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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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


                                    FORM 10-Q


(Mark One)

         |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the quarterly period ended November 30, 2007

         |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the transition period from ___________ to __________

                          Commission File No. 001-32526

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



                             BSD Medical Corporation
             (Exact Name of Registrant as Specified in Its Charter)

                  Delaware                                  75-1590407
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)

                              2188 West 2200 South
                           Salt Lake City, Utah 84119
          (Address of principal executive offices, including zip code)

                                 (801) 972-5555
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

         Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer or non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
(Check one): Large Accelerated Filer |_| Accelerated Filer |X| Non-accelerated
Filer |_|

         Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

         As of January 9, 2008, there were 21,288,333 shares of the Registrant's
common stock, $0.001 par value per share, outstanding.






                                       1
<PAGE>
                             BSD MEDICAL CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED NOVEMBER 30, 2007


                         PART I - Financial Information

      Item 1.  Financial Statements

               Condensed Balance Sheets........................................3
               Condensed Statements of Operations..............................4
               Condensed Statements of Cash Flows..............................5
               Notes to Condensed Financial Statements.........................6

      Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations............................13

      Item 3.  Quantitative and Qualitative Disclosures About Market
               Risk...........................................................19

      Item 4.  Controls and Procedures........................................20


                           PART II - Other Information

      Item 1A.  Risk Factors..................................................20

      Item 6.  Exhibits.......................................................21

      Signatures..............................................................22



                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.


                             BSD MEDICAL CORPORATION
                            Condensed Balance Sheets
                                   (Unaudited)


                                                  November 30,      August 31,
              ASSETS                                   2007             2007
                                               --------------------------------
Current assets:
   Cash and cash equivalents                   $      731,513    $      416,540
   Investments                                     15,860,611        19,090,118
   Accounts receivable, net of allowance
     for doubtful accounts of $20,000                 491,130           203,267
   Related party trade accounts
     receivable                                     1,036,247           488,200
   Income tax receivable                            2,162,022         1,759,995
   Inventories, net                                 1,602,503         1,510,067
   Deferred tax asset                                       -           387,000
   Other current assets                               119,776           127,003
                                               --------------------------------
   Total current assets                            22,003,802        23,982,190

Property and equipment, net                         1,451,066           271,077
Patents, net                                           39,870            19,373
Deferred tax asset                                          -            69,000
                                               -------------------------------

                                               $   23,494,738    $   24,341,640
                                               ================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                            $      269,305    $      235,676
   Accrued liabilities                                560,732           633,090
   Customer deposits                                   83,065           214,638
   Deferred revenue - current portion                  23,392            26,115
                                               --------------------------------
   Total current liabilities                          936,494         1,109,519

Deferred revenue - net of current
  portion                                              43,334            48,333
                                               --------------------------------

   Total liabilities                                  979,828         1,157,852
                                               --------------------------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.001 par value;
      10,000,000 shares authorized, no
      shares issued and outstanding                         -                 -
   Common stock; $.001 par value,
      40,000,000 shares authorized,
      21,312,664 and 21,297,446 shares
      issued                                           21,313            21,298
   Additional paid-in capital                      26,689,279        26,373,637
   Treasury stock, 24,331 shares at cost                 (234)             (234)
   Other comprehensive loss                          (729,360)         (360,760)
   Accumulated deficit                             (3,466,088)       (2,850,153)
                                               --------------------------------
   Total stockholders' equity                      22,514,910        23,183,788
                                               --------------------------------

                                               $   23,494,738    $   24,341,640
                                               ================================

            See accompanying notes to condensed financial statements

                                       3
<PAGE>
                             BSD MEDICAL CORPORATION
                       Condensed Statements of Operations
                                   (Unaudited)


                                                      Three Months Ended
                                                         November 30,
                                                    2007               2006
                                               --------------------------------
Revenues:
   Sales                                       $      479,703    $      648,611
   Sales to related parties                           908,025            16,044
                                               --------------------------------

   Total revenues                                   1,387,728           664,655
                                               --------------------------------

Operating costs and expenses:
   Cost of sales                                      162,981           436,625
   Cost of related party sales                        277,874            12,630
   Research and development                           337,353           332,079
   Selling, general and administrative              1,393,947         1,556,441
                                               --------------------------------

   Total operating costs and expenses               2,172,155         2,337,775
                                               --------------------------------

Loss from operations                                 (784,427)       (1,673,120)
                                               --------------------------------

Other income (expense):
   Interest income                                    189,348           370,213
   Other expense                                      (63,856)          (27,732)
                                               --------------------------------

   Total other income (expense)                       125,492           342,481
                                               --------------------------------

Loss before income taxes                             (658,935)       (1,330,639)

Income tax benefit                                     43,000           468,968
                                               --------------------------------

Net loss                                             (615,935)         (861,671)

Other comprehensive income (loss) -
   unrealized gain (loss) on investments,
   net of income tax                                 (368,600)           30,869
                                               --------------------------------

Net comprehensive loss                         $     (984,535)   $     (830,802)
                                               ================================

Loss per common share:
   Basic                                       $        (0.03)   $        (0.04)
                                               ================================
   Diluted                                     $        (0.03)   $        (0.04)
                                               ================================

Weighted average number of shares outstanding:
   Basic                                           21,311,000        21,036,000
   Diluted                                         21,311,000        21,036,000

            See accompanying notes to condensed financial statements

                                       4
<PAGE>

                             BSD MEDICAL CORPORATION
                       Condensed Statements of Cash Flows
                                   (Unaudited)


                                                      Three Months Ended
                                                         November 30,
                                                    2007               2006
                                               --------------------------------
Cash flows from operating activities:
   Net loss                                    $     (615,935)   $     (861,671)
   Adjustments to reconcile net loss
    to net cash used
      in operating activities:
      Depreciation and amortization                    26,373            21,116
      Stock-based compensation                        158,630           234,210
      Stock issued for services                        30,000                -
      Provision for doubtful accounts                       -            83,700
      Decrease (increase) in:
         Receivables                                 (835,910)           51,074
         Income tax receivable                       (211,000)         (367,967)
         Inventories                                  (92,436)         (107,983)
         Deferred tax assets                          168,000          (101,000)
         Other current assets                           7,227             7,968
      Increase (decrease) in:
         Accounts payable                              33,629           124,860
         Accrued liabilities                          (72,358)         (121,131)
         Customer deposits                           (131,573)                -
         Deferred revenue                              (7,722)          (11,286)
         Income taxes payable                               -        (1,500,000)
                                               --------------------------------

