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


                                  FORM 10 - QSB


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

                   For the Quarterly Period Ended May 31, 2005

                         Commission file number 0-10783


                             BSD MEDICAL CORPORATION


         DELAWARE                                      75-1590407
---------------------------               --------------------------------------
  (State of Incorporation)                (IRS Employer Identification Number)


                 2188 West 2200 South
                 Salt Lake City, Utah                             84119
---------------------------------------------------    -------------------------
       (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number:  (801) 972-5555

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


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of July 15, 2005,  there were 20,365,070  shares of the  Registrant's  common
stock, $0.001 par value per share, outstanding.

Transitional Small Business Disclosure Format (Check one):   Yes [  ]   No [X]



<PAGE>


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                             BSD MEDICAL CORPORATION
                             Condensed Balance Sheet
                                   (Unaudited)
<TABLE>
<CAPTION>

                              Assets                                               May 31,
                              ------                                                2005
                                                                             -------------------
<S>                                                                         <C>
Current assets:
    Cash and cash equivalents                                               $       13,922,445
    Receivables, net                                                                   215,924
    Related party receivables                                                          473,415
    Inventories                                                                      1,076,735
    Deferred tax asset                                                                 112,000
    Other current assets                                                                50,730
                                                                             -------------------

           Total current assets                                                     15,851,249

Property and equipment, net                                                            196,396
Patents, net                                                                            23,599
                                                                             -------------------
                                                                            $       16,071,244
                                                                             ===================

               Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                        $          152,330
    Accrued expenses                                                                   199,684
    Customer deposits                                                                   87,358
    Income tax payable                                                                 778,000
    Deferred revenue                                                                    16,438
                                                                             -------------------

           Total current liabilities                                                 1,233,810

Long term liabilities
     Deferred tax liability                                                             42,000
                                                                             -------------------

           Total liabilities                                                         1,275,810
                                                                             -------------------

Stockholders' equity:
    Preferred stock, $.001 par value; 10,000,000 authorized,
        no shares  issued and outstanding                                                    -
    Common stock, $.001 par value; authorized 40,000,000 shares;
      issued 20,358,166 and outstanding  20,333,835  shares                             20,334
    Additional paid-in capital                                                      23,566,869
    Deferred compensation                                                              (34,050)
    Accumulated deficit                                                             (8,757,485)
    Common stock in treasury 24,331shares, at cost                                        (234)
                                                                             -------------------

           Net stockholders' equity                                                 14,795,434
                                                                             -------------------

                                                                            $       16,071,244
                                                                             ===================
See accompanying notes to financial statements.
</TABLE>
                                       1
<PAGE>
<TABLE>
<CAPTION>

                             BSD MEDICAL CORPORATION
                       Condensed Statements of Operations
                                   (Unaudited)


                                                    Three Months Ended May 31,          Nine Months Ended May 31,
                                                      2005              2004             2005               2004
                                                 ---------------  ----------------  ---------------   ----------------
<S>                                             <C>              <C>               <C>               <C>
Sales                                           $     321,843    $     147,899     $     799,129     $     560,156

Related party sales                                    43,370          285,823           539,431           981,241
                                                 ---------------  ----------------  ---------------   ----------------

           Total revenues                             365,213          433,722         1,338,560         1,541,397
                                                 ---------------  ----------------  ---------------   ----------------
Costs and expenses:

    Cost of sales                                     284,252          117,855           734,945           448,068

    Cost of related party sales                        19,208          126,389           213,845           395,039

    Research and development                          270,803          160,715           645,683           490,006

    Selling, general, and administrative              504,923          342,793         1,343,619           803,947
                                                 ---------------  ----------------  ---------------   ----------------

           Total costs and expenses                 1,079,186          747,752         2,938,092         2,137,060
                                                 ---------------  ----------------  ---------------   ----------------

           Operating loss                            (713,973)        (314,030)       (1,599,532)         (595,663)
                                                 ---------------  ----------------  ---------------   ----------------

Other income (expense):

    Interest income                                    43,306            2,215           200,804             4,816

    Interest expense                                        -             (124)                -              (477)

    Other income                                    5,460,462                -         6,555,391                 -
                                                 ---------------  ----------------  ---------------   ----------------

           Total other income                       5,503,768            2,091         6,756,195             4,339
                                                 ---------------  ----------------  ---------------   ----------------

           Income (loss) before income taxes        4,789,795         (311,939)        5,156,663          (591,324)

Provision for income taxes                         (1,841,000)                -       (1,841,000)                 -
                                                 ---------------  ----------------  ---------------   ----------------

           Net income  (loss)                   $   2,948,795    $    (311,939)    $   3,315,663     $    (591,324)
                                                 ===============  ================  ===============   ================

Net income (loss) per common and
common equivalent share,

     Basic                                      $         .15    $        (.02)    $         .17     $        (.03)
                                                 ===============  ================  ===============   ================

     Diluted                                    $         .14    $        (.02)    $         .16     $        (.03)
                                                 ===============  ================  ===============   ================

Weighted average number of shares outstanding,

     Basic                                         20,144,000       19,912,000        20,108,000        19,246,000
                                                 ===============  ================  ===============   ================

     Diluted                                       20,612,000       19,912,000        21,376,000        19,246,000
                                                 ===============  ================  ===============   ================

</TABLE>

See accompanying notes to financial statements.

