-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FxwK8AxYQcaIliFS5RRv+fBD49Fi9vH97qkOosdbGjPgugtu5MyPrxnr8egZF9+m bmIdSHSdOt18TEp2LcHxDw== 0000899243-99-000723.txt : 19990414 0000899243-99-000723.hdr.sgml : 19990414 ACCESSION NUMBER: 0000899243-99-000723 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNACQ INTERNATIONAL INC CENTRAL INDEX KEY: 0000890908 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 760375477 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21574 FILM NUMBER: 99592623 BUSINESS ADDRESS: STREET 1: 10304 INTERSTATE 10 EAST STREET 2: SUITE 369 CITY: HOUSTON STATE: TX ZIP: 77029 BUSINESS PHONE: 7136736639 MAIL ADDRESS: STREET 1: 10304 I-10 EAST STREET 2: SUITE 369 CITY: HOUSTON STATE: TX ZIP: 77029 10QSB 1 FORM 10-QSB 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 February 28, 1999 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, HOUSTON, TEXAS 77029 (address of principal executive offices) Zip Code Registrants telephone number, including area code (713)673-6432 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 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 CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable dates. Title of Each Class Outstanding at February 28, 1999 Common Stock, $0.001 par value 3,296,045 shares Transitional Small Business Disclosure Format (check one) Yes ______ No X Page 1 of 9 PART I. - FINANCIAL INFORMATION ITEM I. - FINANCIAL STATEMENTS DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited) ASSETS FEBRUARY 28, AUGUST 31, 1999 1998 - -------------------------------------------------------------------------------- CURRENT ASSETS: Cash 2,193,989 2,413,257 Restricted Short-Term Investments 30,000 30,000 Receivable (Net of Allowance for Doubtful Accounts) 1,604,660 1,665,349 Inventory 34,721 29,608 Due from Related Party 15,826 15,856 - -------------------------------------------------------------------------------- Total Current Assets 3,879,196 4,154,070 FIXED ASSETS - NET 6,703,919 5,212,841 OTHER ASSETS 185,506 245,145 - -------------------------------------------------------------------------------- TOTAL ASSETS 10,768,621 9,612,056 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable 570,109 187,817 Accrued Liabilities 120,974 311,354 Notes Payable 250,000 250,000 Current Portion of Notes Payable 150,335 242,612 Income Taxes Payable 611,923 465,306 Deferred Income Taxes Payable 186,000 186,000 - -------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,889,341 1,643,089 LONG-TERM DEBT 928,206 954,144 DEFERRED FEDERAL INCOME TAX PAYABLE 165,640 133,000 MINORITY INTERESTS IN SUBSIDIARY 1,186,986 1,077,305 STOCKHOLDERS' EQUITY: Preferred Stock, $0.01 Par Value, 5,000,000 Shares Authorized, None Issued or Outstanding Common Stock, $0.001 Par Value, 300,000,000 Shares Authorized After 8 to 1 & 4 to 1 Reverse Stock Split, 3,606,628 Shares Issued and 3,296,045 Shares Outstanding 3,607 3,607 Additional Paid In Capital 3,552,761 3,552,761 Retained Earnings 3,681,055 2,874,049 LESS TREASURY STOCK: 310,583 shares at cost (638,975) (625,899) - -------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 6,598,448 5,804,518 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 10,768,621 9,612,056 ================================================================================ Page 2 of 9 DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY 28 FEBRUARY 28 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------- INCOME 3,235,153 2,336,093 5,652,778 4,606,654 COST OF SALE 100,673 183,289 198,763 312,397 - ---------------------------------------------------------------------------------------------------- GROSS PROFIT 3,134,480 2,152,804 5,454,015 4,294,257 LESS EXPENSES: Contract payments to physicians 565,810 485,320 959,068 908,673 Compensation and benefits 490,998 437,246 983,481 990,619 Medical supplies 293,392 148,116 589,579 299,022 Other general & administrative exp. 695,967 365,637 1,081,627 765,423 Depreciation & amortization 160,898 122,355 285,300 243,920 Rent and occupancy 49,625 107,870 161,180 146,225 Interest 29,508 32,280 62,898 64,071 - ---------------------------------------------------------------------------------------------------- Total Expenses 2,286,198 1,698,824 4,123,133 3,417,953 - ---------------------------------------------------------------------------------------------------- NET INCOME FROM OPERATIONS 848,282 453,980 1,330,882 876,304 MINORITY INTERESTS IN (75,983) (62,577) (109,681) (139,679) (PROFIT)/LOSS OF SUBSIDIARY LESS PROVISION FOR FEDERAL INCOME TAXES Deferred 256,505 153,205 414,195 270,568 - ---------------------------------------------------------------------------------------------------- Total Income Taxes 256,505 153,205 414,195 270,568 - ---------------------------------------------------------------------------------------------------- NET INCOME (LOSS) 515,794 238,198 807,006 466,057 ==================================================================================================== NET INCOME (LOSS) PER COMMON SHARE: BASIC EARNINGS (LOSS) PER SHARE 0.156 0.072 0.245 0.141 DILUTED EARNINGS (LOSS) PER SHARE 0.149 0.069 0.232 0.134 - ---------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARE-BASIC 3,296,045 3,296,045 3,296,045 3,296,045 WEIGHTED AVERAGE SHARE-DILUTED 3,471,177 3,471,177 3,471,177 3,471,177 (1) (1) (1) (1)
(1)(AS ADJUSTED FOR 4 TO 1 REVERSE STOCK SPLIT EFFECTIVE FEBRUARY 10, 1998 AND 310,583 POST 4 TO 1 REVERSE SPLIT TREASURY SHARES.) Page 3 of 9 DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 28 (UNAUDITED) 1999 1998 - -------------------------------------------------------------------------------- RECONCILIATION OF NET INCOME TO NET CASH USED BY OPERATING ACTIVITIES: Net Income (Loss) 807,006 466,057 ADD: ITEMS NOT REQUIRING CASH: DEPRECIATION 285,300 243,920 Adjustments to reconcile net income (loss) to net cash provided by operating activities: (Increase) Decrease in Accounts Receivable 60,689 368,355 (Increase) Decrease in Inventory (5,113) 4,333 (Increase) Decrease in Other Current Assets 0 0 (Increase) Decrease in Due from Related Party 30 15,400 Increase (Decrease) in Accounts Payable 382,292 (313,978) Increase (Decrease) in Accrued Liabilities (190,380) (444,533) Increase (Decrease) in Current Notes Payable (92,277) (30,018) Increase (Decrease) in Current Income Taxes 146,617 0 Increase (Decrease) in Deferred Income Taxes 32,640 277,999 - -------------------------------------------------------------------------------- Net Cash Provided/(Used) by Operating Activities 1,426,804 587,535 CASH FLOW FROM INVESTING ACTIVITIES: (Purchase)/Dispose of Fixed Assets (1,776,378) (96,445) (Purchase)/Amortization of Other Assets 59,639 (78,292) (Decrease)/Increase of Minority Interests 109,681 128,079 in subsidiary - -------------------------------------------------------------------------------- Net Cash Provided/(Used) by Investing Activities (1,607,058) (46,658) CASH FLOW FROM FINANCING ACTIVITIES: Borrowing/(Retirement) of Long -Term Debt (25,938) 437,726 Issuance of Common Stock 0 (10,628) Issuance of Paid In Capital 0 100,631 Acquisition of Treasury Stock (13,076) (517,500) - -------------------------------------------------------------------------------- Net Cash Provided/(Used) by Financing Activities (39,014) 10,229 - -------------------------------------------------------------------------------- Net Increase/(Decrease) in Cash (219,268) 551,106 CASH BALANCE AT BEGINNING OF YEAR 2,413,257 1,031,981 - -------------------------------------------------------------------------------- CASH BALANCE AT END OF THE QUARTER 2,193,989 1,583,087 ================================================================================ Page 4 of 9 DYNACQ INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 1999 (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 for 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, 1998. Operating results for the six months period ended February 28,1999 are not necessarily indicative of the results that may be expected for the year ending August 31, 1999. Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1999 TO THE THREE MONTHS ENDED FEBRUARY 28, 1998 Consolidated revenues for the three months ended February 28, 1999 increased $899,060 or 39% from that for the corresponding previous quarter ended February 28, 1998. Notwithstanding this significant increase in consolidated revenues, there were a number of significant increases and decreases in the component revenue categories. For instance, while Doctor's Practice Management, Inc. ("DPMI") generated $871,165 revenues in the corresponding quarter of the previous fiscal year, it only generated $737,753 revenues in the current quarter, a reduction of $133,411 or 15% due to fewer physicians under management. Revenue attributable to home infusion therapy operations in the current quarter decreased $86,400 or 22% compared to the corresponding quarter of the previous fiscal year. Rental revenue increased $40,000 and revenue attributable to Vista operations increased $1,078,500 or 82% from that of the prior fiscal year due to more patient referrals. Consolidated costs of sale for the three months ended February 28, 1999 decreased $82,616 or 