   Net cash used in operating activities           (1,543,075)       (2,548,110)
                                               --------------------------------

Cash flows from investing activities:
   Sale of investments                              3,072,907         1,666,755
   Purchase of property and equipment              (1,205,892)          (23,812)
   Increase in patents                                (20,967)                -
                                               --------------------------------

   Net cash provided by investing activities        1,846,048         1,642,943
                                               --------------------------------

Cash flows from financing activities:
   Proceeds from the sale of common stock              12,000                 -
                                               --------------------------------

Net increase (decrease) in cash and cash
  equivalents                                         314,973          (905,167)
Cash and cash equivalents, beginning of
  period                                              416,540         2,179,094
                                               --------------------------------

Cash and cash equivalents, end of period       $      731,513    $    1,273,927
                                               ================================

            See accompanying notes to condensed financial statements


                                       5
<PAGE>
                             BSD MEDICAL CORPORATION
                     Notes to Condensed Financial Statements
                                   (Unaudited)



Note 1.  Basis of Presentation

         The  accompanying  unaudited  condensed  balance  sheets of BSD Medical
Corporation  (the "Company") as of November 30, 2007 and August 31, 2007 and the
related unaudited  condensed  statements of operations and of cash flows for the
three months ended  November 30, 2007 and 2006 have been  prepared in accordance
with  U.S.  generally  accepted  accounting  principles  for  interim  financial
reporting  and  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission  (the "SEC").  The  condensed  financial  statements do not
include all of the information and footnotes required by U.S. generally accepted
accounting  principles  for  complete  financial  statements.   These  condensed
financial  statements should be read in conjunction with the notes thereto,  and
the financial statements and notes thereto included in our annual report on Form
10-K for the year ended August 31, 2007.

         All  adjustments  (consisting  only of  normal  recurring  adjustments)
necessary for the fair presentation of our financial position as of November 30,
2007 and August 31,  2007 and our results of  operations  and cash flows for the
three months ended November 30, 2007 and 2006 have been included. The results of
operations for the three months ended November 30, 2007 may not be indicative of
the results for the year ending August 31, 2008.

Note 2.  Recent Accounting Pronouncements

         In July 2006, the Financial  Accounting Standards Board ("FASB") issued
FASB Interpretation  ("FIN") 48, Accounting for Uncertainty in Income Taxes. FIN
48 clarifies  the  accounting  for  uncertainty  in income taxes  recognized  in
financial  statements  in  accordance  with  Statement of  Financial  Accounting
Standards  (SFAS) No. 109,  Accounting  for Income  Taxes.  This  Interpretation
prescribes a recognition  threshold and measurement  attribute for the financial
statement  recognition and measurement of a tax position taken or expected to be
taken  in a  tax  return.  FIN  48  also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure and transition.  We adopted this Interpretation on September 1, 2007,
with no material impact on our financial statements.

         In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations.  This statement  replaces SFAS No. 141, Business  Combinations and
applies to all  transactions  or other events in which an entity (the  acquirer)
obtains  control  of one or more  businesses  (the  acquiree),  including  those
sometimes  referred to as "true mergers" or "mergers of equals" and combinations
achieved  without the  transfer of  consideration.  This  statement  establishes
principles and requirements for how the acquirer:  a) recognizes and measures in
its financial  statements the  identifiable  assets  acquired,  the  liabilities
assumed,  and any  noncontrolling  interest in the acquiree;  b) recognizes  and
measures the  goodwill  acquired in the  business  combination  or a gain from a
bargain purchase; and c) determines what information to disclose to enable users
of the financials statements to evaluate the nature and financial effects of the
business  combination.  This statement  will be effective for fiscal years,  and
interim  periods  within those fiscal years,  beginning on or after December 15,
2008,  or our fiscal  year  beginning  September  1, 2009.  Earlier  adoption is
prohibited.  We  currently  are  unable to  determine  what  impact  the  future
application of this pronouncement may have on our financial statements.

         In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated  Financial Statements.  This statement applies to all entities that
prepare consolidated financial statements,  except not-for-profit organizations,
and amends Accounting  Research Bulletin ("ARB") 51 to establish  accounting and
reporting standards for the noncontrolling  interest in a subsidiary and for the
deconsolidation   of  a  subsidiary.   It  also  amends   certain  of  ARB  51's


                                       6
<PAGE>

consolidation  procedures for consistency  with the requirements of SFAS No. 141
(revised 2007).  This statement will be effective for fiscal years,  and interim
periods  within those fiscal years,  beginning on or after December 15, 2008, or
our fiscal year beginning September 1, 2009. Earlier adoption is prohibited.  We
currently  are unable to determine  what impact the future  application  of this
pronouncement may have on our financial statements.

         In February  2007,  the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial  Liabilities - Including an Amendment of FASB
Statement No. 115.  This  statement  permits  entities to choose to measure many
financial  instruments  and  certain  other  items  at fair  value.  Most of the
provisions  of SFAS No.  159 apply  only to  entities  that elect the fair value
option.   However,  the  amendment  to  SFAS  No.  115  Accounting  for  Certain
Investments  in  Debt  and  Equity  Securities  applies  to  all  entities  with
available-for-sale  and trading securities.  SFAS No. 159 is effective as of the
beginning of an entity's  first fiscal year that begins after November 15, 2007,
or our fiscal year beginning  September 1, 2008.  Early adoption is permitted as
of the  beginning  of a fiscal year that begins on or before  November 15, 2007,
provided  the entity also elects to apply the  provision  of SFAS No. 157,  Fair
Value Measurements. We have not elected early adoption of this statement, and do
not expect the  adoption of this  statement  will have a material  impact on our
financial statements.

         In September  2006, the FASB issued SFAS Statement No. 158,  Employers'
Accounting for Defined Benefit Pension and Other Postretirement  Plans. This new
standard will require  employers to fully recognize the  obligations  associated
with  single-employer  defined  benefit  pension,  retiree  healthcare and other
postretirement plans in their financial  statements.  We adopted SFAS No. 158 on
September 1, 2007, with no material impact on our financial  statements since we
currently do not sponsor a defined benefit pension or postretirement plan within
the scope of the standard.