                                       2
<PAGE>

<TABLE>
<CAPTION>
                             BSD MEDICAL CORPORATION
                       Condensed Statements of Cash Flows
                                   (Unaudited)


                                                                                    Nine Months Ended May 31,
                                                                                      2005             2004
                                                                                  -------------------------------
<S>                                                                              <C>             <C>
Cash flows from operating activities:
    Net Income (loss)                                                            $  3,315,663    $   (591,324)
    Adjustments to reconcile net income (loss) to net cash used in
      operating activities:
       Provision for allowance for doubtful accounts                                        -          14,569
       Depreciation and amortization                                                   45,106          33,597
       Gain on sale of investment in TherMatrx                                     (6,552,089)              -
       Gain on sale of property                                                        (1,050)              -
       Stock compensation expense                                                      45,000          12,000
       Deferred compensation                                                            9,508           7,858
       Deferred income taxes                                                          708,000               -
       (Increase) decrease in:
           Receivables                                                               (430,035)        160,962
           Inventories                                                               (336,319)         24,877
           Prepaid expenses and deposits                                                  336         (14,682)
       Increase (decrease) in:
           Accounts payable                                                            53,199        (160,973)
           Accrued expenses                                                          (224,233)       (224,324)
           Customer deposits                                                           87,358               -
           Income tax payable                                                       1,008,182               -
           Deferred revenue                                                           (30,785)        (26,296)
                                                                                  -------------------------------
              Net cash used in operating activities                                (2,302,159)       (763,736)
                                                                                  -------------------------------

Cash flows from investing activities:

    Proceeds from sale of investment in TherMatrx                                   6,552,089               -
    Purchase of property and equipment                                               (100,994)        (11,038)
    Proceeds from sale of property                                                      1,050               -
                                                                                  -------------------------------
              Net cash provided by (used in) investing activities                   6,452,145         (11,038)
                                                                                  -------------------------------

Cash flows from financing activities:
    Proceeds from issuance of common stock options                                     75,305       2,108,482
                                                                                  -------------------------------
              Net cash provided by financing activities                                75,305       2,108,482
                                                                                  -------------------------------
Increase in cash and cash equivalents                                               4,225,291       1,333,708
Cash and cash equivalents, beginning of period                                      9,697,154         136,003
                                                                                  -------------------------------
Cash and cash equivalents, end of period                                         $ 13,922,445   $   1,469,711
                                                                                  ===============================
</TABLE>

Supplemental Disclosure of Cash Flow Information
------------------------------------------------

o        The Company  paid no cash for  interest  and  $124,919 for income taxes
         during the nine months  ended May 31, 2005 and $477 for interest and $0
         for income taxes during the nine months ended May 31, 2004.

o        The Company  issued  75,000 stock options for each of the periods ended
         May 31,  2005 and 2004,  which  resulted  in an  increase  to  Deferred
         Compensation of $15,750 and $8,250, respectively.

o        The  Company  had an income  tax  benefit  from the  exercise  of stock
         options of $230,182  during the period  ended May 31,  2005,  which was
         recorded as an increase to additional paid-in capital.


                                       3
<PAGE>


                             BSD MEDICAL CORPORATION
                     Notes to Condensed Financial Statements

Note 1.  Basis of Presentation

         The  Condensed  Balance  Sheet  as  of  May  31,  2005,  the  Condensed
Statements  of  Operations  for the three and nine months ended May 31, 2005 and
2004,  and the Condensed  Statements of Cash Flows for the nine months ended May
31,  2005 and 2004 have been  prepared  by the  Company  without  audit.  In the
opinion of management,  all adjustments to the books and accounts (which include
only normal  recurring  adjustments)  necessary to present  fairly the financial
position,  results of  operations,  and  changes in  financial  position  of the
Company have been made.

         Certain  information  and  footnote  disclosures  normally  included in
financial  statements  prepared  in  accordance  with  U.S.  generally  accepted
accounting  principles have been condensed or omitted. The results of operations
for the periods ended May 31, 2005 are not necessarily indicative of the results
to be expected for the full year.

Note 2.  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.

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

<TABLE>
<CAPTION>

                                           Three Months Ended May 31,       Nine Months Ended May 31,
                                       ---------------------------------- ----------------------------------
                                            2004              2003            2004              2003
<S>                                       <C>               <C>            <C>                 <C>
Weighted average number of
   shares outstanding - basic             20,144,000        19,912,000     20,108,000          19,246,000
Dilutive effect of stock options             468,000                 -      1,268,000                   -
                                       -------------- ----------------- -------------- -------------------

Weighted average number of
   shares outstanding - diluted           20,612,000        19,912,000     21,376,000          19,246,000
                                       ============== ================= ============== ===================
</TABLE>

Note 3.    Related Party Transactions

         During the nine months ended May 31, 2005 and May 31, 2004, the Company
had  sales  to  an  unconsolidated  affiliate  and  an  entity  controlled  by a
significant  stockholder  and member of the Board of  Directors  of $539,431 and
$981,241,  respectively.  These  related party transactions  represent 40.3% and
63.7% of total sales. Related party  revenue from TherMatrx was $0 in the period
ended May 31, 2005  compared to $99,503 in period ended May 31, 2004. As of July
15, 2004, we no longer considered TherMatrx a related party since our investment
was sold to American Medical Systems, Inc.(AMS) on that date.

