostic  imaging
and  therapeutic equipment from $2.7 billion in  1993  to  $4.4
billion  in  the  year  2000.   The  cancer  therapy  equipment
evaluated included hyperthermia equipment.

   For the year ended  August 31, 1995,  two customers accounted
for approximately 25% and 18%, respectively, of net sales of the
Company.   The  loss  of  a significant customer  could  have  a
material  detrimental  impact on the Company's  operations.   In
order  to  expand the customer base, BSD is currently increasing
its distributorship network, has implemented new distributorship
incentive programs, and is currently evaluating all distributors
and  appointing new distributors in some countries.  BSD is also
actively pursuing strategic marketing alliances.

   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, the Health Care Financing  Administration
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 into one of two categories - A  or  B.
Category  A  includes devices for which questions of safety  and
effectiveness  have  not  been resolved.   Category  B  includes
investigational devices for which underlying questions of safety
and effectiveness of that device type have been resolved.  As of
November  1,  1995, HCFA stated that all devices and  procedures
which  fall  under  Category B will be reimbursed  for  Medicare
patients.   All of BSD's investigational equipment and protocols
have been categorized by the FDA into Category B and thus may be
reimbursed by Medicare.  This new procedure will have no  effect
on  BSD's  PMA  approved  equipment and therapy  which  received
approval   for  reimbursement  from  HCFA  in  1984.    However,
investigational  treatments using BSD's PMA  approved  equipment
may  also  be reimbursed under this new policy.  BSD anticipates
that  these changes in reimbursement policy may have a  positive
effect on U.S. sales.

   Cost-containment  policies  are impacting  the  major  cancer
markets  such  as  the U.S., Western Europe,  and  Japan.   Even
though these changes have negatively impacted the industry,  the
long-term  effects  of  healthcare reform  are  expected  to  be
favorable  and  provide increased opportunity for cost-effective
clinically  proven therapies and equipment such as hyperthermia.
BSD's  products  have  been designed to provide  cost  effective
treatment.

   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.

COMPETITION

  The Company believes that it is a technological and commercial
leader  in  the field of hyperthermia.  However, competition  in
the  medical  products industry is intense, both in  the  United
States  and  internationally.  Some of the Company's competitors
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 (Clinitherm
-  no  longer  in business, Labthermics, Cheung Labs,  and  Cook
Medical)   have  received  FDA  Pre-Market  Approval   for   the
commercial  sale  of  certain  hyperthermia  equipment  for  the
treatment  of cancer in the U.S.  In the BPH market, competitive
companies offering products similar to BSD's BSD-50 include EDAP
Technomed  (which  has  PMA approval from  the  FDA),  Urologix,
VidaMed  (which  has 510(k) marketing clearance from  the  FDA),
Dornier,    and   Thermal   Therapeutics.    In   addition    to
hyperthermia/thermotherapy equipment made by competitors,  there
are  many  other  competitive treatments  for  benign  prostatic
hyperplasia (including various drug treatments, surgical lasers,
ultrasound    ablation,   electro-cautery    surgery,    stents,
transurethral incision of the prostate (T.U.I.P.),  and  balloon
dilation)   which  are  currently  being  developed,  clinically
investigated and/or actively marketed.  The Company competes  in
foreign    markets   with   many   foreign   manufacturers    of
hyperthermia/thermotherapy systems, some of which  have  greater
financial and other resources than the Company.

   The Company believes that other companies are considering  or
will consider marketing hyperthermia/thermotherapy equipment and
anticipates increased competition both in the United States  and
internationally.   There  can  be  no  assurance  that   others,
including  those  with  greater  resources  and  more  extensive
business  experience than the Company, 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  rapid  technological  change.   There  can  be   no
assurance  that other forms of treatment will not  be  developed
which could render the Company's hyperthermia systems obsolete.

   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 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,  technical  and  clinical  training  is  performed  by
Company  personnel or consultants.  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.  The Company's manufacturing operations
consist  primarily of component assembly and testing.   Most  of
the  principal components of the Company's systems are purchased
from independent suppliers and are modified, as required, by the
Company  at  its  facilities.   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.  Raw/pre-fabricated materials, components,
and  sub-assemblies required for production are tested at  every
stage of manufacture and again prior to final shipment.  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 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 high quality manufacturing and testing
services under contract to local companies.

RESEARCH AND DEVELOPMENT

   Technological changes in the treatment of disease in general,
and  in  the  hyperthermia  field in particular,  are  frequent.
Thus, the Company intends to continue to devote substantial sums
to  research  and  development  in  order  to  improve  existing
products  and  develop new products.  During  the  fiscal  years
ended August 31, 1994, August 31, 1995, and August 31, 1996, the
Company expended $250,243, $219,871, and $565,158, respectively,
for  research and development, representing 27.55%, 19.14%,  and
22.28%  of  total revenues.  The Company intends to  pursue  new
markets and applications for the Company's products.

   Prototype  development  by  the  Company  of  the  Sigma  Eye
applicator, a new deep hyperthermia applicator which provides 3D
phase steering of energy, was funded by an NCI Phase I grant  of
$50,000.  As of August 1995, NCI approved funding of $325,066 to
BSD for a Phase II project to complete the design and testing of
a  modified BSD-2000 control system and the new Sigma Eye  (BSD-
2000-3D).  Additional NCI funding of $138,499 has been allocated
for  the  second year to complete this effort and begin clinical
evaluation  of  the new Sigma Eye and BSD-2000  control  system.
BSD  is  also completing the development of a new BSD-2000-3D/MR
system  under  contract with Dr. Sennewald/Medizin Technik  GmbH
for  delivery  to  Munich  in 1997.  The  BSD-2000-3D/MR  System
combines  three state-of-the-art technologies: three-dimensional
(3D) focused deep regional hyperthermia using the Sigma Eye;  3D
patient specific treatment planning; and open Magnetic Resonance
(MR) Imaging.  The Company believes that this system will be the
technological   breakthrough  needed   to   revolutionize   deep
hyperthermia treatment and thus increase survival and quality of
life  for  patients suffering from many large and  deep  tumors;
i.e.,   recurrent  breast,  sarcoma,  lung,  colorectal,  liver,
cervical, bladder, stomach, and prostate.  The first system will
be   installed   at   a  leading  German  oncological   research
institution  -  the Clinic of Medical Oncology of  the  Klinikum
Grosshadern  Medical  School of Ludwigs-Maximilians-Universitaet
Muenchen, Munich, Germany.  The Medical School received  funding
from  the  Stiftung Deutsche Krebshilfe e.V. (German Cancer  Aid
Foundation) for the system order.  Over the past few years,  the
Foundation has contributed more than DM 11 million ($7.5 million
U.S.) to this Institution to develop the clinical application of
regional  deep hyperthermia combined with chemotherapy  for  the
treatment of cancer patients.

   The Company is also currently collaborating with a number  of
research       institutions      to       develop       advanced
hyperthermia/thermotherapy  products  and  treatments   and   to
increase the clinical applications for BSD's products.

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 has been issued 18  patents  in  the
United  States and additional patents outside the United States.
Other  hyperthermia related patents are pending  in  the  United
States,  Japan and Europe.  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.  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 licenser.  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.

   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 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 which is no  longer
in business and one which has been terminated by BSD).

   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 (see Part I, Item 3, Urologix vs.  BSD
Medical Corporation).

  In July 1996, BSD entered into a license agreement and granted
EDAP  Technomed, Inc. a non-exclusive, non-transferable  license
of  certain rights to one of BSD's patents.  As a result of this
transaction, BSD received a non-refundable license  fee  in  the
amount  of  $1,500,000 ($1,000,000 in July 1996 and $500,000  in
September  1996), as well as the right to receive  royalties  of
2.5%,  up to a  maximum  of  $3,500,000,  on the sale of certain 
products.

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.  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.

   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.  Product improvements must be  submitted  to
the  FDA  under  IDEs,  510(k) PreMarket  notifications  or  PMA
supplements.

   International sales of unapproved medical devices are subject
to  FDA  export  requirements, unless these products  have  been
previously approved by one of 8 countries specified by the  FDA.
In  addition, international sales are subject to the  regulatory
safety  agency  requirements of each  country.   The  regulatory
review process varies from country to country.  The Company  has
obtained   regulatory  approval,  import  approval  and   export
approval for various of its products from certain countries  and
has  applied for additional approvals and will continue to apply
for others.  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.  Sales into the European Union (EU)  are
now  governed by the need to obtain a CE Mark and to comply with
all  applicable  directives.  BSD has  started  the  process  of
obtaining testing and certifications needed for compliance which
will  allow BSD to affix the CE Mark.  There can be no assurance
that BSD can obtain the CE Mark, and, if BSD is unable to obtain
these approvals, it could have a significant material effect  on
the Company's financial condition.