         In  September   2006,   the  FASB  issued  SFAS  No.  157,  Fair  Value
Measurements.  SFAS No. 157 defines  fair  value,  establishes  a framework  for
measuring  fair  value,  and  requires  enhanced  disclosures  about  fair value
measurements.  SFAS No. 157  requires  companies  to disclose  the fair value of
their  financial  instruments  according to a fair value hierarchy as defined in
the  standard.   Additionally,   companies  are  required  to  provide  enhanced
disclosure regarding financial instruments in one of the categories, including a
reconciliation  of the beginning and ending  balances  separately for each major
category of assets and  liabilities.  In November 2007, the FASB  authorized its
staff to draft a  proposed  FASB  Staff  Position  ("Proposed  FSP")  that would
partially   defer  the  effective  date  of  SFAS  No.  157  for  one  year  for
non-financial  assets and  liabilities  that are recognized or disclosed at fair
value in the financial  statements on a non-recurring basis. If the proposed FSP
is approved,  SFAS No. 157 will be effective for financial statements issued for
fiscal years  beginning  after  November 15, 2007, or our fiscal year  beginning
September 1, 2008, for financial assets and liabilities carried at fair value on
a recurring  basis and on September  1, 2009,  for  non-recurring  non-financial
assets and liabilities that are recognized or disclosed at fair value. We do not
expect the adoption of SFAS No. 157 will have a material impact on our financial
statements.

         In March 2006,  the FASB issued SFAS No. 156,  Accounting for Servicing
of Financial Assets to simplify accounting for separately  recognized  servicing
assets and servicing  liabilities.  SFAS No. 156 amends SFAS No. 140, Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
Liabilities.  Additionally,  SFAS No. 156 applies to all  separately  recognized
servicing  assets and  liabilities  acquired or issued after the beginning of an
entity's  fiscal year that begins  after  September  15,  2006,  although  early
adoption is  permitted.  We adopted SFAS No. 156 on  September 1, 2007,  with no
material impact on our financial statements.

         In February 2006, the FASB issued SFAS No. 155,  Accounting for Certain
Hybrid  Instruments,  which  amends  SFAS No.  133,  Accounting  for  Derivative
Instruments and Hedging  Activities,  and SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and  Extinguishments of Liabilities.  SFAS No.
155 allows financial  instruments that have embedded derivatives to be accounted
for as a whole  (eliminating the need to bifurcate the derivative from its host)


                                       7
<PAGE>

if the holder elects to account for the whole  instrument on a fair value basis.
SFAS No. 155 also clarifies and amends certain other  provisions of SFAS No. 133
and SFAS No. 140.  This  statement is effective  for all  financial  instruments
acquired or issued in financial  years  beginning  after  September 15, 2006. We
adopted  SFAS No. 156 on  September  1,  2007,  with no  material  impact on our
financial statements.

         On December  21,  2006,  the FASB issued  FASB Staff  Position  ("FSP")
Emerging Issues Task Force ("EITF") 00-19-2, Accounting for Registration Payment
Arrangements, which requires an issuer to account for a contingent obligation to
transfer  consideration  under a registration  payment arrangement in accordance
with FASB Statement No. 5, Accounting for Contingencies and FASB  Interpretation
14,  Reasonable   Estimation  of  the  Amount  of  Loss.   Registration  payment
arrangements  are  frequently  entered  into  in  connection  with  issuance  of
unregistered  financial  instruments,  such as  equity  shares  or  warrants.  A
registration  payment  arrangement  contingently  obligates  the  issuer to make
future  payments or otherwise  transfer  consideration  to another  party if the
issuer  fails to file a  registration  statement  with the SEC for the resale of
specified  financial  instruments  or fails to have the  registration  statement
declared  effective within a specific  period.  The FSP requires issuers to make
certain  disclosures  for  each  registration  payment  arrangement  or group of
similar arrangements.  The FSP is effective immediately for registration payment
arrangements and financial  instruments entered into or modified after the FSP's
issuance date. For  previously  issued  registration  payment  arrangements  and
financial  instruments subject to those  arrangements,  the FSP is effective for
financial  statements issued for fiscal years beginning after December 15, 2006.
We adopted this  standard on September 1, 2007,  with no material  impact on our
financial statements.

         EITF No. 07-3,  Accounting for Nonrefundable Advance Payments for Goods
or Services Received for Use in Future Research and Development Activities,  was
issued in June 2007.  The EITF reached a consensus that  nonrefundable  payments
for goods and  services  that will be used or rendered  for future  research and
development  activities should be deferred and capitalized.  Such amounts should
be  recognized  as an expense as the related goods are delivered and the related
services are performed. Entities should continue to evaluate whether they expect
the goods to be  delivered  or services to be  rendered.  If the entity does not
expect the goods to be  delivered or services to be  rendered,  the  capitalized
advance payment should be charged to expense.  This  pronouncement  is effective
for financial  statements  issued for fiscal years  beginning after December 15,
2007,  our fiscal year beginning  September 1, 2008, and interim  periods within
those fiscal years. Earlier application is not permitted.  Entities are required
to report the  effects of  applying  this  pronouncement  prospectively  for new
contracts entered into on or after the effective date of this pronouncement. The
future  application  of this  pronouncement  may have a  material  effect on the
Company's financial condition and results of operations. We currently are unable
to determine what impact the future  application of this  pronouncement may have
on our financial statements.


Note 3.  Net Income (Loss) Per Common Share

         The  computation  of basic  earnings  per common  share is based on the
weighted average number of shares outstanding during the period. The computation
of diluted  earnings per common share is based on the weighted average number of
shares  outstanding  during the period plus the  weighted  average  common stock
equivalents  which would arise from the  exercise of stock  options  outstanding
using the treasury  stock  method and the average  market price per share during
the period.  When  common  stock  equivalents  are  anti-dilutive,  they are not
included. During the three months ended November 30, 2007 and November 30, 2006,
1,086,918 and 1,174,999 common stock  equivalents  related to stock options were
not included in the computation due to their anti-dilutive effect, respectively,
because of the Company's net loss.