         At May 31,  2005,  receivables  include  $473,416  due  from an  entity
controlled by a significant stockholder and member of the Board of Directors.

Note 4.  Stock-Based Compensation

         The Company  accounts for stock options  granted to employees under the
recognition  and  measurement  principles of APB Opinion No. 25,  Accounting for
Stock  Issued to  Employees,  and related  Interpretations,  and has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No.  123,  "Accounting  for  Stock-Based  Compensation."  Accordingly,  only the
intrinsic value has been recognized in the financial  statements as expense. Had
the  Company's  options  been  determined  based on the fair value  method,  the
results of operations would have been reduced to the pro forma amounts indicated
below for the three and nine months ended May 31, 2005 and 2004:


                                       4
<PAGE>
<TABLE>
<CAPTION>

                                                                Nine Months Ended         Three Months Ended
                                                                     May 31,                     May 31,
                                                                2005          2004         2005         2004
                                                           -----------------------------------------------------
<S>                                                        <C>           <C>           <C>         <C>
Net income (loss)  - as reported                           $   3,515,663 $   (591,324) $ 2,948,795 $  (311,939)

Add:  Stock based employee compensation expense included
in reported net income (loss), net of related tax effects
                                                                   9,508        7,858            -           -

Deduct:  Total stock based employee compensation expense
determined under fair value based method for all awards,
net of related taxes                                            (347,460)     (25,000)     (50,926)    (25,000)
                                                           -----------------------------------------------------
Net income (loss) - pro forma                              $   2,977,711 $   (608,466) $ 2,897,869 $  (336.939)
                                                           -----------------------------------------------------

Basic income (loss) per share - as reported                $         .17 $       (.03) $       .15 $      (.02)
                                                           -----------------------------------------------------

Diluted income (loss) per share - as reported              $         .16 $       (.03) $       .14 $      (.02)
                                                           -----------------------------------------------------

Basic income (loss) per share -  pro-forma                 $         .15 $       (.03) $       .14 $      (.02)
                                                           -----------------------------------------------------

Diluted income (loss) per share - pro-forma                $         .14 $       (.03) $       .14 $      (.02)
                                                           -----------------------------------------------------

</TABLE>

         The fair value of each option granted for the nine months ended May 31,
2005 and May 31, 2004 is estimated on the date of grant using the  Black-Scholes
option pricing model with the following assumptions:


                                         ----------------------------------
                                                     2005             2004
                                         ----------------------------------

Expected dividend yield                   $             - $              -
Expected stock price volatility                       81%              83%
Risk-free interest rate                             3.32%             5.5%
Expected life of options                          7 years          3 years

         The  weighted  average  fair value of options  granted  during the nine
months ended May 31, 2005 and 2004 was $1.97 and $1.01, respectively.

Note 5.  Gain on Sale of Investment in TherMatrx

         On July 15, 2004,  the  Company's  investment  in TherMatrx was sold to
American  Medical  Systems,  Inc.  (AMS).  The Company's  portion of the initial
payment  from this sale,  received in fiscal 2004,  was nearly $9 million,  with
additional  payments  contingent on the quarterly sales of TherMatrx through the
fourth calendar quarter of 2005. During the quarter ended February 28, 2005, the
Company  received  additional  payments from the sale of TherMatrx  that totaled
$1,094,406. During the quarter ended May 31, 2005, the Company received payments
of $5,457,683, to bring the total payments to date of $15,526,532. These amounts
were  recorded  as a gain and have  been  reflected  in  "Other  income"  in the
statement of operations.  We anticipate that we will receive quarterly  payments
from AMS with  respect  to the sale of our  TherMatrxinvestment  in  August  and
November of 2005 and February of 2006.

Note 6.  Listing on AMEX

         On July 9, 2005 the American  Stock  Exchange  approved the listing for
BSD Medical  Corporation  and the Company  started trading on that day under the
symbol "BSM".



                                       5
<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
subsections   entitled   "Forward-Looking   Statements"   below.  The  following
discussion  should  be read  in  conjunction  with  our  consolidated  financial
statements and notes thereto  included in this report.   We assume no obligation
to revise or update any  forward-looking  statements  for any reason,  except as
required by law.

General
-------

         We  develop,  manufacture,  market and  service  systems  that  deliver
precision focused  electromagnetic energy to bring diseased parts of the body up
to temperature  levels as required for use in a variety of medical therapies and
applications.  Our  objective is to  commercialize  our  developed  products and
further expand the application of our technology into new markets.  We pioneered
the  use of  microwave  thermal  therapy  for  the  treatment  of  the  symptoms
associated  with  enlarged  prostate,  and  are  responsible  for  much  of  the
technology that has created a substantial  medical  industry using that therapy.
Our longest-term development has been the application of focused electromagnetic
energy for the treatment of cancer.

