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Dynacq Healthcare Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 13, 2012 04:15PM

Dynacq Healthcare Inc. (DYII) filed Quarterly Report for the period ended 2012-05-31. Dynacq Healthcare, Inc. has a market cap of $8.1 million; its shares were traded at around $0.58 with and P/S ratio of 3.8.



Highlight of Business Operations:

Excluding the above mentioned stop-loss contractual allowance of $10,254,990, net patient service revenue decreased by $862,156, or 48%, from $1,782,818 to $920,662, and total surgical cases decreased by 8% from 194 cases for the three months ended May 31, 2011 to 179 cases for the three months ended May 31, 2012. While the number of cases decreased by 8%, net patient service revenue decreased by 48%. 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. Subsequent to the period ended May 31, 2012, a physician from our medical staff, who accounted for 30% and 14% of total gross billed charges for three months ended May 31, 2012 and 2011, respectively, is unable to continue his practice due to personal reasons. The Company is making efforts to find a replacement for this physician at the present time; however, there can be no assurance given that we will succeed in this process.

Other operating expenses include primarily administrative expenses for managing 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 $321,040, from $713,940 for the three months ended May 31, 2011 to $392,900 for the three months ended May 31, 2012. For the three months ended May 31, 2011, the Company’s subsidiary in Hong Kong incurred the following costs: (1) marketing fees of $150,000, (2) rent of $49,672 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 three months ended May 31, 2012. The Company also incurred lower professional fees and other miscellaneous expenses primarily associated with lower net revenues.

Excluding the above mentioned stop-loss contractual allowance of $10,254,990, net patient service revenue decreased by $2,189,095, or 37%, from $5,921,446 to $3,732,351, and total surgical cases decreased by 14% from 557 cases for the nine months ended May 31, 2011 to 481 cases for the nine months ended May 31, 2012. While the number of cases decreased by 14%, net patient service revenue decreased by 37%. 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. Subsequent to the period ended May 31, 2012, a physician from our medical staff, who accounted for 25% and 5% of total gross billed charges for nine months ended May 31, 2012 and 2011, respectively, is unable to continue his practice due to personal reasons. The Company is making efforts to find a replacement for this physician at the present time; however, there can be no assurance given that we will succeed in this process.

months ended May 31, 2011, due to the non-cash compensation expense true-up in 2011 based on forfeiture of incentive stock options, the expense was $82,620, (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 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 nine months in 2011, whereas for the nine 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, (5) the Compensation Committee approved a bonus of $300,000 payable to the chief financial officer of the Company for his role in winding down the operations in Hong Kong; the Committee recognized that he has been working above and beyond the norm to revive the Company’s business including actively working on marketing and several special projects and that he has also been instrumental in providing continuity in management during the transition of the Company’s new chief executive officer, and (6) the Company continues to make efforts to increase its net patient service revenues and has hired additional marketing personnel during the nine months ended May 31, 2012. Subsequent to the quarter ended May 31, 2012, in July 2012, the employment agreement with Dr. Larkin was terminated.

Other operating expenses include primarily administrative expenses for managing 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 $1,119,657, from $2,381,163 for the nine months ended May 31, 2011 to $1,261,506 for the nine months ended May 31, 2012. For the nine months ended May 31, 2011, the Company’s subsidiary in Hong Kong incurred the following costs: (1) marketing fees of $450,000, (2) rent of $149,398 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 nine months ended May 31, 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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