10-K/A

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

Amendment No. 1

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

For the fiscal year ended August 31, 2012

¨ 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: 000-21574

DYNACQ HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

Nevada	76-0375477
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

4301 Vista Road, Pasadena, Texas 77504

(Address of Principal Executive Offices)(Zip Code)

Registrant’s telephone number, including area code: (713) 378-2000

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of each class

Common Stock, $0.001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check One):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of February 29, 2012 was $4,840,684. As of March 19, 2013, the registrant had 14,543,626 shares of common stock outstanding.

Explanatory Note

The purpose of this amendment on Form 10-K/A to Dynacq Healthcare, Inc.’s annual report on Form 10-K for the year ended August 31, 2012, filed with the Securities and Exchange Commission on March 22, 2013 (the “Form 10-K”), is solely to furnish Exhibit 101 to the Form 10-K in accordance with Rule 405 of Regulation S-T.

No other changes have been made to the Form 10-K. This Amendment No. 1 to the Form 10-K speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-K.

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements: See Index to Consolidated Financial Statements under Item 8 on Page 37 of this Report.

(a)(2) Financial Statement Schedule: Not required.

(b) Exhibits. The following exhibits are to be filed as part of the annual report:

EXHIBIT NO.	IDENTIFICATION OF EXHIBIT
*Exhibit 3.1	Certificate of Incorporation incorporated by reference to Exhibit 3.1 to the Form 10-K filed November 13, 2007.
*Exhibit 3.2	Bylaws incorporated by reference to Exhibit 3.2 to the Form 10-K filed November 13, 2007.
*+Exhibit 10.1	The Company’s Year 2000 Incentive Plan adopted on August 29, 2000, and incorporated by reference as Appendix B from the Company’s Definitive Proxy Statement on Schedule 14A filed August 9, 2000.
*+Exhibit 10.2	The Company’s Year 2011 Stock Incentive Plan adopted on September 2, 2011, and incorporated by reference as Exhibit A from the Company’s Definitive Information Statement on Schedule 14C filed August 11, 2011.
*Exhibit 10.3	Form of Indemnification Agreement with various officers and directors of the Company, incorporated by reference to Exhibit 10.11 to the Form 10-K for the fiscal year ended August 31, 2004.
*Exhibit 10.4	Commercial Contract of Sale dated March 7, 2013 for the sale of the Garland facility, incorporated by reference to Exhibit 10.1 to the Form 8-K/A filed March 15, 2013.
*Exhibit 14.1	Code of Ethics for Principal Executive and Senior Financial Officers, incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003.
*Exhibit 21.1	Listing of subsidiaries.
*Exhibit 23.1	Consent of KWCO, PC.
*Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*Exhibit 31.2	Certification of Corporate Controller Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Exhibit 32.2	Certification of Corporate Controller Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS	XBRL Instance Document.
**101.SCH	XBRL Taxonomy Schema Document.
**101.CAL	XBRL Calculation Linkbase Document.
**101.DEF	XBRL Definition Linkbase Document.
**101.LAB	XBRL Label Linkbase Document.
**101.PRE	XBRL Presentation Linkbase Document.

+ Management contract or compensatory plan or arrangement.

* This exhibit was previously included in the annual report on Form 10-K for the year ended August 31, 2012, filed with the Securities and Exchange Commission on March 22, 2013.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 Healthcare, Inc.
Date: March 29, 2013	By:	/s/ Eric K. Chan
		Eric K. Chan, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Eric K. Chan Eric K. Chan (Principal Executive Officer)	Director, CEO and President	March 29, 2013
/s/ Hemant Khemka Hemant Khemka (Interim Principal Financial and Accounting Officer)	Corporate Controller	March 29, 2013

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Significant Accounting Policies (Details 1) (Fair Value, Measurements, Recurring [Member], USD $)	Aug. 31, 2012
Quoted prices in active markets for identical Level 1 [Member]
Assets
Investments available-for-sale
Trading securities	1,280,518
Significant other observable inputs Level 2 [Member]
Assets
Investments available-for-sale	16,828,886
Trading securities
Significant unobservable Level 3 [Member]
Assets
Investments available-for-sale
Trading securities

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Income Taxes (Textual) [Abstract]
Percentage of likelihood to be realized upon settlement	50.00%
Income taxes computed using the statutory rate	35.00%	35.00%
Income tax expenses	$ 4,018,699	$ (1,357,468)
Income tax benefits		$ 1,146,766

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Notes Payable (Details) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Debt Instrument [Line Items]
Total	$ 1,179,922	$ 1,191,879
Schedule of Notes payable
Less: Current portion	(105,735)	(97,918)
Long-term portion	1,074,187	1,093,961
Apartment purchased in Hong Kong [Member]
Debt Instrument [Line Items]
Total	1,091,615	1,155,729
Purchase of equipment [Member]
Debt Instrument [Line Items]
Total	$ 88,307	$ 36,150

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Industry Segments and Geographic Information (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Schedule of revenues from concerning operations of business segments
Net patient service revenue	$ 5,531,233	$ (1,977,207)
Loss before income taxes from continuing operations	(6,555,970)	(18,745,825)
Corporate [Member]
Schedule of revenues from concerning operations of business segments
Net patient service revenue
Loss before income taxes from continuing operations	(2,515,232)	(4,936,556)
US Division Segment [Member]
Schedule of revenues from concerning operations of business segments
Net patient service revenue	5,531,233	(1,977,207)
Loss before income taxes from continuing operations	$ (4,040,738)	$ (13,809,269)

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Related Party Transactions (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2009
Related Party Transaction [Line Items]
Accrued liabilities	$ 11,763,362	$ 18,430,553
Related Party Transactions (Textual) [Abstract]
Payment for physicians	75
Company paid emergency room physician services	421,725	434,100
Due from Affiliates	46,848	46,381
Former Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Company purchased artifacts as inventory for re-sale in China		92,180
Accrued liabilities	270,468	242,301
Anesthesia Associates [Member]
Related Party Transaction [Line Items]
Monthly compensation to the Pasadena facility			5,000
Company paid for anesthesiology services	60,000	60,000
Redwood [Member]
Related Party Transaction [Line Items]
Monthly compensation to the Pasadena facility			20,000
Director paid rent and management fees	14,938	16,163
Payment for recruitment services	$ 240,000	$ 240,000
Redwood and Anesthesia Associates [Member]
Related Party Transaction [Line Items]
Number of agreements in order to replace the previous anesthesiology group			2

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Discontinued Operations (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Income Statement Disclosures
Net patient service revenue	$ 397,278	$ 1,917,687
Cost and expenses:
Compensation and benefits	204,337	3,084,137
Medical services and supplies	235,977	1,179,900
Other operating expenses	593,942	3,897,306
Asset impairment charge	1,058,056
Depreciation and amortization	82,353	90,734
Total costs and expenses	2,174,665	8,252,077
Operating income (loss)	(1,777,387)	(6,334,390)
Other income (expenses), net	382,403	931,415
Income Loss before income taxes	(1,394,984)	(5,402,975)
Benefit for income taxes		1,880,806
Income (loss )on discontinued operations, net of taxes	(1,394,984)	(3,522,169)
Loss on disposal of discontinued assets	(229,201)	(187,041)
Benefit for income taxes		65,464
Loss on disposal of discontinued operations, net of taxes	(229,201)	(121,577)
Total Income (loss) on discontinued operations, net of taxes	(1,624,185)	(3,643,746)
Balance Sheet Disclosures
Current assets		378,754
Property and equipment, net	5,401,092	6,530,773
Total assets	5,401,092	6,909,527
Current liabilities:
Accounts payable and accrued liabilities		604,302
Total liabilities		604,302
U.S Division [Member]
Income Statement Disclosures
Net patient service revenue	397,278	1,086,455
Cost and expenses:
Compensation and benefits	181,693	2,473,738
Medical services and supplies	235,977	773,448
Other operating expenses	957,090	3,007,084
Asset impairment charge	1,058,056
Total costs and expenses	2,432,816	6,254,270
Operating income (loss)	(2,035,538)	(5,167,815)
Other income (expenses), net	304,673	(129,505)
Income Loss before income taxes	(1,730,865)	(5,297,320)
Benefit for income taxes		1,850,654
Income (loss )on discontinued operations, net of taxes	(1,730,865)	(3,446,666)
Total Income (loss) on discontinued operations, net of taxes	(1,730,865)	(3,446,666)
Balance Sheet Disclosures
Current assets		260,020
Property and equipment, net	5,401,092	6,530,773
Total assets	5,401,092	6,790,793
Corporate Division [Member]
Income Statement Disclosures
Net patient service revenue		831,232
Cost and expenses:
Compensation and benefits	22,644	610,399
Medical services and supplies		406,452
Other operating expenses	(363,148)	890,222
Depreciation and amortization	82,353	90,734
Total costs and expenses	(258,151)	1,997,807
Operating income (loss)	258,151	(1,166,575)
Other income (expenses), net	77,730	1,060,920
Income Loss before income taxes	335,881	(105,655)
Benefit for income taxes		30,152
Income (loss )on discontinued operations, net of taxes	335,881	(75,503)
Loss on disposal of discontinued assets	(229,201)	(187,041)
Benefit for income taxes		65,464
Loss on disposal of discontinued operations, net of taxes	(229,201)	(121,577)
Total Income (loss) on discontinued operations, net of taxes	106,680	(197,080)
Balance Sheet Disclosures
Current assets		118,734
Total assets		118,734
Current liabilities:
Accounts payable and accrued liabilities		604,302
Total liabilities		$ 604,302

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Accrued Liabilities (Tables)

12 Months Ended

Aug. 31, 2012

Accrued Liabilities [Abstract]

Summary of accrued liabilities

	2012		2011
MDR stop-loss cases accrual, including accrued interest	$	9,548,602	$	12,918,370
Marketing fees liability		300,000		2,381,565
Payroll and related taxes		389,713		703,398
Noncontrolling interest in consolidated subsidiary buy-out liability		106,937		156,737
Property taxes		339,527		364,308
Medicare liability		—		400,000
Year-end accruals of expenses and other		1,078,583		1,506,175
Total accrued liabilities	$	11,763,362	$	18,430,553

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Restatement (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2010
Balance Sheet
Income tax receivable	$ 569,430	$ 569,430
Total current assets	19,687,070	35,473,261
Total assets	46,185,296	64,429,206
Retained earnings	12,108,494	24,259,990
Total Dynacq stockholders' equity	30,715,156	41,508,930	63,003,491
Total equity	30,781,415	41,572,547
Total liabilities and equity	46,185,296	64,429,206
Statement of Operations
(Provision) benefit for income taxes	(4,018,699)	1,357,468
Loss from continuing operations	(10,574,669)	(17,388,357)
Net loss	(12,198,854)	(21,032,103)
Net loss	(12,151,496)	(21,016,125)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.	$ (0.73)	$ (1.22)
Net loss attributable to Dynacq Healthcare, Inc.	$ (0.85)	$ (1.48)
Statement of Cash Flows
Net loss	(12,151,496)	(21,016,125)
Income taxes receivable		3,457,353
As Reported [Member]
Balance Sheet
Income tax receivable		2,363,724
Total current assets		37,267,555
Total assets		66,223,500
Retained earnings		26,054,284
Total Dynacq stockholders' equity		43,303,224
Total equity		43,366,841
Total liabilities and equity		66,223,500
Statement of Operations
(Provision) benefit for income taxes		3,151,762
Loss from continuing operations		(15,594,063)
Net loss		(19,237,809)
Net loss		(19,221,831)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		$ (1.10)
Net loss attributable to Dynacq Healthcare, Inc.		$ (1.36)
Statement of Cash Flows
Net loss		(19,221,831)
Income taxes receivable		1,663,059
Difference [Member]
Balance Sheet
Income tax receivable		(1,794,294)
Total current assets		(1,794,294)
Total assets		(1,794,294)
Retained earnings		(1,794,294)
Total Dynacq stockholders' equity		(1,794,294)
Total equity		(1,794,294)
Total liabilities and equity		(1,794,294)
Statement of Operations
(Provision) benefit for income taxes		(1,794,294)
Loss from continuing operations		(1,794,294)
Net loss		(1,794,294)
Net loss		(1,794,294)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		$ (0.13)
Net loss attributable to Dynacq Healthcare, Inc.		$ (0.13)
Statement of Cash Flows
Net loss		(1,794,294)
Income taxes receivable		$ 1,794,294

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Stockholders Equity and Stock Option Plan (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Aug. 31, 2012
Share based compensation shares authorized under stock option plans exercise price range [Abstract]
Options Outstanding, Shares	2,791
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	5 years 7 months 6 days
Options Outstanding, Weighted Average Exercise Price	$ 1.92
Options Exercisable, Shares	1,023
Weighted Average Exercise Price	$ 2.88
Range One [Member]
Share based compensation shares authorized under stock option plans exercise price range [Abstract]
Range of Exercise Prices, Lower Range Limit	$ 1.00
Range of Exercise Prices, Upper Range Limit	$ 1.10
Options Outstanding, Shares	1,050
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	5 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 1.03
Range Two [Member]
Share based compensation shares authorized under stock option plans exercise price range [Abstract]
Range of Exercise Prices, Lower Range Limit	$ 1.86
Options Outstanding, Shares	957
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	8 years 10 months 24 days
Options Outstanding, Weighted Average Exercise Price	$ 1.86
Options Exercisable, Shares	239
Weighted Average Exercise Price	$ 1.86
Range Three [Member]
Share based compensation shares authorized under stock option plans exercise price range [Abstract]
Range of Exercise Prices, Lower Range Limit	$ 2.50
Range of Exercise Prices, Upper Range Limit	$ 2.75
Options Outstanding, Shares	569
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 2.54
Options Exercisable, Shares	569
Weighted Average Exercise Price	$ 2.54
Range Four [Member]
Share based compensation shares authorized under stock option plans exercise price range [Abstract]
Range of Exercise Prices, Lower Range Limit	$ 4.90
Options Outstanding, Shares	215
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	2 years 3 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 4.90
Options Exercisable, Shares	215
Weighted Average Exercise Price	$ 4.90

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Subsequent Events (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Aug. 31, 2012
Subsequent Events (Textual) [Abstract]
Cost of Internal Investigation	$ 2
Expense paid to third party	$ 7.8

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Industry Segments and Geographic Information (Details 1) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Schedule of assets from concerning operations of business segments
Total assets	$ 46,185,296	$ 64,429,206
Assets of continuing operations [Member]
Schedule of assets from concerning operations of business segments
Total assets	40,784,204	57,519,679
Assets of discontinued operations [Member]
Schedule of assets from concerning operations of business segments
Total assets	5,401,092	6,909,527
Corporate [Member]
Schedule of assets from concerning operations of business segments
Total assets	32,711,311	48,756,664
US Division Segment [Member]
Schedule of assets from concerning operations of business segments
Total assets	$ 8,072,893	$ 8,763,015

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Significant Accounting Policies (Tables)

12 Months Ended

Aug. 31, 2012

Significant Accounting Policies [Abstract]

Estimated useful lives of assets

	Useful Life
Land		N/A
Buildings and improvements		39 years
Equipment, furniture and fixtures		5 years

Financial assets and liabilities measured at fair value on a recurring basis

	Quoted prices in active markets for identical		Significant other observable inputs		Significant unobservable
	(Level 1)		(Level 2)		(Level 3)
Assets
Investments available-for-sale	$	—	$	16,828,886	$	—
Trading securities		1,280,518		—		—

Percentage of gross patient service revenue by financial class

	2012			2011
Workers’ Compensation		11	%		26	%
Commercial		40	%		39	%
Medicare		28	%		17	%
Medicaid		1	%		1	%
Self-Pay		16	%		13	%
Other		4	%		4	%

Gross revenues and contractual allowances for Pasadena facility

	2012			2011
Gross billed charges	$	19,619,903		$	22,138,821
Contractual allowance (1)		14,088,670			24,116,028
Net revenue	$	5,531,233		$	(1,977,207	)
Contractual allowance percentage (1)		72	%		109	%

⁽¹⁾ The contractual allowance percentage, excluding the stop-loss fee dispute amount booked in the quarter ended May 31, 2011, which is discussed below, would have been 63% for the year ended August 31, 2011.

Activity in the noncontrolling interest liability account

Balance August 31, 2010	$	79,595
Loss allocated to noncontrolling interest holders		(15,978	)
Distribution to noncontrolling interest holders		(98,350	)
Loss on purchase of noncontrolling interest		98,350
Balance August 31, 2011		63,617
Loss allocated to noncontrolling interest holders		(47,358	)
Capital contributions from / distributions to new noncontrolling interest holders, net		50,000
Balance August 31, 2012	$	66,259

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Income Taxes (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Current tax (benefit) expense:
Federal		$ (569,430)
State		(3,000)
Total current		(572,430)
Deferred tax (benefit) expense:
Federal	4,018,699	(785,038)
State
Total deferred	4,018,699	(785,038)
Total income tax benefit	$ 4,018,699	$ (1,357,468)

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Significant Accounting Policies (Details 4) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Activity in the noncontrolling interest liability account
Starting Balance, Noncontrolling interest	$ 63,617	$ 79,595
Loss allocated to noncontrolling interest holders	(47,358)	(15,978)
Distribution to noncontrolling interest holders		(98,350)
Loss on buy back of noncontrolling interest		98,350
Capital contributions from / distributions to new noncontrolling interest holders, net	50,000
Closing Balance, Noncontrolling interest	$ 66,259	$ 63,617

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Subsequent Events (Details) (USD $)	12 Months Ended		120 Months Ended	144 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2012
Summary of Statement of operation Classification
Utilities Operating Expense	$ (604,745)	$ 2,418,805	$ 5,936,406
Operating expense net				7,750,466
Non-executive employee salaries [Member]
Summary of Statement of operation Classification
Utilities Operating Expense, Other	3,526	45,838	1,097,894	1,147,258
Professional Fees [Member]
Summary of Statement of operation Classification
Utilities Operating Expense, Other	(56,000)	380,000	1,324,000	1,648,000
Rent Expenses [Member]
Summary of Statement of operation Classification
Utilities Operating Expense, Other		292,967	939,512	1,232,479
Marketing Expense [Member]
Summary of Statement of operation Classification
Utilities Operating Expense, Other	(820,000)	1,700,000	2,575,000	3,455,000
Abandoned Cash [Member]
Summary of Statement of operation Classification
Utilities Operating Expense, Other	$ 267,729			$ 267,729

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Subsequent Events (Tables)

12 Months Ended

Aug. 31, 2012

Subsequent Events [Abstract]

Summary of Statement of operation Classification

	Years Ended August 31,					Aggregate For Years Ended August 31, 2001
	2012			2011		to 2010		Total
Compensation and benefits
Non-executive employee salaries	$	3,526		$	45,838	$	1,097,894	$	1,147,258
Other operating expenses
Professional fees		(56,000	)(1)		380,000		1,324,000		1,648,000
Marketing expenses		(820,000	)(1)		1,700,000		2,575,000		3,455,000
Rent expenses		—			292,967		939,512		1,232,479
Abandoned cash		267,729			—		—		267,729
Total	$	(604,745	)(1)	$	2,418,805	$	5,936,406	$	7,750,466

⁽¹⁾  The negative expense in 2012 is the result of the reversal of expenses accrued in 2011.