                                       8
<PAGE>

         The shares used in the  computation of the Company's  basic and diluted
earnings per share are reconciled as follows:


                                                       Three Months Ended
                                                          November 30,
                                                    2007               2006
                                               --------------------------------

     Weighted average number of shares
       outstanding - basic                         21,311,000        21,036,000
     Dilutive effect of stock options                       -                 -
                                               --------------------------------

     Weighted average number of shares
       outstanding - diluted                       21,311,000        21,036,000
                                               ================================


Note 4.  Inventories

         Inventories consist of the following:

                                                November 30,        August 31,
                                                    2007              2007
                                               --------------------------------

         Parts and supplies                    $      869,778    $      835,498
         Work-in-process                              718,919           610,846
         Finished goods                                53,806           103,723
         Reserve for obsolete inventory               (40,000)          (40,000)
                                               --------------------------------

         Inventories, net                      $    1,602,503    $    1,510,067
                                               ================================


Note 5.  Property and Equipment

         Property and equipment consist of the following:

                                                November 30,        August 31,
                                                    2007              2007
                                               --------------------------------

         Equipment                             $      968,054    $      962,162
         Furniture and fixtures                       298,576           298,576
         Leasehold improvements                        17,420            17,420
         Building                                     956,000                 -
         Land                                         244,000                 -
                                               --------------------------------

                                                    2,484,050         1,278,158
         Less accumulated depreciation             (1,032,984)       (1,007,081)
                                               --------------------------------

         Property and equipment, net           $    1,451,066    $      271,077
                                               ================================

         When  the  lease  on the  Company's  office,  production  and  research
facilities  expired  in  November  2007,  the  Company  exercised  its option to
purchase the building and land for a total purchase price of $1,200,000.



                                       9
<PAGE>

Note 6.  Related Party Transactions

         During the three months ended  November 30, 2007 and November 30, 2006,
we had sales of $908,025 and $16,044, respectively, to an entity controlled by a
significant  stockholder  and member of the Board of  Directors.  These  related
party  transactions  represent  approximately 65% and 2% of total sales for each
respective three-month period.

         At  November  30,  2007  and  August  31,  2007,  receivables  included
$1,036,247 and $488,200, respectively, from this entity.

Note 7.  Stock-Based Compensation

         We have a stock-based  employee  plan and a director  option plan which
are  described  more fully in Note 11 in our 2007 Annual Report on Form 10-K. As
of November  30,  2007,  we had  approximately  502,000  shares of common  stock
reserved for future issuance under the stock option plans.

         The Company  accounts for  stock-based  compensation in accordance with
SFAS  No.  123(R),  Share  Based  Payments.  Under  the fair  value  recognition
provisions of this statement,  stock-based  compensation cost is measured at the
grant  date  based on the value of the  award  granted  using the  Black-Scholes
option pricing model,  and recognized  over the period in which the award vests.
The stock-based  compensation  expense for the three-month period ended November
30, 2007 has been  allocated to the various  categories  of operating  costs and
expenses in a manner similar to the allocation of payroll expense as follows:


         Cost of sales                                           $       21,148
         Research and development                                        25,495
         Selling, general and administrative                            111,987
                                                                 --------------

         Total                                                   $      158,630
                                                                 ==============

         Stock-based  compensation  expense  for the  three-month  period  ended
November  30,  2006 of  $234,210  has been  included  in  selling,  general  and
administrative expenses.

         During the three months ended  November  30, 2007,  we granted  120,000
options to our  directors,  with one fifth  vesting  each year for the next five
years, and 10,000 options to employees, with one third vesting each year for the
next three  years.  This grant  accounts  for  $25,492 of the total  stock-based
compensation expense for the three months ended November 30, 2007.

         Unrecognized stock-based compensation expense expected to be recognized
over  the  estimated  weighted-average  amortization  period  of 1.89  years  is
approximately $1,912,000 at November 30, 2007.

         Our  weighted-average  assumptions used in the Black-Scholes  valuation
model for equity awards with time-based  vesting  provisions  granted during the
three months ended November 30, 2007 are shown below:



             Expected volatility                                         63.38%
             Expected dividends                                              0%
             Expected term                                           6.25 Years
             Risk-free interest rate                                      4.28%



                                       10
<PAGE>

         The expected  volatility  rate was  estimated  based on the  historical
volatility  of our  common  stock.  The  expected  term was  estimated  based on
historical  experience of stock option  exercise and  forfeiture.  The risk-free
interest rate is the rate provided by the U.S. Treasury for Daily Treasury Yield
Curve Rates commonly referred to as "Constant  Maturity Treasury" rate in effect
at the time of grant with a remaining term equal to the expected option term.

         A summary of the  time-based  stock  option  awards as of November  30,
2007, and changes during the three months then ended, is as follows:


                                                      Weighted-
                                       Weighted-       Average
                                        Average       Remaining      Aggregate
                                       Exercise     Contract Term    Intrinsic
                         Shares         Price          (Years)         Value
                        --------------------------------------------------------

Outstanding at
  August 31, 2007       1,795,853     $     2.31
Granted                   130,000           6.46
Exercised                 (11,000)          1.34
Forfeited or expired            -             -
                        ------------------------

Outstanding at
  November 30, 2007     1,914,853     $     2.60          6.71
                        ========================================================

Exercisable at
  November 30, 2007     1,339,712     $     1.58          5.77      $ 5,253,977
                        ========================================================

         The  weighted-average  grant-date  fair value of stock options  granted
during the three months ended November 30, 2007 was $4.05.


Note 8.  Supplemental Cash Flow Information

         The Company paid no amounts for interest  during the three months ended
November 30, 2007 and 2006.  The Company paid no amounts for income taxes during
the three months ended November 30, 2007,  and paid  $1,500,000 for income taxes
during the three months ended November 30, 2006.

         During the three  months ended  November 30, 2007,  the Company had the
following non-cash financing and investing activities:

         o    Recorded an increase in additional paid-in capital of $115,027,  a
              decrease  in  long-term  deferred  tax  asset  of  $76,000  and an
              increase in income tax  receivable of $191,027  related to the tax
              benefit from the exercise of stock options.

         o    Increased  other   comprehensive   loss  by  $368,600,   decreased
              investments  by $156,600  and  decreased  short-term  deferred tax
              asset by $212,000.

         o    Increased common stock and decreased additional paid-in capital by
              $1.

         During the three  months ended  November 30, 2006,  the Company had the
following non-cash financing and investing activities:

         o    Increased other comprehensive income and increased  investments by
              $30,869.



                                       11
<PAGE>

         o    Transferred  deferred   compensation  of  $247,000  to  additional
              paid-in capital.

         o    Decreased income taxes payable and decreased income tax receivable
              by $39,946.


















                                       12
<PAGE>

Item 2.  Management's  Discussion  and Analysis of Financial  Condition  and
         Results of Operations.

         This  Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations  and other parts of this report  contain  forward-looking
statements that involve risks and uncertainties.  Forward-looking statements can
also be  identified  by  words  such as  "anticipates,"  "expects,"  "believes,"
"plans,"  "predicts,"  and similar  terms.  Forward-looking  statements  are not
guarantees of future performance and our actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such  differences  include,  but are not limited to those discussed in the
subsection entitled "Forward-Looking Statements" below. The following discussion
should be read in  conjunction  with our financial  statements and notes thereto
included  in this  report.  We assume  no  obligation  to  revise or update  any
forward-looking statements for any reason, except as required by law.

