Discontinued Operations

3 Months Ended

Nov. 30, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Discontinued Operations

Under ASC Topic 360-10-35, Property, Plant, and Equipment – Subsequent Measurement (formerly referred to as SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets), we classify assets to be disposed of as held for sale or, if appropriate, discontinued operations when they have received appropriate approvals to be disposed of by our management or Board of Directors. Cash flows from our discontinued businesses are reflected as discontinued operating, investing, and financing activities in our statement of cash flows. We had $6,748,300 of assets of discontinued operations and $615,598 of liabilities of discontinued operations as of November 30, 2011.

U.S. Division

The Company had made the decision to sell its Garland facility as of August 31, 2010, and its operation was classified as discontinued operations for the year ended August 31, 2010. However, the Company closed the Garland facility on September 30, 2011, and accordingly its operations for the fiscal year 2011 and the quarter ended November 30, 2011 continue to be classified as discontinued operations. The Company plans to either sell the Garland facility or pursue converting it into an ambulatory surgical center, if and when the Company can identify and generate a steady referral source for outpatient cases. The Company intended to sell its Pasadena facility also, and had it classified as discontinued operations, as of August 31, 2010. However, since a sale was not consummated during the 12-month period following the decision to sell, the operations of the Pasadena facility have been reclassified as continuing operations for the fiscal year 2011 and the quarter ended November 30, 2011. The Company is continuing to revamp its operations at the Pasadena facility to become profitable again by modifying the business model and controlling expenses. However, there can be no assurance that we will be successful in turning the facility around.

The Company had an independent appraisal done for both the hospitals in October 2011, and based on each hospital's valuation, expected sale proceeds, and expected cash flows has determined that there is no impairment charge required in connection with the foregoing disposal activities. Because we do not intend to sell the accounts receivable of hospitals in discontinued operations, the receivables are included in our accounts receivable in the accompanying Consolidated Balance Sheets.

Corporate Division

The Company's operations at Second People's Hospital and its various proposed businesses in China, including but not limited to sandstone mining, mined coal trading, natural gas stations and sale of artifacts have been classified as discontinued operations. The Company's two foreign subsidiaries, Dynacq-Huai Bei and Sino Bond, are the only two companies that continue to be classified as continuing operations, and its other foreign subsidiaries have been reclassified as discontinued operations.

The following is a summary of financial information related to our discontinued operations for the quarter ended November 30, 2011 and 2010. We have reclassified prior period financial statements to exclude these businesses from continuing operations.

Discontinued Operations
	Three months ended November 30, 2011									Three months ended November 30, 2010
	U.S. Division			Corporate Division			Total			U.S. Division			Corporate Division			Total
Net patient service revenue	$	224,876		$	—		$	224,876		$	553,511		$	491,322		$	1,044,833
Costs and expenses:
Compensation and benefits		155,607			22,511			178,118			677,234			270,319			947,553
Medical services and supplies		220,971			—			220,971			225,728			275,645			501,373
Other operating expenses		337,944			98,493			436,437			621,604			125,624			747,228
Depreciation and amortization		—			5,175			5,175			—			10,426			10,426
Total costs and expenses		714,522			126,179			840,701			1,524,566			682,014			2,206,580
Operating loss		(489,646	)		(126,179	)		(615,825	)		(971,055	)		(190,692	)		(1,161,747	)
Other income (expense), net		(10,745	)		63,904			53,159			51			134,684			134,735
Loss before income taxes		(500,391	)		(62,275	)		(562,666	)		(971,004	)		(56,008	)		(1,027,012	)
Benefit for income taxes		—			—			—			317,391			39,970			357,361
Total loss on discontinued operations, net of taxes	$	(500,391	)	$	(62,275	)	$	(562,666	)	$	(653,613	)	$	(16,038	)	$	(669,651	)

	November 30, 2011						August 31, 2011
	U.S. Division		Corporate Division		Total		U.S. Division		Corporate Division		Total
Current assets	$	96,573	$	120,954	$	217,527	$	260,020	$	118,734	$	378,754
Property and equipment, net		6,530,773		—		6,530,773		6,530,773		—		6,530,773
Total assets	$	6,627,346	$	120,954	$	6,748,300	$	6,790,793	$	118,734	$	6,909,527
Current liabilities:
Accounts payable and accrued liabilities	$	—	$	615,598	$	615,598	$	—	$	604,302	$	604,302
Total liabilities	$	—	$	615,598	$	615,598	$	—	$	604,302	$	604,302