  FDA regulations pertain not only to human health care products
and  medical  devices, but also to the processes and  facilities
used  to manufacture such products.  The Company is required  to
register  with the FDA as a device manufacturer.  As  such,  the
Company  is inspected from time to time by the FDA to  determine
whether  the  Company is in compliance with various  regulations
relating to medical device manufacturers.  All devices  must  be
manufactured  in  accordance with Good  Manufacturing  Practices
(GMPs)  specified  in  regulations  under  the  FD&C  Act.    In
complying   with   FDA's  Good  Manufacturing   Practice   (GMP)
regulations, manufacturers must continue to expend  time,  money
and  effort  in the areas of production and quality  control  to
ensure   full   compliance.    Significant   changes   to    the
manufacturing process require notification to the FDA,  and  all
changes  require  documentation.  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 product malfunctions
that would likely cause or contribute to death or serious injury
if  the  malfunctions  were to recur.  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.   Although  the
Company  cannot predict what impact, if any, such changes  might
have  on  its business, such changes could materially  adversely
affect the Company's business.

   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.   The
BSD-50, BSD-400, and the BSD-500 hyperthermia system applicators
emit a fixed frequency of 915 MHz, which is approved by the  FCC
for medical applications.  Some European countries allow the use
of 433.92 MHz rather than 915 MHz, thus the BSD-50, BSD-400, and
BSD-500  can  be  operated  at 433.92 MHz.   Accordingly,  these
systems  do  not require shielding to prevent interference  with
communications.   The  BSD-1000, BSD-1500 and  BSD-2000  systems
utilize variable-frequency generators and applicators to achieve
therapeutic  temperatures.  Accordingly, these  systems  require
electromagnetic shielding.  Ultrasound hyperthermia systems  can
be  operated  without  shielding because  the  applicators  emit
acoustic rather than electromagnetic energy.

PRODUCT LIABILITY EXPOSURE

   The  manufacture 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 which  might
be  made against the Company.  In the Company's 18 year history,
3  product liability claims have been filed against the Company,
and all were settled out of court with no material impact on 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

   On  August 31, 1996, the Company had 19 employees, 15 of them
full  time  employees.   None  of the  Company's  employees  are
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  and is rented on a lease with an option to purchase.   The
annual  rental  expense  is $62,400 (see  Note  6  to  Financial
Statements).   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
has  received a commercial appraisal on the facility of $928,000
and  has an agreement with its current landlord to purchase  the
building  for  approximately $330,000.   Thus,  the  Company  is
currently attempting to obtain an agreement which will allow the
Company  to purchase the facility and, in connection  with  this
agreement, borrow up to approximately 70% of the appraised value
of the building (see page F-14, Note 6 to Financial Statements).
The  Company believes that it carries adequate insurance on  the
property; however, there can be no assurance that this insurance
will provide adequate coverage.


ITEM 3.  LEGAL PROCEEDINGS

UROLOGIX,  INC.  VS.  BSD  MEDICAL  CORPORATION,  United  States
District Court for the District of Minnesota, Civil Action No. 4-
96-647.

   In  June  1996,  BSD  Medical notified  Urologix,  Inc.  that
Urologix was in breach of the parties' license agreement because
of  violations  by Urologix, Inc. of the settlement  and  patent
licensing  agreement's confidentiality provisions and  that  the
agreement  was  terminated.  On July 30,  1996,  Urologix,  Inc.
filed   suit  (under  seal)  against  the  Company   seeking   a
declaration  that the Company's termination of a settlement  and
patent  licensing  agreement  was  not  proper,  and  that   the
settlement and patent licensing agreement remains in full  force
and  effect.   The Company answered the complaint  and  filed  a
counterclaim on August 20, 1996, seeking a declaratory  judgment
that the settlement and patent licensing agreement were properly
terminated  by  the  Company (based on  Urologix,  Inc.'s  prior
breach  of  the  confidentiality provision) and seeking  damages
caused  by  such  breach.   Urologix,  Inc.  has  answered   the
counterclaim and discovery has recently commenced.

   At  this  point  in time, it is not possible to  predict  the
parties' relative likelihood of success on their various claims.
Though   Urologix's  complaint  against  the  Company   requests
unspecified "damages," it is apparent that the principal  thrust
of  the  relief  sought  by Urologix, Inc.  is  declaratory  and
injunctive.   Since the Company has taken no action to  preclude
Urologix, Inc. from continuing to offer products or to otherwise
affect  Urologix's  on-going business, it  seems  unlikely  that
Urologix,  Inc.  will  ever  be able  to  establish  significant
monetary damages.

NELSON BUNKER HUNT LIQUIDATING TRUST VS. ALAN L. HIMBER

  Alan L. Himber, a former principal and officer of the Company,
filed  for  bankruptcy relief under Chapter 7  in  the  Northern
District of Texas.  Mr. Himber's claims against the Company  for
wages   and   equitable  ownership  interests  through   various
partnerships  became  property of  the  Chapter  7  estate.   It
appears  that, through an Asset Purchase and Release of  Claims,
the  Chapter 7 Trustee of Himber's estate released and  conveyed
the  Himber  estate's wage claim and claims of interest  in  the
Company to the NBH Liquidating Trust.

BSD MEDICAL CORPORATION VS. ALAN L. HIMBER

  The Company was involved in litigation against Mr. Alan Himber
(see 1994 10-K, Part I, Item 3, BSD Medical Corporation vs. Alan
L.  Himber).  A Settlement Agreement was reached on January  12,
1996,   on  behalf  of  Himber's  estate  which  unconditionally
released  BSD  from  all claims, causes  of  action,  legal  and
administrative  remedies related to any  claim,  event,  act  or
omission,  whether  known or unknown, by  Himber,  occurring  or
arising  prior to January 12, 1996 (see 1994 10-K, Part I,  Item
3, Nelson Bunker Hunt Liquidating Trust vs. Alan L. Himber).


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

  No matters were submitted to a vote of security holders during
the fourth quarter of fiscal year 1995.

<PAGE>
                           PART II

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

   The  Company's  Common  Stock  began  publicly  trading  on
December  9,  1980,  and  was traded in  the  over-the-counter
market  under  the NASDAQ symbol "BSDM" until it was  delisted
from  NASDAQ on January 3, 1991.  Since then, it has continued
to  trade (very sporadically) in the over-the-counter  market.
For  the  periods  subsequent to December  1990,  consistently
reliable  stock  quotations have not  been  readily  available
because there has been no established market for the Company's
stock  due  to  BSD's stock being delisted from NASDAQ.   (The
Company plans to apply to have the symbol "BSDM" appear on the
NASD "Bulletin Board" in the future.)

  As of August 31, 1996, there were approximately 625 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, 1995, and the statements
of  operations,  statements of  cash  flow  and   statements  of 
stockholders' deficit  for  the  years  ending  August 31, 1994, 
and  1995,  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.

   FISCAL  YEAR  ENDED AUGUST 31, 1995.  Revenues for  the  year
ended  August 31, 1995, totaled $1,148,656, compared to $908,263
for the year ended August 31, 1994, an increase of $240,393,  or
26.47%.   The  legal battle for control of the majority  of  the
Company's  stock was resolved in 1994 and the majority ownership
was  purchased  by long-term Company insiders and BSD's  primary
distributor (see Part II, Item 7, Management Discussion, page II-
2,  August  31, 1994, 10-K), which has resulted in a  change  in
focus  for  the  Company  as well as  a  change  in  management,
marketing,  and  sales  strategy.   The  increase  in  1995  was
primarily a result of these changes in strategy.

   The  Company's  revenues from products and  services  in  the
United States, as compared to $360,593 in fiscal 1994, increased 
slightly to $383,256 in  fiscal 1995.  The Company believes that 
the domestic market will begin to expand  slowly in  the  future 
because  of  the  Company's  increased   sales efforts,   recent  
publication  of  randomized studies showing the effectiveness of 
hyperthermia, and a renewed interest in hyperthermia in the U.S.
                              
   Gross  profit  on  product  sales  for  1995 was $501,923, an 
increase of 15.66%, as compared  to  $433,971  in fiscal 1994; a 
result of an increase  in product  sales.   Gross  profit margin
as a percentage  of  sales decreased  from 50.56% in fiscal 1994 
to 43.70% in fiscal  1995, primarily  because  of options issued
to employees  to  purchase shares of the Company's common stock, 
which have been  recorded as deferred compensation and amortized
over the vesting  period of the options (see Note 5 to Financial
Statements) and the sale of a BSD-2000 at a reduced profit, sold
at that price  because it was  the  first  BSD-2000  placed in a 
specific country and would provide a reference site to stimulate 
future sales.

   Selling, General and Administrative Expenses for 1995 totaled
$589,180,  a  decrease of $228,045, or 27.90%,  as  compared  to
$817,225  in fiscal 1994.  The decrease was primarily caused  by
cost-cutting  measures  and  efficiencies  implemented  by   the
Company, particularly in the areas of general and administrative
staffing.   These  expenses may increase in the  future  as  the
Company intends to expand its marketing and sales efforts.

  Research and Development Expenses totaled $219,871, a decrease
of $30,372 in 1995, or 12.14%, as compared to $250,243 in fiscal
1994  due  to cost cutting measures implemented in all areas  of
the  Company  during  this time while management  evaluated  the
overall  business structure and focus.  The Company  intends  to
increase  research and development in order to improve  existing
products and develop new products, including the development  of
the  BSD-2000-3D  and the BSD-2000-3D/MR third  generation  deep
regional  hyperthermia equipment.  The Company also  intends  to
pursue new markets and applications for the Company's products.

