SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______________________ to
_________________________
Commission file number 0-20554
DYNACQ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 76-0375477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10304 INTERSTATE 10 EAST, SUITE 369 77029
HOUSTON, TEXAS Zip Code
(address of principal
executive offices)
Registrants telephone number, including area code (713) 673-6639
N/A
(Former name, former address and former fiscal
year, if changed since last report
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
Total number of pages in Form 10-QSB 9
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes [X]. No. [ ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) filed all reports required to be filed by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by court.
Yes _______________________ No _______________________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the lastest practicable date.
Title of Each Class Outstanding at July 15, 1996
- ------------------------------------- ----------------------------------
Common Stock, $0.001 par value 14,235,136 shares
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (AUDITED)
ASSETS
MAY 31, AUGUST 31,
1996 1995
-------------- ----------
CURRENT ASSETS:
Cash............................... $ 1,580,072 $ 649,572
Receivable (Net of Allowance for
Doubtful Accounts)................ 1,675,488 2,090,114
Inventory.......................... 27,537 29,924
Prepaid Expenses................... 29,266 64,260
-------------- ----------
Total Current Assets............... 3,312,363 2,833,870
FIXED ASSETS -- NET..................... 5,193,881 5,433,117
DUE FROM AFFILIATE...................... 900,135 525,827
OTHER ASSETS............................ 632,062 694,256
-------------- ----------
TOTAL ASSETS.................. $ 10,038,441 $9,487,070
============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES..................... $ 274,141 $ 146,248
Account Payable.................... 84,072 76,635
Current Portion of Notes Payable... 267,872 297,095
Feeral Income Taxes Payable........ 917,784 935,849
-------------- ----------
TOTAL CURRENT LIABILITIES..... 1,543,869 1,455,827
DEFERRED FEDERAL INCOME TAX PAYABLE..... 140,400 104,400
LONG-TERM DEBT.......................... 1,055,713 1,244,143
MINORITY INTERESTS IN SUBSIDIARY........ 874,143 908,511
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 Par Value,
5,000,000 Shares Authorized, None
Issued or Outstanding............. -- --
Common Stock, $.001 Par Value,
300,000,000 Shares Authorized,
14,235,135 Shares Issued and
Outstanding....................... 14,235 14,235
Additional Paid In Capital......... 3,332,026 3,332,026
Retained Earnings.................. 3,078,055 2,427,928
-------------- ----------
TOTAL STOCKHOLDERS' EQUITY.... 6,424,316 5,774,189
-------------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY....... $ 10,038,441 $9,487,070
============== ==========
DYNACQ INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MAY 31, MAY 31,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME.................................. $ 2,451,385 $ 1,592,510 $ 5,960,078 $ 4,961,593
COST OF SALE............................ $ 79,523 $ 103,173 $ 260,445 $ 309,056
------------ ------------ ------------ ------------
GROSS PROFIT.......................... $ 2,371,862 $ 1,489,337 $ 5,699,633 $ 4,652,537
------------ ------------ ------------ ------------
LESS EXPENSES:
Contract Services..................... $ 913,954 $ 299,578 $ 1,709,167 $ 941,877
Salaries.............................. $ 341,725 $ 256,049 $ 807,119 $ 905,593
Medical Supplies...................... $ 180,934 $ 202,987 $ 460,591 $ 551,424
Administrative........................ $ 89,168 $ 72,127 $ 207,517 $ 195,784
Depreciation and Amortization......... $ 130,151 $ 116,141 $ 388,690 $ 268,179
Auto Expenses......................... $ 10,195 $ 14,434 $ 28,954 $ 43,127
Taxes, Licences and Professional
Fees............................... $ 338,405 $ 48,724 $ 625,472 $ 189,794
Leasing............................... $ 4,105 $ 37,966 $ 9,928 $ 58,487
Rent.................................. $ 29,514 $ 9,867 $ 37,230 $ 43,479
Marketing & Promotion................. $ 6,727 $ 1,876 $ 25,438 $ 5,076
Maintenance & Repairs................. $ 36,427 $ 34,155 $ 96,607 $ 75,150
Utilities............................. $ 29,563 $ 21,518 $ 75,134 $ 57,896
Insurance............................. $ 42,973 $ 54,812 $ 51,953 $ 84,839
Interest.............................. $ 33,285 $ 45,316 $ 105,690 $ 135,462
------------ ------------ ------------ ------------
Total Expenses..................... $ 2,187,126 $ 1,215,550 $ 4,629,490 $ 3,556,167
------------ ------------ ------------ ------------
NET INCOME FROM OPERATIONS.............. $ 184,736 $ 273,787 $ 1,070,143 $ 1,096,370
MINORITY INTERESTS IN (PROFITS)/LOSS OF
SUBSIDIARY............................ $ 15,703 $ (40,822) $ (69,948) $ (61,582)
LESS PROVISION FOR FEDERAL INCOME
TAXES.................................