General
-------

         BSD Medical Corporation  develops,  manufactures,  markets and services
medical systems that deliver precision-focused radio frequency (RF) or microwave
energy into diseased sites of the body,  heating them to specified  temperatures
as required by a variety of medical  therapies.  Our business  objectives are to
commercialize our products  developed for the treatment of cancer and to further
expand our  developments  to treat other  diseases and medical  conditions.  Our
product line for cancer therapy has been created to offer  hospitals and clinics
a  complete  solution  for  thermal  treatment  of  cancer as  provided  through
microwave/RF systems.

         While our  primary  developments  to date have  been  cancer  treatment
systems,  we  also  pioneered  the  use of  microwave  thermal  therapy  for the
treatment of symptoms associated with enlarged prostate,  and we are responsible
for much of the  technology  that  created a new  medical  industry  using  that
therapy.  In  accordance  with our  strategic  plan,  we  subsequently  sold our
interest in  TherMatrx,  Inc.,  the company  established  to  commercialize  our
technology for treating enlarged prostate  symptoms,  to provide funding that we
can utilize for  commercializing our systems used in the treatment of cancer and
in pursuing other business objectives.

         In spite of the advances in cancer treatment  technology,  according to
the American Cancer Society over 40% of cancer patients continue to die from the
disease in the United States,  and cancer has now surpassed heart disease as the
number   one  killer   from  all   causes  of  death  in  the   United   States.
Commercialization  of our systems used to treat  cancer,  including the BSD-2000
and BSD-500  families of systems and the new MicroThermX  100 microwave  thermal
ablation  system,  is our most immediate  business  objective.  Our BSD-2000 and
BSD-500  cancer  treatment  systems  are used to treat  cancer  with heat  while
boosting the  effectiveness  of radiation and  chemotherapy  through a number of
biological mechanisms.  Our MicroThermX 100 system is used to treat cancers with
heat alone.  Current and targeted cancer treatment sites for our systems include
cancers of the prostate,  breast,  head, neck,  bladder,  cervix,  colon/rectum,
esophagus,  liver,  brain,  bone,  stomach  and lung,  and  general  pelvic  and
abdominal tumors. Our cancer treatment systems have been used to treat thousands
of patients  throughout the world, and have been recognized,  including the 2005
Frost & Sullivan  "Technology  Innovation of the Year Award" for cancer  therapy
devices.

         Our BSD-2000 systems are used to  non-invasively  treat cancers located
deeper in the body,  and are designed to be companions  to the  estimated  7,500
linear  accelerators  used to treat cancer through  radiation and in combination
with chemotherapy  treatments.  Our BSD-500 systems treat cancers on or near the
body surface and those that can be approached  through body orifices such as the
throat, the rectum, etc., or through interstitial  treatment in combination with
interstitial  radiation   (brachytherapy).   BSD-500  systems  can  be  used  as
companions to our BSD-2000 systems and the estimated 2,500 brachytherapy systems
installed, as well as with chemotherapy  treatments.  The MicroThermX 100 system
is used to treat cancers that can be destroyed with heat alone.



                                       13
<PAGE>
         Based on our management team's knowledge of the market, we believe that
the fully saturated  potential market for these developed cancer therapy systems
is in excess of $5 billion. We also project an after-market opportunity based on
service  agreements that equates to  approximately  15% of the purchase price of
our systems per year.  We believe  that the  replacement  cycle for our systems,
based on advances in software,  hardware and other components,  will average 5-7
years. We estimate our financial model in the higher  production  environment of
established  commercial sales could achieve a 60% gross margin on systems and an
80% gross margin on service agreements and disposable  applicators used with our
MicroThermX  100 system,  although there is no assurance that these results will
be obtained.

         We have received  United States Food and Drug  Administration,  or FDA,
approval to market our commercial version of the BSD-500,  and in March 2006, we
completed  a  submission  for FDA  approval  to sell the  BSD-2000 in the United
States.  In August 2007, we  successfully  concluded a pre-approval  and quality
system  inspection  by the FDA. On December 31, 2007,  we received a letter from
the FDA  providing  guidance  regarding  amendments  needed to make the BSD-2000
submission  approvable.  We are currently  preparing our FDA  submission for the
MicroThermX  100 system.  We have designed our cancer therapy  systems such that
together they are capable of providing  treatment for most solid tumors  located
virtually anywhere in the body.

         Our common stock trades on the American Stock Exchange (AMEX) under the
symbol "BSM."

Critical Accounting Policies and Estimates
------------------------------------------

         The following is a discussion of our critical  accounting  policies and
estimates  that  management  believes  are material to an  understanding  of our
results of operations and which involve the exercise of judgment or estimates by
management.

         Revenue Recognition.  Revenue from the sale of cancer treatment systems
is  recognized  when a  purchase  order has been  received,  the system has been
shipped,  the  selling  price  is  fixed  or  determinable,  and  collection  is
reasonably  assured.  Most system sales are F.O.B.  shipping  point;  therefore,
shipment  is  deemed to have  occurred  when the  product  is  delivered  to the
transportation  carrier.  Most  system  sales do not  include  installation.  If
installation  is included  as part of the  contract,  revenue is not  recognized
until installation has occurred, or until any remaining installation  obligation
is deemed to be perfunctory.  Some sales of cancer treatment systems may include
training as part of the sale. In such cases,  the portion of the revenue related
to the  training,  calculated  based on the amount  charged  for  training  on a
stand-alone  basis,  is  deferred  and  recognized  when the  training  has been
provided.  The sales of our cancer  treatment  systems do not  require  specific
customer acceptance provisions and do not include the right of return, except in
cases  where the product  does not  function  as  warranted  by us. We provide a
reserve  allowance  for  estimated  returns.  To  date,  returns  have  not been
significant.

         Revenue from manufacturing  services is recorded when an agreement with
the customer  exists for such  services,  the services have been  provided,  and
collection is  reasonably  assured.  Revenue from training  services is recorded
when an  agreement  with the  customer  exists for such  training,  the training
services have been provided, and collection is reasonably assured.  Revenue from
service support  contracts is recognized on a straight-line  basis over the term
of the contract.