    Total  Costs and  Expenses  for  1995  were  $1,455,784,  an
insignificant  decrease of 2.41% as compared  to  $1,491,760  in
fiscal 1994.

   In 1994 and 1995,  Other  Income, Net,  a  component of Other 
Income  (Expense),  included gains from  settling trade accounts 
payable  for less  than  their  recorded  balances  as  well  as 
recovery of  previously  estimated reserves and expenses.  These  
gains totaled approximately $110,000 in fiscal 1994 and $162,000
in  1995,  decreasing  loss  per  share  by  $.01 in fiscal 1995 
and 1994.

   Interest  Expense  increased to $37,493 in  fiscal  1995,  as
compared  to  $12,376  in 1994.  The 1995  increase  was  caused
primarily by capitalization of the building lease costs incurred
for  the Company to obtain and retain the option to purchase the
building BSD currently occupies at a favorable price (see Note 6
to Financial Statements).

   During  fiscal 1995, the Company experienced a  net  loss  of
$196,879  a  decrease  of  26.60%, as compared to a  net loss of 
$268,224 in fiscal 1994 due to cost cutting measures implemented
by current management.

  RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.  International
sales  accounted  for 60.30% and 66.63% of the  Company's  total
product sales during the fiscal years ended August 31, 1994, and 
August  31,  1995,  respectively.    The  Company  expects  that 
international sales  will continue to  represent  a  significant
portion of its total sales.  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
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.  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
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,
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.  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  by
$126,739 a decrease of 9.66% from August 31, 1994, to August 31,
1995.   The decrease was primarily due to cost cutting  measures
and  a  reduction  in  inventory.   Cash  increased  $5,189,  an
increase  of  12.67%, primarily as a result of  normal  business
fluctuations.   Trade accounts receivable increased  $8,640,  an
increase  of  9.36%  primarily as a result  of  normal  periodic
fluctuations in shipments.  Inventories decreased by $152,291, a
decrease  of  22.26%, primarily as a result of finished  systems
shipped during 1995 which had been previously held in inventory.
Current liabilities decreased by $630,308, a decrease of  39.45%
primarily as a result of decreases in accounts payable,  accrued
expenses, and customer deposits as well as other normal periodic
fluctuations.

MANAGEMENT DISCUSSION AND CURRENT STATUS OF FINANCIAL CONDITION.

   Management believes that the current projected sales combined
with  projected grants may be sufficient to meet  the  Company's
operating  cash requirements into 1997. However,  if  sales  and
grants are not sufficient to meet the Company's operating needs,
management   intends   to   use  its  current   cash   position,
supplemented  and  aided by anticipated cash  flow  from  sales,
budget  controls, fiscal conservatism, the possibility of loans,
and if necessary, private placements of its equity securities to
meet  operating  requirements planned for 1997.   The  Company's
backlog  of unfilled customer orders was $410,141, as of  August
31,  1995,  and  $409,141, as of August 31,  1996.   However,  a
$335,000  deposit has already been collected by the Company  for
this  backlog.   The Company also had long term receivables  due
for  field service contracts of $115,108, as of August 31, 1995,
and $106,820, as of August 31, 1996.

   Following  the change in controlling interest in the  Company
(see  Part III, Item 13, Employees Acquire Controlling  Interest
in  BSD  Medical,  August  31, 1994  10-K),  current  management
evaluated  its  overall business and implemented  new  corporate
structuring,  focus and strategies.  The Company  implemented  a
strategic  plan  to  reactivate domestic  sales  of  the  cancer
product  lines  and anticipates slow increases  in  this  market
segment  in  the future.  Management plans to expand world  wide
marketing  for  current  cancer  products  into  two  previously
unexplored  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  increasing  trend  toward  managed  care
facilities provides a new opportunity for the marketing of BSD's
therapies  which  provide  reduced  patient  care  costs   while
increasing  the  efficacy of other modalities  and  the  Company
plans to develop marketing strategies targeted for this market.

   BSD  is  seeking an investor/partner to provide  the  capital
needed  to  implement  and  accelerate  current  corporate   and
marketing  opportunities.  The Company is also actively  seeking
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.
BSD  is  well  positioned for these types of alliances, and they 
would  allow  the  Company  to  expand  and  grow  more quickly.  
A  report  on  the medical industry by Frost and  Sullivan,  the
leading worldwide publisher of high-technology research reports,
predicted  a  seven  percent annual growth in medical  equipment
markets  and  an  increase in the worldwide  market  for  cancer
diagnostic  imaging and therapeutic equipment from $2.7  billion
in  1993  to $4.4 billion in the year 2000.  The cancer  therapy
equipment evaluated included hyperthermia equipment.  Management
has  implemented programs to increase profitability  and  expand
BSD's  business and anticipates that these strategic plans  will
result in future growth and profitability; however, there can be
no assurance these plans will be successful.

   BSD  plans to support further R & D for current products  to
improve  function and reduce cost.  Funding of R & D objectives
for the cancer products will primarily come from government and
foundation  sources,  and  product  improvements  on   existing
product lines will be supported by current product sales.   The
Company also intends to pursue new markets and applications for
the  Company's  product as well as all new  opportunities  that
would  be commercially viable. The Company is primarily focused
on the development and commercialization of minimally invasive,
low  toxicity, effective treatments of disease using controlled
heating.   Changing the body's temperature is one of  the  most
natural  and  non-toxic  methods  to  change  the  biology  and
physiology  of  tissue, and research into heating  may  provide
additional new and unexplored diagnostic and treatment  methods
for  a variety of conditions.  BSD is a high technology company
with  a  sophisticated research University customer base.   The
research  based  customers often ask  BSD  to  develop  medical
products based on proposed solutions to current problems.   BSD
plans  to  rely  heavily on collaboration with this  University
based  idea pool for expansion of current products as  well  as
development of new products.  This approach ensures that  there
is  an established market for the products developed by BSD and
provides   rapid   evaluation  of  technical   feasibility   by
collaborative   testing   of   new   products.    New    market
opportunities  will  be allocated limited internal  funding  to
determine  market and technical feasibility.  Once  feasibility
is  established, a project plan will be prepared and  submitted
to  the  Board  of  Directors for review  and  further  funding
approval.   Some  of  these  R & D projects  may  lead  to  new
products,  partnerships, and strategic  alliances.   The  Board
will  determine whether these business opportunities should  be
pursued  by  BSD or sold to other interested parties.   BSD  is
currently evaluating some new applications.

   The  Company  has  expanded its business to include  contract
manufacturing  in  order  to  more  effectively  utilize   BSD's
manufacturing expertise.  Management is currently increasing the
marketing of this service.

   The  Company is placing a significant emphasis on development
of  the  BPH  treatment  market, as  opposed  to  the  Company's
traditional emphasis on sales to the oncology market, because of
the  large market potential.  BSD holds major patents in several
aspects of hyperthermia/thermotherapy treatment of BPH.   It  is
BSD's  contention  that  all  other  companies  in  this  market
infringe  BSD's  patents and BSD intends to  defend  its  patent
positions  and  control  entry into its protected  markets.   In
1996,  BSD  received a $1.5 million cash license fee  from  EDAP
Technomed,  Inc., for a non-exclusive, non-transferable,  patent
license  for one of BSD's U.S. patents for heating the  prostate
with  microwave  energy.  In addition to  the  payment  of  $1.5
million for the license, BSD has received, and will continue  to
receive,  royalties  on the sale of certain products  from  EDAP
Technomed.

   In  1996, BSD received the first purchase order for its  new,
advanced,  deep  regional, hyperthermia system -  the  BSD-2000-
3D/MR System.  The purchase order for the amount of $850,000 was
received   from  Dr.  Sennewald/Medizin-Technik  GmbH,   Munich,
Germany,  BSD's  primary European distributor, and  included  an
option  for a second system order.  In August 1995, the  Company
was  awarded a Phase II National Cancer Institute SBIR grant for
$325,066  for the first year with additional funding of $138,499
for  the  second year to support some of the development efforts
for the BSD-2000-3D.  The Company anticipates that the BSD-2000-
3D System may increase the expansion of the commercial market in
hyperthermia   throughout   the   world.    BSD   has    started
collaborative  developments  for clinical  application  of  this
technology,  and  some of these developments will  be  conducted
under  grants from the Stiftung Deutsche Krebshilfe e.V. (German
Cancer  Aid  Foundation).  In a January 23, 1996 press  release,
the  Foundation stated that they have contributed more  than  DM
30.5  million to implement the clinical application of  regional
deep   hyperthermia   for  the  treatment  of   cancer   because
hyperthermia is one of the few new weapons which have passed the
test in the fight against cancer during the past years.