         One of our  significant  contributions  to the  advancement  of medical
therapy  has been our  pioneering  efforts in  developing  a new  treatment  for
conditions associated with enlargement of the prostate that afflicts most men as
they age. As the prostate  enlarges it constricts  urine flow.  The condition is
known  medically  as  benign  prostatic  hyperplasia  or  BPH.  We  developed  a
technology that allows men to be treated for BPH through an outpatient procedure
as an alternative to surgery or a lengthy regimen of medication.

         We  determined  early  in our  planning  that we  would  treat  our BPH
development  as a spin-off  business  with the intent of providing an asset that
could  help fund our  other  business  plans.  As a result,  we  introduced  the
opportunity to investment groups and subsequently,  on October 31, 1997, entered
into an agreement with investors  Oracle  Strategic  Partners,  L.P. and Charles
Manker.   Together  we   established  a  new  company,   TherMatrx,   which  was
independently managed.

         On July 15, 2004, TherMatrx was sold to American Medical Systems,  Inc.
(AMS).  Our portion of the initial payment from this sale was nearly $9 million,
with additional  payments contingent on the quarterly sales of TherMatrx through
the fourth calendar quarter of 2005. We received  additional  payments  totaling
$1,094,406  during the quarter ended February 28, 2005. During the quarter ended
May 31, 2005, we received payments of $5,457,683, to bring the total payments to
date to $15,526,532. We have estimated that our portion of the total payout from
this sale will be between $30 and $40  million.  If  TherMatrx  sales exceed our
projections,  the maximum  payout that we could  receive  from the sale is $62.5
million. If TherMatrx sales fall under our projections, there is no guarantee of
any further payment beyond those payments already received.

         Since the inception of our company we have precision engineered systems
designed to increase the  effectiveness of cancer  treatment  through the use of
focused  electromagnetic  energy.  From this development our current BSD-500 and
BSD-2000  systems  have  emerged.  We have also  developed  enhancements  to our
BSD-2000  system,  including  the  BSD-2000/3D  that is  designed to allow three
dimensional  steering of deep  focused  energy and heat to  targeted  tumors and
tissue and the BSD-2000/3D/MR  that includes an interface for magnetic resonance
imaging.  These systems are sold with  supporting  software and may also be sold
with support services.

                                       6
<PAGE>

         Our accumulated  deficit since inception  decreased from $12,073,146 as
of August 31, 2004 to $8,757,485  as of May 31, 2005 due to net income  recorded
during  the nine  months  ended  May 31,  2005,  as a result  of our sale of our
investment in TherMatrx.  We recorded an after tax net profit for the first nine
months of fiscal 2005 of $3,315,663.

         We recognize  revenue from the sale of cancer  treatment  systems,  the
sale of parts and accessories related to the cancer treatment systems,  the sale
of software  license  rights,  providing  manufacturing  services,  training and
service support contracts.  Product sales were $1,189,824 and $1,396,379 for the
nine  months  ended May 31,  2005 and 2004,  respectively.  Service  revenue was
$148,736  and  $145,018  for the  nine  months  ended  May 31,  2005  and  2004,
respectively.

         We derived $539,431,  or 40.3% of our revenue for the nine months ended
May 31, 2005 from sales to a related  party,  Medizin-Technik  GmbH. Dr. Gerhard
Sennewald,  one of our  directors,  is a  stockholder,  executive  officer and a
director of Medizin-Technik GmbH.

         In the nine months ended May 31, 2005, we derived  $799,129,  or 59.7%,
of our revenue  from sales to unrelated  parties.  These  revenues  consisted of
product sales of approximately  $667,791,  consulting  services of approximately
$91,979 and service  contracts of approximately  $39,359.  Cost of sales for the
nine months ended May 31, 2005  includes raw material and labor costs.  Research
and development  expenses include  expenditures for new product  development and
development of enhancements to existing products.

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

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

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

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

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

                                       7
<PAGE>

         Inventory  Reserves.  As of May 31, 2005, we had recorded a reserve for
potential inventory  impairment of $80,000. We periodically review our inventory
levels and usage,  paying particular  attention to slower-moving  items. We have
projected  no orders  to be placed  with us for  TherMatrx  systems,  and do not
project a requirement for any inventory impairment based on this decline.

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

         Allowance for Doubtful Accounts.  We provide our customers with payment
terms that vary from contract to contract.  Our allowance for doubtful  accounts
at May 31, 2005 was $0. Bad debt  expense for the period  ended May 31, 2005 was
approximately $9,000. We perform ongoing credit evaluations of our customers and
maintain  allowances for possible losses.  Allowance estimates are recorded on a
customer-by-customer   basis  and  are  determined  based  on  the  age  of  the
receivable,  compliance  with payment  terms,  and prior  history with  existing
clients.  The  non-payment  of a receivable  related to the sale of a BSD-500 or
BSD-2000 could have a material adverse impact on our results of operations.

