8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 17, 2003

DYNACQ HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation)

000-20554	76-0375477
(Commission File Number)	(I.R.S. Employer Identification No.)

10304 Interstate 10 East, Suite 369, Houston, Texas 77029

(Address of principal executive offices, including zip code)

(713) 673-6432

(Registrant’s telephone number, including area code)

Item 4. Changes in Registrant’s Certifying Accountant

On December 17, 2003, Ernst & Young LLP (“E&Y”) notified Dynacq Healthcare, Inc. (the “Company”) that it resigned as the Company’s independent auditor effective immediately.

E&Y was engaged as the Company’s independent auditor on May 31, 2002. E&Y’s report on the financial statements for the fiscal year ended August 31, 2002 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Company plans to file the Form 10-K for the fiscal year ended August 31, 2003 as soon as practicable after the successor auditor completes the audit of the Company’s financial statements for the year ended August 31, 2003 and the SEC completes its review of the Company’s periodic reports.

The Audit Committee of the Company’s Board of Directors was informed of, but did not recommend or approve, E&Y’s resignation.

During the Company’s fiscal year ended August 31, 2002 and the subsequent interim periods preceding E&Y’s resignation, there were no disagreements between the Company and E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to E&Y’s satisfaction, would have caused E&Y to make reference to the subject matter of the disagreement in connection with their report.

On December 15, 2003, E&Y orally communicated to certain officers of the Company E&Y’s concerns relating to the Company’s disclosure controls, accounting controls and controls over the safeguarding of assets regarding a significant transaction related to the sale of certain receivables. On December 17, 2003, E&Y informed the Company it lacked the internal controls necessary to develop reliable financial statements. Neither the Company’s Board of Directors nor the Audit Committee of the Company’s Board of Directors has discussed the lack of internal controls with E&Y. The Company plans to authorize E&Y to respond fully to the inquiries of the successor accountant regarding E&Y’s statement that the Company lacks the internal controls necessary to develop reliable financial statements.

The Company provided E&Y with a copy of the foregoing disclosures. Attached as Exhibit 16.1 is a copy of E&Y’s letter regarding the change in certifying accountant.

Item 5. Other Events

The Company issued a press release announcing the resignation of E&Y on December 18, 2003; a copy of that press release is filed as Exhibit 99.1 to this Current Report on Form 8-K. In addition, on December 18, 2003, the Company announced that it had received a notice of pending NASDAQ delisting and an informal SEC investigation. A copy of that press release is filed as Exhibit 99.2 to this Current Report on Form 8-K.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(c) Exhibits. The following are filed as Exhibits to this report:

Exhibit No.	Description
16.1	Letter of Ernst & Young LLP regarding change in certifying accountant.
99.1	Press Release, issued by Dynacq Healthcare, Inc. on December 18, 2003.
99.2	Press Release, issued by Dynacq Healthcare, Inc. on December 18, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: December 24, 2003	By: DYNACQ HEALTHCARE, INC.
		/s/ Philip S. Chan
		Philip S. Chan, Chief Financial Officer

Index of Exhibits

Exhibit No.	Exhibit Description
16.1	Letter of Ernst & Young LLP regarding change in certifying accountant.
99.1	Press Release, issued by Dynacq Healthcare, Inc. on December 18, 2003.
99.2	Press Release, issued by Dynacq Healthcare, Inc. on December 18, 2003.

EX-16.1

Exhibit 16.1

December 24, 2003

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, DC 20549

Ladies and Gentlemen:

We have read Item 4 of Form 8-K dated December 24, 2003, of Dynacq Healthcare, Inc. and are in agreement with the statements contained in the first paragraph, the first and second sentences of the second paragraph, the fourth paragraph, the fifth paragraph and the sixth paragraph. We have no basis to agree or disagree with other statements of the registrant contained therein.

/s/ Ernst & Young LLP

EX-99.1

Exhibit 99.1

Dynacq Healthcare Announces Resignation of Independent Auditor

HOUSTON—(BUSINESS WIRE)—Dec. 18, 2003— Dynacq Healthcare, Inc. (Nasdaq: DYII) (the “Company”) announced today that Ernst & Young, LLP (“E&Y”) resigned late on December 17, 2003 as the Company’s independent auditor effective immediately. No reason for the resignation was specified in E&Y’s letter of resignation. However, E&Y verbally advised the Company that E&Y resigned due to the Company’s lack of internal controls necessary to develop reliable financial statements. The Company believes there are no pending disagreements between the Company and E&Y as to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

The Company has commenced the process of interviewing candidates to serve as successor auditor.

As a result of E&Y’s resignation, the Company continues to be unable to file its annual report on Form 10-K. The Company plans to file Form 10-K as soon as practicable after its new auditor completes the audit of the Company’s financial statements for the year ended August 31, 2003 and the SEC completes its review of the Company’s periodic reports. The Company is evaluating the impact of its inability to timely file its Form 10-K on its covenants under the Company’s revolving credit facility, its obligations under Nasdaq listing standards, and its reporting obligations under the Securities Exchange Act of 1934. The Company already has communicated, or shortly will be in communication, with its banks, the Nasdaq Stock Market, and the Securities and Exchange Commission.

Statements in this release concerning the beliefs, expectations, intentions, future events, future performance, and business prospects may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act and are based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the forward-looking statements. The risks and uncertainties that may cause these forward-looking statements to prove to be incorrect include, without limitation, that the engagement of the new audit firm or the new audit firm’s review and audit of the Company’s financials may be protracted, or that financing options and transactions otherwise available to the Company will be dependant upon retention of a new auditor and completion of any required audits and reviews.

EX-99.2

Exhibit 99.2

Dynacq Healthcare Receives Notice of Pending NASDAQ Delisting and Informal SEC Investigation

HOUSTON—(BUSINESS WIRE)—Dec. 18, 2003—Dynacq Healthcare, Inc. (NASDAQ NM: DYII) said it has received a Nasdaq Staff Determination stating that because Dynacq failed to comply with the requirement of NASD Marketplace Rule 4310 (c) (14) that it file a copy of its Form 10-K Annual Report to the Securities and Exchange Commission (“SEC”) in a timely fashion, its Common Stock will be delisted from The Nasdaq National Market on December 30, 2003, unless Dynacq requests a hearing. Dynacq intends to request a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance that the Panel will grant the Company’s request for continued listing. The NASD staff also stated that, as a result of the filing delinquency, from the opening of trading on December 19, 2003 Dynacq’s trading symbol will carry the additional letter “E” and will be DYIIE.

In addition, Dynacq stated that it has received a notice from the Ft. Worth, Texas office of the SEC that it is conducting an informal investigation pertaining to Dynacq’s reporting of its financial statements, its recognition of costs and revenue, its allowances for doubtful accounts, and its internal controls. Dynacq said it will cooperate fully with the SEC investigation.

Statements in this release concerning the beliefs, expectations, intentions, future events, future performance, and business prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act and are based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the forward-looking statements.