  Management is dedicated to improving operating results through
consistent  performance, improved sales  levels,  new  corporate
directions, diversification of products and services,  and  cost
reductions;  however,  there are no assurances  that  management
will  be successful in achieving improved operating results  and
there  are  certain risk factors which 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 absence of a substantial backlog may impair  the
Company's ability to plan production and inventory levels, which
could  lead  to  fluctuations  in  operating  results,  and  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
domestic  United States 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  and  recent
changes  in  Medicare reimbursement policy should stimulate  the
U.S.  market;  however, BSD projects that the U.S.  market  will
continue to grow at a slower rate than the international market.

   Domestic United States orders have traditionally generated  a
substantial  cash  down  payment with each  order.   These  down
payments  have  helped to stabilize cash fluctuations  over  the
course  of  each year and have helped to finance the acquisition
of  the  specific components needed to produce the  systems  for
which  these down payments have been received.  For the previous
few  years,  foreign sales have provided the majority  of  sales
revenues, and the Company anticipates that the majority  of  its
sales  for at least the next one to two years will be to foreign
customers.   The  dramatic  shift  from  predominantly  domestic
United States sales to predominantly foreign sales could have  a
negative  impact  on the Company's ability to  fund  its  future
purchases  of raw materials because payments to the Company  for
foreign sales have typically been by means of letters of  credit
whereby  100% of the purchase price for each system is  paid  to
the Company after the system has been produced and shipped.   In
order  to  remedy this situation, the Company is  attempting  to
encourage  substantial down payments with system orders  and  is
seeking to establish a line of credit; however, there can be  no
assurance the Company will be successful in obtaining either.


ITEM 7.  FINANCIAL STATEMENTS

  Pursuant to Rule 12b-23, the financial statements set forth on
pages  F-1  through  F-17 attached hereto  are  incorporated  by
reference.


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

  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,  executive  officers,  and  other   significant
employee(s) of the Company.


                                             
     Name              Age               Position
                             
Paul F. Turner,         49       Chairman of the Board, Acting
M.S.E.E.                          President, and Senior Vice
                                  President of Research
                             
Dixie Toolson Sells     46       Vice President of Regulatory
                                  Affairs and Corporate Secretary
                             
Ray Lauritzen           46       Vice President of Field Service
                             
Gerhard W. Sennewald,   60       Member of the Board of Directors
Ph.D.                        
S. Lewis Meyer, Ph.D.   52       Member of the Board of Directors
                             
J. Gordon Short, M.D.   65       Member of the Board of Directors
                             
Theron Schaefermeyer    45       Director of International Sales
                                  and Marketing
                             


   Mr. Turner has been with BSD for 18 years.  He has served  as
Staff and Senior Scientist from 1979 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.  On October  3,  1995,  the
Board of Directors appointed Mr. Turner as Acting President.

   Ms. Sells has been with BSD for 18 years.  She has 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.

   Mr.  Lauritzen has been with BSD for 14 years.  He has 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  12  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.  S.  Lewis Meyer returned to BSD's Board of Directors  in
December 1994, after previously serving as a Director in the mid-
1980's.   Dr. Meyer is President and Chief Executive Officer  of
Imatron,  Inc., a publicly traded manufacturer of  Ultrafast  CT
(Registered  Trademark) Scanner.   Dr.  Meyer  is   also   Chief
Executive  Officer of Heartscan Imaging, Inc., a  subsidiary  of
Imatron,  Inc.,  which  is  engaged  in  the  development  of  a
nationwide  network of coronary artery disease  risk  assessment
centers.

   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  which  specializes  in  consumable  specialty
supplies.

  Mr. Schaefermeyer has been with BSD for 15 years.  He has been
a  Research Assistant since 1985 and assisted with International
Marketing  from  1991  to 1995.  He has served  as  Director  of
International Sales and Marketing since July 1995.

   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,
stock  option grants and exercises during fiscal year 1995,  and
fiscal year-end stock option values for the person(s) acting  in
a  similar capacity to chief executive officer of the Company in
the  fiscal  year  ended August 31, 1995.   No  other  executive
officers   of   the  Company  received  compensation   exceeding
$100,000.


                    SUMMARY COMPENSATION TABLE

                                               Long Term           
                   Annual Compensation   Compensation Awards
---------------------------------------------------------------------
                                  Other                      
                                 Annual  Restric-             All
 Name and   Fiscal  Salary Bonus Compen-   ted               Other
 Position    Year    ($)    ($)  sation   Stock    Options  Compen-
                                   ($)   Awards($)   (#)    sation($)
---------------------------------------------------------------------
Paul F.      1995  $115,000 -0-   -0-     $1,240(1) 166,000   -0-
Turner,      1994  $115,000 -0-   -0-       -0-       -0-     -0-
Acting       1993  $110,212 -0-   -0-       -0-       -0-     -0-
President;
Sr VP,
Research
                                                          
Steven J.    1995   $64,817 -0-   -0-     $1,240(1)   -0-     -0-
Carwell,     1994  $102,000 -0-   -0-        -0-      -0-     -0-
President;   1993   n/a(2)  n/a   n/a        n/a      n/a     n/a
(2)
------------------------- 
 
(1)     During fiscal 1995, the Company awarded both Mr.  Turner
  and  Mr.  Carwell  1,000  shares of restricted  common  stock.
  Consistently  reliable stock quotations have not been  readily
  available  because  there has been no established  market  for
  the  Company's  stock  (see Part II, Item  5).   However,  the
  Company  received  a  valuation  of  $1.24  per  share  on   a
  controlling  interest  basis as  of  December  4,  1994.   The
  Company   believes  these  numbers  may  not  be  a   reliable
  indicator   of  actual  realizable  value  of  these   shares.
  However,  this value has been reflected for the shares  listed
  in this table.

(2)     Mr.  Carwell  served as President of  the  Company  from
  December  16,  1993, to May 3, 1995.  Prior  to  December  16,
  1993, Mr. Carwell was not an officer of the Company.
 
 
                              
       OPTION/SAR GRANTS IN LAST FISCAL YEAR - Individual Grants

                                   Percent of 
                                     Total      Exercise  
    Name and             Options    Options     or Base    Expiration
    Position               (#)    Granted to     Price        Date
                                   Employees     ($/Sh)
                                   in Fiscal
                                     1995
------------------------------------------------------------------------
Paul F. Turner,          166,000    20.23%        $.10     April 4, 2005
Acting President;
Sr VP, Research                 



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


            Shares                 Number of            Value of
           Acquired    Value      Securities          Unexercised
 Name and     on      Realized    Underlying          In-the-Money
 Position  Exercise     ($)       Unexercised          Options at
             (#)                  Options at           FY-end ($)
                                  FY-end  (#)
                               ------------------    --------------------
                               Exerci-  Unexerci-    Exerci-  Unexerci-
                                sable     sable       sable     sable
-------------------------------------------------------------------------
Paul F.      -0-        -0-      -0-    166,000        n/a    $189,240 (1)
Turner,
Acting
President;
Sr VP,
Research
------------------


(1)     Consistently  reliable stock quotations  have  not  been
  readily  available  because  there  has  been  no  established
  market  for  the  Company's  stock  (see  Part  II,  Item  5).
  However,  the Company received a valuation of $1.24 per  share
  on  a controlling interest basis as of December 4, 1994.   The
  Company   believes  these  numbers  may  not  be  a   reliable
  indicator  of  actual  realizable  value  of  these   options.
  However, this value has been reflected for the options  listed
  in this table.


COMPENSATION OF DIRECTORS

   During  fiscal year 1995 each of the directors and  full-time
employees of the Company were given 1,000 restricted shares each
of  BSD  common  stock.   Each  director  also  received  35,000
nontransferable stock options under the "BSD Medical Corporation
1987  Stock  Option Plan".  These options were  at  an  exercise
price of $.10 per share, vest over a five year period and expire
in 2005.  The directors have not received any other compensation
for their service to the Company as directors.

EMPLOYMENT CONTRACTS

  The Company has an employment contract with Mr. Paul F. Turner
which was signed November 2, 1988.  The agreement provides  that
after October 1, 1993, Paul Turner's salary shall be based  upon
reasonable   mutual  agreements.   The  last   salary   increase
provided,  according to this agreement between  Mr.  Turner  and
BSD,  a  raise to $115,000 per year, as of October 1, 1993.   In
the  case of non-voluntary termination, Mr. Turner shall 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  shall  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
August 31, 1995, 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:

Name and Address of      Shares of Common      Percentage of
Beneficial Owner        Stock Beneficially     Common Stock
                             Owned (1)         Ownership (2)
---------------------------------------------------------------- 
Dr. Gerhard W. Sennewald     7,092,881            43.85%
 c/o Medizin-Technik GmbH
 Augustenstrasse 27
 D-80333 Munich, Germany

Paul F. Turner               2,013,918            12.45%
 762 Lacey Way
 North Salt Lake, UT 84054

Inchon Partners, L.P. (3)      912,500             5.64%
 c/o Alan L. Himber
 3878 Oak Lawn
 Suite 100B-212
 Dallas, TX  75219-4610

Steven Hite                    886,985             5.48%
 10329 South 1540 West
 South Jordan, UT  84095

S. Lewis Meyer, Ph.D.            4,000               *
 c/o Imatron
 389 Oyster Point Blvd.
 S. San Francisco, CA  94080

J. Gordon Short, M.D., FCAP      1,000               *
 c/o Brevis Corporation
 3310 South 2700 East
 Salt Lake City, UT  84109

All officers and directors   9,574,291            59.16%
as a group (6 persons)
-------------------


* 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.   (No  officers  or directors  had  vested  options
  within 60 days of fiscal year 1995.)

