I’ve been actively seeking to explain why the final Q of BSD Medical’s showed so little income, when sales for that Q had been indicated by the company as jumping by a large amount. In the post I am responding to, I suggested they would explain this in there 10K, but they did not. To understand why there is something to explain, start by listening to the VERY IMPORTANT Webinar, held on 7 Aug ’12 (it is available only for a few more days, until the end of November – and it is still the main source of information about the company’s marketing status for their presently-key product:
http://www.investorcalendar.com/console/ConsoleFrameset.asp?ID=169216&brand=Vcall&ClickType=&playerID=1&urlID=174930&sessionID=B2512C87FF864152&email=raybowman@aol.com&tck=BSDM
(about 1 hour total – but I have noted some key passages)
The main topic was the Fee-Per-Use (FPU) program for the MTX-180, which product line (especially the expensive disposables) is expected to be a very substantial revenue source. This product has met with effusive approval in early use by leading doctors – it is outstandingly effective. The Fee-per-use program was implemented to overcome the present severe curtailment of capital expenditures by hospitals (due to the ongoing heavy recession). This curtailment is surely most severe for equipment for newly introduced therapies, since the machines could be expected to be seldom used for some indeterminable period. Leasing would also be unlikely because of low usage, initially. The FPU program provides the MTX-180’s for case-by-case use, and the fees have been described emphatically by CEO Wolcott as “handsome”.
Note: The practicality of the FPU plan is due to the small size/weight of the MTX-180. Representatives, each covering one of several (presently) large metro areas can deliver a machine on short notice – along with the disposables, if the hospital has not established their own stock. This plan was trialed, with strong success, in the Salt Lake City area; and early results from the expanded program were claimed as strong, before the Webinar.
Key passages: (timing approximate)
17 min: Maravich (Marketing VP) summarizes progress of the FPU plan
22 min: Maravich states 400% increase in antenna sales in the three months prior to Aug, after implementing the FPU program. In the Q&A period he states this as 300 antennas and gives the price as $2000 ea.
53 min: Wolcott states that the FPUs are so large that 3 or 4 uses pay for an MTX-180 (while only a reasonable guess, I conservatively assume he means mfg cost, not the usual selling price – and I think the mfg cost would be something like $6000, quite possibly more).
Up to three antennas can be used at one time by the MTX-180. Assuming an average of two per treatment and using an FPU of $2000, the net revenue per antenna used would be $3000. So, for early months of the FU plan operation, when an average of 100 antennas per month were used, the revenues would be $900,000, and this could be conservative. Assuming this rate continued in Aug (a later news release indicated strong FPU sales for September); and, rounding a bit, about $1 million in FPU related sales should have occurred in the 4th Q. But, the reported sales are only $489,000 – for ALL revenues. This glaring discrepancy calls for an explanation by the company, and I expected to see one in the 10K – but, the 10 K is silent on this important issue (the FPU program promises profitability, soon!). However, the issue has at least one speculative, but reasonable, explanation: delayed revenue recognition. Since the FPU program is carried out “in the field”, formal recognition of the income might well require receipt of formal reports from the representatives; quarterly? So, income recognition from the FPU program might be substantially delayed.
Whatever is the case, the statements in the Webinar – and the subsequent news release -- are legally actionable if not true; so I take them as factual – and, by far, the most informative input we have re the company’s (presently) most important product. And, the implication from them is that the 10K gives a very inaccurate picture of BSD Medical’s present operations. If I am right, then now is a particularly
good time to buy the stock. Of course, all must make their own decisions – I am just trying to help.
Comments, please! |