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Income Taxes (Details 2) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Deferred tax liabilities:
Depreciation, Noncurrent	$ (180,415)	$ (131,353)
Exchange gains provision, Noncurrent		(518,217)
Investment valuation, Noncurrent		(3,500,481)
Deferred tax assets:
Net operating loss carryforward, Noncurrent	7,827,575	2,885,821
Revenue and expense differences, Current	54,664	350,986
Revenue and expense differences, Non Current	3,342,010	4,521,437
Allowance for uncollectible accounts, Current	513,456	656,884
Asset impairment, Current	370,320	79,239
Asset impairment, Non-current		633,915
Other Assets Current	(166,758)
Other Assets Non Current	43,551	86,838
Valuation allowance, Current	(771,682)	(1,087,109)
Valuation allowance, Noncurrent	(11,032,721)	(3,977,960)
Net deferred tax asset (liability), Current
Net deferred tax asset (liability), Noncurrent

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Commitments and Contingencies (Details) (USD $)	1 Months Ended	12 Months Ended
	Mar. 31, 2010	Aug. 31, 2012	Aug. 31, 2011
Trading Activity Gains And Losses [Line Items]
Rent and lease expenses paid		$ 127,000	$ 470,000
Period of company's minimum rental commitments under non-cancellable operating leases		5 years
Total commitment under administrative support services agreements		259,000
Payments under administrative support services agreements		266,000	433,000
Payments under agreements with outside organizations		162,000	762,000
Amount of total commitments		12,400,000
Commitments and Contingencies (Textual) [Abstract]
Increase in the contractual allowance and related interest expense			12,900,000
Refund of voluntarily paid awards including prejudgment interest		3,700,000
Additional deposit		204,000
Additional refund not including prejudgment interest		7,700,000
Company's minimum rental commitments under non-cancellable operating leases		63,000
Payments under company's hospital and other service agreements		1,190,000	1,296,000
Minimum interest rate under notes payable commitment		4.50%
Maximum interest rate under notes payable commitment		6.00%
Amount paid for purchase of equipment		88,000
Amount paid for purchase of equipment in next twelve months		41,000
Amount paid for purchase of equipment in year two		40,000
Amount paid for purchase of equipment in year three		7,000
Maturity Period of Mortgage Loan	18 years	18 years
Mortgage loan	1,245,775	1,245,775
Mortgage loan basis spread on Hang Seng inter bank offered rates	0.70%	0.70%
Variable interest rate	2.90%	2.90%
Effective interest rate		1.12%
Principal payments due on the note payable in fiscal years 2013		65,000
Principal payments due on the note payable in fiscal years 2014		65,000
Principal payments due on the note payable in fiscal years 2015		66,000
Principal payments due on the note payable in fiscal years 2016		67,000
Principal payments due on the note payable in fiscal years 2017		67,000
Principal payments due on the note payable in fiscal years there after		762,000
Purchase of equipment under capital leases		203,000
Amount payable for purchasing equipment under capital leases in 2013		113,000
Amount payable for purchasing equipment under capital leases in 2014		90,000
Amount payable in 2013		11,100,000
Amount payable in 2014		219,000
Amount payable in 2015		91,000
Amount payable in 2016		82,000
Amount payable in 2017		76,000
Amount payable after five years		807,000
Company's minimum commitments under hospital and other service agreements		712,000
Discontinued Operations [Member]
Trading Activity Gains And Losses [Line Items]
Payments under company's hospital and other service agreements		0	668,000
Rent and lease expenses paid		117,000	225,000
Company's minimum rental commitments under non-cancellable operating leases		139,000
Total commitment under administrative support services agreements		64,000
Payments under administrative support services agreements		110,000	210,000
Payments under agreements with outside organizations		0	124,500
Amount of total commitments		$ 203,000

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Net Income (Loss) Per Share (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Numerator:
Loss from continuing operations	$ (10,574,669)	$ (17,388,357)
Less: Net loss attributable to noncontrolling interest	47,358	15,978
Net loss before discontinued operations	(10,527,311)	(17,372,379)
Discontinued operations, net of income taxes	(1,394,984)	(3,522,169)
Loss on disposal of discontinued operations, net of income taxes	(229,201)	(121,577)
Net loss attributable to Dynacq Healthcare, Inc.	$ (12,151,496)	$ (21,016,125)
Denominator:
Basic and diluted average common shares outstanding	14,489,780	14,196,191
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.	$ (0.73)	$ (1.22)
Discontinued operations, net of income taxes	$ (0.10)	$ (0.25)
Loss on disposal of discontinued operations, net of income taxes	$ (0.02)	$ (0.01)
Net loss attributable to Dynacq Healthcare, Inc.	$ (0.85)	$ (1.48)

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Discontinued Operations (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Discontinued Operations (Textual) [Abstract]
Assets of discontinued operations	$ 5,401,092	$ 6,909,527
Liabilities of discontinued operations		604,302
Period within which sale not to be consummated		12 months
Impairment charge	$ 1,100,000

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Property and Equipment

12 Months Ended

Aug. 31, 2012

Property and Equipment [Abstract]

Property and Equipment

2. Property and Equipment

At August 31, property and equipment consisted of the following:

	2012			2011
Land	$	497,110		$	497,110
Buildings and improvements		8,989,115			9,281,245
Equipment, furniture and fixtures		10,058,232			10,518,364
		19,544,457			20,296,719
Less accumulated depreciation and amortization		(12,888,637	)		(13,127,855	)
Net property and equipment	$	6,655,820		$	7,168,864

For the years ended August 31, 2012 and 2011, depreciation expense was $550,643 and $568,069, respectively.

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Net Income (Loss) Per Share (Details Textual) (Stock Options [Member])	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Stock Options [Member]
Net Income (Loss) Per Share (Textual) [Abstract]
Stock options with exercise prices exceeding current market prices	2,653,000	1,232,000

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Significant Accounting Policies (Details Textual) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended	12 Months Ended			23 Months Ended
	Mar. 31, 2010	May 31, 2012 Cases	Aug. 31, 2011	Feb. 28, 2011	Aug. 31, 2012 Cases	Aug. 31, 2011	Aug. 31, 2009	Nov. 30, 2008	Nov. 30, 2011	Sep. 30, 2010	Nov. 13, 2008
Noncontrolling Interest [Line Items]
Loss on the initial public offerings of equity securities					$ (317,206)	$ 935,279
Significant Accounting Policies (Textual) [Abstract]
Period within which sale not to be consummated						12 months
Company invested approximately of its available cash in marketable securities							9,100,000
Marketable securities with book cost			700,000
Balance of these securities is valued					16,800,000
Company intends to hold these for a minimum period of an additional 12 months					12 months
Corporate office costs					5,900,000	8,300,000
Maturity period of highly liquid investments					three months or less
Company purchased an apartment in Hong Kong as an investment	2,014,207				2,014,207
Maturity Period of Mortgage Loan	18 years				18 years
Mortgage loan	1,245,775				1,245,775
Mortgage loan basis spread on Hang Seng inter bank offered rates	0.70%				0.70%
Percentage of interest rate below Hong Kong interest rate	2.90%				2.90%
Additional deposit					204,000
Effective interest rate					1.12%
Principal payments due on the note payable in fiscal years there after					762,000
Current portions of the note payable					64,558
Long-term portions of the note payable					1,027,057
Impairment Charge for Sale of Asset					1,100,000
Depreciation expense associated with the apartment					51,646	51,646
Company borrowed as notes payable									116,339	65,000
Payment on mortgage loan			63,709		64,114	63,709
Interest rate									4.50%	6.00%
Notes to be repaid									36 months	24 months
Payment on notes payable					64,182	28,850
Current portions of the note payable					47,129
Long-term portions of the note payable					41,178
Marketable securities with a book cost for a gain			1,300,000
Estimated time taken into account collections received after close of period					30 days
Estimated time taken to collect amounts for the services performed					6 months
Percentage of Contractual Allowance Excluding Stop Loss Fee Dispute Amount						63.00%
State Office of Administrative Hearings								90.00%
Reimbursed of customary audited charges for an inpatient admission											75.00%
Customary audited charges					40,000
Number of cases of insurance carriers					180
Claim amount of insurance carriers					11,000,000
No of cases refused					130
Refund value including prejudgment interest					3,700,000
Refund value excluding prejudgment interest					7,700,000
Number of appealed cases					179
Number of pending cases					178
Approximate number of cases the Company establish the criteria		80
Approximate percentage of billed charges paid					95.00%
Percentage of billed charges evaluated by government department					5.00%
Bad debt expenses				24,755
Advertising and marketing costs					162,000	2,412,000
Marketing expense to be incurred based on a contract with Kenkon Limited						1,050,000
Marketing costs, expense and accrual reversed					870,000
Advertising and marketing costs for its discontinued operations					0	125,000
Loss on buy back of noncontrolling interest						98,350
Gain on sale of apartment					480,000
Investments Level1 [Member]
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Company's investments in Level 1 are in equity stocks					2,047,390
Fair Value Inputs Level2 [Member]
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Company's investments in Level 2 are in perpetual bonds					8,435,146
HONG KONG [Member]
Noncontrolling Interest [Line Items]
Loss on the initial public offerings of equity securities					318,206	364,721
Minimum [Member]
Noncontrolling Interest [Line Items]
Equity interests ranging minimum to maximum					1.00%
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Estimated useful lives of the assets					5 years
Maximum [Member]
Noncontrolling Interest [Line Items]
Equity interests ranging minimum to maximum					1.75%
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Estimated useful lives of the assets					39 years
Pasadena Facility [Member]
Noncontrolling Interest [Line Items]
No of hospital own and operate in Pasadena					1
Company through its subsidiaries ownership interest			100.00%		99.00%	100.00%
Increase in the contractual allowance						10,254,990
Interest expense at our Pasadena facility						1,751,478
Increase in the contractual allowance negative revenue for the Pasadena facility						1,977,207
Garland Facility [Member]
Noncontrolling Interest [Line Items]
No of hospital own and operate in Pasadena					1
Date of disposal of hospital in Garland,Texas					Sep. 30, 2011
Company through its subsidiaries ownership interest			98.25%		98.25%	98.25%
Additional loss in the contractual allowance						779,583
Additional interest expense at our Garland facility						$ 132,339

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Income Taxes (Tables)

12 Months Ended

Aug. 31, 2012

Income Taxes [Abstract]

Provision for Income Taxes

	Year Ended August 31,
	2012		2011
			(Restated)
Current tax (benefit) expense:
Federal	$	—	$	(569,430	)
State		—		(3,000	)
Total current		—		(572,430	)
Deferred tax (benefit) expense:
Federal		4,018,699		(785,038	)
State		—		—
Total deferred		4,018,699		(785,038	)
Total income tax (benefit) expense	$	4,018,699	$	(1,357,468	)

Provision (benefit) for deferred income taxes

	2012			2011
				Restated
Applicable to:
Net operating loss carryforward	$	(4,941,754	)	$	(5,466,384	)
Differences between revenues and expenses recognized for federal income tax and financial reporting purposes		2,172,058			(341,188	)
Difference in method of computing depreciation for tax and financial reporting purposes		49,061			(42,535	)
Valuation allowance		6,739,334			5,065,069
Deferred income tax expense (benefit)	$	4,018,699		$	(785,038	)

Components of Company's deferred tax liabilities and assets

	Current			Noncurrent
Deferred tax liabilities:
Depreciation	$	—		$	(180,415	)
Deferred tax assets:
Net operating loss carryforward		—			7,827,575
Revenue and expense differences		54,664			3,342,010
Allowance for uncollectible accounts		513,456			—
Asset impairment		370,320			—
Other		(166,758	)		43,551
Valuation allowance		(771,682	)		(11,032,721	)
Net deferred tax asset (liability)	$	—		$	—

Significant components of the Company’s deferred tax liabilities and assets were as follows at August 31, 2011:

	Current			Noncurrent
				(Restated)
Deferred tax liabilities:
Depreciation	$	—		$	(131,353	)
Exchange gains provision		—			(518,217	)
Investment valuation		—			(3,500,481	)
Deferred tax assets:
Net operating loss carryforward					2,885,821
Revenue and expense differences		350,986			4,521,437
Allowance for uncollectible accounts		656,884			—
Asset impairment		79,239			633,915
Other		—			86,838
Valuation allowance		(1,087,109	)		(3,977,960	)
Net deferred tax asset (liability)	$	—		$	—

Reconciliation of the benefit for statutory federal income tax rate to income before income taxes and noncontrolling interests

	Year Ended August 31,
	2012			2011
				(Restated)
Benefit for income taxes computed using the statutory rate of 35%	$	(2,294,590	)	$	(6,561,039	)
State income taxes, net of federal benefit		—			(1,950	)
Noncontrolling interest in loss of consolidated subsidiaries		16,575			5,592
Non-deductible expenses		(442,620	)		134,860
Changes in valuation allowance		6,739,334			5,065,069
Expense (benefit) for income taxes	$	4,018,699		$	(1,357,468	)

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Notes Payable (Tables)

12 Months Ended

Aug. 31, 2012

Notes Payable [Abstract]

Schedule of Notes payable

	2012			2011
Note payable secured by the apartment purchased in Hong Kong as an investment for $2,014,207. The Company obtained an 18-year mortgage loan of $1,245,775 from a financial institution, with a variable interest rate at the lower of 3-month Hang Seng Interbank Offered Rates plus 0.7% or 2.9% below the Hong Kong Dollar best lending rate quoted by the financial institution. The effective interest rate at August 31, 2012 was 1.12%. Subsequent to the year ended August 31, 2012, the apartment was sold, and the related note payable was also paid off.	$	1,091,615		$	1,155,729
Notes payable for $116,339 and $65,000 for purchases of equipment for the Pasadena facility at an interest rate of 4.5% and 6%, secured by the said equipment.		88,307			36,150
Total		1,179,922			1,191,879
Less: Current portion		(105,735	)		(97,918	)
Long-term portion	$	1,074,187		$	1,093,961

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Stockholders Equity and Stock Option Plan (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Summary of stock option activities
Shares Outstanding, Beginning balance	2,206,000
Shares, Granted	1,450,000
Shares, Exercised		0
Shares, Expired or canceled	(865,000)
Shares Outstanding, Ending balance	2,791,000	2,206,000
Weighted Average Option Exercise Price Per Share Outstanding, Beginning balance	$ 2.41
Weighted Average Option Exercise Price Per Share, Granted	$ 1.03
Weighted Average Option Exercise Price Per Share, Exercised
Weighted Average Option Exercise Price Per Share, Expired or cancelled	$ 1.68
Weighted Average Option Exercise Price Per Share, Ending balance	$ 1.92	$ 2.41
Weighted Average Grant Date Fair Value Per Share Outstanding, Beginning balance
Weighted Average Grant Date Fair Value Per Share, Granted	$ 0.52	$ 1.12
Weighted Average Grant Date Fair Value Per Share, Exercised
Weighted Average Grant Date Fair Value Per Share, Expired or cancelled
Weighted Average Grant Date Fair Value Per Share Outstanding, Ending balance
Aggregate Intrinsic Value Outstanding, Beginning balance
Aggregate Intrinsic Value, Granted
Aggregate Intrinsic Value, Exercised
Aggregate Intrinsic Value, Expired or cancelled
Aggregate Intrinsic Value Outstanding, Ending balance

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Property and Equipment (Details) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Schedule of Property and Equipment
Gross property and equipment	$ 19,544,457	$ 20,296,719
Less accumulated depreciation and amortization	(12,888,637)	(13,127,855)
Net property and equipment	6,655,820	7,168,864
Land [Member]
Schedule of Property and Equipment
Gross property and equipment	497,110	497,110
Buildings and improvements [Member]
Schedule of Property and Equipment
Gross property and equipment	8,989,115	9,281,245
Equipment, furniture and fixtures [Member]
Schedule of Property and Equipment
Gross property and equipment	$ 10,058,232	$ 10,518,364

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Stockholders Equity and Stock Option Plan (Tables)

12 Months Ended

Aug. 31, 2012

Stockholders Equity and Stock Option Plan [Abstract]

Summary of stock option activity

	Shares			Weighted Average Option Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value(1)
Outstanding, August 31, 2011		2,206		$	2.41	$	—	$	—
Granted		1,450			1.03		0.52		—
Exercised		—			—		—		—
Expired or canceled		(865	)		1.68		—		—
Outstanding, August 31, 2012		2,791		$	1.92		—	$	—

⁽¹⁾  These amounts represent the difference between the exercise price and the closing price of Dynacq common stock on August 9, 2012 and August 31, 2011, as reported on the NASDAQ stock market, for all in-the-money options outstanding. For exercised options, intrinsic value represents the difference between the exercise price and the closing price of Dynacq common stock on the date of exercise.

Summary of information related to stock options outstanding and related weighted average price and life information

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
	(Share Amounts In Thousands)
$1.00 – 1.10		1,050		5.8	$	1.03		—	$	—
$1.86		957		8.9		1.86		239		1.86
$2.50 – 2.75		569		0.8		2.54		569		2.54
$4.90		215		2.3		4.90		215		4.90
Total		2,791		5.6	$	1.92		1,023	$	2.88

Summary of fair value of the stock-based awards estimated using the Black-Scholes model

	Year Ended August 31,
	2012			2011
Estimated fair value	$	0.52		$	1.12
Expected life (years)		4.1			4.1
Risk free interest rate		0.79	%		1.55	%
Volatility		78	%		81	%
Dividend yield		—			—

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Net Income (Loss) Per Share (Tables)

12 Months Ended

Aug. 31, 2012

Net Income (Loss) Per Share [Abstract]

Computation of basic and diluted loss per common share

	Year Ended August 31,
	2012			2011
				(Restated)
Basic and diluted loss per common share:
Numerator:
Loss from continuing operations	$	(10,574,669	)	$	(17,388,357	)
Less: Net loss attributable to noncontrolling interest		47,358			15,978
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		(10,527,311	)		(17,372,379	)
Discontinued operations, net of income taxes		(1,394,984	)		(3,522,169	)
Loss on disposal of discontinued operations, net of income taxes		(229,201	)		(121,577	)
Net loss attributable to Dynacq Healthcare, Inc.	$	(12,151,496	)	$	(21,016,125	)
Denominator:
Basic and diluted average common shares outstanding		14,489,780			14,196,191
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.	$	(0.73	)	$	(1.22	)
Discontinued operations, net of income taxes		(0.10	)		(0.25	)
Loss on disposal of discontinued operations, net of income taxes		(0.02	)		(0.01	)
Net loss attributable to Dynacq Healthcare, Inc.	$	(0.85	)	$	(1.48	)

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Significant Accounting Policies

12 Months Ended

Aug. 31, 2012

Significant Accounting Policies [Abstract]

Significant Accounting Policies

1. Significant Accounting Policies

Business and Organization

Dynacq Healthcare, Inc., a Nevada corporation (the “Company”), is a holding company that through its subsidiaries in the United States develops and manages general acute care hospitals that principally provide specialized surgeries. The Company through its subsidiaries in China and Hong Kong also (1) provided healthcare management services to a hospital in China until February 28, 2011; and (2) invests in debt and equity securities, including short-term investments in initial public offerings and pre-initial public offerings. The Company through its United States subsidiaries (1) owns and operates one general acute care hospital in Pasadena, Texas and (2) owns one general acute care hospital in Garland, Texas, which was closed on September 30, 2011, and accordingly this business is classified as “Discontinued Operations” for the year ended August 31, 2012 and 2011 (see Note 3 — Discontinued Operations below). The Company is currently composed of two divisions: U.S. and Corporate.