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

Three Months Ended May 31, 2005 compared to the Three Months Ended May 31, 2004

         Revenue.  Revenue for the three  months ended May 31, 2005 was $365,213
compared to $433,722 for the quarter  ended May 31, 2004, a decrease of $68,509,
or  approximately  16%. The  decrease in total  revenue was  primarily  due to a
decrease in sales to related parties.  Sales to Medizin-Technik  totaled $43,370
in the  quarter  ended May 31, 2005  compared  to $274,941 in the  corresponding
quarter of fiscal  2004.  Dr.  Gerhard  Sennewald,  one of our  directors,  is a
stockholder,  executive officer and a director of Medizin-Technik GmbH. Sales to
Medizin-Technik  may  fluctuate  significantly  depending  on  Medizin-Technik's
anticipated  sales and  ability  to place  orders in  Europe.  Our  revenue  can
fluctuate  significantly  from period to period because 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 the revenue
from period to period as noted in the decrease in sales to Medizin-Technik  from
the third  quarter of fiscal 2004 to the third  quarter of fiscal 2005.  Product
sales decreased to $349,506 as compared to $416,288 in the corresponding quarter
of fiscal 2004, a decrease of $66,782, or 16.0%.

         Related Party Revenue. We derived $43,370, or approximately 12%, of our
revenue in the three months ended May 31, 2005 from sales to related  parties as
compared to $285,823 or 65.9%, in the corresponding  quarter of fiscal 2004. All
of the  related  party  revenue in the 2005 period was from sales of systems and
component  parts to  Medizin-Technik.  For the period  ended May 31,  2004,  the
related party revenue  $274,941 for sales to  Medizin-Technik  and the remaining
sales of $10,882 was from services provided to TherMatrx.  Since the sale of our
investment  in  TherMatrx  in July 2004,  TherMatrx  is no longer  considered  a
related party. Sales to Medizin-Technik may fluctuate  significantly from period
to period due to the high cost of a BSD-2000 or BSD-500 system.  Sales increases
of one or two systems can have a material effect on our revenue.

         Non-related  Party Revenue.  In the three months ended May 31, 2005, we
derived  $321,843,  or 88.1%,  of our total  revenue  from sales to  non-related
parties, as compared to approximately  $147,899, or 34.1%, for the corresponding
period of fiscal 2004. Our fiscal 2005  non-related  party revenue  consisted of
product sales of approximately  $300,852,  consulting  services of approximately
$7,872 and service contracts of approximately $13,119.

                                       8
<PAGE>

         Gross Profit.  Gross profit for the three months ended May 31, 2005 was
$61,753, or 16.9% as compared to $189,478,  or 43.7%, of total product sales for
the  corresponding  period  in fiscal  2004.  Because  we have not had  employee
layoffs due to the specialized  nature of our employees and because of the fixed
costs associated with production,  as our sales declined in the 2005 period,  it
resulted in a decline in gross profit percentage. As sales volumes increase, our
employees are more utilized, thus increasing the gross profit percentage.

         Selling  General  and  Administrative  Expenses.  Selling,  general and
administrative  expenses increased to $504,923 in the three months ended May 31,
2005, from $342,793 for the corresponding  period of fiscal 2004, an increase of
$162,130,  or 47.3%. This increase was primarily due to an increase in sales and
marketing  costs  supporting new product sales from $85,673 for the three months
ended May 31, 2004 to $169,269 for the three months ended May 31, 2005.  We also
incurred  higher  consulting  costs related to marketing and  preparation of FDA
submissions.  Consulting costs increased from $26,874 to $64,083 in the 2004 and
2005  periods,  respectively.  Payroll  costs also  increased  from  $134,550 to
$197,792,  a result of wage and salary raises, the addition of new employees and
fewer BSD employees working as consultants for TherMatrx.

         Research and Development  Expenses.  Research and development  expenses
were  $270,803 for the three months ended May 31, 2005,  as compared to $160,715
for the corresponding period in fiscal 2004, an increase of $110,088,  or 68.5%,
primarily  due to an increase  in payroll and  consulting  costs.  Research  and
development  expenses for the period ended May 31, 2005 related primarily to the
conversion of systems software to foreign languages for international use and to
new developments in the areas of thermal therapy and thermal ablation.

         Interest  income.  Interest  income  increased to $43,306 for the three
months ended May 31, 2005 as compared to $2,215 for the corresponding  period in
fiscal 2004 due to the  significantly  higher levels of cash  resulting from the
sale of our investment inTherMatrx.

         Provision for income taxes. During the three months ended May 31, 2005,
we recorded a provision for income taxes of $1,841,000. Of this amount, $708,000
was deferred  income tax expense and  $1,133,000 was current income tax expense.
The income tax expense is a direct result of the payments received from the sale
of our investment in TherMatrx  which resulted in significant net income for the
period.

         Net income.  The net income for the three months ended May 31, 2005 was
$2,948,795,  after an income tax provision of $1,841,000, as compared with a net
loss of $311,939 for the  corresponding  period of fiscal 2004.  The increase in
the net profit was primarily due to payments of $5,457,683  received  during the
period ended May 31, 2005 from the sale of our  investment  in TherMatrx and the
increase in interest income.