45% from that for the corresponding previous quarter ended February 28, 1998, was primarily attributable to the home infusion therapy operations, which has decreased activities in the current quarter. Consolidated operating expenses for the three months ended February 28, 1999 increased $587,734 or 35% from that for the corresponding previous quarter ended February 28, 1998 primarily due to increase in activities of Vista. The significant increases and decreases in the component expense categories of the consolidated operating expenses are explained as follows: Page 5 of 9 (1) The increase in other general and administrative expense of $330,330 or 90% was primarily attributable to the increase in management and consulting fee paid to outside management company for overall operation improvement and enhancement in the current quarter. (2) The increase in compensation and benefits expenses of $53,752 or 12%, of which $26,000 was attributable to Vista as a result of increase in activities, and the remaining $27,000 was attributable to DPMI, which has employed personnel for the new hospital to be opened in the third quarter. (3) The increase in medical supplies expense of $145,276 or 98% was primarily attributable to Vista, which has increased activities in the current quarter. (4) The decrease in rent and occupancy expenses of $58,245 or 54% was primarily due to incurring of less rent expense by DPMI for fewer physicians under management in the current quarter. COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 1999 TO THE SIX MONTHS ENDED FEBRUARY 28, 1998. Consolidated revenues for the six months ended February 28, 1999 increased $1,046,124 or 23% from that for the corresponding period ended February 28 of the previous fiscal year. Notwithstanding this moderate increase in consolidated revenues, there were a number of significant increases and decreases in the component revenue categories. For instance, while DPMI generated $1,483,102 revenues in the corresponding previous period of fiscal 1998, it only generated $676,624 revenues in the current period, a reduction of $806,478 or 54% due to fewer physicians under management. Revenue attributable to home infusion therapy operations decreased $294,593 or 43% in the current period due to lower patient load as a result of fewer referrals and lower reimbursable insurance charges per patient compared to the corresponding period of the previous fiscal year. Revenues attributable to Vista operations increased $2,107,583 or 86% from that of the prior year due to more patient referrals. Consolidated costs of sale for the six months ended February 28, 1999 decreased $113,634 or 36% from that for the corresponding period ended February 28 of the previous fiscal year, primarily attributable to the home infusion operations, which has decreased activities in the period. Consolidated operating expenses for the six months ended February 28, 1999 increased $705,180 or 21% from that for the corresponding period ended February 28 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 other general and administrative expense of $316,204 or 41% was primarily attributable to the increase in management and consulting fee paid to outside management company for overall operation improvement and enhancement in the current period. (2) The increase in medical supplies expense of $290,557 or 97% was primarily attributable to Vista, which had increased activities in the current period. FINANCIAL CONDITION COMPARISON OF THE BALANCE SHEETS AT SIX MONTHS ENDED FEBRUARY 28, 1999 TO THE AUDITED BALANCE SHEET AT FISCAL YEAR ENDED AUGUST 31, 1998. Consolidated cash for the six months ended February 28, 1999 decreased $219,268 or 9% from that of the previous audited balance sheet ending August 31, 1999 was due to $1,426,804 provided by operating activities, $1,607,058 used by investing activities and $39,014 used by financing activities. Consolidated accounts payable and accrued liabilities for the six months ended February 28, 1999 increased $191,912 or 25% from that of the previous audited balance sheet ended August 31, 1998 due to incurring of new payable. Page 6 of 9 Liquidity and Capital Resources The Company maintained sufficient liquidity in fiscal 1999 and 1998 to meet its business needs. The Company had working capital of $1,989,855 at February 28, 1999 which decreased $521,126 or 21% from working capital at August 31, 1998 primarily due to decrease in cash, and funding for the construction of the hospital. At February 28, 1999, the Company maintained a liquid position evidenced by a current ratio of 2 to 1 and total debt