The Company was incorporated under the laws of the State of Nevada in 1992. The Company was reincorporated in Delaware in November 2003 and reincorporated back in Nevada in August 2007.

U.S. Division

In the United States, the Company manages and operates one general acute care hospital that principally provides specialized surgeries such as bariatric, orthopedic and neuro-spine surgeries.

In May 1998, Vista Community Medical Center, L.L.C., a Texas limited liability company, was organized for the purpose of operating a hospital (the “Pasadena facility”). In June 2003, the Pasadena facility was converted to a limited liability partnership. As of August 31, 2012 and 2011, the Company through its subsidiaries had a 99% and 100%, respectively, ownership interest in the Pasadena facility.

In July 2003, Vista Hospital of Dallas, LLP was organized for the purposes of acquiring and operating a surgical hospital in Garland, Texas (the “Garland facility”). As of August 31, 2012 and 2011, the Company had a 98.25% membership interest in the Garland facility. In August 2010, the Board of Directors of the Company approved a plan to dispose of the Garland facility. The Company closed the Garland facility on September 30, 2011, and accordingly, its operations for the year ended August 31, 2012 and 2011 continue to be classified as discontinued operations.

Corporate Division

From March 1, 2009 to February 28, 2011, Dynacq Huai Bei Healthcare, Inc. (“Dynacq-Huai Bei”), a wholly owned subsidiary of the Company provided healthcare management services to the Second People’s Hospital in Rui An, China. The Company organized Dynacq-Huai Bei in April 2008 under the laws of the People’s Republic of China. Dynacq-Huai Bei was responsible for funding any operating deficits, and is to be rewarded with any operating profits, of that hospital during the management period. Due to continued losses at the Second People’s Hospital, the Company terminated the management agreement with the Rui An City Department of Health. The Company ceased providing healthcare management services to the Second People’s Hospital as of February 28, 2011. The Company wrote off the fixed assets and inventory balances as of February 28, 2011, and does not expect any further losses due to the termination of this management agreement related to the Second People’s Hospital. We have accounted for the operations of Dynacq-Huai Bei and Second People’s Hospital in Rui An, China as discontinued operations.

Dynacq-Huai Bei and the Rui An City Department of Health had also previously entered into an agreement assigning to Dynacq-Huai Bei the right to manage the Third People’s Hospital in Rui An, which hospital is currently under construction. Dynacq-Huai Bei and the Rui An City Department of Health, in November 2010, mutually agreed to terminate this agreement due to continued delays in the construction of the Third People’s Hospital. Accordingly, Dynacq-Huai Bei will not manage the Third People’s Hospital.

The Company also organized Sino Bond Inc. Limited, a Hong Kong corporation (“Sino Bond”) to hold and manage investments in Hong Kong. Sino Bond invests in debt and equity securities in Europe and Asia, including initial public offerings and pre-initial public offerings.

During the fiscal year ended August 31, 2009, the Company invested approximately $9.1 million of its available cash in marketable securities. During the quarter ended August 31, 2011, one of these marketable securities with a book cost of $700,000 was called for a gain of $1.3 million. As of August 31, 2012, the balance of these securities is valued at approximately $16.8 million. The Company intends to hold these for a minimum period of an additional 12 months, except for one particular security that was called subsequent to the year ended August 31, 2012. During the year ended August 31, 2012 and 2011, the Company also traded in initial public offerings of equity securities on the Hong Kong Stock Exchange and had losses of $318,206 and $364,721, respectively.

Reclassification

Certain previously reported financial information has been reclassified to conform to the current year’s presentation. The impact of such reclassification was not significant to the prior year’s overall presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for annual financial information and with the instructions to Form 10-K and Article 3 and 3-A of Regulation S-X. The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as general and administrative by the Company would include the corporate office costs, which were approximately $5.9 million and $8.3 million for the fiscal years 2012 and 2011, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant of the Company’s estimates is the determination of revenue to recognize for the services the Company provides and the determination of the contractual allowance. See “Revenue Recognition” below for further discussion. Actual results could differ materially from those estimates used in preparation of these financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Investments in Available-for-Sale and Trading Securities

The Company has invested in various bonds. These investments are classified as available-for-sale securities, and are carried at fair value as of August 31, 2012 and 2011, based on the quoted market prices as of that date. These investments are subject to default risk. The Company intends to hold these for a minimum period of an additional 12 months. Unrealized gains in the fair value are reported in accumulated other comprehensive income, net of related income tax effect. The Company regularly monitors its investment portfolio for any decline in fair value that is other than temporary and records any such impairment as an impairment loss. The determination on the gain or loss on the sale of any security is specific identification method.

The Company also invests in initial public offerings of equity securities on the Hong Kong Stock Exchange. These investments are classified as trading securities, and are carried at fair value as of August 31, 2012. These investments are subject to fluctuations in the market price. During the year ended August 31, 2012 and 2011, the Company had a net loss of $318,206 and $364,721 in trading of these securities, respectively.

Investment in Real Estate and Note Payable

In March 2010, the Company purchased an apartment in Hong Kong as an investment for $2,014,207. This apartment was used as a security to obtain an 18-year mortgage loan of $1,245,775 from a financial institution, with a variable interest rate at the lower of 3-month Hang Seng Interbank Offered Rates plus 0.7% or 2.9% below the Hong Kong Dollar best lending rate quoted by the financial institution. The effective interest rate at August 31, 2012 was 1.12%. The Company has paid down $64,114 and $63,709 during the fiscal year ended August 31, 2012 and 2011, respectively, and the current and long-term portions of the note payable as of August 31, 2012 are $64,558 and $1,027,057, respectively. For the fiscal year ended August 31, 2012 and 2011, depreciation expense associated with the apartment was $51,646 in each year. Subsequent to the year ended August 31, 2012, this apartment was sold for a gain of approximately $480,000.

In November 2011 and September 2010, the Company borrowed $116,339 and $65,000 as notes payable from a financial institution at an interest rate of 4.5% and 6%, which notes are to be repaid in 36 and 24 monthly installments, respectively, and are secured by specific equipments purchased at our Pasadena facility. The Company has paid down $64,182 and $28,850 during the year ended August 31, 2012 and 2011, respectively, and the current and long-term portions of the notes payable as of August 31, 2012 are $47,129 and $41,178, respectively.

Inventories

Inventories, consisting primarily of medical supplies, are stated at the lower of cost or market, with cost determined by use of the average cost method.

Property and Equipment

Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Expenditures which extend the physical or economic life of the assets are capitalized and depreciated.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from five to 39 years. The Company has classified its assets into three categories. The categories are listed below, along with the useful life and the weighted average useful life for each category.

	Useful Life
Land		N/A
Buildings and improvements		39 years
Equipment, furniture and fixtures		5 years

The Company also leases equipment under capital leases. Such assets are amortized on a straight-line basis over the lesser of the term of the lease or the remaining useful life of the assets.

Impairment of Long-lived Assets

In accordance with ASC Topic 360-10-05, “Impairment or Disposal of Long-Lived Assets”, the Company evaluates the carrying value of property, plant and equipment and definite-lived assets whenever a change in circumstances indicates that the carrying value may not be recoverable from the undiscounted future cash flows from operations. If an impairment exists, the net book values are reduced to fair values as warranted.

In August 2010, the Board of Directors of the Company approved a plan to dispose of the Pasadena and Garland facilities due to continued operating losses. Both facilities have experienced decreases in net patient revenues and number of cases, generally attributable to the loss of physicians from our medical staffs resulting in fewer elective surgeries. The opening of a new hospital near our Garland facility had a direct adverse impact on our ability to retain members of the medical staff at that facility and consequently on our patient volume. Neither of these facilities is currently profitable, and the Board of Directors believed this plan of disposal was in the Company’s best interest.

The Company closed the Garland facility on September 30, 2011. The Company signed a commercial contract of sale on March 7, 2013 to sell its Garland facility. The sale is expected to close in May 2013. Based on the sales price, the Company has taken an impairment charge of approximately $1.1 million as of August 31, 2012. This facility belongs to the U.S. Division.

The Company obtained an independent appraisal for the Pasadena facility in October 2012, and based on the hospital’s valuation, expected sale proceeds, and expected cash flows, has determined that there is no impairment charge required in connection with the foregoing operating and/or disposal activities.

Fair Value of Financial Instruments

On September 1, 2008, the Company adopted ASC Topic 825-10-25, “Financial Instruments” (formerly referred to as SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”)), which permits entities to choose to measure certain financial assets and liabilities at fair value. The adoption of ASC Topic 825-10-25 had no impact on the consolidated financial statements because the Company did not elect the fair value option for any financial assets or financial liabilities that were not already recorded at fair value.

On September 1, 2008, the Company adopted ASC Topic 820, “Fair Value Measurements and Disclosures” (formerly referred to as SFAS 157) for our financial assets and liabilities. Management uses the fair value hierarchy of ASC Topic 820, which gives the highest priority to quoted prices in active markets. The fair value of financial instruments is estimated based on market trading information, where available. Absent published market values for an instrument or other assets, management uses observable market data to arrive at its estimates of fair value. Management believes that the carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value. ASC Topic 820 defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted price for identical or similar assets and liabilities in markets that are not active; or other input that are observable or can be corroborated by observable market data.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance related to fair value disclosure requirements. The new guidance resulted in a change in the Company’s accounting policy effective March 1, 2010. Under this guidance, companies will be required to make additional disclosures concerning significant transfers of amounts between the Level 1 and Level 2 fair value disclosures, as well as further disaggregation of the types of activity that were previously disclosed in the rollforward of Level 3 fair value disclosures. Further, the guidance clarifies the level of aggregation of assets and liabilities within the fair value hierarchy that may be presented. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of August 31, 2012, segregated among the appropriate levels within the fair value hierarchy:

	Quoted prices in active markets for identical		Significant other observable inputs		Significant unobservable
	(Level 1)		(Level 2)		(Level 3)
Assets
Investments available-for-sale	$	—	$	16,828,886	$	—
Trading securities		1,280,518		—		—

The Company’s investments in Level 1 are in equity stocks at a cost of $2,047,390. The Company’s investments in Level 2 are in perpetual bonds traded on the European markets, at a cost of $8,435,146.

Revenue Recognition

Background

The Company’s revenue recognition policy is significant because net patient service revenue is a primary component of its results of operations. Revenue is recognized as services are delivered. The determination of the amount of revenue to be recognized in connection with the Company’s services is subject to significant judgments and estimates, which are discussed below.

Revenue Recognition Policy

The Company has established billing rates for its medical services which it bills as gross revenue as services are delivered. Gross billed revenues are then reduced by the Company’s estimate of the discount (contractual allowance) to arrive at net patient service revenues. Net patient service revenues may not represent amounts ultimately collected. The Company adjusts current period revenue for actual differences in estimated revenue recorded in prior periods and actual cash collections.

The table below sets forth the percentage of our gross patient service revenue by financial class for our Pasadena facility for the fiscal years 2012 and 2011:

	2012			2011
Workers’ Compensation		11	%		26	%
Commercial		40	%		39	%
Medicare		28	%		17	%
Medicaid		1	%		1	%
Self-Pay		16	%		13	%
Other		4	%		4	%

Contractual Allowance

The Company computes its contractual allowance based on the estimated collections on its gross billed charges. The Company computes its estimate by taking into account collections received, up to 30 days after the end of the period, for the services performed and also estimating amounts collectible for the services performed within the last six months. The following table shows gross revenues and contractual allowances for our Pasadena facility for fiscal years 2012 and 2011:

	2012			2011
Gross billed charges	$	19,619,903		$	22,138,821
Contractual allowance (1)		14,088,670			24,116,028
Net revenue	$	5,531,233		$	(1,977,207	)
Contractual allowance percentage (1)		72	%		109	%

⁽¹⁾ The contractual allowance percentage, excluding the stop-loss fee dispute amount booked in the quarter ended May 31, 2011, which is discussed below, would have been 63% for the year ended August 31, 2011.

A significant amount of our net revenue results from Texas workers’ compensation claims, which are governed by the rules and regulations of the Texas Department of Workers’ Compensation (“TDWC”) and the workers’ compensation healthcare networks. If our hospital chooses to participate in a network, the amount of revenue that will be generated from workers’ compensation claims will be governed by the network contract.

For claims arising prior to the implementation of workers’ compensation networks and out of network claims, inpatient and outpatient surgical services are either reimbursed pursuant to the Acute Care In-Patient Hospital Fee Guideline or at a “fair and reasonable” rate for services in which the fee guideline is not applicable. Starting March 1, 2008, the Texas Workers’ Compensation 2008 Acute Care Hospital Outpatient and Inpatient Facility Fee Guidelines (the “Guidelines”) became effective. Under these Guidelines, the reimbursement amounts are determined by applying the most recently adopted and effective Medicare reimbursement formula and factors; however, if the maximum allowable reimbursement for the procedure performed cannot be calculated using these Guidelines, then reimbursement is determined on a fair and reasonable basis.

Based on these Guidelines, the reimbursement due the Company for workers’ compensation cases is lower than we previously experienced. The Company has continued accepting Texas workers’ compensation cases, and has not made any substantial changes in its focus towards such cases. Our net patient service revenue for Texas workers’ compensation cases as a percentage of gross billings has decreased primarily as a result of lower reimbursement rates for workers’ compensation procedures still being performed.

Should we disagree with the amount of reimbursement provided by a third-party payer, we are required to pursue the MDR process at the TDWC to request proper reimbursement for services. From January 2007 to November 2008, the Company had been successful in its pursuit of collections regarding the stop-loss cases pending before the State Office of Administrative Hearings (“SOAH”), receiving positive rulings in over 90% of its claims presented for administrative determination. The 2007 district court decision upholding our interpretation of the statute as applied to the stop-loss claims was appealed by certain insurance carriers, and on November 13, 2008 the Third Court of Appeals determined that in order for a hospital to be reimbursed at 75% of its usual and customary audited charges for an inpatient admission, the hospital must not only bill at least $40,000, but also show that the admission involved unusually costly and unusually extensive services. Procedurally, the decision means that each case where a carrier raised an issue regarding whether the services provided were unusually costly or unusually extensive would be remanded to either SOAH or MDR for a case-by-case determination of whether the services provided meet these standards, once the definitions of those standards are determined. As a result of the Third Court of Appeals opinion, any stop-loss cases pending at SOAH have been remanded to the TDWC since these cases have not been reviewed or decided by the two-prong standard decided by the Third Court of Appeals. The SOAH Administrative Law judges determined that the most appropriate location for these cases is the TDWC, pending a final, non-appealable decision.

A petition asking the Texas Supreme Court to review the Third Court of Appeals decision has been denied. Therefore, the Company is bound by the Third Court of Appeals decision. The Texas Supreme Court’s decision has further delayed final adjudication in these pending stop-loss cases. The uncertain outcome in these cases will depend on a very lengthy process. We anticipate further, lengthy litigation at the Travis County District Courts and the Texas Courts of Appeals. Because of this lengthy process and the uncertainty of recovery in these cases, collection of a material amount of funds in these pending stop-loss cases is not anticipated during the 2013 fiscal year.

Through August 2012, insurance carriers have voluntarily paid the awards in the decisions and orders issued by SOAH, plus interest, in approximately 180 cases, involving approximately $11 million in claims. In most of these cases, the carriers have requested refunds of the payments made in the event that the SOAH decisions and orders are reversed on appeal. Our request that the TDWC Commissioner enforce the awards which were not voluntarily paid by the carriers was refused in approximately 130 cases. Motions filed seeking a refund in some cases in which the awards were voluntarily paid have been granted and the Company has been ordered to refund approximately $3.7 million, including prejudgment interest, pending remand for a case-by-case determination of whether the services provided were unusually costly and unusually extensive. In fiscal year 2011, the Company deposited these amounts as cash deposits into the registry of the court in order to stay execution of the judgments ordering refunds. Additionally, the Company has deposited $204,000 in September 2012 for another year’s interest in order to continue to stay execution of the judgments ordering refunds. We anticipate that similar motions requesting remand and a refund for awards voluntarily paid will be filed and will likely be granted by the 345th Judicial District Court of Travis County, Texas. If and when these additional motions are granted, the Company will be ordered to refund an additional $7.7 million, not including prejudgment interest. The Company has appealed the judgments requiring a refund to the carriers. The briefs of the parties have been filed with the court of appeals and the Company is now waiting for the court of appeals to act on the appeals. While the appeals are pending, the adjudication of those cases remanded for determinations of whether the services provided were unusually costly and unusually extensive will continue. Voluntary payments made pursuant to the Decisions and Orders are premature payments by the carriers and may be ordered to be refunded. Once the Company is given the opportunity to present its evidence regarding whether the services provided were unusually costly and unusually extensive, the Company anticipates that it will prevail in the underlying stop-loss fee disputes and that payments refunded to the carriers will be recaptured.

Due to the uncertainties associated with these stop-loss fee dispute cases, in fiscal year 2011, the Company recognized an increase of $10,254,990 in the contractual allowance at our Pasadena facility (and an additional loss of $779,583 in the contractual allowance at our Garland facility, which is classified as discontinued operations), and $1,751,478 in interest expense at our Pasadena facility (and an additional interest expense of $132,339 at our Garland facility). The increase in the contractual allowance resulted in the $1,977,207 negative revenue for the Pasadena facility for the year ended August 31, 2011.