(3)   Alan L. Himber, as the General Partner of Inchon Partners,
  L.P.,  possessed  voting  rights to the  stock  owned  by  the
  partnership  and  acted on behalf of the limited  partners  of
  the  partnership.   However,  Mr.  Himber  is  in  Chapter   7
  bankruptcy,  and  according  to an  agreement  between  Thomas
  Powers,  Himber's  Chapter 7 Trustee,  and  Carter  Pate,  the
  NBHLT  Trustee, dated January 12, 1996, Powers was  deemed  to
  have  "sold,  transferred, and conveyed" to the NBHLT  all  of
  the  Himber  estate's interest in and right to any  shares  of
  stock  of BSD, and all rights of the Himber estate to  acquire
  additional  shares  of BSD, including all  options,  warrants,
  and   convertible  instruments.   Thus,  all  of  the   Himber
  estate's  interest in and control of Inchon Partners has  been
  transferred  to the NBHLT (see Part I, Item 3,  Nelson  Bunker
  Hunt Liquidating Trust vs. Alan L. Himber).

   The  following  table sets forth certain  information  as  of
November  14, 1996, 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:

Name and Address of      Shares of Common      Percentage of
Beneficial Owner        Stock Beneficially     Common Stock
                             Owned (1)         Ownership (2)
------------------------------------------------------------------
Dr. Gerhard W. Sennewald    6,662,946 (3)          41.01%
 c/o Medizin-Technik GmbH
 Augustenstrasse 27
 D-80333 Munich, Germany

Paul F. Turner              1,984,807 (4)          12.14%
 762 Lacey Way
 North Salt Lake, UT 84054

Dora Lee Langdon              886,485               5.48%
 P.O. Box 278
 Granbury, TX  76048-0278

Inchon Partners, L.P. (5)     912,500               5.64%
 c/o NBH Liquidating Trust
 c/o R. Carter Pate
 c/o Sun Coast Plastics
 2700 South Westmoreland
 Dallas, TX  75233

S. Lewis Meyer, Ph.D.          12,000 (6)             *
 c/o Imatron
 389 Oyster Point Blvd.
 S. San Francisco, CA  94080

J. Gordon Short, M.D., FCAP     9,000 (7)             *
 c/o Brevis Corporation
 3310 South 2700 East
 Salt Lake City, UT  84109

All officers and directors  9,215,836 (8)             55.81%
as a group (6 persons)
--------------

* 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 69,065 shares subject to options.

(4)  Includes 169,889 shares subject to options.

(5)   Alan L. Himber, as the General Partner of Inchon Partners,
  L.P.,  possessed  voting  rights to the  stock  owned  by  the
  partnership  and  acted on behalf of the limited  partners  of
  the  partnership.   However,  Mr.  Himber  is  in  Chapter   7
  bankruptcy,  and  according  to an  agreement  between  Thomas
  Powers,  Himber's  Chapter 7 Trustee,  and  Carter  Pate,  the
  NBHLT  Trustee, dated January 12, 1996, Powers was  deemed  to
  have  "sold,  transferred, and conveyed" to the NBHLT  all  of
  the  Himber  estate's interest in and right to any  shares  of
  stock  of BSD, and all rights of the Himber estate to  acquire
  additional  shares  of BSD, including all  options,  warrants,
  and   convertible  instruments.   Thus,  all  of  the   Himber
  estate's  interest in and control of Inchon Partners has  been
  transferred  to the NBHLT (see Part I, Item 3,  Nelson  Bunker
  Hunt Liquidating Trust vs. Alan L. Himber).

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

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

(8)  Includes 335,545 shares subject to options.


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  BSD   Medical   Corporation  1987  Stock   Option   Plan.
      Incorporated  by  reference to  Exhibit  10  of  the  BSD
      Medical Corporation Form 10-K, filed April 8, 1988.
      
10.4  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.
      
10.5  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.
      
27    Financial Data Schedule.

(b) Reports on Form 8-K
     
   During  the  last quarter of fiscal year 1995, no reports  on
   Form 8-K were filed by the Company.

<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:  February 24, 1997    By:  /s/   Paul F. Turner
                                Paul F. Turner
                                Chairman  of  the Board,  Acting
                                President,   and   Senior   Vice
                                President of Research



  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:  February 24, 1997    By:  /s/   Paul F. Turner
                                Paul F. Turner
                                Chairman   of   the  Board,   Acting
                                President, and Senior Vice President
                                of Research


Date:  February 24, 1997    By:  /s/   S. Lewis Meyer
                                Dr. S. Lewis Meyer
                                Member of the Board of Directors


Date:  February 24, 1997    By:  /s/   Gerhard W. Sennewald
                                Dr. Gerhard W. Sennewald
                                Member of the Board of Directors


Date: February 24, 1997     By:  /s/   J. Gordon Short
                                Dr. J. Gordon Short
                                Member of the Board of Directors

<PAGE>













                   BSD MEDICAL CORPORATION


                    Financial Statements

                        Form 10-K SB


                  August 31, 1995 and 1994

<PAGE>





                Independent Auditors' Report



The Board of Directors
BSD Medical Corporation:


We  have  audited  the  accompanying balance  sheet  of  BSD
Medical Corporation (the Company) as of August 31, 1995  and
the related statements of operations, stockholders' deficit,
and  cash flows for each of the years in the two-year period
ended  August 31, 1995.  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 at August 31, 1995,  and
the results of its operations and its cash flows for each of
the  years in the two-year period ended August 31, 1995,  in
conformity with generally accepted accounting principles.

The  accompanying  financial statements have  been  prepared
assuming  that  BSD Medical Corporation will continue  as  a
going  concern.   As discussed in note 11 to  the  financial
statements, the Company has current liabilities in excess of
current  assets and a net stockholders' deficit  that  raise
substantial doubt about its ability to continue as  a  going
concern.  Management's plans in regard to these matters  are
also described in note 11.  The financial statements do  not
include  any adjustments that might result from the  outcome
of this uncertainty.


                                                     
                                                     
                                                     
                                KPMG Peat Marwick LLP

Salt Lake City, Utah
November 25, 1996
<PAGE>

                   BSD MEDICAL CORPORATION
                              
                        Balance Sheet
                              
                       August 31, 1995


                              Assets                                    
Current assets:                                                      
Cash and cash equivalents                                            $46,125
Receivables:                                                          
Trade accounts, net of allowance for 
  doubtful receivables of $10,000                                    100,978
Employee and other                                                     7,770
                                                                  ----------    
Total net receivables                                                108,748
Inventories (note 9):                                             ----------    
Raw materials                                                        205,864
Work-in-process                                                      247,070
Finished goods                                                        79,047
                                                                  ----------    
Total inventories                                                    531,981
                                                                  ----------    
Prepaid expenses and other assets                                     29,891
                                                                  ----------    
Total current assets                                                 716,745
                                                                  ----------   
Property and equipment:                                              
Furniture and fixtures                                               297,743
Equipment                                                            466,233
Building, under capital lease, net of reserve for potential           
  impairment of $181,534 (note 6)                                    233,766
                                                                  ----------    
Total property and equipment                                         997,742
                                                                      
Less accumulated depreciation and amortization                       732,384
                                                                  ----------    
Net property and equipment                                           265,358
                                                                  ----------    
Long-term receivables                                                115,108
                                                                      
Patents, at cost, less accumulated amortization of $175,106           87,626
                                                                  ----------    
                                                                  $1,184,837
                                                                  ==========

See accompanying notes to financial statements.
                             F-2
<PAGE>
                              
                              
                              
                              
             Liabilities and Stockholders' Deficit                      

Current liabilities:                                                        
Notes payable (note 2)                                            $ 263,480
Current installments of obligation under capital lease (note 6)      48,403
Current installments of obligation under long-term debt (note 7)     19,815
Accounts payable                                                    196,713
Accrued payroll and commissions                                     152,169
Customer deposits (note 9)                                          122,427
Warranty reserves                                                    57,005
Accrued expenses                                                    107,316
                                                                 ----------     
Total current liabilities                                           967,328
                                                                 ----------    
Obligation under capital lease, excluding current                   
  installments (note 6)                                             152,924
Obligation under long-term debt, excluding current installments      90,366
  (note 7)
Deferred revenue                                                    210,099
Related party deferred revenue (note 9)                             335,141
                                                                 ----------    
Total liabilities                                                 1,755,858
                                                                 ----------     
Stockholders' deficit (notes 4 and 5):                                      
 Preferred stock, $1.00 par value; authorized 10,000,000 shares;      
   none issued and outstanding (liquidation value $100 per share)         -
 Common stock, $.01 par value; authorized 20,000,000 shares;
   issued and outstanding 16,176,980 shares                         161,770
Additional paid-in capital                                       20,055,347
Accumulated deficit                                             (19,713,157)
Common stock in treasury, 91,448 shares, at cost                    (19,911)
Deferred compensation                                            (1,055,070)
                                                                 ----------    
Net stockholders' deficit                                          (571,021)
                                                                     