to equity of 0.63 to 1. The Company expects to have positive cash flow from operations for fiscal 1999. The Company is actively targeting opportunities to expand in the outpatient surgical clinic markets by acquisition of existing facilities or the construction of new facilities. The Company will be required to fund approximately $3,500,000 to construct and equip the hospital of which approximately $2,100,000 has been paid. The Company expects to fund the balance from cash-on-hand and internally generated funds. The Company believes it has the ability to borrow funds if necessary to meet its capital needs. However, there can be no assurance that the Company will have sufficient funds available to meet all of its capital needs. The Company expects the operations of the hospital to have a material effect on the Company's consolidated operating results. While the Company believes the operating results of the hospital will be successful in the long-term, it can provide no such assurance at this time to its shareholders. In the short-term, expected operating results from the hospital could be negatively impacted by construction delays, start-up delays or problems including staffing and equipment, low patient utilization (particularly in the first year), licensing or regulatory delays or other problems, which could have a material adverse effect on the Company's liquidity and capital resources. In the long-term, the skill and experience of the hospital's management team and competition will play critical roles. PART II. ITEM 1. - LEGAL PROCEEDINGS The Company is not a party to any material litigation. 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 April 8, 1999, the Company purchased back 4,000 post 4 to 1 Reverse Split shares at $3.756 per share for a total purchase price of $15,022.79 as treasury shares. ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K Exhibits 27 Financial Data Schedule Page 7 of 9 FORWARD-LOOKING INFORMATION The information in this Form 10-QSB contains forward-looking statements relating to the Company that are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, the Company's management. When used in this Form 10-QSB, words such as "opinion", "anticipate", "believe", "estimate", "expect", "intend" and similar expressions, as they relate to the Company or the Company's management, identify forward-looking statements. Such statements reflect the current views or expectations of the Company with respect to future events, and are subject to change based on numerous factors including, but not limited to, regulatory changes and changes in management's intentions or beliefs. Year 2000 Compliance Issues. The Company is currently evaluating its entire operation as a result of potential problems associated with Year 2000. The Company's personnel are evaluating all areas for compliance issues and are developing correction plans if necessary. Some internal areas and processes being evaluated include initial charge entry through billing and collections; accounts payable invoice receipt through processing and payment; bank processing of receipts and disbursements; computer hardware and software functionality; and time and/or date-sensitive office and medical equipment functionality. At present, the Company does not anticipate any material disruption in its operations or significant costs to be incurred to attain compliance. There can be no assurance, however, that the Company will identify or adequately assess all aspects of its business that may be effected. Due to this uncertainty, a contingency plan will be developed as each area is evaluated to minimize any negative impact to the Company. The Company is in the process of soliciting information concerning the Year 2000 compliance status of its payers (including the Medicare and Medicaid government programs), suppliers, and customers. In the event that any of the Company's significant payers, suppliers, or customers do not successfully and timely achieve Year 2000 compliance, the Company's business and/or operations could be adversely affected. Page 8 of 9 SIGNATURES Pursuant to the requirements of the Securities and 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: April 13, 1999 BY: /s/ Philip Chan Philip Chan VP-Finance/Treasurer & Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 1 6-MOS AUG-31-1998 FEB-28-1999 2,193,989 0 1,604,660 0 34,721 3,879,196 6,703,919 0 10,768,621 1,889,341 928,206 0 0 3,607 6,594,841 10,768,621 0 5,652,778 198,763 4,060,235 0 0 62,898 1,330,882 414,195 916,687 0 0 0 807,006 0.245 0.232
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