Claims regarding payment for ambulatory surgical center and hospital outpatient services remain pending at the TDWC. It is expected that these claims will be adjudicated at SOAH and possibly in the Texas district and appellate courts. The basis for reimbursement for these services made the subject of these pending cases is the determination of “fair and reasonable” charges. In 2007, we received unfavorable rulings from SOAH in all of our appeals of unfavorable decisions related to services provided in 2001 and 2002. The 179 cases, which have been appealed to the Travis County district courts, challenge the constitutionality of the relevant statutory language. The Company received an unfavorable ruling in its lead case in March 2009, which ruling was appealed to and was upheld by the Third Court of Appeals on August 26, 2010. The Texas Supreme Court denied a petition asking for review of the Third Court of Appeals decision. The unfavorable interpretation by the Texas Courts of Appeal in our lead case negatively affects the recovery of additional reimbursement, not only in the lead case, but in the remaining 178 pending cases. Consequently, the Company is bound by the Third Court of Appeals’ ruling that interprets the applicable statute and fee guideline to require that the amount that will be paid to a provider must not only be at a “fair and reasonable rate” but also must “ensure the quality of medical care” and “achieve effective cost control” and be the same or less than that charged to others with an equivalent standard of living. This ruling will impact cases in which a fee guideline was not applicable, specifically all pending cases involving ambulatory surgical services provided from 2001 through 2004 as well as all pending cases involving hospital outpatient services provided prior to March 1, 2008, when the Guidelines took effect. Since the Third Court of Appeals’ unfavorable ruling, collection, if any, in these cases depends on the Company’s ability to establish the criteria in this ruling. The Company was given the opportunity to establish the criteria in approximately 80 cases, which were set for hearing on the merits from March through May 2012 and was unsuccessful. Additionally, the Company will have the opportunity to continue to establish the criteria in several thousand cases currently pending at SOAH during the 2013 fiscal year.

Due to the uncertainties regarding the accounts receivable in the MDR process, the 2008 and 2010 Third Court of Appeals’ opinions and our legal counsel’s advice that settlements with insurance carriers have virtually stopped, the Company had fully reserved all accounts receivable related to the MDR process as of August 31, 2008. Any monies collected for these MDR accounts receivable will be recorded as current period’s net patient service revenues.

Accounts Receivable

Accounts receivable represent net receivables for services provided by the Company. At each balance sheet date management reviews the accounts receivable for collectibility.

The contractual allowance stated as a percentage of gross receivables at the balance sheet dates is larger than the contractual allowance percentage used to reduce gross billed charges due to the application of partial cash collections to the outstanding gross receivable balances, without any adjustment being made to the contractual allowance. The contractual allowance amounts netted against gross receivables are not adjusted until such time as the final collections on an individual receivable are recognized.

Sources of Revenue and Reimbursement

The focal point of our business is providing patient care services, including complex orthopedic and bariatric procedures. The Company pursues optimal reimbursement from third-party payers for these services. We do not normally participate in managed care or other contractual reimbursement agreements, principally because they limit reimbursement for the medical services provided. This business model often results in increased amounts of reimbursement for the same or similar procedure, as compared to other healthcare providers. However, there are no contractual or administrative requirements for “prompt payment” of claims by third-party payers within a specified time frame. As a result, the Company has tended to receive higher amounts of per-procedure reimbursement than that which may be received by other healthcare providers performing similar services. Conversely, despite the increased reimbursement, we may take additional time to collect the expected reimbursement from third-party payers. The Company has been participating in managed care contracts since the first quarter of fiscal 2006 and anticipates entering into additional contracts in the future. So far these contracts have not resulted in any meaningful patient revenues. Increased participation in managed care contracts and programs may decrease the per-procedure reimbursement that the Company collects in the future for similar services.

In addition to the fact that our collection process may be longer than other healthcare providers because of our focus on workers’ compensation and other commercial payers, the collection process can be extended due to our efforts to obtain all optimal reimbursement available to the Company. Specifically, for medical services provided to injured workers, the Company may initially receive reimbursement that may not be within the fee guidelines or regulatory guidelines mandating reimbursement. For such cases in which third-party payers did not provide appropriate reimbursement pursuant to these guidelines, the Company pursues further reimbursement. The Company reviews and pursues those particular claims that are determined to warrant additional reimbursement pursuant to the fee or regulatory guidelines. The Company’s pursuit of additional reimbursement amounts that it believes are due under fee or regulatory guidelines may be accomplished through established dispute resolution procedures with applicable regulatory authorities.

Surgeries are typically not scheduled unless they are pre-authorized by insurance carrier for medical necessity, with the exception of Medicare, Medicaid and self-pay surgeries. After the surgery, the Company’s automated computer system generates a statement of billed charges to the third-party payer. At that time, the Company also requests payment from patients for any remaining amounts that are the responsibility of the patient. In cases where a commercial insurance payers’ pre-approval is not approved subsequently, those accounts receivable may be classified to self-pay. Historically, such classifications have not been significant.

Discontinued Operations

Revenue Recognition Policy

In China, the local government Department of Health establishes billing rates for a hospital’s sale of prescription medication and medical services. A majority of the services provided by Second People’s Hospital is to cash pay patients, who pay for the services in advance. For services provided under the local government’s social healthcare insurance program, we are generally paid at approximately 95% of billed charges two to three months after the date of service. The remaining 5% of billed charges is evaluated by the local government Department of Health on a semi-annual basis and may be paid to the hospital after that evaluation is complete. As of February 28, 2011, the Company terminated the management agreement with the Rui An City Department of Health. The Company had bad debt expenses of $24,755 for the six months ended February 28, 2011, related to denials under the social healthcare insurance program. Since the amount of bad debt expense is minimal, it has been included with Other Operating Expenses in the income statement.

Accounts Receivable

Accounts receivable represent net receivables for services provided by the Company. At each balance sheet date management reviews the accounts receivable for collectibility.

Stock Based Compensation

Under ASC Topic 718, Stock Compensation, the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense attributed is based on estimated forfeiture rate, which is updated based on actual forfeitures as appropriate. This option pricing model requires the input of highly subjective assumptions, including the expected volatility of our common stock, pre-vesting forfeiture rate and an option’s expected life. The financial statements include amounts that are based on the Company’s best estimates and judgments.

Advertising Costs

Advertising and marketing costs in the amounts of $162,000 and $2,412,000 for the years ending August 31, 2012 and 2011, respectively, were expensed as incurred. The marketing cost for the year ended August 31, 2011 included $1,050,000 for estimated marketing expenses that were supposed to be incurred in fiscal years 2012 and 2013 based on a contract with Kenkon Limited, which expires in May 2013 (The Company believed that the proposed businesses being pursued in China and Hong Kong would eventually be beneficial; however, due to no immediate project in an advanced stage, the Company had expensed the contractual obligation through the entire term of the contract as of August 31, 2011). In fiscal year 2012, the Company reversed $870,000 of marketing costs that were expensed and accrued for in fiscal year 2011, since the amounts were determined to be not payable. In addition, the Company had advertising and marketing costs in the amounts of $-0- and $125,000 for the years ending August 31, 2012 and 2011, respectively, for its discontinued operations, which were also expensed as incurred.

Income Taxes

The Company uses the liability method in accounting for income taxes. Under this method, deferred tax liabilities or assets are determined based on differences between the income tax basis and the financial reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. If the Company is uncertain about its ability to recognize benefit from net operating losses, it records a valuation allowance against deferred tax assets.

Noncontrolling Interest

The equity of minority investors (minority investors are generally physician groups and other healthcare providers that perform surgeries at the Company’s facilities) in certain subsidiaries of the Company is reported on the consolidated balance sheets as noncontrolling interest. Noncontrolling interest reported in the consolidated income statements reflect the respective interests in the income or loss of the limited partnerships or limited liability companies attributable to the minority investors (equity interests ranged from 1% to 1.75% during the fiscal year ended August 31, 2012). During 2011, the Company purchased noncontrolling interests at an amount that was $98,350 more than the net book value of the noncontrolling interest liability on the date of purchase. The $98,350 loss has been included in Rent and Other Income in the accompanying consolidated statement of operations for the year ended August 31, 2011.

The following table sets forth the activity in the noncontrolling interest liability account for the fiscal years ending August 31, 2012 and 2011:

Balance August 31, 2010	$	79,595
Loss allocated to noncontrolling interest holders		(15,978	)
Distribution to noncontrolling interest holders		(98,350	)
Loss on purchase of noncontrolling interest		98,350
Balance August 31, 2011		63,617
Loss allocated to noncontrolling interest holders		(47,358	)
Capital contributions from / distributions to new noncontrolling interest holders, net		50,000
Balance August 31, 2012	$	66,259

Net Income (Loss) per Share

Basic net income (loss) per share has been computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share has been calculated to give effect to the dilutive effect of common stock equivalents consisting of stock options and warrants in years in which the Company has income.

Foreign Currency Translation

The functional currency of the Company as a whole is the U.S. Dollar. The Company has designated the Chinese Yuan Renminbi as the functional currency for Dynacq-Huai Bei in mainland China, and the U.S. Dollar for Sino Bond in Hong Kong. Assets and liabilities are translated into U.S. dollars using current exchange rates as of the balance sheet date. Income and expense are translated at average exchange rates prevailing during the period. The effects of foreign currency translation adjustments are included as a component of Accumulated Other Comprehensive Income within stockholders’ equity.

Recent Accounting Pronouncements

Presentation of Comprehensive Income: In June 2011, the FASB amended its guidance governing the presentation of comprehensive income. The amended guidance eliminates the option to report other comprehensive income and its components in the statement of changes in equity. Under the new guidance, an entity can elect to present items of net income and other comprehensive income in one continuous statement referred to as the statement of comprehensive income or in two separate, but consecutive, statements. While the options for presenting other comprehensive income change under the guidance, other portions of the current guidance will not change. For public entities, these changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact on our consolidated financial position or results of operation.

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Comprehensive Loss and Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Aug. 31, 2012

Comprehensive Loss and Accumulated Other Comprehensive Income [Abstract]

Summary other comprehensive income

	2012			2011
				(Restated)
Net loss	$	(12,151,496	)	$	(21,016,125	)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of taxes of $(12,530) and $315,465, respectively		(23,268	)		585,864
Reclassification adjustment for foreign currency gains included in net income, net of taxes of $(501,273) and $-0-, respectively		(921,318	)		—
Change in valuation of investment available-for-sale, net of taxes of $(3,500,481) and $(1,427,334), respectively		1,910,234			(2,650,763	)
Reclassification adjustment for gains on call of investment available-for-sale included in net income, net of taxes of $-0- and $455,000, respectively		—			845,000
Total other comprehensive loss, net of taxes		(11,185,848	)		(22,236,024	)
Comprehensive loss attributable to the noncontrolling interest		—			—
Comprehensive loss attributable to Dynacq Healthcare, Inc.	$	(11,185,848	)	$	(22,236,024	)

Components of accumulated other comprehensive income

	August 31, 2012		August 31, 2011
Foreign currency translation adjustment, net of taxes of $4,414 and $518,217, respectively	$	8,196	$	952,782
Change in valuation of investment available-for-sale, net of taxes of $-0- and $3,500,481, respectively		8,411,128		6,500,894
Total accumulated other comprehensive income, net of taxes of $4,414 and $4,018,698, respectively	$	8,419,324	$	7,453,676

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Significant Accounting Policies (Details 2)	Aug. 31, 2012	Aug. 31, 2011
Self-Pay [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	16.00%	13.00%
Workers' compensation [Member] | Third-Party Payor [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	11.00%	26.00%
Commercial [Member] | Third-Party Payor [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	40.00%	39.00%
Medicare [Member] | Third-Party Payor [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	28.00%	17.00%
Medicaid [Member] | Third-Party Payor [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	1.00%	1.00%
Other [Member] | Third-Party Payor [Member]
Product Information [Line Items]
Percentage of gross patient service revenue	4.00%	4.00%

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Income Taxes (Details 3) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Reconciliation of the benefit for statutory federal income tax rate to income before income taxes and noncontrolling interests
Benefit for income taxes computed using the statutory rate of 35%	$ (2,294,590)	$ (6,561,039)
State income taxes, net of federal benefit		(1,950)
Noncontrolling interest in loss of consolidated subsidiaries	16,575	5,592
Non-deductible expenses	(442,620)	134,860
Changes in valuation allowance	6,739,334	5,065,069
Total income tax benefit	$ 4,018,699	$ (1,357,468)

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Industry Segments and Geographic Information (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2009
Noncontrolling Interest [Line Items]
Loss on the initial public offerings of equity securities	$ (317,206)	$ 935,279
Industry segments and geographic information (Textual) [Abstract]
Period of sale not consummated		12 months
Investment in marketable securities			9,100,000
Book cost marketable securities		700,000
Gain from marketable securities		1,300,000
Balance from marketable securities	16,828,886	18,722,274
Closing cost	625,000
Impairment charge	1,100,000
HONG KONG [Member]
Noncontrolling Interest [Line Items]
Loss on the initial public offerings of equity securities	$ 318,206	$ 364,721

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Consolidated Balance Sheets (USD $)	Aug. 31, 2012	Aug. 31, 2011
Current assets:
Cash and cash equivalents	$ 10,638,217	$ 24,315,160
Accounts receivable, net of contractual allowances of approximately $187,478,000 and $188,513,000 at August 31, 2012 and 2011, respectively	797,964	1,192,279
Inventories	408,961	550,441
Trading securities	1,280,518	1,471,644
Interest receivable	167,229	192,366
Prepaid expenses	423,659	272,414
Income tax receivable	569,430	569,430
Assets of discontinued operations	5,401,092	6,909,527
Total current assets	19,687,070	35,473,261
Investments available-for-sale	16,828,886	18,722,274
Investment in real estate, net	1,889,395	1,941,041
Property and equipment, net	6,655,820	7,168,864
Income tax receivable	868,249	868,249
Other assets	255,876	255,517
Total assets	46,185,296	64,429,206
Current liabilities:
Accounts payable	2,271,436	2,346,720
Accrued liabilities	11,763,362	18,430,553
Current portion of notes payable	105,735	97,918
Current portion of capital lease obligations	101,696	94,044
Liabilities of discontinued operations		604,302
Total current liabilities	14,242,229	21,573,537
Non-current liabilities:
Long-term portion of notes payable	1,074,187	1,093,961
Long-term portion of capital lease obligations	87,465	189,161
Total liabilities	15,403,881	22,856,659
Commitments and contingencies
Dynacq stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued or outstanding
Common stock, $.001 par value; 100,000,000 shares authorized, 14,543,626 and 14,426,960 shares issued at August 31, 2012 and 2011, respectively	14,544	14,427
Additional paid-in capital	10,172,794	9,780,837
Accumulated other comprehensive income	8,419,324	7,453,676
Retained earnings	12,108,494	24,259,990
Total Dynacq stockholders' equity	30,715,156	41,508,930
Non-controlling interest	66,259	63,617
Total equity	30,781,415	41,572,547
Total liabilities and equity	$ 46,185,296	$ 64,429,206

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Property and Equipment (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Property And Equipment (Textual) [Abstract]
Depreciation expense	$ 550,643	$ 568,069

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Consolidated Statements of Stockholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Consolidated Statements of Stockholders' Equity [Abstract]
Foreign currency translation adjustment, net of taxes	$ (12,530)	$ 315,465
Unrealized gains (loss) on securities available-for-sale, net of taxes	(3,500,481)	(972,334)
Reclassification adjustment for foreign currency gains included in net income, net of taxes	$ (501,273)	$ 0

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Stockholders Equity and Stock Option Plan (Details Textual) (USD $)	1 Months Ended	12 Months Ended			1 Months Ended					1 Months Ended	12 Months Ended
	Jul. 07, 2011	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012 Stock Option [Member]	Feb. 06, 2012 Year 2011 Stock Incentive Plan [Member]	Jan. 12, 2012 Year 2011 Stock Incentive Plan [Member]	Nov. 14, 2011 Year 2011 Stock Incentive Plan [Member] Employee	Aug. 31, 2012 Year 2011 Stock Incentive Plan [Member]	Aug. 31, 2011 Year 2011 Stock Incentive Plan [Member]	Jul. 07, 2011 Year 2000 Stock Incentive Plan [Member]	Aug. 31, 2012 Year 2000 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares reserved									15,000,000		5,000,000
Stock options granted		1,450,000			1,000,000	250,000	200,000			1,400,000
Weighted Average Option Exercise Price Per Share					$ 1.00	$ 1.10	$ 1.07
Number of employees stock options granted							2
Share Based Compensation Arrangement By Share Based Payment Award Options Vesting Period					5 years	10 years	5 years			10 years
Stock options vested in annual installments beginning on the first anniversary date						25.00%				25.00%
Shares to be issued upon exercise of outstanding options								1,050,000			1,740,566
Shares to be issued under after giving effect to shares issued and canceled								13,950,000
New stock option awards issued											0
Weighted average exercise price of stock options		$ 1.03								$ 1.89
Share Based Compensation Arrangement By Share Based Payment Award Options Vesting Period Minimum										5 years
Share Based Compensation Arrangement By Share Based Payment Award Options Vesting Period Maximum										10 years
Percentage of stock options exercisable in annual installments beginning on the first anniversary date										25.00%
Total unrecognized compensation expense for outstanding stock options				$ 1,043,000
Stockholders Equity And Stock Option Plan (Textual) [Abstract]
Shares of undesignated preferred stock authorized		5,000,000	5,000,000
Preferred Stock, Shares Issued
Preferred Stock, Shares Outstanding
Treasury shares purchased		0	0
Stock options exercised			0
Stock-based compensation expense associated with the Company's stock options		$ 325,408	$ 276,463
Weighted average number of years to recognize the compensation expense		1 year 8 months 12 days
Employee service share based compensation nonvested stock options compensation cost not yet recognized period		3 years 2 months 12 days
Earning potential of an employee from granting performance share award	1,500,000

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Industry Segments and Geographic Information (Tables)

12 Months Ended

Aug. 31, 2012

Industry Segments and Geographic Information [Abstract]

Schedule of revenues from concerning operations of business segments

	Year Ended August 31,
	2012			2011
Revenues from external customers
Net patient service revenues
U.S. Division	$	5,531,233		$	(1,977,207	)
Corporate		—			—
Consolidated	$	5,531,233		$	(1,977,207	)
Loss before taxes and discontinued operations
U.S. Division	$	(4,040,738	)	$	(13,809,269	)
Corporate		(2,515,232	)		(4,936,556	)
Consolidated	$	(6,555,970	)	$	(18,745,825	)

Schedule of assets from concerning operations of business segments

	August 31,
	2012		2011
			(Restated)
Total Assets
U.S. Division	$	8,072,893	$	8,763,015
Corporate		32,711,311		48,756,664
Assets of continuing operations		40,784,204		57,519,679
Assets of discontinued operations		5,401,092		6,909,527
Consolidated	$	46,185,296	$	64,429,206

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Comprehensive Loss and Accumulated Other Comprehensive Income (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Comprehensive Loss and Accumulated Other Comprehensive Income (Textual) [Abstract]
Foreign currency translation adjustment, net of taxes	$ (12,530)	$ 315,465
Reclassification adjustment for foreign currency gains included in net income, net of taxes	(501,273)	0
Change in valuation of investment available-for-sale, net of taxes	(3,500,481)	(1,427,334)
Reclassification adjustment for gains on call of investment available-for-sale included in net income, net of taxes	0	455,000
Foreign currency translation adjustment, net of taxes	4,414	518,217
Change in valuation of investment available-for-sale, net of taxes	0	3,500,481
Total accumulated other comprehensive income, net of taxes	$ 4,414	$ 4,018,698

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Restatement

12 Months Ended

Aug. 31, 2012

Restatement [Abstract]

Restatement

15. Restatement

The estimated income tax refund for the year ended August 31, 2011 was overstated by $1,794,294. The following summarizes the restated amounts:

	As  Reported(1)			Difference			As Restated
Balance Sheet
Income tax receivable	$	2,363,724		$	(1,794,294	)	$	569,430
Total current assets		37,267,555			(1,794,294	)		35,473,261
Total assets		66,223,500			(1,794,294	)		64,429,206
Retained earnings		26,054,284			(1,794,294	)		24,259,990
Total Dynacq stockholders’ equity		43,303,224			(1,794,294	)		41,508,930
Total equity		43,366,841			(1,794,294	)		41,572,547
Total liabilities and equity		66,223,500			(1,794,294	)		64,429,206
Statement of Operations
Benefit for income taxes		3,151,762			(1,794,294	)		1,357,468
Loss from continuing operation		(15,594,063	)		(1,794,294	)		(17,388,357	)
Net loss		(19,237,809	)		(1,794,294	)		(21,032,103	)
Net loss attributable to Dynacq Healthcare, Inc.		(19,221,831	)		(1,794,294	)		(21,016,125	)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		(1.10	)		(0.13	)		(1.22	)
Net loss attributable to Dynacq Healthcare, Inc.		(1.36	)		(0.13	)		(1.48	)
Statement of Cash Flows
Net loss		(19,221,831	)		(1,794,294	)		(21,016,125	)
Income tax receivable		1,663,059			1,794,294			3,457,353

⁽¹⁾  The amounts are stated after reclassification of certain discontinued operations.