Current............................... $ 130,932 $ 112,640 $ 314,068 $ 328,568
Deferred.............................. $ (60,779) (13,837) $ 36,000 $ 51,161
------------ ------------ ------------ ------------
Total Income Taxes................. $ 70,153 $ 98,803 $ 350,068 $ 379,729
------------ ------------ ------------ ------------
NET INCOME BEFORE EXTRAORDINARY ITEM.... $ 130,286 $ 134,162 $ 650,127 $ 655,059
EXTRAORDINARY ITEM...................... $ 0 $ 0 $ 1,459
------------ ------------ ------------ ------------
NET INCOME.............................. $ 130,286 $ 134,162 $ 650,127 $ 656,518
============ ============ ============ ============
EARNINGS PER SHARE...................... $ 0.009 $ 0.009 $ 0.046 $ 0.046
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING........................ 14,235,136 14,235,136 14,235,136 14,235,136
</TABLE>
DYNACQ INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31
(UNAUDITED)
1996 1995
------------ --------------
RECONCILIATION OF NET INCOME TO NET
CASH USED BY OPERATING ACTIVITIES:
Net Income (Loss).................... $ 650,127 $ 656,518
ADD: ITEMS NOT REQUIRING CASH:
Depreciation.................... $ 388,690 $ 268,179
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Increase) Decrease in Accounts
Receivable..................... $ 414,626 $ 66,780
(Increase) Decrease in
Inventory...................... $ 2,387 $ 6,428
(Increase) Decrease in Prepaid
Expenses....................... $ 34,994 $ 121,150
(Increase) Decrease in Notes
Receivable..................... $ (374,308) $ (51,083)
(Increase) Decrease in Other
Assets......................... $ 62,194
Increase (Decrease) in Accounts
Payable........................ $ 127,893 $ (81,821)
Increase (Decrease) in Accrued
Expenses....................... $ 7,437 $ 0
Increase (Decrease) in Current
Notes Payable.................. $ (29,223) $ (198,251)
Increase (Decrease) in Current
Income Taxes................... $ (18,065) $ (159,486)
Increase (Decrease) in Deferred
Income Taxes................... $ 36,000 $ 414,037
------------ --------------
Net Cash Used by Operating
Activities........................... $ 1,302,752 $ 1,042,451
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets........ $ (149,454) $ (2,185,091)
Decrease of Minority Interests
in subsidiary.................. $ (34,368) $ (141,583)
------------ --------------
Net Cash Used by Investing
Activities.............. $ (183,822) $ (2,043,508)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of Long-Term Debt.... $ (188,430) $ (118,022)
------------ --------------
Net Cash Provided by
Financing Activities.... $ (188,430) $ (118,022)
------------ --------------
Net Increase (Decrease) in
Cash.................... $ 930,500 $ (1,119,079)
CASH BALANCE AT BEGINNING OF YEAR.... $ 649,572 $ 2,073,071
------------ --------------
CASH BALANCE AT END OF QUARTER....... $ 1,580,072 $ 953,992
============ ==============
DYNACQ INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996
(UNAUDITED)
NOTE 1. -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
Dynacq International, Inc. without audit pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and management believes that the
disclosures are adequate to make the information presented not misleading. These
financial statements include all of the adjustments which, in the opinion of
management, are necessary to a fair presentation of financial position and
results of operations. All such adjustments are of a normal and recurring
nature. These unaudited financial statements should be read in conjunction with
the audited financial statements at August 31, 1995. Operating results for the
nine month period ended May 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending August 31, 1996.
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MAY 31, 1996
TO THE THREE MONTHS ENDED MAY 31, 1995
Consolidated revenues for the three months ended May 31, 1996 increased
$858,875 or 54% from that for the corresponding previous quarter ended May 31,
1995. Notwithstanding this significant increase in consolidated revenues, there
was a number of significant increases and decreases in the component revenue
categories. For instance, revenue attributable to the home infusion therapy
operations decreased $114,021 in the current quarter due to lower patient load
as compared to the corresponding quarter of the previous fiscal year. Revenue
attributable to service fee from Vista Healthcare, Inc. ("Vista"), the Company's
61% owned subsidiary, decreased $68,520 due to changing the service fee as
management fee to Doctors Practice Management, Inc. ("DPMI"'), the Company's
100% owned subsidiary, which had a $1,201,075 increase in revenue, of which
$589,148 was management fee from Vista. These combined revenues increase of
$1,018,534 was offset by a revenue decrease of $159,659 attributable to Vista
due to fewer cases.