         Our revenue  recognition  policy is the same for sales to both  related
parties and non-related parties. We provide the same products and services under
the  same  terms  to  non-related  parties  as  to  related  parties.  Sales  to
distributors  are recognized in the same manner as sales to end-user  customers.
Deferred  revenue and customer  deposits  payable  include  amounts from service
contracts as well as cash  received  for the sales of  products,  which have not
been shipped.

         Inventory  Reserves.  We periodically  review our inventory  levels and
usage,  paying particular  attention to slower-moving  items. If projected sales


                                       14
<PAGE>

for fiscal 2008 do not materialize or if our hyperthermia systems do not receive
increased  market  acceptance,  we may be required  to increase  the reserve for
inventory impairment in future periods.

         Product  Warranty.  We provide  product  warranties  on our BSD-500 and
BSD-2000 systems. These warranties vary from contract to contract, but generally
consist  of  parts  and  labor   warranties  for  one  year  from  the  date  of
installation.  To date,  expenses  resulting from such  warranties have not been
material. We record a warranty expense at the time of each sale. This reserve is
estimated  based on prior  history of service  expense  associated  with similar
units sold in the past.

         Allowance for Doubtful  Accounts.  We maintain  allowances for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make  required  payments.  As of November  30, 2007 and August 31, 2007 we had a
$20,000 balance in this account. This allowance is a significant estimate and is
regularly evaluated by us for adequacy by taking into consideration factors such
as past  experience,  credit quality of the customer base, age of the receivable
balances,  both  individually  and  in  the  aggregate,   and  current  economic
conditions  that may  affect  a  customer's  ability  to pay.  If the  financial
condition of our customers  were to  deteriorate,  resulting in an impairment of
their  ability  to  make  payments,   additional  allowances  may  be  required.
Stock-based Compensation - We account for stock-based compensation in accordance
with SFAS No.  123(R),  which  requires us to measure the  compensation  cost of
stock  options and other  stock-based  awards to employees and directors at fair
value at the grant date and  recognize  compensation  expense over the requisite
service  period for awards  expected  to vest.  During  the three  months  ended
November 30, 2007 and November 30,  2006,  we recorded  compensation  expense of
$158,630 and $234,210,  respectively,  for stock options issued to directors and
employees.  The fair value of stock options is computed using the  Black-Scholes
valuation  model,  which model  utilizes  inputs that are subject to change over
time,  including the  volatility  of the market price of our common stock,  risk
free  interest  rates,  requisite  service  periods and  assumptions  made by us
regarding the assumed life and vesting of stock options and stock-based  awards.
As  new  options  or  stock-based  awards  are  granted,   additional   non-cash
compensation expense will be recorded by us.

         Income  Taxes - We  account  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   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.

         We maintain valuation  allowances where it is more likely than not that
all or a portion  of a  deferred  tax asset  will not be  realized.  Changes  in
valuation  allowances  are included in our income tax provision in the period of
change. In determining whether a valuation  allowance is warranted,  we evaluate
factors such as prior earnings history, expected future earnings and our ability
to carry-back reversing items within two years to offset income taxes previously
paid.

         To the extent that we have the  ability to  carry-back  current  period
taxable  losses  within two years to offset  income taxes  previously  paid,  we
record an income tax receivable and a current income tax benefit.



                                       15
<PAGE>

Results of Operations
---------------------

Three Months Ended November 30, 2007 Compared to the Three Months Ended November
30, 2006

         Revenues.  Total  revenues for the three months ended November 30, 2007
were $1,387,728,  compared to $664,655,  for the three months ended November 30,
2006,  an increase of $723,073,  or  approximately  109%.  The increase in total
revenues  was due to an increase in the volume of sales to related  parties,  as
further discussed below. Our revenues can fluctuate significantly from period to
period  because  our sales,  to date,  have been based upon a  relatively  small
number of systems,  the sales price of each being substantial  enough to greatly
impact revenue levels in the periods in which they occur. Sales of a few systems
can cause a large change in our revenue from period to period.

         Related Party Sales.  We had  $908,025,  or  approximately  65%, of our
revenues  in the three  months  ended  November  30,  2007 from sales to related
parties as compared to $16,044 or  approximately  2%, in the three  months ended
November 30, 2006. These sales for the three months ended November 30, 2007 were
to  Medizin-Technik  GmbH and consisted of product sales of $879,512,  probes of
$8,700 and other  revenues of $19,813.  All of the related party revenues in the
three months ended  November  30, 2006 were from sales of component  parts.  Dr.
Gerhard Sennewald, one of our stockholders and directors, is also a stockholder,
executive officer and director of Medizin-Technik.  Sales to Medizin-Technik may
fluctuate  significantly  from period to period because our sales, to date, have
been based upon a relatively  small  number of systems,  the sales price of each
being  substantial  enough to greatly  impact  revenue  levels in the periods in
which they occur. Sales of a few systems can cause a large change in our revenue
from period to period.

         Non-Related  Party Sales.  In the three months ended November 30, 2007,
we had $479,703 or  approximately  35% of our  revenues  from sales to unrelated
parties,  as compared to $648,611,  or  approximately  98%, for the three months
ended  November  30, 2006.  These sales for the three months ended  November 30,
2007  consisted  of product  sales of  $435,000,  service  contracts of $15,371,
probes of $13,847  and other  revenues of $15,485.  By  comparison,  non-related
party sales for the three  months ended  November 30, 2006  consisted of product
sales of $586,612, consulting services of $31,143, service contracts of $14,110,
and probes of $16,746.

         Gross Profit. Gross profit for the three months ended November 30, 2007
was  $946,873 or 68% of total  product  sales as compared to $215,400 or 32%, of
total  product  sales for the three  months ended  November  30, 2006.  As sales
volumes  increase,  we will more fully  absorb our fixed  overhead  costs,  thus
increasing our gross profit  percentage.  The gross margin  percentage will also
fluctuate  from period to period  depending on the mix of revenues  reported for
the period.

         Research and Development  Expenses.  Research and development  expenses
were  $337,353  for the three months  ended  November  30, 2007,  as compared to
$332,079,  for the three months ended  November 30, 2006, an increase of $5,274,
or approximately 2%.

         Selling  General  and  Administrative  Expenses.  Selling,  general and
administrative  expenses  decreased  to  $1,393,947  in the three  months  ended
November 30, 2007, from $1,556,441 for the three months ended November 30, 2006,
a decrease of $162,494 or approximately  10%. This decrease was primarily due to
a reduction in  compensation  expense  related to the issuance of stock  options
charged to selling,  general and administrative expenses in the current year. We
anticipate that our selling,  general and administrative  expenses will continue
at the level  reported  in the  first  quarter  of the  current  fiscal  year or
increase, at least in the short term.