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Restatement (Table)

12 Months Ended

Aug. 31, 2012

Restatement [Abstract]

Schedule of restated amount in financials

	As  Reported(1)			Difference			As Restated
Balance Sheet
Income tax receivable	$	2,363,724		$	(1,794,294	)	$	569,430
Total current assets		37,267,555			(1,794,294	)		35,473,261
Total assets		66,223,500			(1,794,294	)		64,429,206
Retained earnings		26,054,284			(1,794,294	)		24,259,990
Total Dynacq stockholders’ equity		43,303,224			(1,794,294	)		41,508,930
Total equity		43,366,841			(1,794,294	)		41,572,547
Total liabilities and equity		66,223,500			(1,794,294	)		64,429,206
Statement of Operations
Benefit for income taxes		3,151,762			(1,794,294	)		1,357,468
Loss from continuing operation		(15,594,063	)		(1,794,294	)		(17,388,357	)
Net loss		(19,237,809	)		(1,794,294	)		(21,032,103	)
Net loss attributable to Dynacq Healthcare, Inc.		(19,221,831	)		(1,794,294	)		(21,016,125	)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		(1.10	)		(0.13	)		(1.22	)
Net loss attributable to Dynacq Healthcare, Inc.		(1.36	)		(0.13	)		(1.48	)
Statement of Cash Flows
Net loss		(19,221,831	)		(1,794,294	)		(21,016,125	)
Income tax receivable		1,663,059			1,794,294			3,457,353

⁽¹⁾  The amounts are stated after reclassification of certain discontinued operations.

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Significant Accounting Policies (Policies)

12 Months Ended

Aug. 31, 2012

Significant Accounting Policies [Abstract]

Business and Organization

Business and Organization

Dynacq Healthcare, Inc., a Nevada corporation (the “Company”), is a holding company that through its subsidiaries in the United States develops and manages general acute care hospitals that principally provide specialized surgeries. The Company through its subsidiaries in China and Hong Kong also (1) provided healthcare management services to a hospital in China until February 28, 2011; and (2) invests in debt and equity securities, including short-term investments in initial public offerings and pre-initial public offerings. The Company through its United States subsidiaries (1) owns and operates one general acute care hospital in Pasadena, Texas and (2) owns one general acute care hospital in Garland, Texas, which was closed on September 30, 2011, and accordingly this business is classified as “Discontinued Operations” for the year ended August 31, 2012 and 2011 (see Note 3 — Discontinued Operations below). The Company is currently composed of two divisions: U.S. and Corporate.

The Company was incorporated under the laws of the State of Nevada in 1992. The Company was reincorporated in Delaware in November 2003 and reincorporated back in Nevada in August 2007.

U.S. Division

In the United States, the Company manages and operates one general acute care hospital that principally provides specialized surgeries such as bariatric, orthopedic and neuro-spine surgeries.

In May 1998, Vista Community Medical Center, L.L.C., a Texas limited liability company, was organized for the purpose of operating a hospital (the “Pasadena facility”). In June 2003, the Pasadena facility was converted to a limited liability partnership. As of August 31, 2012 and 2011, the Company through its subsidiaries had a 99% and 100%, respectively, ownership interest in the Pasadena facility.

In July 2003, Vista Hospital of Dallas, LLP was organized for the purposes of acquiring and operating a surgical hospital in Garland, Texas (the “Garland facility”). As of August 31, 2012 and 2011, the Company had a 98.25% membership interest in the Garland facility. In August 2010, the Board of Directors of the Company approved a plan to dispose of the Garland facility. The Company closed the Garland facility on September 30, 2011, and accordingly, its operations for the year ended August 31, 2012 and 2011 continue to be classified as discontinued operations.

Corporate Division

From March 1, 2009 to February 28, 2011, Dynacq Huai Bei Healthcare, Inc. (“Dynacq-Huai Bei”), a wholly owned subsidiary of the Company provided healthcare management services to the Second People’s Hospital in Rui An, China. The Company organized Dynacq-Huai Bei in April 2008 under the laws of the People’s Republic of China. Dynacq-Huai Bei was responsible for funding any operating deficits, and is to be rewarded with any operating profits, of that hospital during the management period. Due to continued losses at the Second People’s Hospital, the Company terminated the management agreement with the Rui An City Department of Health. The Company ceased providing healthcare management services to the Second People’s Hospital as of February 28, 2011. The Company wrote off the fixed assets and inventory balances as of February 28, 2011, and does not expect any further losses due to the termination of this management agreement related to the Second People’s Hospital. We have accounted for the operations of Dynacq-Huai Bei and Second People’s Hospital in Rui An, China as discontinued operations.

Dynacq-Huai Bei and the Rui An City Department of Health had also previously entered into an agreement assigning to Dynacq-Huai Bei the right to manage the Third People’s Hospital in Rui An, which hospital is currently under construction. Dynacq-Huai Bei and the Rui An City Department of Health, in November 2010, mutually agreed to terminate this agreement due to continued delays in the construction of the Third People’s Hospital. Accordingly, Dynacq-Huai Bei will not manage the Third People’s Hospital.

The Company also organized Sino Bond Inc. Limited, a Hong Kong corporation (“Sino Bond”) to hold and manage investments in Hong Kong. Sino Bond invests in debt and equity securities in Europe and Asia, including initial public offerings and pre-initial public offerings.

During the fiscal year ended August 31, 2009, the Company invested approximately $9.1 million of its available cash in marketable securities. During the quarter ended August 31, 2011, one of these marketable securities with a book cost of $700,000 was called for a gain of $1.3 million. As of August 31, 2012, the balance of these securities is valued at approximately $16.8 million. The Company intends to hold these for a minimum period of an additional 12 months, except for one particular security that was called subsequent to the year ended August 31, 2012. During the year ended August 31, 2012 and 2011, the Company also traded in initial public offerings of equity securities on the Hong Kong Stock Exchange and had losses of $318,206 and $364,721, respectively.

Reclassification

Reclassification

Certain previously reported financial information has been reclassified to conform to the current year’s presentation. The impact of such reclassification was not significant to the prior year’s overall presentation.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for annual financial information and with the instructions to Form 10-K and Article 3 and 3-A of Regulation S-X. The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as general and administrative by the Company would include the corporate office costs, which were approximately $5.9 million and $8.3 million for the fiscal years 2012 and 2011, respectively.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant of the Company’s estimates is the determination of revenue to recognize for the services the Company provides and the determination of the contractual allowance. See “Revenue Recognition” below for further discussion. Actual results could differ materially from those estimates used in preparation of these financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Investments in Available-for-Sale and Trading Securities

Investments in Available-for-Sale and Trading Securities

The Company has invested in various bonds. These investments are classified as available-for-sale securities, and are carried at fair value as of August 31, 2012 and 2011, based on the quoted market prices as of that date. These investments are subject to default risk. The Company intends to hold these for a minimum period of an additional 12 months. Unrealized gains in the fair value are reported in accumulated other comprehensive income, net of related income tax effect. The Company regularly monitors its investment portfolio for any decline in fair value that is other than temporary and records any such impairment as an impairment loss. The determination on the gain or loss on the sale of any security is specific identification method.

The Company also invests in initial public offerings of equity securities on the Hong Kong Stock Exchange. These investments are classified as trading securities, and are carried at fair value as of August 31, 2012. These investments are subject to fluctuations in the market price. During the year ended August 31, 2012 and 2011, the Company had a net loss of $318,206 and $364,721 in trading of these securities, respectively.

Investment in Real Estate and Note Payable

Investment in Real Estate and Note Payable

In March 2010, the Company purchased an apartment in Hong Kong as an investment for $2,014,207. This apartment was used as a security to obtain an 18-year mortgage loan of $1,245,775 from a financial institution, with a variable interest rate at the lower of 3-month Hang Seng Interbank Offered Rates plus 0.7% or 2.9% below the Hong Kong Dollar best lending rate quoted by the financial institution. The effective interest rate at August 31, 2012 was 1.12%. The Company has paid down $64,114 and $63,709 during the fiscal year ended August 31, 2012 and 2011, respectively, and the current and long-term portions of the note payable as of August 31, 2012 are $64,558 and $1,027,057, respectively. For the fiscal year ended August 31, 2012 and 2011, depreciation expense associated with the apartment was $51,646 in each year. Subsequent to the year ended August 31, 2012, this apartment was sold for a gain of approximately $480,000.

In November 2011 and September 2010, the Company borrowed $116,339 and $65,000 as notes payable from a financial institution at an interest rate of 4.5% and 6%, which notes are to be repaid in 36 and 24 monthly installments, respectively, and are secured by specific equipments purchased at our Pasadena facility. The Company has paid down $64,182 and $28,850 during the year ended August 31, 2012 and 2011, respectively, and the current and long-term portions of the notes payable as of August 31, 2012 are $47,129 and $41,178, respectively.

Inventories

Inventories

Inventories, consisting primarily of medical supplies, are stated at the lower of cost or market, with cost determined by use of the average cost method.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Expenditures which extend the physical or economic life of the assets are capitalized and depreciated.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from five to 39 years. The Company has classified its assets into three categories. The categories are listed below, along with the useful life and the weighted average useful life for each category.

	Useful Life
Land		N/A
Buildings and improvements		39 years
Equipment, furniture and fixtures		5 years

The Company also leases equipment under capital leases. Such assets are amortized on a straight-line basis over the lesser of the term of the lease or the remaining useful life of the assets.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

In accordance with ASC Topic 360-10-05, “Impairment or Disposal of Long-Lived Assets”, the Company evaluates the carrying value of property, plant and equipment and definite-lived assets whenever a change in circumstances indicates that the carrying value may not be recoverable from the undiscounted future cash flows from operations. If an impairment exists, the net book values are reduced to fair values as warranted.

In August 2010, the Board of Directors of the Company approved a plan to dispose of the Pasadena and Garland facilities due to continued operating losses. Both facilities have experienced decreases in net patient revenues and number of cases, generally attributable to the loss of physicians from our medical staffs resulting in fewer elective surgeries. The opening of a new hospital near our Garland facility had a direct adverse impact on our ability to retain members of the medical staff at that facility and consequently on our patient volume. Neither of these facilities is currently profitable, and the Board of Directors believed this plan of disposal was in the Company’s best interest.

The Company closed the Garland facility on September 30, 2011. The Company signed a commercial contract of sale on March 7, 2013 to sell its Garland facility. The sale is expected to close in May 2013. Based on the sales price, the Company has taken an impairment charge of approximately $1.1 million as of August 31, 2012. This facility belongs to the U.S. Division.

The Company obtained an independent appraisal for the Pasadena facility in October 2012, and based on the hospital’s valuation, expected sale proceeds, and expected cash flows, has determined that there is no impairment charge required in connection with the foregoing operating and/or disposal activities.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

On September 1, 2008, the Company adopted ASC Topic 825-10-25, “Financial Instruments” (formerly referred to as SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”)), which permits entities to choose to measure certain financial assets and liabilities at fair value. The adoption of ASC Topic 825-10-25 had no impact on the consolidated financial statements because the Company did not elect the fair value option for any financial assets or financial liabilities that were not already recorded at fair value.

On September 1, 2008, the Company adopted ASC Topic 820, “Fair Value Measurements and Disclosures” (formerly referred to as SFAS 157) for our financial assets and liabilities. Management uses the fair value hierarchy of ASC Topic 820, which gives the highest priority to quoted prices in active markets. The fair value of financial instruments is estimated based on market trading information, where available. Absent published market values for an instrument or other assets, management uses observable market data to arrive at its estimates of fair value. Management believes that the carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value. ASC Topic 820 defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted price for identical or similar assets and liabilities in markets that are not active; or other input that are observable or can be corroborated by observable market data.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance related to fair value disclosure requirements. The new guidance resulted in a change in the Company’s accounting policy effective March 1, 2010. Under this guidance, companies will be required to make additional disclosures concerning significant transfers of amounts between the Level 1 and Level 2 fair value disclosures, as well as further disaggregation of the types of activity that were previously disclosed in the rollforward of Level 3 fair value disclosures. Further, the guidance clarifies the level of aggregation of assets and liabilities within the fair value hierarchy that may be presented. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of August 31, 2012, segregated among the appropriate levels within the fair value hierarchy:

	Quoted prices in active markets for identical		Significant other observable inputs		Significant unobservable
	(Level 1)		(Level 2)		(Level 3)
Assets
Investments available-for-sale	$	—	$	16,828,886	$	—
Trading securities		1,280,518		—		—

The Company’s investments in Level 1 are in equity stocks at a cost of $2,047,390. The Company’s investments in Level 2 are in perpetual bonds traded on the European markets, at a cost of $8,435,146.

Revenue Recognition

Revenue Recognition

Background

The Company’s revenue recognition policy is significant because net patient service revenue is a primary component of its results of operations. Revenue is recognized as services are delivered. The determination of the amount of revenue to be recognized in connection with the Company’s services is subject to significant judgments and estimates, which are discussed below.

Revenue Recognition Policy

The Company has established billing rates for its medical services which it bills as gross revenue as services are delivered. Gross billed revenues are then reduced by the Company’s estimate of the discount (contractual allowance) to arrive at net patient service revenues. Net patient service revenues may not represent amounts ultimately collected. The Company adjusts current period revenue for actual differences in estimated revenue recorded in prior periods and actual cash collections.

The table below sets forth the percentage of our gross patient service revenue by financial class for our Pasadena facility for the fiscal years 2012 and 2011:

	2012			2011
Workers’ Compensation		11	%		26	%
Commercial		40	%		39	%
Medicare		28	%		17	%
Medicaid		1	%		1	%
Self-Pay		16	%		13	%
Other		4	%		4	%

Contractual Allowance

The Company computes its contractual allowance based on the estimated collections on its gross billed charges. The Company computes its estimate by taking into account collections received, up to 30 days after the end of the period, for the services performed and also estimating amounts collectible for the services performed within the last six months. The following table shows gross revenues and contractual allowances for our Pasadena facility for fiscal years 2012 and 2011:

	2012			2011
Gross billed charges	$	19,619,903		$	22,138,821
Contractual allowance (1)		14,088,670			24,116,028
Net revenue	$	5,531,233		$	(1,977,207	)
Contractual allowance percentage (1)		72	%		109	%

⁽¹⁾ The contractual allowance percentage, excluding the stop-loss fee dispute amount booked in the quarter ended May 31, 2011, which is discussed below, would have been 63% for the year ended August 31, 2011.

A significant amount of our net revenue results from Texas workers’ compensation claims, which are governed by the rules and regulations of the Texas Department of Workers’ Compensation (“TDWC”) and the workers’ compensation healthcare networks. If our hospital chooses to participate in a network, the amount of revenue that will be generated from workers’ compensation claims will be governed by the network contract.

For claims arising prior to the implementation of workers’ compensation networks and out of network claims, inpatient and outpatient surgical services are either reimbursed pursuant to the Acute Care In-Patient Hospital Fee Guideline or at a “fair and reasonable” rate for services in which the fee guideline is not applicable. Starting March 1, 2008, the Texas Workers’ Compensation 2008 Acute Care Hospital Outpatient and Inpatient Facility Fee Guidelines (the “Guidelines”) became effective. Under these Guidelines, the reimbursement amounts are determined by applying the most recently adopted and effective Medicare reimbursement formula and factors; however, if the maximum allowable reimbursement for the procedure performed cannot be calculated using these Guidelines, then reimbursement is determined on a fair and reasonable basis.

Based on these Guidelines, the reimbursement due the Company for workers’ compensation cases is lower than we previously experienced. The Company has continued accepting Texas workers’ compensation cases, and has not made any substantial changes in its focus towards such cases. Our net patient service revenue for Texas workers’ compensation cases as a percentage of gross billings has decreased primarily as a result of lower reimbursement rates for workers’ compensation procedures still being performed.

Should we disagree with the amount of reimbursement provided by a third-party payer, we are required to pursue the MDR process at the TDWC to request proper reimbursement for services. From January 2007 to November 2008, the Company had been successful in its pursuit of collections regarding the stop-loss cases pending before the State Office of Administrative Hearings (“SOAH”), receiving positive rulings in over 90% of its claims presented for administrative determination. The 2007 district court decision upholding our interpretation of the statute as applied to the stop-loss claims was appealed by certain insurance carriers, and on November 13, 2008 the Third Court of Appeals determined that in order for a hospital to be reimbursed at 75% of its usual and customary audited charges for an inpatient admission, the hospital must not only bill at least $40,000, but also show that the admission involved unusually costly and unusually extensive services. Procedurally, the decision means that each case where a carrier raised an issue regarding whether the services provided were unusually costly or unusually extensive would be remanded to either SOAH or MDR for a case-by-case determination of whether the services provided meet these standards, once the definitions of those standards are determined. As a result of the Third Court of Appeals opinion, any stop-loss cases pending at SOAH have been remanded to the TDWC since these cases have not been reviewed or decided by the two-prong standard decided by the Third Court of Appeals. The SOAH Administrative Law judges determined that the most appropriate location for these cases is the TDWC, pending a final, non-appealable decision.