Consolidated Cost of Sale for the three months ended May 31, 1996 decreased
$23,650 or 23% from that for the corresponding previous quarter ended May 31,
1995 primarily due to lower infusion patient load and fewer cases performed at
Vista. Consolidated operating expenses for the three months ended May 31, 1996
increased $971,576 or 80% from that for the corresponding previous quarter ended
May 31, 1995. The significant increases and decreases in the component expense
categories of the consolidated operating expenses are explained as follows:
(1) The increase in consolidated contract services expenses of $614,376 or 205%
was primarily attributable to DPMI because of increases in its activities.
(2) The increase in consolidated salaries expenses of $85,676 or 33% was
primarily attributable to DPMI because of increases in its activities.
(3) The increase in consolidated medical supplies expenses of $22,053 or 10.8%
was primarily attributable to DPMI because of increases in its activities.
(4) The increase in consolidated administrative expenses of $17,041 or 24% was
primarily attributable to DPMI because of increases in its activities.
(5) The increase in consolidated depreciation and amortization expenses of
$14,010 or 12% was primarily due to the completion of the new professional
building and the purchase of furnitures and equipments for the new
building.
(6) The increase in consolidated taxes, licences and professional fees expenses
of $289,681 or 595% included a $53,017 increase in property taxes for the
new professional building, a $201,817 management fee paid by Vista to DPMI,
and a $34,847 corporate franchise tax accrued for DPMI.
(7) The decrease in consolidated leasing expenses of $33,861 or 825% included a
$19,096 and a $14,765 decrease attributable to Vista and DPMI, respectively
due to termination of their respective leases.
(8) The increase in consolidated rent expenses of $19,647 or 199% was primarily
incurred by physicians managed by DPMI.
(9) The increase in consolidated marketing and promotion expense of $4,851 or
258% was primarily incurred by the Company for public relations effort.
(10) The increase in consolidated utilities expenses of $8,045 or 38% included a
$6,697 increase incurred by the new professional building and a $1,348
increase incurred by Vista.
(11) The increase in consolidated insurance expenses of $11,839 or 27% was
primarily incurred by Vista.
(12) The decrease in consolidated interest expenses of $12,031 or 27% was
primarily attributable to Vista due to loan amortization.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1996
TO THE NINE MONTHS ENDED MAY 31, 1995
Consolidated revenues for the nine months ended May 31, 1996 increased
$998,485 or 20% form that for the corresponding period ended May 31 of the
previous fiscal year. Notwithstanding this significant increase in consolidated
revenues, there were a number of significant increases and decreases in the
component revenue categories. For instance, revenue attributable to home
infusion therapy operations decreased $485,132 or 27% in the nine months period
ended May 31, 1996 due to lower patient load as compared to the corresponding
nine months of the previous fiscal year. Revenue attributable to service fee
from Vista decreased $69,100 due to changing the service fee as management fee
to DPMI, which had a $1,175,949 increase in revenue, of which $380,273 was
management fee from Vista. Revenue attributable to Vista increased $229,140 and
rental revenue increased $146,628 in the nine months period ended May 31, 1996
when compared to the corresponding nine months of the previous fiscal year.
Consolidated costs of sale for the nine months ended May 31, 1996 decreased
$48,611 or 16% from that for the corresponding period ended May 31 of the
previous fiscal year primarily attributable to home infusion therapy operations
due to lower patient load.
Consolidated operating expenses for the nine months ended May 31, 1996
increased $1,073,323 or 30% from that for the corresponding period ended May 31
of the previous fiscal year. The significant increases and decreases in the
component expense categories of the consolidated operating expenses are
explained as follows:
(1) The increase in consolidated contract services expenses of $767,290 or 81%
included a $904,643 increase incurred by DPMI due to increases in its
activities offset by a decrease of $124,430 attributable to Vista due to
fewer cases and a decrease of $12,923 attributable to home infusion
operations due to lower patient load.
(2) The decrease in consolidated salaries expenses of $98,474 or 11% primarily
due to a $75,513 decrease attributable to DPMI, and a $21,235 incurred by
Dynacq (Asia) Ltd. during the corresponding nine months period in the
previous fiscal year but was dormant prior to the start of the nine months
period in the current fiscal year.
(3) The decrease in consolidated medical supplies expenses of $90,833 or 16%
was primarily attributable to DPMI.
(4) The increase in consolidated depreciation and amortization expenses of
$120,511 or 45% was primarily due to the completion of the new professional
building and the purchase of furniture and equipment for the new building.