Commitments and contingencies (notes 10, 11, and 13)             ----------   
                                                                    
                                                                $ 1,184,837
                             F-3                                 ==========
<PAGE>
                   BSD MEDICAL CORPORATION
                              
                  Statements of Operations
                              
            Years ended August 31, 1995 and 1994



                                                         1995        1994
                                                      ----------  ----------
Product sales                                         $1,148,656     858,263
Grant revenue                                                  -      50,000
                                                      ----------  ----------
Total revenues                                         1,148,656     908,263
                                                      ----------  ----------
Costs and expenses:                                                   
 Cost of product sales                                   646,733     424,292
 Research and development                                219,871     250,243
 Selling, general, and administrative                    589,180     817,225
                                                      ----------  ----------
Total costs and expenses                               1,455,784   1,491,760
                                                      ----------  ----------
Operating loss                                          (307,128)   (583,497)

Other income (expense):                                               
 Interest income                                             896         538
 Write-off of patents                                    (38,284)   (126,471)
 Interest expense                                        (37,493)    (12,376)
 Other, net                                              185,130     453,582
                                                      ----------  ----------
Total other income                                       110,249     315,273
                                                      ----------  ----------
Net loss                                             $  (196,879)   (268,224)
                                                      ==========  ==========
Net loss per common and common equivalent share      $      (.01)       (.03)
                                                      ==========  ==========
Weighted average number of shares outstanding         15,123,113   9,853,778
                                                      ==========  ==========



See accompanying notes to financial statements.
                             F-4
<PAGE>

                   BSD MEDICAL CORPORATION
                              
             Statements of Stockholders' Deficit
                              
            Years ended August 31, 1995 and 1994
                              
<TABLE>
<CAPTION>
                              
                                                  Addi-                                          Net
                            Series C   Com-       tional     Deferred    Accumu-     Common     stock-
                            Preferred  mon        paid-in    compen-     lated       stock in  holders
                              stock    stock      capital    sation      deficit     treasury   deficit
                            --------- -------   ---------- ----------- ------------ ---------  ---------
<S>                          <C>       <C>      <C>        <C>         <C>          <C>        <C>
Balances, August 31, 1993     $ 5,072  98,538   18,951,886           - (19,192,471) (153,414)  (290,389)
 Reissuance of 100,000                                                                      
   shares of treasury                                                                       
   stock to acquire asset                                                                              
   under capital lease              -       -            -           -           -   129,034    129,034
 Dividends accrued -                                                                        
   preferred stock                  -       -            -           -     (50,720)        -    (50,720)
 Net loss                           -       -            -           -    (268,224)        -   (268,224)
                            --------- -------   ---------- ----------- ------------ ---------  ---------                        
Balances, August 31, 1994       5,072  98,538   18,951,886           - (19,511,415)  (24,380)  (480,299)
 Dividends accrued -                                                                         
   preferred stock                  -       -            -           -      (4,863)        -     (4,863)
 Shares issued in                                                                            
   satisfaction of                                                                                      
   dividend payable               856       -       84,744           -           -         -     85,600
 Common stock issued as                                                                                 
   equivalent replacement                                                                               
   value for preferred                                                                                   
   stock (note 4)              (5,928) 63,232      (57,304)          -           -         -          -
 Treasury stock issued                                                                                  
   for employee bonuses             -       -       20,951           -           -     4,469     25,420 
 Deferred compensation                                                                                  
   related to grant of                                                                                 
   stock options                    -       -    1,055,070  (1,055,070)          -         -          -
 Net loss                           -       -            -           -    (196,879)        -   (196,879)
                            --------- -------  ----------- ----------- ------------ --------- ----------- 
Balances, August 31, 1995    $      - 161,770   20,055,347  (1,055,070)(19,713,157)  (19,911)  (571,021)
                            ========= =======  =========== =========== ============ ========= ===========
</TABLE>


See accompanying notes to financial statements.
                             F-5
<PAGE>

                   BSD MEDICAL CORPORATION
                              
                  Statements of Cash Flows
                              
            Years ended August 31, 1995 and 1994
                              
                              
Increase (Decrease) in Cash and Cash Equivalents       1995      1994
------------------------------------------------     --------  --------
Cash flows from operating activities:                                 
 Net loss                                          $ (196,879) (268,224)
 Adjustments to reconcile net loss to net 
   cash provided by operating activities:
    Depreciation and amortization                      48,773    50,939
    Write-off of patents                               38,284   126,471
    Provision for losses on trade accounts receivable       -   (44,380)
    Provision for losses on inventory                       -   (65,000)
    Provision for warranties                           60,822    42,144
    Provision for impairment of asset under 
      capital lease                                         -   181,534
    Loss on disposal of assets                             48        99
    Gain on settlement of payables                   (162,442) (109,749)
    Reduction of reserves                             (14,065)  (61,194)
    Stock issued for employee bonuses                  25,420         -
 Changes in assets and liabilities:                                     
    Receivables                                      (104,401)   52,455
    Inventories                                       152,291  (124,152)
    Prepaid expenses and other assets                    (900)    8,009
    Accounts payable                                  (16,809)  183,680
    Accrued payroll and commissions                    90,383  (140,475)
    Customer deposits                                  39,926   351,711
    Warranty reserves                                 (55,422) (124,759)
    Accrued expenses                                  (23,273)  (60,631)
    Deferred revenue                                  154,649    12,730
                                                     --------  --------
                                                                       
        Net cash provided by operating activities      36,405    11,208
                                                     --------  --------
Cash flows from investing activities:                                 
 Additions to property, plant, and equipment           (2,167)     (806)
 Purchase of other assets                                   -   (98,804)
                                                     --------  --------
        Net cash used in investing activities          (2,167)  (99,610)
                                                     --------  --------
Cash flows from financing activities:                                 
 Net proceeds from short-term notes payable             3,390    58,993
 Principal payments on capital lease obligation       (32,439)        -
                                                     --------  --------
                                                                       
        Net cash provided by (used in) 
          financing activities                        (29,049)   58,993
                                                     --------  --------
                              
                             F-6
<PAGE>
                   BSD MEDICAL CORPORATION
                              
            Statements of Cash Flows (continued)
                              
            Years ended August 31, 1995 and 1994
                              
                              
                                                        1995      1994
                                                      --------  -------- 
Increase (decrease) in cash and cash equivalents      $  5,189   (29,409)
Cash and cash equivalents, beginning of year            40,936    70,345
                                                      --------  --------
Cash and cash equivalents, end of year                $ 46,125    40,936
                                                      ========  ======== 
Supplemental Schedule of Noncash Investing and 
Financing Activities:
----------------------------------------------                          
Dividends accrued on preferred stock                  $  4,863    50,720
Preferred stock issued as dividend in lieu of cash      85,600         -
6,323,202 shares of common stock issued as 
  equivalent replacement value for 5,928 shares 
  of preferred stock                                    63,232         -
Conversion of accounts payable and accrued expenses
  to notes payable and long-term debt                  244,313         -
Reissuance of 100,000 shares of treasury stock to 
  acquire assets under capital lease                         -   129,034
Transfer of prepaid expense to assets under capital 
  lease                                                      -    52,500
Capital lease obligation incurred acquiring the 
  assets under capital lease                                 -   233,766
Transfer of customer deposits to deferred revenue      300,000         -
                                                                       
Supplemental Disclosure of Cash Flow Information                      
------------------------------------------------
Cash paid during the year for interest                $ 37,493    12,376



See accompanying notes to financial statements.
                             F-7
<PAGE>



(1)   Summary of Significant Accounting Policies

      (a)  General

            BSD  Medical Corporation, the Company,  develops,
      produces,  markets, and services systems used  for  the
      treatment  of cancer and other diseases.  Such  systems
      are sold worldwide.

      (b)  Cash and Cash Equivalents

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

      (c)  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  on  the  basis   of   accumulated
      manufacturing costs, but not in excess of  market  (net
      realizable value).

      (d)  Property and Equipment

            Property,  plant,  and equipment  are  stated  at
      cost.   The  building under capital lease is stated  at
      the  present value of the minimum lease payments,  plus
      costs  incurred  to obtain the option to  purchase  the
      building,  less  the reserve for potential  impairment.
      Depreciation   is  provided  using  the   straight-line
      method over the estimated useful lives of 40 years  for
      the  building and leasehold improvements and  5  to  12
      years for furniture, fixtures, and equipment.

      (e)  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.

                             F-8
<PAGE>
(1)   Summary of Significant Accounting Policies (continued)

      (f)  Loss Per Common Share

            Loss  per  common share is based on the  weighted
      average  number  of common shares outstanding.   Common
      stock  equivalents  (stock options and  warrants)  have
      not  been included in the computation as they would not
      have a dilutive or material effect.