A petition asking the Texas Supreme Court to review the Third Court of Appeals decision has been denied. Therefore, the Company is bound by the Third Court of Appeals decision. The Texas Supreme Court’s decision has further delayed final adjudication in these pending stop-loss cases. The uncertain outcome in these cases will depend on a very lengthy process. We anticipate further, lengthy litigation at the Travis County District Courts and the Texas Courts of Appeals. Because of this lengthy process and the uncertainty of recovery in these cases, collection of a material amount of funds in these pending stop-loss cases is not anticipated during the 2013 fiscal year.

Through August 2012, insurance carriers have voluntarily paid the awards in the decisions and orders issued by SOAH, plus interest, in approximately 180 cases, involving approximately $11 million in claims. In most of these cases, the carriers have requested refunds of the payments made in the event that the SOAH decisions and orders are reversed on appeal. Our request that the TDWC Commissioner enforce the awards which were not voluntarily paid by the carriers was refused in approximately 130 cases. Motions filed seeking a refund in some cases in which the awards were voluntarily paid have been granted and the Company has been ordered to refund approximately $3.7 million, including prejudgment interest, pending remand for a case-by-case determination of whether the services provided were unusually costly and unusually extensive. In fiscal year 2011, the Company deposited these amounts as cash deposits into the registry of the court in order to stay execution of the judgments ordering refunds. Additionally, the Company has deposited $204,000 in September 2012 for another year’s interest in order to continue to stay execution of the judgments ordering refunds. We anticipate that similar motions requesting remand and a refund for awards voluntarily paid will be filed and will likely be granted by the 345th Judicial District Court of Travis County, Texas. If and when these additional motions are granted, the Company will be ordered to refund an additional $7.7 million, not including prejudgment interest. The Company has appealed the judgments requiring a refund to the carriers. The briefs of the parties have been filed with the court of appeals and the Company is now waiting for the court of appeals to act on the appeals. While the appeals are pending, the adjudication of those cases remanded for determinations of whether the services provided were unusually costly and unusually extensive will continue. Voluntary payments made pursuant to the Decisions and Orders are premature payments by the carriers and may be ordered to be refunded. Once the Company is given the opportunity to present its evidence regarding whether the services provided were unusually costly and unusually extensive, the Company anticipates that it will prevail in the underlying stop-loss fee disputes and that payments refunded to the carriers will be recaptured.

Due to the uncertainties associated with these stop-loss fee dispute cases, in fiscal year 2011, the Company recognized an increase of $10,254,990 in the contractual allowance at our Pasadena facility (and an additional loss of $779,583 in the contractual allowance at our Garland facility, which is classified as discontinued operations), and $1,751,478 in interest expense at our Pasadena facility (and an additional interest expense of $132,339 at our Garland facility). The increase in the contractual allowance resulted in the $1,977,207 negative revenue for the Pasadena facility for the year ended August 31, 2011.

Claims regarding payment for ambulatory surgical center and hospital outpatient services remain pending at the TDWC. It is expected that these claims will be adjudicated at SOAH and possibly in the Texas district and appellate courts. The basis for reimbursement for these services made the subject of these pending cases is the determination of “fair and reasonable” charges. In 2007, we received unfavorable rulings from SOAH in all of our appeals of unfavorable decisions related to services provided in 2001 and 2002. The 179 cases, which have been appealed to the Travis County district courts, challenge the constitutionality of the relevant statutory language. The Company received an unfavorable ruling in its lead case in March 2009, which ruling was appealed to and was upheld by the Third Court of Appeals on August 26, 2010. The Texas Supreme Court denied a petition asking for review of the Third Court of Appeals decision. The unfavorable interpretation by the Texas Courts of Appeal in our lead case negatively affects the recovery of additional reimbursement, not only in the lead case, but in the remaining 178 pending cases. Consequently, the Company is bound by the Third Court of Appeals’ ruling that interprets the applicable statute and fee guideline to require that the amount that will be paid to a provider must not only be at a “fair and reasonable rate” but also must “ensure the quality of medical care” and “achieve effective cost control” and be the same or less than that charged to others with an equivalent standard of living. This ruling will impact cases in which a fee guideline was not applicable, specifically all pending cases involving ambulatory surgical services provided from 2001 through 2004 as well as all pending cases involving hospital outpatient services provided prior to March 1, 2008, when the Guidelines took effect. Since the Third Court of Appeals’ unfavorable ruling, collection, if any, in these cases depends on the Company’s ability to establish the criteria in this ruling. The Company was given the opportunity to establish the criteria in approximately 80 cases, which were set for hearing on the merits from March through May 2012 and was unsuccessful. Additionally, the Company will have the opportunity to continue to establish the criteria in several thousand cases currently pending at SOAH during the 2013 fiscal year.

Due to the uncertainties regarding the accounts receivable in the MDR process, the 2008 and 2010 Third Court of Appeals’ opinions and our legal counsel’s advice that settlements with insurance carriers have virtually stopped, the Company had fully reserved all accounts receivable related to the MDR process as of August 31, 2008. Any monies collected for these MDR accounts receivable will be recorded as current period’s net patient service revenues.

Accounts Receivable

Accounts receivable represent net receivables for services provided by the Company. At each balance sheet date management reviews the accounts receivable for collectibility.

The contractual allowance stated as a percentage of gross receivables at the balance sheet dates is larger than the contractual allowance percentage used to reduce gross billed charges due to the application of partial cash collections to the outstanding gross receivable balances, without any adjustment being made to the contractual allowance. The contractual allowance amounts netted against gross receivables are not adjusted until such time as the final collections on an individual receivable are recognized.

Sources of Revenue and Reimbursement

The focal point of our business is providing patient care services, including complex orthopedic and bariatric procedures. The Company pursues optimal reimbursement from third-party payers for these services. We do not normally participate in managed care or other contractual reimbursement agreements, principally because they limit reimbursement for the medical services provided. This business model often results in increased amounts of reimbursement for the same or similar procedure, as compared to other healthcare providers. However, there are no contractual or administrative requirements for “prompt payment” of claims by third-party payers within a specified time frame. As a result, the Company has tended to receive higher amounts of per-procedure reimbursement than that which may be received by other healthcare providers performing similar services. Conversely, despite the increased reimbursement, we may take additional time to collect the expected reimbursement from third-party payers. The Company has been participating in managed care contracts since the first quarter of fiscal 2006 and anticipates entering into additional contracts in the future. So far these contracts have not resulted in any meaningful patient revenues. Increased participation in managed care contracts and programs may decrease the per-procedure reimbursement that the Company collects in the future for similar services.

In addition to the fact that our collection process may be longer than other healthcare providers because of our focus on workers’ compensation and other commercial payers, the collection process can be extended due to our efforts to obtain all optimal reimbursement available to the Company. Specifically, for medical services provided to injured workers, the Company may initially receive reimbursement that may not be within the fee guidelines or regulatory guidelines mandating reimbursement. For such cases in which third-party payers did not provide appropriate reimbursement pursuant to these guidelines, the Company pursues further reimbursement. The Company reviews and pursues those particular claims that are determined to warrant additional reimbursement pursuant to the fee or regulatory guidelines. The Company’s pursuit of additional reimbursement amounts that it believes are due under fee or regulatory guidelines may be accomplished through established dispute resolution procedures with applicable regulatory authorities.

Surgeries are typically not scheduled unless they are pre-authorized by insurance carrier for medical necessity, with the exception of Medicare, Medicaid and self-pay surgeries. After the surgery, the Company’s automated computer system generates a statement of billed charges to the third-party payer. At that time, the Company also requests payment from patients for any remaining amounts that are the responsibility of the patient. In cases where a commercial insurance payers’ pre-approval is not approved subsequently, those accounts receivable may be classified to self-pay. Historically, such classifications have not been significant.

Discontinued Operations

Revenue Recognition Policy

In China, the local government Department of Health establishes billing rates for a hospital’s sale of prescription medication and medical services. A majority of the services provided by Second People’s Hospital is to cash pay patients, who pay for the services in advance. For services provided under the local government’s social healthcare insurance program, we are generally paid at approximately 95% of billed charges two to three months after the date of service. The remaining 5% of billed charges is evaluated by the local government Department of Health on a semi-annual basis and may be paid to the hospital after that evaluation is complete. As of February 28, 2011, the Company terminated the management agreement with the Rui An City Department of Health. The Company had bad debt expenses of $24,755 for the six months ended February 28, 2011, related to denials under the social healthcare insurance program. Since the amount of bad debt expense is minimal, it has been included with Other Operating Expenses in the income statement.

Accounts Receivable

Accounts receivable represent net receivables for services provided by the Company. At each balance sheet date management reviews the accounts receivable for collectibility.

Stock Based Compensation

Stock Based Compensation

Under ASC Topic 718, Stock Compensation, the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense attributed is based on estimated forfeiture rate, which is updated based on actual forfeitures as appropriate. This option pricing model requires the input of highly subjective assumptions, including the expected volatility of our common stock, pre-vesting forfeiture rate and an option’s expected life. The financial statements include amounts that are based on the Company’s best estimates and judgments.

Advertising Costs

Advertising Costs

Advertising and marketing costs in the amounts of $162,000 and $2,412,000 for the years ending August 31, 2012 and 2011, respectively, were expensed as incurred. The marketing cost for the year ended August 31, 2011 included $1,050,000 for estimated marketing expenses that were supposed to be incurred in fiscal years 2012 and 2013 based on a contract with Kenkon Limited, which expires in May 2013 (The Company believed that the proposed businesses being pursued in China and Hong Kong would eventually be beneficial; however, due to no immediate project in an advanced stage, the Company had expensed the contractual obligation through the entire term of the contract as of August 31, 2011). In fiscal year 2012, the Company reversed $870,000 of marketing costs that were expensed and accrued for in fiscal year 2011, since the amounts were determined to be not payable. In addition, the Company had advertising and marketing costs in the amounts of $-0- and $125,000 for the years ending August 31, 2012 and 2011, respectively, for its discontinued operations, which were also expensed as incurred.

Income Taxes

Income Taxes

The Company uses the liability method in accounting for income taxes. Under this method, deferred tax liabilities or assets are determined based on differences between the income tax basis and the financial reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. If the Company is uncertain about its ability to recognize benefit from net operating losses, it records a valuation allowance against deferred tax assets.

Noncontrolling Interest

Noncontrolling Interest

The equity of minority investors (minority investors are generally physician groups and other healthcare providers that perform surgeries at the Company’s facilities) in certain subsidiaries of the Company is reported on the consolidated balance sheets as noncontrolling interest. Noncontrolling interest reported in the consolidated income statements reflect the respective interests in the income or loss of the limited partnerships or limited liability companies attributable to the minority investors (equity interests ranged from 1% to 1.75% during the fiscal year ended August 31, 2012). During 2011, the Company purchased noncontrolling interests at an amount that was $98,350 more than the net book value of the noncontrolling interest liability on the date of purchase. The $98,350 loss has been included in Rent and Other Income in the accompanying consolidated statement of operations for the year ended August 31, 2011.

The following table sets forth the activity in the noncontrolling interest liability account for the fiscal years ending August 31, 2012 and 2011:

Balance August 31, 2010	$	79,595
Loss allocated to noncontrolling interest holders		(15,978	)
Distribution to noncontrolling interest holders		(98,350	)
Loss on purchase of noncontrolling interest		98,350
Balance August 31, 2011		63,617
Loss allocated to noncontrolling interest holders		(47,358	)
Capital contributions from / distributions to new noncontrolling interest holders, net		50,000
Balance August 31, 2012	$	66,259

Net Income (Loss) per Share

Net Income (Loss) per Share

Basic net income (loss) per share has been computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share has been calculated to give effect to the dilutive effect of common stock equivalents consisting of stock options and warrants in years in which the Company has income.

Foreign Currency Translation

Foreign Currency Translation

The functional currency of the Company as a whole is the U.S. Dollar. The Company has designated the Chinese Yuan Renminbi as the functional currency for Dynacq-Huai Bei in mainland China, and the U.S. Dollar for Sino Bond in Hong Kong. Assets and liabilities are translated into U.S. dollars using current exchange rates as of the balance sheet date. Income and expense are translated at average exchange rates prevailing during the period. The effects of foreign currency translation adjustments are included as a component of Accumulated Other Comprehensive Income within stockholders’ equity.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Presentation of Comprehensive Income: In June 2011, the FASB amended its guidance governing the presentation of comprehensive income. The amended guidance eliminates the option to report other comprehensive income and its components in the statement of changes in equity. Under the new guidance, an entity can elect to present items of net income and other comprehensive income in one continuous statement referred to as the statement of comprehensive income or in two separate, but consecutive, statements. While the options for presenting other comprehensive income change under the guidance, other portions of the current guidance will not change. For public entities, these changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact on our consolidated financial position or results of operation.

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Concentrations of Credit Risk and Fair Value of Financial Instruments (Details)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Concentration Risk [Line Items]
Concentration Risk, Percentage	100.00%	100.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third-Party Payor [Member] | Workers' compensation [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	1.00%	1.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third-Party Payor [Member] | Workers' compensation subject to Medical Dispute Resolution process [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	84.00%	85.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third-Party Payor [Member] | Commercial [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	9.00%	8.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third-Party Payor [Member] | Medicare / Government [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	1.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third-Party Payor [Member] | Other [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	1.00%	2.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Self-Pay [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	4.00%	4.00%

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Cash flows from operating activities
Net loss	$ (12,151,496)	$ (21,016,125)
Less loss from discontinued operations, net of income taxes	1,624,185	3,643,746
Net loss before discontinued operations	(10,527,311)	(17,372,379)
Adjustments to reconcile net loss before discontinued operations to net cash used in operating activities:
Depreciation and amortization	550,643	568,069
(Gain) loss on disposal of assets	(34,392)	172,174
Loss (gain) on call/sale of investments in bonds and securities	317,206	(935,279)
Deferred income taxes	2,358,623	(2,690,894)
Noncontrolling interest	(47,358)	(15,978)
Loss on buy back of noncontrolling interest		98,350
Charge for stock options to employees	275,408	276,463
Charge for non-controlling interest sale and issuance of stock awards	166,666	232,500
Write-off of investment in affiliates		232,500
Foreign currency exchange (gains) losses	293,640	(268,656)
Changes in operating assets and liabilities:
Accounts receivable	394,315	1,106,783
Inventories	141,480	20,438
Prepaid expenses	(151,245)	179,873
Interest receivable	25,137	162,095
Income taxes receivable		3,457,353
Other assets	(880)	5,221
Accounts payable	(75,284)	(500,576)
Accrued liabilities	(6,634,363)	13,921,368
Cash used in continuing activities	(12,947,715)	(1,350,575)
Cash used in discontinued activities	(748,076)	(2,718,020)
Net cash used in operating activities	(13,695,791)	(4,068,595)
Cash flows from investing activities
Purchase of trading securities	(211,248)	(6,304,748)
Sale/call proceeds of trading and investment available-for-sale securities	94,669	6,460,659
Sale of equipment	51,325
Purchase of equipment	(159,919)	(7,532)
Cash provided by (used in) continuing activities	(225,173)	148,379
Cash provided by (used in) discontinued activities	14,000	(104,385)
Net cash provided by (used in) investing activities	(211,173)	43,994
Cash flows from financing activities
Principal payments on notes payable	(128,296)	(92,559)
Proceeds from notes payable	116,339	65,000
Payments on capital lease	(94,044)	(86,969)
Contributions from, purchases of and distributions to noncontrolling interest holders, net	100,000	(98,350)
Cash used in continuing activities	(6,001)	(212,878)
Cash used in discontinued activities		(43,112)
Net cash used in financing activities	(6,001)	(255,990)
Effect of exchange rate changes on cash	236,022	929,806
Net decrease in cash and cash equivalents	(13,676,943)	(3,350,785)
Cash and cash equivalents at beginning of year	24,315,160	27,665,945
Cash and cash equivalents at end of year	10,638,217	24,315,160
Cash paid during year for:
Interest	751,082	42,375
Income taxes
Non-cash investing and financing activities:
Investments in bonds	(1,590,247)	(2,778,096)
Accumulated other comprehensive income	(1,910,234)	1,805,762
Deferred tax liabilities	3,500,481	972,334
Equipment from capital lease		34,592
Capital lease obligation		(34,592)
Non-cash investing and financing activities

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Consolidated Balance Sheets (Parenthetical) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Consolidated Balance Sheets [Abstract]
Contractual allowances for accounts receivable	$ 187,478,000	$ 188,513,000
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	14,543,626	14,426,960

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Comprehensive Loss and Accumulated Other Comprehensive Income

12 Months Ended

Aug. 31, 2012

Comprehensive Loss and Accumulated Other Comprehensive Income [Abstract]

Comprehensive Loss and Accumulated Other Comprehensive Income

10. Comprehensive Loss and Accumulated Other Comprehensive Income

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) represents certain components of revenues, expenses, gains and losses that are included in comprehensive income (loss), but are excluded from net income (loss). Other comprehensive income (loss) amounts are recorded directly as an adjustment to stockholders’ equity, net of tax, and for the years ended August 31, 2012 and 2011 were as follows:

	2012			2011
				(Restated)
Net loss	$	(12,151,496	)	$	(21,016,125	)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of taxes of $(12,530) and $315,465, respectively		(23,268	)		585,864
Reclassification adjustment for foreign currency gains included in net income, net of taxes of $(501,273) and $-0-, respectively		(921,318	)		—
Change in valuation of investment available-for-sale, net of taxes of $(3,500,481) and $(1,427,334), respectively		1,910,234			(2,650,763	)
Reclassification adjustment for gains on call of investment available-for-sale included in net income, net of taxes of $-0- and $455,000, respectively		—			845,000
Total other comprehensive loss, net of taxes		(11,185,848	)		(22,236,024	)
Comprehensive loss attributable to the noncontrolling interest		—			—
Comprehensive loss attributable to Dynacq Healthcare, Inc.	$	(11,185,848	)	$	(22,236,024	)

The components of accumulated other comprehensive income were as follows:

	August 31, 2012		August 31, 2011
Foreign currency translation adjustment, net of taxes of $4,414 and $518,217, respectively	$	8,196	$	952,782
Change in valuation of investment available-for-sale, net of taxes of $-0- and $3,500,481, respectively		8,411,128		6,500,894
Total accumulated other comprehensive income, net of taxes of $4,414 and $4,018,698, respectively	$	8,419,324	$	7,453,676

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Document and Entity Information (USD $)	12 Months Ended
	Aug. 31, 2012	Mar. 19, 2013	Feb. 29, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	DYNACQ HEALTHCARE INC
Entity Central Index Key	0000890908
Document Type	10-K
Document Period End Date	Aug. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--08-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	No
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 4,840,684
Entity Common Stock, Shares Outstanding		14,543,626

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Accrued Liabilities

12 Months Ended

Aug. 31, 2012

Accrued Liabilities [Abstract]

Accrued Liabilities

11. Accrued Liabilities

Accrued liabilities at August 31 is as follows:

	2012		2011
MDR stop-loss cases accrual, including accrued interest	$	9,548,602	$	12,918,370
Marketing fees liability		300,000		2,381,565
Payroll and related taxes		389,713		703,398
Noncontrolling interest in consolidated subsidiary buy-out liability		106,937		156,737
Property taxes		339,527		364,308
Medicare liability		—		400,000
Year-end accruals of expenses and other		1,078,583		1,506,175
Total accrued liabilities	$	11,763,362	$	18,430,553

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Consolidated Statements of Operations (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Consolidated Statements of Operations [Abstract]
Net patient service revenue	$ 5,531,233	$ (1,977,207)
Costs and expenses:
Compensation and benefits	7,176,781	7,418,697
Medical services and supplies	1,557,792	1,490,251
Other operating expenses	4,399,283	8,165,321
Depreciation and amortization	550,643	568,069
Total costs and expenses	13,684,499	17,642,338
Operating loss	(8,153,266)	(19,619,545)
Other income (expense):
Rent and other income	961,781	1,320,292
Interest income	1,225,910	1,343,091
Interest expense	(590,395)	(1,789,663)
Total other income, net	1,597,296	873,720
Loss before income taxes from continuing operations	(6,555,970)	(18,745,825)
(Provision) benefit for income taxes	(4,018,699)	1,357,468
Loss from continuing operations	(10,574,669)	(17,388,357)
Discontinued operations, net of income taxes	(1,394,984)	(3,522,169)
Loss on disposal of discontinued operations, net of income taxes	(229,201)	(121,577)
Net loss	(12,198,854)	(21,032,103)
Less: Net loss attributable to noncontrolling interest	47,358	15,978
Net loss attributable to Dynacq Healthcare, Inc.	(12,151,496)	(21,016,125)
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.	$ (0.73)	$ (1.22)
Discontinued operations, net of income taxes	$ (0.10)	$ (0.25)
Loss on disposal of discontinued operations, net of income taxes	$ (0.02)	$ (0.01)
Net loss attributable to Dynacq Healthcare, Inc.	$ (0.85)	$ (1.48)
Basic and diluted average common shares outstanding	14,489,780	14,196,191
Amounts attributable to Dynacq Healthcare, Inc.:
Loss from continuing operations	(10,527,311)	(17,372,379)
Discontinued operations, net of income taxes	(1,394,984)	(3,522,169)
Loss on disposal of discontinued operations, net of income taxes	(229,201)	(121,577)
Net loss attributable to Dynacq Healthcare, Inc.	$ (12,151,496)	$ (21,016,125)

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Income Taxes

12 Months Ended

Aug. 31, 2012

Income Taxes [Abstract]

Income Taxes

5. Income Taxes

The provision (benefit) for income taxes consisted of the following:

	Year Ended August 31,
	2012		2011
			(Restated)
Current tax (benefit) expense:
Federal	$	—	$	(569,430	)
State		—		(3,000	)
Total current		—		(572,430	)
Deferred tax (benefit) expense:
Federal		4,018,699		(785,038	)
State		—		—
Total deferred		4,018,699		(785,038	)
Total income tax (benefit) expense	$	4,018,699	$	(1,357,468	)

As of August 31, 2012 there was an income tax expense of $4,018,699. The Company had anticipated collecting significant amounts of money from the MDR cases, which were fully reserved, to offset some of the prior years’ losses but has not been successful as yet. In addition, the Company in fiscal year 2012 continued to have operating losses. The Company believes that the likelihood of realizing future tax benefit for the deferred tax assets is low, and hence increased the valuation allowance to write-off the deferred tax assets. As of August 31, 2011, the Company had an income tax benefit of $1,146,766. Please refer to note 15 of these Consolidated Financial Statements for a discussion of the restated income tax receivable as at August 31, 2011.

The components of the provision (benefit) for deferred income taxes at August 31 were as follows:

	2012			2011
				Restated
Applicable to:
Net operating loss carryforward	$	(4,941,754	)	$	(5,466,384	)
Differences between revenues and expenses recognized for federal income tax and financial reporting purposes		2,172,058			(341,188	)
Difference in method of computing depreciation for tax and financial reporting purposes		49,061			(42,535	)
Valuation allowance		6,739,334			5,065,069
Deferred income tax expense (benefit)	$	4,018,699		$	(785,038	)

Significant components of the Company’s deferred tax liabilities and assets were as follows at August 31, 2012:

	Current			Noncurrent
Deferred tax liabilities:
Depreciation	$	—		$	(180,415	)
Deferred tax assets:
Net operating loss carryforward		—			7,827,575
Revenue and expense differences		54,664			3,342,010
Allowance for uncollectible accounts		513,456			—
Asset impairment		370,320			—
Other		(166,758	)		43,551
Valuation allowance		(771,682	)		(11,032,721	)
Net deferred tax asset (liability)	$	—		$	—

Significant components of the Company’s deferred tax liabilities and assets were as follows at August 31, 2011:

	Current			Noncurrent
				(Restated)
Deferred tax liabilities:
Depreciation	$	—		$	(131,353	)
Exchange gains provision		—			(518,217	)
Investment valuation		—			(3,500,481	)
Deferred tax assets:
Net operating loss carryforward					2,885,821
Revenue and expense differences		350,986			4,521,437
Allowance for uncollectible accounts		656,884			—
Asset impairment		79,239			633,915
Other		—			86,838
Valuation allowance		(1,087,109	)		(3,977,960	)
Net deferred tax asset (liability)	$	—		$	—

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to the uncertainty of the Company’s ability to recognize the benefit from the net operating losses, the Company has recorded a full valuation allowance against the deferred tax assets as at August 31, 2012.

The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

A reconciliation of the benefit for income taxes with amounts determined by applying the statutory federal income tax rate to income before income taxes and noncontrolling interests is as follows:

	Year Ended August 31,
	2012			2011
				(Restated)
Benefit for income taxes computed using the statutory rate of 35%	$	(2,294,590	)	$	(6,561,039	)
State income taxes, net of federal benefit		—			(1,950	)
Noncontrolling interest in loss of consolidated subsidiaries		16,575			5,592
Non-deductible expenses		(442,620	)		134,860
Changes in valuation allowance		6,739,334			5,065,069
Expense (benefit) for income taxes	$	4,018,699		$	(1,357,468	)

The Company files income tax returns in the U.S. federal and foreign jurisdictions. The U.S. Internal Revenue Service has closed examination of the Company’s income tax returns through fiscal year 2007. With regard to foreign tax jurisdictions, the Company has not been subjected to examination by tax authorities since it started its foreign operations.

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Notes Payable

12 Months Ended

Aug. 31, 2012

Notes Payable [Abstract]

Notes payable

4. Notes payable

At August 31, notes payable consisted of the following:

	2012			2011
Note payable secured by the apartment purchased in Hong Kong as an investment for $2,014,207. The Company obtained an 18-year mortgage loan of $1,245,775 from a financial institution, with a variable interest rate at the lower of 3-month Hang Seng Interbank Offered Rates plus 0.7% or 2.9% below the Hong Kong Dollar best lending rate quoted by the financial institution. The effective interest rate at August 31, 2012 was 1.12%. Subsequent to the year ended August 31, 2012, the apartment was sold, and the related note payable was also paid off.	$	1,091,615		$	1,155,729
Notes payable for $116,339 and $65,000 for purchases of equipment for the Pasadena facility at an interest rate of 4.5% and 6%, secured by the said equipment.		88,307			36,150
Total		1,179,922			1,191,879
Less: Current portion		(105,735	)		(97,918	)
Long-term portion	$	1,074,187		$	1,093,961

Principal payments due on the note payable in fiscal years 2013, 2014, 2015, 2016, 2017 and thereafter are $105,735, $105,529, $72,872, $66,729, $67,470 and $761,587, respectively.

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Subsequent Events

12 Months Ended

Aug. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

Internal Investigation

As previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 9, 2012, we announced that, at the request of our Board of Directors (the “Board”), we had commenced an internal investigation of our past business practices, potentially encompassing members of the Board, management and third persons, and related accounting matters (the “Investigation”).

The Investigation, which was performed by outside legal counsel and other outside consultants at the direction of the Board, was substantially completed on December 27, 2012 at a cost of approximately $2 million. The Investigation included a review of a substantial number of Company documents and emails, as well as interviews with employees, members of the Board and other persons who were familiar with the facts surrounding the Investigation. The results of the Investigation, which were reported directly to the Board, revealed that the former Chief Financial Officer of the Company did not perform a significant review or independent analysis of transactions initiated by the former Chief Executive Officer. As a result, we believe that, for the five fiscal years ending on August 31, 2012, we did not maintain effective control over financial reporting due to the existence of a material weakness related to a failure of internal controls designed to limit the ability of management to override our system of internal controls. The results of the Investigation also revealed that the former Chief Financial Officer misrepresented certain information to our independent auditor, which we have also determined to be a material weakness in our internal control over financial reporting. We also identified the existence of a significant deficiency related to a lack of objectivity by our former executive officers with respect to accounting decisions.

Based on the results of the Investigation and recommendations made by our independent auditor regarding the foregoing material weaknesses and significant deficiencies in internal control over financial reporting, we are reviewing our internal control and compliance policies and procedures. We believe that no additional remediation efforts with respect to the material weaknesses and the significant deficiency as they relate to the former Chief Executive Officer and the former Chief Financial Officer are necessary, as the executives who occupied these offices during the events in question are no longer employed by us.

We have determined that our previously reported consolidated balance sheets for periods up to and including August 31, 2012 do not require any material adjustments and/or restatements in respect of the results of the Investigation. Further, the Investigation did not result in any material change to our previously reported net income or loss or financial position for the same periods. However, the Investigation, along with subsequent analysis performed by us and our auditors did reveal that Company expenditures in the amount of approximately $7.8 million were authorized by former officers of the Company and paid to various third parties, and the results of the Investigation and the subsequent analysis performed by us and our auditors provided no evidence of a discernible benefit to the Company resulting from these expenditures. The following table summarizes the statement of operations classification of these amounts for each of the years ended August 31, 2012 and 2011 and in aggregate for the years ended August 31, 2001 to 2010:

	Years Ended August 31,					Aggregate For Years Ended August 31, 2001
	2012			2011		to 2010		Total
Compensation and benefits
Non-executive employee salaries	$	3,526		$	45,838	$	1,097,894	$	1,147,258
Other operating expenses
Professional fees		(56,000	)(1)		380,000		1,324,000		1,648,000
Marketing expenses		(820,000	)(1)		1,700,000		2,575,000		3,455,000
Rent expenses		—			292,967		939,512		1,232,479
Abandoned cash		267,729			—		—		267,729
Total	$	(604,745	)(1)	$	2,418,805	$	5,936,406	$	7,750,466

⁽¹⁾  The negative expense in 2012 is the result of the reversal of expenses accrued in 2011.

We have determined that the questionable nature of these expenditures may result in their reclassification in our financial statements, from operating costs and expenses to other expenses, depending on determinations that the Board may make in the future. We do not expect these reclassifications, even if they are made, to result in a material restatement of our financial statements.

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Commitments and Contingencies

12 Months Ended

Aug. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Due to the uncertainties associated with the stop-loss fee dispute cases, the Company has recognized, in fiscal year 2011, an increase of $12.9 million in the contractual allowance and related interest expense at our Pasadena and Garland facilities. For a detailed discussion of this, see Revenue Recognition Policy under Note 1 to the Consolidated Financial Statements. Motions filed seeking a refund in some cases in which the awards were voluntarily paid have been granted and the Company has been ordered to refund approximately $3.7 million, including prejudgment interest, pending remand for a case-by-case determination of whether the services provided were unusually costly and unusually extensive. In fiscal year 2011, the Company deposited these amounts as cash deposits into the registry of the court in order to stay execution of the judgments ordering refunds. Additionally, the Company has deposited $204,000 in September 2012 for another year’s interest in order to continue to stay execution of the judgments ordering refunds. We anticipate that similar motions requesting remand and a refund for awards voluntarily paid will be filed and will likely be granted by the 345th Judicial District Court of Travis County, Texas. If and when these additional motions are granted, the Company will be ordered to refund an additional $7.7 million, not including prejudgment interest. The Company has appealed the judgments requiring a refund to the carriers. The briefs of the parties have been filed with the court of appeals and the Company is now waiting for the court of appeals to act on the appeals. While the appeals are pending, the adjudication of those cases remanded for determinations of whether the services provided were unusually costly and unusually extensive will continue. Voluntary payments made pursuant to the Decisions and Orders are premature payments by the carriers and may be ordered to be refunded. Once the Company is given the opportunity to present its evidence regarding whether the services provided were unusually costly and unusually extensive, the Company anticipates that it will prevail in the underlying stop-loss fee disputes and that payments refunded to the carriers will be recaptured.

Total rent and lease expenses paid by the Company for the fiscal years 2012 and 2011 were approximately $127,000 and $470,000, respectively. The Company’s total minimum rental commitments under noncancellable operating leases are approximately $63,000 in the next five fiscal years.

The Company has contracts with doctors to manage various areas of the Company’s hospital and other service agreements. Payments made under these agreements for the fiscal years ending August 31, 2012 and 2011 were $1,190,000 and $1,296,000, respectively. The Company’s minimum commitments under these contracts are approximately $712,000, all of which is payable in fiscal year 2013.

The Company has administrative support services agreements with outside organizations for administrative support services. Payments made related to these agreements for fiscal years 2012 and 2011 were $266,000 and $433,000, respectively. The Company has a total commitment of approximately $259,000, all of which is to be incurred in fiscal year 2013 related to these administrative support services agreements.

The Company, through its subsidiary, also had agreements with outside organizations that offer marketing, pre-authorization and follow up support services to prospective bariatric and orthopedic patients in areas serviced by the Pasadena facility. The facility received bariatric and orthopedic referrals from other sources, and the organizations referred clients to other area hospitals. The Company had cancelled these agreements in the first quarter of fiscal year 2011, and does not have a commitment related to these agreements anymore, and markets on a month-to-month basis. These marketing expenses for the fiscal years 2012 and 2011 were $162,000 and $762,000, respectively.

The Company has notes payable commitment for purchases of equipment for the Pasadena facility at an interest rate of 4.5% and 6%, secured by the said equipment of approximately $88,000, of which $41,000 is payable in 2013, $40,000 in 2014 and $7,000 in 2015.

The Company has a note payable related to an apartment purchased in Hong Kong as an investment. The Company obtained an 18-year mortgage loan of $1,245,775 from a financial institution, with a variable interest rate at the lower of 3-month Hang Seng Interbank Offered Rates plus 0.7% or 2.9% below the Hong Kong Dollar best lending rate quoted by the financial institution. The effective interest rate at August 31, 2012 was 1.12%. The total amount payable in fiscal years 2013, 2014, 2015, 2016, 2017 and thereafter are $65,000, $65,000, $66,000, $67,000, $67,000 and $762,000, respectively. Subsequent to the year ended August 31, 2012, the Company sold the apartment in Hong Kong, as well as paid off the related note payable.

The Company has purchased some equipment under capital leases, and has a total commitment to pay $203,000 under these leases, of which $113,000 is payable in fiscal year 2013, and $90,000 in 2014.

These commitments mentioned above total $12.4 million, of which $11.1 million is payable in fiscal year 2013, $219,000 in 2014, $91,000 in 2015, $82,000 in 2016, $76,000 in 2017, and approximately $807,000 is payable after five years.

Discontinued Operations

Total rent and lease expenses paid by the Company for its discontinued operations for the fiscal years 2012 and 2011 were approximately $117,000 and $225,000, respectively. The Company’s total minimum rental commitments under noncancellable operating leases are approximately $139,000.

The Company had contracts with doctors to manage various areas of the Company’s hospital and other service agreements. Payments made under these agreements for the fiscal years ended August 31, 2012 and 2011 were $-0-and $668,000, respectively.

The Company had administrative support services agreements with outside organizations for administrative support services. Payments made related to these agreements for fiscal years 2012 and 2011 were $110,000 and $210,000, respectively. The Company has a total commitment of approximately $64,000, all of which is to be incurred in fiscal year 2013, related to these administrative support services agreements.

The Company, through its subsidiary, also had agreements with outside organizations that offer marketing, pre-authorization and follow up support services to prospective bariatric and orthopedic patients in areas serviced by the Garland facility, before its closure in September 2011. The facility received bariatric and orthopedic referrals from other sources, and the organizations referred clients to other area hospitals. The Company had since cancelled these agreements in the first quarter of fiscal year 2011, and does not have a commitment related to these agreements anymore. These marketing expenses for the fiscal years 2012 and 2011 were $-0- and $124,500, respectively.

These commitments mentioned above for discontinued operations total $203,000.

Risks and Uncertainties

The Company maintains various insurance policies that cover each of its U.S. facilities; including occurrence medical malpractice coverage. In addition, all physicians granted privileges at the Company’s U.S. facilities are required to maintain medical malpractice insurance coverage. The Company also maintains general liability and property insurance coverage for each U.S. facility, including flood coverage. The Company does not currently maintain workers’ compensation coverage in Texas. In regard to the Employee Health Insurance Plan, the Company is self-insured with specific and aggregate re-insurance with stop-loss levels appropriate for the Company’s group size. Coverage is maintained in amounts management deems adequate.

The Company is routinely involved in litigation and administrative proceedings that are incidental to its business. Specifically, all judicial review of unsatisfactory determinations of reimbursement amounts due us for our Texas facilities’ fees must be made in the district courts of Travis County, Texas in what can often be a lengthy procedure.

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Employee Benefit Plan

12 Months Ended

Aug. 31, 2012

Employee Benefit Plan [Abstract]

Employee Benefit Plan

8. Employee Benefit Plan

The Company sponsors a 401(k) defined contribution plan covering substantially all employees of the Company and provides for voluntary contributions by these employees, subject to certain limits. The plan was effective June 1, 2001. The Company makes discretionary contributions to the plan. The Company’s contributions for fiscal years 2012 and 2011 were $32,322 and $29,083, respectively. In addition, for its employees at its discontinued operations, the company contributed $1,821 and $11,981 for fiscal years 2012 and 2011, respectively.