(5) The increase in consolidated taxes, licences and professional fees of
$435,678 or 230% including a $53,636 increase in property taxes for the new
building, a $354,806 management paid by Vista to DPMI, and a $30,517
corporate franchise tax accrued for DPMI. This combined increase of
$438,959 was offset by a professional fee of $3,281 incurred by Dynacq
(Asia) Ltd. during the nine months period in the corresponding previous
fiscal year but was dormant prior to the start of the nine months period of
the current fiscal year.
(6) The decrease in consolidated leasing expenses of $48,559 or 83% included a
$28,236 and $20,323 decrease for DPMI and Vista, respectively for
termination of their respective leases.
(7) The increase in consolidated marketing and promotion expense of $20,362 or
400% primarily incurred by the Company for public relations effort.
(8) The increase in maintenance and repairs expense of $21,457 or 28% primarily
due to the maintenance of the new building.
(9) The increase in utilities expense of $17,238 or 30% was primarily incurred
by the new professional building.
(10) The decrease in insurance expense of $32,886 or 39% primarily attributable
to Vista and DPMI for savings in professional liability insurance.
(11) The decrease in interest expenses of $29,772 or 22% included a $11,696
decrease attributable to Vista due to loan amortization, and a $18,076
incurred by Dynacq (Asia) Ltd. during the nine months period
in the corresponding previous fiscal year but was dormant prior to the
start of the nine months period in the current fiscal year.
FINANCIAL CONDITION
COMPARISON OF THE BALANCE SHEETS AT NINE MONTHS
ENDED MAY 31, 1996 TO THE AUDITED BALANCE SHEET
AT FISCAL YEAR ENDED AUGUST 31, 1995.
Consolidated cash for the nine months ended May 31, 1996 increased $930,500
from that of the previous audited balance sheet ending August 31, 1995 primarily
due to cash generated from operations. Consolidated Prepaid Expenses for the
nine months ended May 31, 1996 decreased $34,994 from that of the previous
audited balance sheet ending August 31, 1995 primarily due to refund of
deposits. Consolidated Fixed Assets for the nine months ended May 31, 1996
decreased $239,236 from that of the previous audited balance sheet ending August
31, 1995 primarily due to reduction from fixed assets of depreciation expense of
$388,690 offset by an increase of $149,454 in equipment purchase. Consolidated
Amounts Due from Affiliates for the nine months ended May 31, 1996 increased
$374,308 from that of the previous audited balance sheet ended August 31, 1995
primarily due to loan advance of $666,922 to affiliated physicians offset by
loan repayment of $292,614 from affiliated physicians. Consolidated Other Assets
for the nine months ended May 31, 1996 decreased $62,194 from that of the
previous audited balance sheet ended August 31, 1995 primarily due to receipt of
reimbursement for an advance. Consolidated Accounts Payable for the nine months
ended May 31, 1996 increased $127,893 from that of the previous audited balance
sheets ended August 31, 1995 primarily due to the accrual of trade payable.
Consolidated Long Term Debt decreased $188,430 from that of the previous audited
balance sheet ended August 31, 1995 due to the repayment of loan principal by
Vista. Consolidated Minority Interests in Subsidiary decreased $34,368 from that
of the previous audited sheet ended August 31, 1995 primarily due to purchase of
treasury shares by Vista.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $1,768,494 at May 31, 1996 increased $390,451 from
working capital at August 31, 1995 primarily due to the increase in cash of
$930,500 resulting from operations, a decrease in accounts receivable of
$414,626, a decrease of prepaid expenses of $34,994, offset by a $29,223 net
repayment of the current portion of its long term notes, an increase in accounts
payable of $127,893 and a decrease in current federal corporate income taxes
payable of $18,065. At May 31, 1996, the Company maintained a liquid position
evidenced by a current ratio of 2.15 to 1 and total debt to equity of 0.56 to 1.
PART II
ITEM 1. -- LEGAL PROCEEDINGS
None
ITEM 2. -- CHANGES IN SECURITIES
None
ITEM 3. -- DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. -- OTHER INFORMATION
On May 28, 1996, Vista purchased 6,490 shares or 3% of its
outstanding common shares from three physician shareholders for
$69,345.18 as treasury stock and purchased 47,416 common shares of
Dynacq International, Inc. from two physician shareholders for
$37,934.40 or $0.80 per share.
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
None
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.
DYNACQ INTERNATIONAL, INC.
DATE July 18, 1996 BY: /s/ PHILIP CHAN
Philip Chan
VP - Finance/Treasurer &
Chief Financial Officer
