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Dynacq Healthcare Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 13, 2012 04:30PM

Dynacq Healthcare Inc. (DYII) filed Quarterly Report for the period ended 2012-02-29. Dynacq Hlthcr has a market cap of $12 million; its shares were traded at around $0.88 with and P/S ratio of 5.6.



Highlight of Business Operations:

Net patient service revenue decreased by $722,097, or 43%, from $1,688,813 to $966,716, and total surgical cases decreased by 10% from 164 cases for the three months ended February 28, 2011 to 148 cases for the three months ended February 29, 2012. While the number of cases decreased by 10%, net patient service revenue decreased by 43%. The change in percentage decrease in net patient service revenue compared to the decrease in the number of cases is primarily due to a change in the surgical mix of cases. Decreases in net patient revenues and number of cases are generally attributable to the loss of physicians from our medical staff.

Compensation and benefits includes all corporate personnel compensation and benefits, and it increased by $499,774, or 90%, in 2012, compared to 2011. The increase in compensation and benefits was due to the following reasons: (1) for the three months ended February 29, 2012, there was a non-cash compensation expense of $82,244, related to employees’ incentive stock options granted in fiscal years 2007, 2011 and 2012. However, for the three months ended February 28, 2011, due to the non-cash compensation expense true-up in 2011 based on forfeiture of incentive stock options, the expense was $(102,963), (2) during the current fiscal year, the Company issued 50,000 shares of its common stock to Dr. Kelly Larkin as consideration for Dr. Larkin’s employment as the Company’s marketing director, and took a compensation charge of $50,000 related to the issuance, (3) the Company has retained the services of Dr. Eric Chan, as its chief executive officer starting January 10, 2012, (4) the chief financial officer of the Company had a reduction in his compensation for part of the three months in 2011, whereas for the three months in 2012, the Compensation Committee reinstated his compensation to $200,000, effective February 1, 2012, and paid him a sum of $77,000, which equates to the prior reductions in his compensation from January 1, 2010 to January 31, 2012. The Committee recognized that he has been working above and beyond the norm to revive the Company’s business including actively working on several special projects and that he has further been instrumental in providing the continuity in management during the transition of the Company’s new chief executive officer, and (5) the Company continues to make efforts to increase its net patient service revenues and has hired various marketing personnel during the three months ended February 29, 2012.

Net patient service revenue decreased by $1,326,939, or 32%, from $4,138,628 to $2,811,689, and total surgical cases decreased by 17% from 363 cases for the six months ended February 28, 2011 to 302 cases for the six months ended February 29, 2012. While the number of cases decreased by 17%, net patient service revenue decreased by 32%. The change in percentage decrease in net patient service revenue compared to the decrease in the number of cases is primarily due to a change in the surgical mix of cases. Decreases in net patient revenues and number of cases are generally attributable to the loss of physicians from our medical staff.

Compensation and benefits includes all corporate personnel compensation and benefits, and it increased by $369,502, or 26%, in 2012, compared to 2011. The increase in compensation and benefits was due to the following reasons: (1) for the six months ended February 29, 2012, there was a non-cash compensation expense of $149,934, related to employees’ incentive stock options granted in fiscal years 2007, 2011 and 2012. However, for the six months ended February 28, 2011, due to the non-cash compensation expense true-up in 2011 based on forfeiture of incentive stock options, the expense was $4,251, (2) during the current fiscal year, the Company issued 50,000 shares of its common stock to Dr. Kelly Larkin as consideration for Dr. Larkin’s employment as the Company’s marketing director, and took a compensation charge of $50,000 related to the issuance, (3) the Company has retained the services of Dr. Eric Chan, as its chief executive officer starting January 10, 2012, (4) the chief financial officer of the Company had a reduction in his compensation for part of the six months in 2011, whereas for the six months in 2012, the Compensation Committee reinstated his compensation to $200,000, effective February 1, 2012, and paid him a sum of $77,000, which equates to the prior reductions in his compensation from January 1, 2010 to January 31, 2012. The Committee recognized that he has been working above and beyond the norm to revive the Company’s business including actively working on several special projects and that he has further been instrumental in providing the continuity in management during the transition of the Company’s new chief executive officer, and (5) the Company continues to make efforts to increase its net patient service revenues and has hired various marketing personnel during the six months ended February 29, 2012.

Other operating expenses includes primarily administrative expenses for managing the various projects the Company was undertaking in China and Hong Kong, related marketing expenses and rent for an apartment for our chief executive officer in Hong Kong. The Company has made the decision to not pursue any new line of business and/or projects, and has also terminated the apartment lease. Other operating expenses also includes all the corporate general and administrative expenses in the U.S., including other professional fees such as legal expenses and audit expenses. Other operating expenses decreased by $798,617, from $1,667,223 for the six months ended February 28, 2011 to $868,606 for the six months ended February 29, 2012. For the six months ended February 28, 2011, the Company’s subsidiary in Hong Kong incurred the following costs: (1) marketing fees of $300,000, (2) rent of $99,726 for an apartment for the Company’s chief executive officer in Hong Kong, and (3) other administrative support services fees. These expenses were not incurred for the six months ended February 29, 2012. The Company also incurred lower professional fees and other miscellaneous expenses primarily associated with lower net revenues.

Read the The complete Report



Stocks Discussed: DYII,
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