      (g)  Patents

            Included are costs incurred in obtaining patents.
      These  costs  are being amortized using  the  straight-
      line method over ten years.

      (h)  Revenue Recognition

            Sales  revenues  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.

      (i)  Research and Development Costs

            Research  and development costs are  expensed  as
      incurred.

      (j)  Other Income

            Included  in  other income in 1995 and  1994  are
      gains  from  settling  payables  for  less  than  their
      recorded  balances.  These gains totaled  approximately
      $162,000  in fiscal 1995, and $110,000 in fiscal  1994,
      decreasing loss per share by $.01 in both years.

      (k)  Use of Estimates

            Management  of the Company has made a  number  of
      estimates  and  assumptions relating  to  reporting  of
      assets   and   liabilities  and   the   disclosure   of
      contingent  assets  and liabilities  to  prepare  these
      financial   statements  in  conformity  with  generally
      accepted  accounting principles.  Actual results  could
      differ from those estimates.

      (l)  Reclassifications

            Certain reclassifications have been made to prior
      year  amounts  to conform with current  year  reporting
      presentation.

                             F-9
<PAGE>

(2)   Short-term Notes Payable

      A  summary  of short-term notes payable at  August  31,
      1995 follows:

                                                            
                                                          
      Noninterest bearing note payable due August 1996   $ 22,983
                                                          
      Note payable, due in quarterly installments         
        equal to 4% of gross sales, bearing               
        interest at 8% with final payment due
        June 30, 1996                                     106,365
                                                          
      Note payable, due in monthly installments of        
        $5,000, bearing interest at 10%                   134,132
                                                         -------- 
                                                         $263,480
                                                         ========

   The  $134,132  note  payable represents outstanding  legal
   fees which were converted from an account payable.


(3)   Income Taxes

   The  Company has recorded no income tax expense due to net
   operating  losses.   The difference between  the  expected
   tax   benefit   and  actual  tax  benefit   is   primarily
   attributable  to  the effect of the net  operating  losses
   being  offset  by  an increase in the Company's  valuation
   allowance.

   The  Company's  gross  deferred  assets  of  approximately
   $4,217,000  in fiscal 1995 and $4,089,000 in fiscal  1994,
   consist primarily of net operating losses which have  been
   fully  reserved  for  with  a  valuation  allowance.   The
   valuation  allowance for deferred tax assets at  September
   1,  1994 was approximately $4,089,000.  The net change  in
   the  valuation  allowance for the year  ended  August  31,
   1995 was an increase of approximately $128,000.

                            F-10
<PAGE>

(3)   Income Taxes (continued)

   At  August 31,  1995, the Company had  tax  and  financial
   statement   net  operating  losses  (NOL),  research   and
   experimentation  tax credits (RETC),  and  investment  tax
   credits  (ITC),  which can be carried  forward  to  reduce
   federal income taxes, approximately as follows:

       Expiration                            
          date           NOL        RETC       ITC
       ----------     ---------   --------   -------
          1996      $   230,000      7,000     4,400
          1997        1,155,000     33,000     3,200
          1998        1,192,000     16,000     2,100
          1999        1,238,000          -     3,300
          2000        1,115,000          -         -
          2001          235,000          -     1,000
          2002        2,827,000      8,000         -
          2003        2,122,000     41,000         -
          2004                -     57,000         -
          2005        1,000,000          -         -
          2007          197,000          -         -
          2008                -          -         -
          2009          200,000          -         -
          2010          174,000          -         -
                       --------   --------   -------
                    $11,685,000    162,000    14,000

   Under  the  rules  of  the Tax Reform  Act  of  1986,  the
   Company  has experienced a greater than 50 percent  change
   of  ownership.  Consequently, use of substantially all  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.   The  maximum  amount   of
   carryovers  available in a given year is  limited  to  the
   product  of  the Company's value on the date of  ownership
   change  and  the federal long-term tax-exempt  rate,  plus
   any   limited  carryover  not  utilized  in  prior  years.
   Management  does not believe that these rules will  impact
   the  computation of income tax provisions for the  current
   or prior years.

   Tax  net  operating  losses expiring  in  the  years  2005
   through  2010  have been estimated due to no  tax  returns
   having  been filed by the Company for the years  in  which
   these losses originated.


                            F-11
<PAGE>

(4)   Preferred Stock Transactions

   Each  class  of preferred stock is entitled to  cumulative
   cash  dividends  at the rate of $10 per share  per  annum.
   On  October  29, 1994, using the rate of 1,066.667  shares
   of  common  stock  for each share of  Series  C  preferred
   stock,  the  Company  issued 6,323,202  shares  of  common
   stock as equivalent replacement value for 5,928 shares  of
   preferred   C   stock  and  accrued  preferred   C   stock
   dividends.  Simultaneous with this transaction the  Series
   C  preferred  stock was canceled and at August  31,  1995,
   there   were  no  Series  C  preferred  stock  authorized,
   issued, or outstanding.


(5)   Stock Option and Award Plans

      (a)  Employee Stock Option Plans

            The  Company's 1987 Stock Option Plan  authorizes
      the  granting  of  incentive  options  to  certain  key
      employees   of  the  Company  and  nonqualified   stock
      options   to   certain   key   employees,   nonemployee
      directors, or individuals who provide services  to  the
      Company.   The  plan,  as  amended,  provides  for  the
      granting  of  options  for  an  aggregate  of   950,000
      shares.   The options vest according to a set  schedule
      over  a five-year period and expire upon the employee's
      termination or after ten years from the date of grant.

            On  May 1, 1995 the Board of Directors authorized
      the   cancellation  of  all  outstanding  options   and
      reissuance  of options with an exercise price  of  $.10
      per  share  which  will vest over a one  to  five  year
      period.   Each employee was granted options to purchase
      3,000  shares  per  year of service  performed  at  the
      Company,  and  the  officers and  directors  were  each
      granted options to purchase 35,000 shares.

A summary of activity follows:
                                                      
                                                Number     Exercise
                                                  of         price
                                                shares     per share
                                              --------   --------------
 Outstanding balance as of August 31, 1993     780,823  $  1.00 to 2.94
 Canceled or expired                           591,500     1.00 to 2.87
                                              --------
 Outstanding balance as of August 31, 1994     189,323     1.00 to 2.94
 Canceled or expired                           189,323     1.00 to 2.94
                                              --------
 Issued                                        925,500         0.10
                                              --------
 Outstanding balance as of August 31, 1995     925,500         0.10
                                              ========           
 Exercisable August 31, 1995                         -             
                                              ========

                            F-12
<PAGE>

(5)   Stock Option and Award Plans (continued)

      (a)  Employee Stock Option Plans (continued)

            During  the  year  ended  August  31,  1995,  the
      Company  issued  options to purchase shares  of  common
      stock,  at  an exercise price of $.10 per  share.   The
      Company  has  recorded  as  deferred  compensation  the
      excess  of the deemed value of the common stock at  the
      date  of  grant over the exercise price.  The  deferred
      compensation  will  be  amortized  ratably   over   the
      vesting period of the options.

      (b)  Incentive Stock Awards

            The  Company also has an employee incentive stock
      award plan (the Plan) whereby up to 100,000 shares  are
      available  to  be  awarded  to  certain  employees  and
      directors  of  the Company at $.25 per share  according
      to  the  Plan's vesting requirements.  No  shares  were
      granted  and  no shares were vested during fiscal  1995
      and 1994.


(6)       Lease

    Future  minimum capital lease payments as of August  31,
1995 are:

                                                                
Year ending August 31:                                 
      1996                                                 $ 73,900
      1997                                                   62,400
      1998                                                   62,400
      1999                                                   57,200
                                                            -------
        Total minimum lease payments                        255,900
                                                             
      Less amount representing interest (at 12%)             54,573
                                                            -------           
        Present value of net minimum capital lease 
          payments                                          201,327
                                                             
      Less current installments of obligations under         
       capital leases                                        48,403
                                                            -------
         Obligations under capital leases,               
           excluding current installments                  $152,924
                                                            =======

                            F-13
<PAGE>

(6)       Lease (continued)
   
   On  July 22, 1994, the Company renewed a lease agreement,
   originally  entered into on June 1, 1991, for a  building
   used  as  the  office  and  manufacturing  site  for  the
   Company. According to the terms of the lease, the Company
   has  the  option  to purchase the building  at  any  time
   during   the   lease   term  at  a  purchase   price   of
   approximately  $330,000.   If  the  Company   elects   to
   exercise  the  purchase option, $2,000  of  each  monthly
   lease  payment made will be applied against the  purchase
   price.  At the time the original lease was executed,  the
   Company   paid   an   additional  sum   of   $52,500   in
   consideration  for the option to purchase  the  building.
   At  the  time  of the renewal of the lease,  the  Company
   reissued 100,000 shares of its treasury stock with a cost
   basis  of $129,034 to the lessor to retain its option  to
   purchase the building.
   
   The asset under capital lease includes the capitalization
   of  the costs incurred to obtain and retain the option to
   purchase the asset, as well as management's best estimate
   of  a  reserve for impairment.  