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

Nine Months Ended May 31, 2005 compared to the Nine Months Ended May 31, 2004

         Revenue.  Revenue for the nine months ended May 31, 2005 was $1,338,560
compared to $1,541,397 for the  corresponding  period in fiscal 2004, a decrease
of $202,837,  or 13.2%.  The decrease in total  revenue was  primarily  due to a
decrease in sales to related parties. Sales to Medizin-Technik  totaled $539,431
for  the  nine  months  ended  May  31,  2005   compared  to  $881,738  for  the
corresponding period in fiscal 2004 and related party revenue from TherMatrx was
$0 for the nine  months  ended May 31,  2005  compared  to $99,503  for the nine
months ended May 31, 2004. We no longer consider TherMatrx a related party since
it was sold to  American  Medical  Systems,  Inc.  (AMS) on July 15,  2004.  Dr.
Gerhard Sennewald, one of our directors, is a stockholder, executive officer and
a director of  Medizin-Technik  GmbH.  Sales to  Medizin-Technik  may  fluctuate
significantly  depending on  Medizin-Technik's  anticipated sales and ability to
place orders in Europe.  Our revenue can fluctuate  significantly from period to
period  because  our sales,  to date,  have been based upon a  relatively  small
number of systems,  the sales price of each being substantial  enough to greatly

                                       9
<PAGE>

impact revenue levels in the periods in which they occur. Sales of a few systems
can cause a large  change in the  revenue  from period to period as noted in the
decrease in sales to  Medizin-Technik  from the nine month  period ended May 31,
2005 as compared  to the  corresponding  period of fiscal  2004.  Product  sales
decreased to $1,189,824 as compared to $1,361,677 in the corresponding period of
fiscal 2004, a decrease of $171,853, or 12.6%.

         Related Party Revenue. We derived $539,431, or 40.3%, of our revenue in
nine  months  ended May 31,  2005 from sales to related  parties as  compared to
$981,241  or 63.7%,  in the  corresponding  period of  fiscal  2004.  All of the
related  party  revenue in the 2005  period was from  sales of BSD  systems  and
component parts to Medizin-Technik.  For the nine months ended May 31, 2004, the
related  party  revenue  was  $881,738  for  sales  to  Medizin-Technik  and the
remaining  sales of $99,503 was from services  provided to TherMatrx.  Since the
sale of our  investment  in  TherMatrx  in July  2004,  TherMatrx  is no  longer
considered a related party. Sales to Medizin-Technik may fluctuate significantly
from  period to period  due to the high cost of a BSD-2000  or  BSD-500  system.
Sales increases of one or two systems can have a material effect on our revenue.

         Non-related  Party  Revenue.  In the nine months ended May 31, 2005, we
derived  $799,129,  or 59.7%,  of our total  revenue  from sales to  non-related
parties,  as compared to $560,156,  or 36.3%,  for the  corresponding  period of
fiscal 2004.  Our fiscal 2005  non-related  party  revenue  consisted of product
sales of approximately  $648,000,  consulting services of approximately $91,979,
service contracts of approximately $39,358 and miscellaneous revenue of $19,792.

         Gross  Profit.  Gross profit for the nine months ended May 31, 2005 was
$389,770,  or 29.1%, of total sales as compared to $698,290,  or 45.3%, of total
sales for the  corresponding  period in fiscal 2004. The decline in gross profit
margin was primarily due to the cost of excess  production  employees  resulting
from the decrease in sales during period ended May 31, 2005. Because we have not
had employee  layoffs and because of the fixed costs associated with production,
as our sales declined,  it resulted in the decline of gross profit margin in the
period ended May 31, 2005.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative expenses increased to $1,343,619 in the nine months ended May 31,
2005, from $803,947 for the corresponding  period of fiscal 2004, an increase of
$539,672, or 67.1%. This increase was primarily caused by increases in sales and
marketing  costs from  approximately  $182,566 in the nine months  ended May 31,
2004 to approximately  $419,370 in the nine months ended May 31, 2005, increases
in  legal  and  accounting  of  approximately  $86,486  in the  2004  period  to
approximately  $113,498 in the 2005 period,  reflecting the use of legal counsel
in preparation  for the  shareholders  meeting and the review of the Form 10-QSB
and proxy statements, as well as fees incurred in connection with tax consulting
and planning.  Shareholder  relations costs increased from approximately $15,765
in the 2004 period to approximately $54,838 in the 2005 period, reflecting costs
incurred in connection with our annual shareholders  meeting and the issuance of
various press releases. Consulting costs increased from approximately $28,117 to
approximately  $109,713  from the 2004 period to the 2005 period,  respectively.
This  increase was due to the use of  consultants  in  marketing  efforts and in
efforts  to  complete   the  FDA   approval   process  and  efforts  to  improve
reimbursement.

         Research and Development  Expenses.  Research and development  expenses
were  $645,683 for the nine months  ended May 31, 2005,  as compared to $490,006
for the corresponding period in fiscal 2004, an increase of $155,677,  or 31.8%,
primarily  due to an increase  in payroll and  consulting  costs.  Research  and
development  expenses for the period ended May 31, 2005 related primarily to the
conversion of systems software to foreign languages for international use and to
new developments in the areas of thermal therapy and thermal ablation.

                                       10
<PAGE>

         Interest  income.  Interest  income  increased to $200,804 for the nine
months ended May 31, 2005 as compared to $4,816 for the corresponding  period in
fiscal 2004 due to the  significantly  higher levels of cash  resulting from the
sale of our investment in TherMatrx.

         Provision for income taxes.  During the nine months ended May 31, 2005,
we recorded a provision for income taxes of $1,841,000. Of this amount, $708,000
was deferred  income tax expense and  $1,133,000 was current income tax expense.
The income tax expense is a direct result of the payments received from the sale
of our investment in TherMatrx  which resulted in significant net income for the
period.