         Interest  Income.  Interest income  decreased to $189,348 for the three
months  ended  November  30, 2007 as compared to $370,213  for the three  months
ended  November 30, 2006,  due to lower  levels of cash and  investments  in the


                                       16
<PAGE>

current fiscal year and due to a lower rate of return  recognized on investments
in the current fiscal year.

         Income Tax Benefit.  For the three months ended  November 30, 2007,  we
reported  an income tax  benefit of $43,000,  which was  comprised  of a current
income  tax  benefit of  $211,000,  partially  offset by a  deferred  income tax
provision of $168,000.  The current income tax benefit of $211,000 represents an
increase to our income tax  receivable  resulting from our ability to carry-back
our taxable loss in the current period to offset income taxes  previously  paid.
The  deferred  income tax  provision  of $168,000  resulted  primarily  from our
recording  a 100%  valuation  allowance  against our  deferred  tax assets as of
November  30, 2007.  In recording  the  valuation  allowance,  we were unable to
conclude  that it is more likely than not that our  deferred  tax assets will be
realized.  In reaching this  determination,  we evaluated  factors such as prior
earnings  history,  expected  future  earnings  and our  ability  to  carry-back
reversing items within two years to offset income taxes paid.

         For the three months ended November 30, 2006, we reported an income tax
benefit of  $468,968,  which was  comprised  of a current  income tax benefit of
$367,968 and a deferred income tax benefit of $101,000.

         Net Loss. During the three months ended November 30, 2007, we had a net
loss of $615,935,  after recording an income tax benefit of $43,000, as compared
to an after tax net loss of  $861,671 in the three  months  ended  November  30,
2006.  Our net  loss in the  first  three  months  of the  current  fiscal  year
decreased  $245,736  compared to the net loss in the first  three  months of the
prior  year,  primarily  due to the  increase  in  related  party  sales and the
decrease  in our  total  operating  costs  and  expenses  in the  current  year,
partially offset by our recording of a deferred income tax provision of $168,000
in the first three months of the current year, as further discussed above.

Liquidity and Capital Resources
-------------------------------

         Since  inception  through  November  30,  2007,  we have  generated  an
accumulated deficit of $3,466,088.  We have historically financed our operations
through  cash from  operations,  research  grants,  licensing  of  technological
assets,  issuance  of  common  stock  and the  sale of  investments  in  spinoff
operations.  As of  November  30,  2007,  we  had  cash,  cash  equivalents  and
investments  totaling  $16,592,124  as compared to cash,  cash  equivalents  and
investments totaling $19,506,658 as of August 31, 2007.

         During the three months ended November 30, 2007, we used  $1,543,075 of
cash in operating activities, primarily as a result of our net loss of $615,935,
increase  in  receivables  of  $835,910,  increase in income tax  receivable  of
$211,000,  increase in inventories of $92,436, and decrease in customer deposits
of $131,573,  partially offset by a decrease in deferred tax assets of $168,000.
By comparison,  net cash used in operating  activities was $2,548,110 during the
three months ended November 30, 2006.

         Net cash  provided by investing  activities  for the three months ended
November 30, 2007 was  $1,846,048,  resulting  from the sale of  investments  of
$3,072,907,  partially  offset by the  purchase of  property  and  equipment  of
$1,205,892  and an increase in patents of $20,967.  For the three  months  ended
November 30, 2006,  net cash provided by investing  activities  was  $1,642,943,
resulting from the sale of investments  of $1,666,755,  partially  offset by the
purchase of property and equipment of $23,812.

         Net cash  provided by financing  activities  consisted of proceeds from
the sale of common stock through the exercise of stock options of $12,000 in the
three  months  ended  November  30,  2007.  No cash was  provided  by or used in
financing activities in the three months ended November 30, 2006.

         We  expect  to incur  additional  expenses  related  to the  commercial
introduction  of our systems,  due to additional  participation  at trade shows,
expenditures  on publicity,  additional  travel,  increased  sales  salaries and

                                       17
<PAGE>

commissions and other related expenses.  In addition, we anticipate that we will
incur  increased  expenses  related  to  seeking   governmental  and  regulatory
approvals  for  our  products  and  continued   expenses  related  to  corporate
governance and compliance  with the  Sarbanes-Oxley  Act of 2002,  during fiscal
2008.

         We  believe  we can cover any cash  requirements  with cost  cutting or
available  cash. If we cannot cover any such cash shortfall with cost cutting or
available  cash,  we would  need to obtain  additional  financing.  We cannot be
certain that any financing will be available when needed or will be available on
terms  acceptable  to us. If we raise equity  capital our  stockholders  will be
diluted.  Insufficient  funds may require us to delay,  scale back or  eliminate
some or all of our programs  designed to facilitate the commercial  introduction
of our systems or entry into new markets.

         As of November 30, 2007,  we have no  significant  commitments  for the
purchase of property and equipment.

         We believe that our current cash and cash equivalents, investments, and
expected cash provided from operating  activities will be sufficient to fund our
operations for the next twelve months.

                           FORWARD-LOOKING STATEMENTS

         With the exception of historical  facts,  the  statements  contained in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  are  forward-looking  statements  within the meaning of the Private
Securities Litigation Reform Act of 1995, which reflect our current expectations
and  beliefs  regarding  our  future  results  of  operations,  performance  and
achievements.  These statements are subject to risks and  uncertainties  and are
based  upon  assumptions  and  beliefs  that may or may not  materialize.  These
forward-looking   statements  include,   but  are  not  limited  to,  statements
concerning:

         o    our belief about the market opportunities for our products;

         o    our anticipated financial performance and business plan;

         o    our expectations  regarding the commercialization of the BSD-2000,
              BSD 500 and MicroThermX 100 systems;

         o    our expectations to further expand our developments to treat other
              diseases and medical conditions;

         o    our  expectations  that  in a  higher  production  environment  of
              established  commercial  sales we could achieve a 60% gross margin
              on system sales and an 80% gross margin on service  agreements and
              disposable applicators used with our MicroThermX 100 system;

         o    our belief  concerning the market  potential for developed  cancer
              therapy systems;

         o    our  expectations  related  to the  after-market  opportunity  for
              service agreements;

         o    our expectations related to the replacement cycle for our systems;

         o    our expectations that we will incur increased  expenses related to
              seeking governmental and regulatory approvals for our products;


                                       18
<PAGE>

         o    our expectations and efforts  regarding FDA approvals  relating to
              the BSD-2000 and MicroThermX 100 systems;

         o    our belief that our  technology  has  application  for  additional
              approaches to treating cancer and for other medical purposes;

         o    our  expectations  related to the amount of expenses we will incur
              for the commercial introduction of our systems;

         o    our expectation  that we will incur increased  expenses related to
              our corporate  governance and compliance  with the  Sarbanes-Oxley
              Act of 2002;

         o    our  expectation  that our  selling,  general  and  administrative
              expenses will continue at the same or increased levels at least in
              the short term;

         o    our belief that we can cover any cash  shortfall with cost cutting
              or available cash; and

         o    our belief that our current working capital,  investments and cash
              from  operations  will be  sufficient  to finance  our  operations
              through working  capital and capital  resources needs for the next
              twelve months.