(7)   Long-term Debt

A summary of long-term debt at August 31, 1995 follows:

                                                  
      Note payable, due in monthly               
        installments of $2,742, bearing           
        interest at 9% with final payment      
        due October 1, 1999                     $ 110,181
      Less current portion                         19,815
                                                  -------
                                                $  90,366
                                                  =======

   The  note payable represents outstanding royalties payable
   which  were  converted  to a note payable  on  August  31,
   1995.  Maturities of this note payable over the next  five
   fiscal   years  are  as  follows:  1996,  $19,815;   1997,
   $25,817; 1998, $28,239; 1999, $30,888; 2000, $5,422.


(8)   Sales to Foreign Customers and Major Customers

   A  summary  of  sales to foreign customers for  the  years
   ended August 31, 1995 and 1994, are as follows:

                                                   1995      1994
                                                 --------  --------
       Europe                                   $ 482,649   545,803
       Canada                                           -       245
       Far East                                   282,751     1,622
                                                 --------  --------
                                                $ 765,400   547,670
                                                 ========  ========
                            F-14
<PAGE>

(8)   Sales   to   Foreign  Customers  and  Major   Customers
      (continued)

   Sales  to single customers, exceeding ten percent of total
   sales,  were  $203,302 and $282,672  in  fiscal  1995  and
   $545,803 in fiscal 1994.


(9)   Related Party Transactions

   In   December  1994,  one  of  the  Company's   principal
   distributors became a major stockholder owning more  than
   40%  of  the Company's common stock and a member  of  the
   Board  of  Directors of the Company.  At August 31,  1995
   the  Company had deferred revenue to this stockholder  of
   $335,141 for the sale of a system which has not yet  been
   shipped.    However,  title  of  this  system  had   been
   transferred  to the stockholder.  The amount included  in
   inventories  for  this  system  at  August  31,  1995  is
   $28,817.   Additionally,  during  fiscal  year  1995  the
   Company  had sales to this stockholder totaling  $203,302
   and  held  deposits from the stockholder for the purchase
   of  systems  for $94,500 at August 31, 1995.  Furthermore
   included  in  finished goods inventories  is  $35,702  of
   inventory on consignment to this stockholder.


(10)  Commitments and Contingencies

   The Company is involved in various claims and other legal
   actions  that  have  arisen in  the  ordinary  course  of
   business.  Furthermore, the last tax returns filed by the
   Company  were  for 1989 and 1990.  While the  outcome  of
   such  matters  is  currently  not  determinable,  it   is
   management's opinion that these matters will not  have  a
   material   adverse  effect  on  the  Company's  financial
   condition, results of operations, or liquidity.

   The  Company has an employment agreement with the  acting
   president  of  the Company.  The agreement provides  that
   the  presidents  salary  will be  based  upon  reasonable
   mutual  agreement.   At August 31,  1996,  the  agreement
   provided for a salary to the acting president of $115,000
   per  year.   Additionally, in the case  of  non-voluntary
   termination, the acting president 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 would  be
   an  average  of  the  acting presidents  salary  for  the
   immediate twelve month period prior to termination.   The
   agreement  also  requires the Company to pay  the  acting
   president for any accrued unused vacation and $1,000  for
   any newly issued patents.
   
   In addition, in July of 1979, the Company entered into 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  licenser.   The  Company   pays
   royalties  based upon its sales of this probe.  Royalties
   accrued as of August 31, 1995 totaled $15,900.

                            F-15
<PAGE>

(11)      Liquidity
   
   As  shown  in  the accompanying financial statements,  at
   August  31,  1995 the Company had current liabilities  in
   excess of current assets and a net stockholders' deficit.
   Also, the Company has historically expended more cash  in
   the  course  of  its business than it has generated  from
   operations,  and  has  had to rely  primarily  upon  cash
   provided  by financing activities and fees received  from
   patent  license  agreements to  meet  cash  requirements.
   Management  intends  to  use its current  cash  position,
   supplemented  and aided by anticipated cash inflows  from
   sales,   budget   cutting,   fiscal   conservatism,   the
   possibility   of   loans,  and,  if  necessary,   private
   placements  of  its equity securities to  meet  operating
   requirements  for  future  years.   However,  there   are
   certain  risk  factors  which 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 nonrecurring expenses, and the
   availability   of  outside  financing.    The   financial
   statements  do  not  include any adjustments  that  might
   result from the outcome of these uncertainties.


(12)  Accounting Standards Issued Not Yet Adopted

   In  December of 1991, the Financial Accounting  Standards
   Board  issued Statement of Financial Accounting Standards
   No.  107,  Disclosures  about  Fair  Value  of  Financial
   Statements.   The  Company  is  required  to  adopt   the
   provisions  of this statement for the years ending  after
   December  31, 1995.  This statement requires all entities
   to  disclose the fair value of financial statement,  both
   assets  and liabilities recognized and not recognized  in
   the  statement  of financial position, for  which  it  is
   practicable  to estimate fair value.  If estimating  fair
   value   is   not  practicable,  this  statement  requires
   disclosure   of  descriptive  information  pertinent   to
   estimating  the  value of the financial instrument.   The
   impact  of  Statement  107 is  not  expected  to  have  a
   material effect on the Company.
   
   In  March  of  1995,  the Financial  Accounting  Standards
   Board  issued Statement of Financial Accounting  Standards
   No.  121,  Accounting  for  the Impairment  of  Long-lived
   Assets  and  Long-lived Assets to  be  Disposed  Of  (FASB
   121).  The Company is required to adopt the provisions  of
   this statement for the years beginning after December  15,
   1995.   This  statement  establishes accounting  standards
   for   the   impairment  of  long-lived   assets,   certain
   identifiable  intangibles, and goodwill related  to  those
   assets  to be held and used and for long-lived assets  and
   certain identifiable intangibles to be disposed of.

                            F-16
<PAGE>

(12)  Accounting    Standards   Issued   Not   Yet    Adopted
      (continued)

   This   Statement  requires  that  long-lived  assets   and
   certain  identifiable intangibles to be held and  used  by
   an  entity  be reviewed for impairment whenever events  or
   changes   in  circumstances  indicate  that  the  carrying
   amount  of an asset may not be recoverable.  In performing
   the  review for recoverability, the entity should estimate
   the  future cash flows expected to result from the use  of
   the  asset  and its eventual disposition.  If the  sum  of
   the  expected future cash flows (undiscounted and  without
   interest charges) is less than the carrying amount of  the
   asset,  an  impairment loss is recognized.  Otherwise,  an
   impairment  loss  is not recognized.   Measurement  of  an
   impairment  loss  for long-lived assets  and  identifiable
   intangibles that an entity expects to hold and use  should
   be  based  on the fair value of the asset.  The impact  of
   FASB 121 is not expected to have a material affect on  the
   Company.

   In  October  of 1995, the Financial Accounting  Standards
   Board  issued Statement of Financial Accounting Standards
   No.  123,  Accounting for Stock Based Compensation  (FASB
   123).  The Company is required to adopt the provisions of
   this  statement  for years beginning after  December  15,
   1995.  This statement encourages all entities to adopt  a
   fair  value based method of accounting for employee stock
   options or similar equity instruments.  However, it  also
   allows an entity to continue to measure compensation cost
   for  those  plans  using  the intrinsic-value  method  of
   accounting  prescribed by APB opinion No. 25,  Accounting
   for   Stock  Issued  to  Employees  (APB  25).   Entities
   electing  to  remain with the accounting in APB  25  must
   make pro forma disclosures of net income and earnings per
   share  as  if  the fair value based method of  accounting
   defined  in  this  statement had  been  applied.   It  is
   currently  anticipated that the Company will continue  to
   measure compensation costs in accordance with APB 25  and
   provide the disclosures required by FASB 123.


 (13) Subsequent Events

   On  July  3, 1996 the Company issued a license  agreement
   for  the  use  of  a  patent owned by  the  Company.   As
   consideration  for the agreement the Company  received  a
   non-refundable license fee of $1,500,000.   In  addition,
   the  Company  will also receive a royalty of 2.5 percent,
   up  to  a maximum of $3,500,000, of the net selling price
   received on products covered by the Company's patent.
   
   In  August  1995  and  1996, the Company  was  awarded  a
   federal  grant  from  the National Cancer  Institute  for
   research   and  development.   The  grant   allowed   for
   reimbursement  of  project expenses up  to  $325,066  and
   $138,499 for fiscal 1996 and 1997, respectively.   During
   fiscal  1996,  $325,066  of revenues  and  expenses  were
   recognized  under this grant.  These grants  were  issued
   for  the  production and testing of system  upgrades.   A
   representative  of  the  awarding  agency  is   currently
   reviewing  the  allowability of  grant  expenditures  for
   fiscal   1996.    This   agency  may   disallow   certain
   expenditures  based  on its judgments  about  information
   available  to it during its examination.  However,  while
   the   outcome   of  the  examination  is  currently   not
   determinable,  it  is  management's  opinion  that   this
   examination  will not have a material adverse  effect  on
   the Company's financial condition, results of operations,
   or liquidity.

                        F-17