         Net income.  The net income for the nine months  ended May 31, 2005 was
$3,315,663,  after an income tax provision of $1,841,000, as compared with a net
loss of $591,324 for the  corresponding  period of fiscal 2004.  The increase in
the net profit was primarily due to payments of $6,552,089  received  during the
2005 period from the sale of our  investment  in  TherMatrx  and the increase in
interest income.

         Fluctuation  in  Operating  Results.  Our  results of  operations  have
fluctuated in the past and may fluctuate in the future from year to year as well
as from  quarter  to  quarter.  Revenue  may  fluctuate  as a result of  factors
relating to the demand for thermotherapy systems and component parts supplied by
us to TherMatrx,  market acceptance of our BSD hyperthermia systems,  changes in
the medical  capital  equipment  market,  changes in order mix and product order
configurations,   competition,   regulatory   developments  and  other  matters.
Operating  expenses  may  fluctuate  as a result  of the  timing  of  sales  and
marketing activities,  research and development and clinical trial expenses, and
general and  administrative  expenses  associated with our potential growth. For
these and other reasons  described  elsewhere,  our results of operations  for a
particular  period may not be  indicative  of  operating  results  for any other
period.

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

         Our accumulated  deficit since inception  decreased from $12,073,146 as
of August 31, 2004 to $8,562,907 as of May 31, 2005, due to net income  recorded
during  the  first  nine  months  of  fiscal  2005 as a  result  of our  sale of
ourinvestment in TherMatrx. We have historically financed our operations through
cash from  operations,  licensing of  technological  assets,  issuance of common
stock  and  through the sale of our  investment  in TherMatrx. We have projected
substantial  payments  yet to be  made  to us as a  result  of the  sale  of our
TherMatrx  shares.  However,  these payments are contingent on the product sales
that TherMatrx achieves through December 31, 2005. We believe these payments, if
received, will contribute significantly to our future capital resources.

         During  the nine  months  ended May 31,  2005,  we used  $2,302,159  in
operating  activities.  The cash used in  operating  activities  was  mainly the
result of net income of $3,315,663,  deferred  income taxes of $708,000,  and an
increase in income taxes payable of $1,008,182 offset by the gain on the sale of
our  investment in TherMatrx of  $6,552,089,  a decrease in accrued  expenses of
$224,233,  an increase in accounts  receivable  of $430,035,  and an increase in
inventory of $336,319.  Our investing  activities  for the nine months ended May
31,  2005  generated  net cash of  $6,452,145  relating  mainly to the  proceeds
received from the sale of our investment in TherMatrx, offset by the purchase of
certain property and equipment of $100,994. Total cash increased from $9,697,154
at August 31,  2004 to  $13,922,445  at May 31,  2005  primarily  as a result of
payments received from the sale of our investment in TherMatrx.

         We expect to use the payments  from the sale of our  TherMatrx  shares,
including any contingent payments, for general corporate purposes, including the
sales  and  marketing  effort  for our FDA  approved  cancer  therapy  products,
supporting  the  FDA   application   for  our  cancer  therapy   products  under
investigational  status, the development of new products used in medical therapy
and the possibility of acquiring new companies or technology.

                                       11
<PAGE>

         We expect to incur additional expenses related to the commercialization
of our BSD-500  systems,  which will  precede any revenue  from the sale of such
systems.  Due to  additional  participation  at  trade  shows,  expenditures  on
publicity,  additional  travel,  higher  sales  commissions  and  other  related
expenses, we project that our sales and marketing expenses will be approximately
$500,000  higher in fiscal 2005 than in the prior year to support the commercial
introduction  of the BSD-500  systems.  In addition,  we anticipate that we will
incur expenses of approximately $110,000 related to governmental and regulatory,
including  FDA,  approvals  during  fiscal 2005 in excess of fiscal 2004. We are
making these investments in sales and marketing and on government and regulatory
activities  to increase our revenue from sales of our BSD-500  system and,  upon
receipt  of FDA  approval,  from the sale of our  BSD-2000  system in the United
States.  These increased  marketing and regulatory expenses are an investment in
generating  offsetting  revenue against the decline in TherMatrx  sales,  and to
provide  future  revenue growth over the long term. We also project that we will
incur approximately  $250,000 in additional new development  expenses associated
with  developments  for the  treatment  of  non-cancerous  diseases  and medical
conditions.

         We believe any cash  shortfall  during  fiscal 2005 that results from a
decrease  in revenues  and  increase in  expenses  can be covered  through  cash
received from the sale of our TherMatrx shares. We believe we can cover any cash
shortfall with cost cutting or available  cash. If we cannot cover any such cash
shortfall  with  cost  cutting  or  available  cash,  we  would  need to  obtain
additional financing.  We cannot be certain that any financing will be available
when needed or will be available on terms acceptable to us.  Insufficient  funds
may require us to delay,  scale back or  eliminate  some or all of our  programs
designed to facilitate the commercial  introduction of our systems or entry into
new markets.