         We wish to caution readers that the forward-looking  statements and our
operating  results are  subject to various  risks and  uncertainties  that could
cause our actual results and outcomes to differ  materially from those discussed
or  anticipated,  including  the  factors set forth in the Item  entitled  "Risk
Factors"  included in our Annual  Report on Form 10-K for the year ended  August
31, 2007 and our other filings with the Securities and Exchange  Commission.  We
also  wish  to  advise   readers  not  to  place  any  undue   reliance  on  the
forward-looking  statements  contained in this report, which reflect our beliefs
and expectations  only as of the date of this report. We assume no obligation to
update or revise  these  forward-looking  statements  to  reflect  new events or
circumstances  or any  changes  in our  beliefs or  expectations,  other than as
required by law.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk.

         A significant  portion of the Company's cash equivalents and short-term
investments bear variable interest rates that are adjusted to market conditions.
Changes in market rates will affect  interest  earned and potentially the market
value of the  principal  of these  instruments.  The  Company  does not  utilize
derivative  instruments  to  offset  the  exposure  to  interest  rate  changes.
Significant  changes  in  interest  rates  may  have a  material  impact  on the
Company's  investment income, but not on the Company's  consolidated  results of
operations.

         The Company does have  significant  sales to foreign  customers  and is
therefore subject to the effects that changes in foreign currency exchange rates
may have on demand for its products and  services.  The Company does not utilize
derivative  instruments  to offset the  exposure to changes in foreign  currency
exchange rates. To minimize  foreign  exchange risk, the Company's  export sales
are transacted in United States dollars.



                                       19
<PAGE>

Item 4.  Controls and Procedures.

         Evaluation of disclosure controls and procedures.

         As of the end of the period  covered by this  report,  we  conducted an
evaluation,  under the supervision and with the  participation of our management
including our principal  executive officer and principal  financial officer,  of
the  effectiveness  of the design and operation of our  disclosure  controls and
procedures  (as defined in Rule  13a-15(e)  or  15d-15(e)  under the  Securities
Exchange  Act of 1934  (the  "Exchange  Act")).  Based on this  evaluation,  the
principal  executive officer and principal  financial officer concluded that our
disclosure  controls and procedures were effective in ensuring that  information
required to be  disclosed  by us in the reports that we file or submit under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods  specified in applicable  rules and forms and that such  information  is
accumulated  and  communicated  to  our  management,   including  our  principal
executive  officer  and  principal  financial  officer,  in a manner that allows
timely decisions regarding required disclosure.

         Changes in internal controls over financial reporting.

         There was no change in our internal  control over  financial  reporting
during our most recently completed fiscal quarter that has materially  affected,
or is  reasonably  likely  to  materially  affect,  our  internal  control  over
financial reporting.

PART II - OTHER INFORMATION

Item 1A. Risk Factors.

         In  addition to the other  information  set forth in this  report,  you
should carefully  consider the factors  discussed in Item 1A - "Risk Factors" in
our annual  report on Form 10-K for the year ended August 31, 2007,  which could
materially  affect  our  business,  financial  condition  or future  results  of
operations.  The  information  presented  below  updates  these risk factors and
should be read in conjunction with the risk factors and information disclosed in
that Form  10-K.  The risks  discussed  in our annual  report on Form  10-K,  as
updated in this report,  are not the only risks facing us.  Additional risks and
uncertainties  not  currently  known  to us or  that  we  currently  deem  to be
immaterial  also  may  materially  adversely  affect  our  business,   financial
condition and/or results of operations.

We have not yet received  pre-market  approval for our BSD-2000 and  MicroThermx
100 systems,  which is necessary for us to commercially  market these systems in
the U.S.

         We have not yet  received  pre-market  approval  for our  BSD-2000  and
MicroThermx 100 systems.  Obtaining these  pre-market  approvals from the FDA is
necessary  for us to  commercially  market these  systems in the United  States.
Obtaining approvals is a lengthy and expensive process. On December 31, 2007, we
received a letter from the FDA providing guidance regarding amendments needed to
make the  BSD-2000  submission  approvable.  We may not be able to obtain  these
approvals on a timely basis, if at all, and such failure could harm our business
prospects substantially. Further, even if we are able to obtain the approvals we
seek from the FDA, the approvals granted might include  significant  limitations
on the indicated uses for which the products may be marketed, which restrictions
could negatively impact our business.



                                       20
<PAGE>

Item 6.  Exhibits.

         The following exhibits are filed as part of this report:

       Exhibit No.     Description of Exhibit
       --------- ---------------------------------------------------------------

         3.2      Bylaws of BSD Medical Corporation, as amended

         31.1     Certification of Principal Executive Officer Required Pursuant
                  to Section 302 of the Sarbanes-Oxley Act of 2002

         31.2     Certification of Principal Financial Officer Required Pursuant
                  to Section 302 of the Sarbanes-Oxley Act of 2002

         32.1     Certification of Principal Executive Officer Required Pursuant
                  to Section 906 of the Sarbanes-Oxley Act of 2002

         32.2     Certification of Principal Financial Officer Required Pursuant
                  to Section 906 of the Sarbanes-Oxley Act of 2002













                                       21
<PAGE>
                                   SIGNATURES


         Pursuant to the  requirements  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:    January 9, 2008             /s/ Hyrum A. Mead
                                     -------------------------------------------
                                     Hyrum A. Mead
                                     President (Principal Executive Officer)

Date:    January 9, 2008             /s/ Dennis P. Gauger
                                     -------------------------------------------
                                     Dennis P. Gauger
                                     Chief Financial Officer (Principal
                                     Accounting Officer)









                                       22





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