                           FORWARD-LOOKING STATEMENTS

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

         o    our anticipated financial performance and business plan;
         o    our  expectations  regarding the  commercial  introduction  of the
              BSD-500 system;
         o    our  expectations and efforts  regarding  receipt of FDA approvals
              relating to the BSD-2000 system;
         o    our  technological   developments  to  the  BSD-500  and  BSD-2000
              systems;
         o    our  ability  to  successfully  develop  our  technology  for  new
              applications and the expense of such developments;
         o    our development or acquisition of new technologies;
         o    our  estimation  of our portion of the total payout from this sale
              of TherMatrx;
         o    the  amount  of  expenses   we  will  incur  for  the   commercial
              introduction of the BSD-500 system;
         o    the  amount  of  expenses  we  will  incur  for  governmental  and
              regulatory, including FDA, approvals;
         o    our  expectation  that related party revenue will continue to be a
              significant portion of our total revenue;
         o    our  belief  that  sales of  BSD-500  and  BSD-2000  systems  will
              increase through our future sales and marketing efforts;
         o    our assumption that we will receive contingent  payments,  and the
              amount  of such  payments,  in  connection  with  the  sale of our
              ownership in TherMatrx to AMS; and
         o    our anticipated use of proceeds from the sale of our investment in
              TherMatrx to AMS.

                                       12
<PAGE>

         We wish to caution readers that the forward-looking  statements and our
operating  results are  subject to various  risks and  uncertainties  that could
cause our actual results and outcomes to differ  materially from those discussed
or  anticipated,  including the factors set forth in the section  entitled "Risk
Factors"  included in our Annual Report on Form 10-KSB for the year ended August
31, 2004 and our other filings with the Securities and Exchange  Commission.  We
also  wish  to  advise   readers  not  to  place  any  undue   reliance  on  the
forward-looking  statements  contained in this report, which reflect our beliefs
and expectations  only as of the date of this report. We assume no obligation to
update or revise  these  forward-looking  statements  to  reflect  new events or
circumstances  or any  changes  in our  beliefs or  expectations,  other than as
required by law.

Item 3.   Controls and Procedures

         a. Evaluation of disclosure controls and procedures.

              Under  the   supervision  and  with  the   participation   of  our
         management,  including  our Principal  Executive  Officer and Principal
         Financial  Officer,  we evaluated the  effectiveness  of the design and
         operation of our disclosure  controls and procedures as of May 31, 2005
         (as  defined  in Rule  13a-15(e)  or  15d-15(e)  under  the  Securities
         Exchange Act of 1934 (the  "Exchange  Act")).  In connection  with this
         evaluation,  management  identified  a  deficiency  that existed in the
         design or operation of our internal  control over  financial  reporting
         that it  considers  to be a  "material  weakness."  The Public  Company
         Accounting  Oversight  Board  has  defined  a  material  weakness  as a
         "significant deficiency or combination of significant deficiencies that
         results in more than a remote  likelihood that a material  misstatement
         of the annual or interim financial  statements will not be prevented or
         detected."

              The deficiency in our internal  control  related to accounting for
         the provision for income taxes, deferred income taxes, and income taxes
         payable.  The  adjustment  to record the income tax  provision  and the
         necessary adjustments to deferred income taxes and income taxes payable
         were  detected and have been  appropriately  recorded and  disclosed in
         this Form  10-QSB.  We are in the  process of  improving  our  internal
         control  over   financial   reporting  in  an  effort  to  remedy  this
         deficiency.

              Based upon that  evaluation and the deficiency  identified  above,
         the  Principal   Executive  Officer  and  Principal  Financial  Officer
         concluded that, as of the end of the period covered by this report, our
         disclosure  controls  and  procedures  were  not  effective  in  timely
         alerting them to the material  information  relating to us, required to
         be included in the reports we file or submit  under the Exchange Act or
         in ensuring  that  information  required to be disclosed in the reports
         that we file or  submit  under  the  Exchange  Act is  accumulated  and
         communicated to management,  including the Principal  Executive Officer
         and Principal  Financial Officer,  to allow timely decisions  regarding
         required disclosures.

         b. Changes in internal controls.

              During the fiscal quarter  covered by this report,  there has been
         no change in our internal control over financial  reporting (as defined
         in Rule  13a-15(f)  or  15d-15(f)  under  the  Exchange  Act)  that has
         materially affected,  or is reasonably likely to materially affect, our
         internal control over financial reporting.


                                       13
<PAGE>

PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

         None.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

         None.

Item 3.       Defaults Upon Senior Securities

         None.

Item 4.       Submission of Matters to a Vote of Security Holders

         None.

Item 5.       Other Information

         None.

Item 6.       Exhibits

         The following exhibits are filed as part of this report:

    Exhibit No.     Description of Exhibit
    -----------     ----------------------
       31.1         Certification Required Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002
       31.2         Certification Required Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002
       32.1         Certification Required Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002
       32.2         Certification Required Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002



                                       14
<PAGE>

                                    SIGNATURE


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
BSD  Medical  Corporation,  the  registrant,  has duly  caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.




                                       BSD MEDICAL CORPORATION



Date:    July 15, 2005                          /s/ Hyrum A. Mead
                                       -----------------------------------------
                                       President (principal executive officer)

Date:    July 15, 2005                          /s/ Dennis E. Bradley
                                       -----------------------------------------
                                       Controller (principal financial officer)



                                       15