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Employee Benefit Plan (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Employee Benefit Plan (Textual) [Abstract]
Company's Contributions to plan	$ 32,322	$ 29,083
Company contributed for Employees at its Discontinued Operations	$ 1,821	$ 11,981

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Related Party Transactions

12 Months Ended

Aug. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

6. Related Party Transactions

The Company has retained Redwood Health Corporation (“Redwood”), to furnish physicians to provide in-house emergency medical coverage for its Pasadena facility during the weekend hours and weekday nights at an hourly rate of $75. The Company’s chief executive officer is a physician and an affiliate of Redwood. The Company paid $421,725 and $434,100 for emergency room physician services to Redwood in fiscal 2012 and 2011, respectively. Management, as well as the Audit Committee that approved the agreement, believes that the hourly rate being paid is consistent with comparable in-house emergency medical coverage rates available in the area.

Dr. Ping Chu, a director of the Company until October 30, 2012, has paid the Company $14,938 and $16,163 during fiscal years ended August 31, 2012 and 2011, respectively for rent and management fees. As of August 31, 2012 and 2011, the Company had accounts receivable from Dr. Chu of $46,848 and $46,381, respectively. Included in the accounts receivable balance were amounts applicable to Dr. Chu’s staffs’ payroll for which he reimburses the Company in the ordinary course of business.

During the fiscal year 2009, the Company retained Anesthesia Associates of Houston Metroplex to provide exclusive, continuous and uninterrupted anesthesiology services, including physicians and CRNAs, to the Pasadena facility for a monthly compensation of $5,000. The Company’s chief executive officer is a physician and an affiliate of Anesthesia Associates of Houston Metroplex. The Company paid $60,000 for anesthesiology services to said organization in each of the fiscal years 2012 and 2011. Management, as well as the Board of Directors that approved the agreement, believes that the rate being paid is consistent with comparable in-house anesthesiology services rates available in the area. During the fiscal year 2009, the Company also retained Redwood to locate and recruit additional skilled anesthesiologists and CRNAs for its Pasadena facility for a monthly compensation of $20,000. The Company paid $240,000 for said recruitment services to Redwood in each of the fiscal years 2012 and 2011. Management, as well as the Board of Directors that approved the agreement, believes that the rate being paid is consistent with comparable rates for recruitment available in the area. The Company entered into these two agreements in order to replace the previous anesthesiology group, whose contract terminated at the end of fiscal 2009. The compensation which was being paid to the previous group was substantially the same as that being paid under the new contracts.

Discontinued Operations

The Company purchased $92,180 worth of artifacts as inventory for re-sale in China during fiscal year 2011. The purchase amount was paid by Mr. Chiu Chan, the Company’s former chief executive officer. The amount payable to his estate of $270,468 and $242,301, as of August 31, 2012 and 2011, respectively, is included in Accrued Liabilities in the Consolidated Balance Sheet. The Audit Committee had since approved the purchases by Mr. Chan on behalf of the Company, and believed that these purchases have been made at the prevailing market rates.

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Stockholders Equity and Stock Option Plan

12 Months Ended

Aug. 31, 2012

Stockholders Equity and Stock Option Plan [Abstract]

Stockholders' Equity and Stock Option Plan

7. Stockholders’ Equity and Stock Option Plan

Preferred Stock

In January 1992, the board of directors approved an amendment to the Company’s Articles of Incorporation to authorize 5,000,000 shares of undesignated preferred stock, for which the board of directors is authorized to fix the designation, powers, preferences and rights. There are no shares of preferred stock issued or outstanding as of August 31, 2012.

Treasury Stock

The Company did not purchase any treasury shares in fiscal years 2012 and 2011.

Stock Option Plans

Year 2011 Stock Incentive Plan

In August 2011, we mailed an Information Statement to all of our stockholders of record as of July 29, 2011. The Information Statement disclosed that our Board of Directors had approved, and the holders of a majority of the outstanding shares of our common stock had executed an Action by Written Consent of Stockholders in Lieu of a Special Meeting (the “Written Consent”), approving the adoption of the Year 2011 Stock Incentive Plan (“2011 Plan”).

The purpose of the 2011 Plan is to strengthen the Company by providing an incentive to its employees, officers, consultants and directors and thereby encouraging them to devote their abilities and industry to the success of the Company’s business enterprise. It is intended that this purpose be achieved by extending to employees, officers, consultants and directors of the Company and its subsidiaries an added long-term incentive for high levels of performance and unusual efforts through the grant of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance awards and restricted stock. The Company has reserved 15,000,000 shares of common stock for future issuance under the 2011 Plan.

On November 14, 2011, the Compensation Committee granted stock options to purchase an aggregate of 200,000 shares under the 2011 Plan, with a weighted average exercise price of $1.07 to two employees. These stock options will vest based on certain operating performance criteria, and expire after five years. The shares underlying these stock options are registered under the Securities Act of 1933 (the “Securities Act”).

On January 12, 2012, the Compensation Committee granted stock options to purchase 250,000 shares under the 2011 Plan, with an exercise price of $1.10 to the Company’s chief executive officer, Eric K. Chan. These stock options will vest in annual installments of 25 percent beginning on the first anniversary date, and expire after ten years. The shares underlying these stock options are registered under the Securities Act.

On February 6, 2012, the Compensation Committee granted stock options to purchase an aggregate of one million shares under the 2011 Plan, with a weighted average exercise price of $1.00 to various employees. These stock options will vest based on certain operating performance criteria, and expire after five years. The shares underlying these stock options are registered under the Securities Act.

As of August 31, 2012, there remain 1,050,000 shares to be issued upon exercise of outstanding options, and 13,950,000 shares which can be issued under the 2011 Plan after giving effect to shares issued and canceled.

2000 Incentive Plan

The Company’s 2000 Incentive Plan (“2000 Plan”) provides for options and other stock-based awards that may be granted to eligible employees, officers, consultants and non-employee directors of the Company or its subsidiaries. The Company had reserved 5,000,000 shares of common stock for future issuance under the 2000 Plan. The 2000 Plan does not have a fixed termination date, provided that no incentive stock option can be granted subsequent to August 29, 2011. As of August 31, 2012, there remain 1,740,566 shares to be issued upon exercise of outstanding options, and no new stock option awards will be issued under the 2000 Plan.

On July 7, 2011, the Compensation Committee granted stock options to purchase an aggregate of 1.4 million shares under the 2000 Plan, with a weighted average exercise price of $1.89 to all full time employees with a minimum of one year of employment with the Company. These stock options will vest in annual installments of 25 percent beginning on the first anniversary date, and expire after ten years. Generally, options granted become exercisable in annual installments of 25% beginning on the first anniversary date, and expire after five to ten years.

The 2011 Plan and the 2000 Plan (the “Plans”) are administered by the Compensation Committee of the board of directors. The Compensation Committee has the power to determine which eligible employees will receive awards, the timing and manner of the grant of such awards, the exercise price of stock options (which may not be less than market value on the date of grant), the number of shares, and all of the terms of the awards. Currently, however, we do not have a Compensation Committee, and accordingly, the Board of Directors, of which our chief executive officer is the sole member, will administer the Plans until such time as a Compensation Committee is established. The Company may at any time amend or terminate the 2011 Plan. However, no amendment that would impair the rights of any participant with respect to outstanding grants can be made without the participant’s prior consent. Stockholder approval of an amendment to the Plans is necessary only when required by applicable law or stock exchange rules.

The following table summarizes the stock option activities for the year ended August 31, 2012 (share amounts in thousands):

	Shares			Weighted Average Option Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value(1)
Outstanding, August 31, 2011		2,206		$	2.41	$	—	$	—
Granted		1,450			1.03		0.52		—
Exercised		—			—		—		—
Expired or canceled		(865	)		1.68		—		—
Outstanding, August 31, 2012		2,791		$	1.92		—	$	—

⁽¹⁾  These amounts represent the difference between the exercise price and the closing price of Dynacq common stock on August 9, 2012 and August 31, 2011, as reported on the NASDAQ stock market, for all in-the-money options outstanding. For exercised options, intrinsic value represents the difference between the exercise price and the closing price of Dynacq common stock on the date of exercise.

For the years ended August 31, 2012 and 2011, the Company did not have any stock options exercised.

For the years ended August 31, 2012 and 2011, stock-based compensation expense associated with the Company’s stock options and stock grants was $325,408 and $276,463, respectively. The total unrecognized compensation expense for outstanding stock options as of August 31, 2012 was approximately $1,043,000, and will be recognized, in general, over 3.2 years. The weighted average number of years to recognize the compensation expense is 1.7 years.

The following summarizes information related to stock options outstanding at August 31, 2012 and related weighted average price and life information:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
	(Share Amounts In Thousands)
$1.00 – 1.10		1,050		5.8	$	1.03		—	$	—
$1.86		957		8.9		1.86		239		1.86
$2.50 – 2.75		569		0.8		2.54		569		2.54
$4.90		215		2.3		4.90		215		4.90
Total		2,791		5.6	$	1.92		1,023	$	2.88

The fair value of the stock-based awards was estimated using the Black-Scholes model with the following weighted average assumptions for two fiscal years ended August 31, 2012:

	Year Ended August 31,
	2012			2011
Estimated fair value	$	0.52		$	1.12
Expected life (years)		4.1			4.1
Risk free interest rate		0.79	%		1.55	%
Volatility		78	%		81	%
Dividend yield		—			—

On July 7, 2011, a performance share award was granted by the Compensation Committee to an employee whereby the employee could have earned up to 1.5 million shares of the Company’s common stock if certain operating performance criteria were met. Due to termination of employment before any of the shares vested, this performance award was cancelled effective as of August 31, 2011. Such shares are not reflected in the above tables for stock option activities and stock options outstanding.

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Net Income (Loss) Per Share

12 Months Ended

Aug. 31, 2012

Net Income (Loss) Per Share [Abstract]

Net Income (Loss) Per Share

9. Net Income (Loss) Per Share

The following table presents the computation of basic and diluted loss per common share attributable to the Company:

	Year Ended August 31,
	2012			2011
				(Restated)
Basic and diluted loss per common share:
Numerator:
Loss from continuing operations	$	(10,574,669	)	$	(17,388,357	)
Less: Net loss attributable to noncontrolling interest		47,358			15,978
Loss from continuing operations attributable to Dynacq Healthcare, Inc.		(10,527,311	)		(17,372,379	)
Discontinued operations, net of income taxes		(1,394,984	)		(3,522,169	)
Loss on disposal of discontinued operations, net of income taxes		(229,201	)		(121,577	)
Net loss attributable to Dynacq Healthcare, Inc.	$	(12,151,496	)	$	(21,016,125	)
Denominator:
Basic and diluted average common shares outstanding		14,489,780			14,196,191
Basic and diluted loss per common share:
Loss from continuing operations attributable to Dynacq Healthcare, Inc.	$	(0.73	)	$	(1.22	)
Discontinued operations, net of income taxes		(0.10	)		(0.25	)
Loss on disposal of discontinued operations, net of income taxes		(0.02	)		(0.01	)
Net loss attributable to Dynacq Healthcare, Inc.	$	(0.85	)	$	(1.48	)

Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted net income (loss) per share, the basic weighted average number of shares is increased by the dilutive effect of stock options determined using the treasury stock method. However, if it is anti-dilutive, the dilutive effect of the stock options is not included in the calculation of diluted net income (loss) per share. Stock options with exercise prices exceeding current market prices that were excluded from the computation of net income (loss) per share amounted to approximately 2,653,000 shares and 1,232,000 shares for the fiscal year ended August 31, 2012 and 2011, respectively.

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Comprehensive Loss and Accumulated Other Comprehensive Income (Details 1) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Components of accumulated other comprehensive income
Foreign currency translation adjustment, net of taxes of $4,414 and $518,217, respectively	$ 8,196	$ 952,782
Change in valuation of investment available-for-sale, net of taxes of $-0- and $3,500,481, respectively	8,411,128	6,500,894
Total accumulated other comprehensive income, net of taxes of $4,414 and $4,018,698, respectively	$ 8,419,324	$ 7,453,676

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Accrued Liabilities (Details) (USD $)	Aug. 31, 2012	Aug. 31, 2011
Summary of accrued liabilities
MDR stop-loss cases accrual, including accrued interest	$ 9,548,602	$ 12,918,370
Marketing fees liability	300,000	2,381,565
Payroll and related taxes	389,713	703,398
Noncontrolling interest in consolidated subsidiary buy-out liability	106,937	156,737
Property taxes	339,527	364,308
Medicare liability		400,000
Year-end accruals of expenses and other	1,078,583	1,506,175
Total accrued liabilities	$ 11,763,362	$ 18,430,553

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Comprehensive Loss and Accumulated Other Comprehensive Income (Details) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Summary other comprehensive income
Net loss	$ (12,151,496)	$ (21,016,125)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of taxes of $(12,530) and $315,465, respectively	(23,268)	585,864
Reclassification adjustment for foreign currency gains included in net income, net of taxes of $(501,273) and $-0-, respectively	(921,318)
Change in valuation of investment available-for-sale, net of taxes of $(3,500,481) and $(1,427,334), respectively	1,910,234	(2,650,763)
Reclassification adjustment for gains on call of investment available-for-sale included in net income, net of taxes of $-0- and $455,000, respectively		845,000
Total other comprehensive loss, net of taxes	(11,185,848)	(22,236,024)
Comprehensive loss attributable to the noncontrolling interest
Comprehensive loss attributable to Dynacq Healthcare, Inc.	$ (11,185,848)	$ (22,236,024)

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Concentrations of Credit Risk and Fair Value of Financial Instruments (Tables)

12 Months Ended

Aug. 31, 2012

Concentrations of Credit Risk and Fair Value of Financial Instruments [Abstract]

Mix of gross receivables from our facilities in the United States from self-pay patients and third-party payers

	2012			2011
Workers’ compensation		1	%		1	%
Workers’ compensation subject to Medical Dispute Resolution process		84	%		85	%
Commercial		9	%		8	%
Medicare / Government		1	%		—	%
Self-pay		4	%		4	%
Other		1	%		2	%
		100	%		100	%

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Income Taxes (Details 1) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Provision (benefit) for deferred income taxes
Net operating loss carryforward	$ (4,941,754)	$ (5,466,384)
Differences between revenues and expenses recognized for federal income tax and financial reporting purposes	2,172,058	(341,188)
Difference in method of computing depreciation for tax and financial reporting purposes	49,061	(42,535)
Valuation allowance	6,739,334	5,065,069
Total deferred	$ 4,018,699	$ (785,038)

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Industry Segments and Geographic Information

12 Months Ended

Aug. 31, 2012

Industry Segments and Geographic Information [Abstract]

Industry Segments and Geographic Information

14. Industry Segments and Geographic Information

The Industry Segment “U.S. Division” comprises of the Company’s Pasadena facility. The Company at the present time has the U.S. Division and the Corporate Division.

Certain previously reported financial information has been reclassified to conform to the current year’s presentation.

Corporate Division

The Company signed a commercial contract of sale on March 7, 2013 to sell its Garland facility. The sale is expected to close in May 2013. Based on the sales price, the Company has taken an impairment charge of approximately $1.1 million as of August 31, 2012. The Company closed the Garland facility on September 30, 2011, and accordingly its operations for the year ended August 31, 2012 and 2011 are classified as “Discontinued Operations” (see Discontinued Operations below).

From March 1, 2009 to February 28, 2011, Dynacq Huai Bei Healthcare, Inc. (“Dynacq-Huai Bei”), a wholly owned subsidiary of the Company provided healthcare management services to the Second People’s Hospital in Rui An, China. The Company organized Dynacq-Huai Bei in April 2008 under the laws of the People’s Republic of China. Dynacq-Huai Bei was responsible for funding any operating deficits, and was entitled to any operating profits, of that hospital during the management period. Due to continued losses at the Second People’s Hospital, the Company terminated the management agreement with the Rui An City Department of Health. The Company ceased providing healthcare management services to the Second People’s Hospital as of February 28, 2011. The Company wrote off the fixed assets and inventory balances as of February 28, 2011, and does not expect any further losses due to the termination of this management agreement related to the Second People’s Hospital. We have accounted for the operations of Dynacq-Huai Bei and Second People’s Hospital in Rui An, China as discontinued operations, and have reclassified prior period financial statements to exclude them from continuing operations.

Dynacq-Huai Bei and the Rui An City Department of Health had also previously entered into an agreement assigning to Dynacq-Huai Bei the right to manage the Third People’s Hospital in Rui An, which hospital is currently under construction. Dynacq-Huai Bei and the Rui An City Department of Health, in November 2010, mutually agreed to terminate this agreement due to continued delays in the construction of the Third People’s Hospital. Accordingly, Dynacq-Huai Bei will not manage the Third People’s Hospital.

The Company also organized Sino Bond Inc. Limited, a Hong Kong corporation (“Sino Bond”) to hold and manage investments in Hong Kong. Sino Bond invests in debt and equity securities in Europe and Asia, including initial public offerings and pre-initial public offerings.

During the fiscal year ended August 31, 2009, the Company invested approximately $9.1 million of its available cash in marketable securities. During the quarter ended August 31, 2011, one of these marketable securities with a book cost of $700,000 was called for a gain of $1.3 million. As of August 31, 2012, the balance of these securities is valued at approximately $16.8 million, except for one particular security that was called subsequent to the year ended August 31, 2012. The Company intends to hold these for a minimum period of an additional 12 months. During the year ended August 31, 2012 and 2011, the Company also traded in initial public offerings of equity securities on the Hong Kong Stock Exchange and had losses of $318,206 and $364,721, respectively.

Discontinued Operations

On September 29, 2011, the Board of Directors of the Company approved the closure of the Garland facility, included in our U.S. division, effective September 30, 2011. Prior to that, in August 2010, the Board of Directors of the Company approved a plan to dispose of the Garland facility due to continued operating losses. The Garland facility had experienced decreases in net patient revenues and number of cases, generally attributable to the loss of physicians from our medical staff. The opening of a new hospital near our Garland facility had a direct adverse impact on our ability to retain members of the medical staff at that facility and consequently on our patient volume. The Garland facility was operating at a loss, and the Board of Directors believed that ceasing operations of the facility at that time was in the Company’s best interest. We do not expect to incur any material costs associated with termination of employment of the affected employees beyond accrued obligations for salary and benefits. The Company has estimated a closing cost of $625,000. The Company signed a commercial contract of sale on March 7, 2013 to sell its Garland facility. The sale is expected to close in May 2013. Based on the sales price, the Company has taken an impairment charge of approximately $1.1 million as of August 31, 2012.

The Company obtained an independent appraisal for the Pasadena facility in October 2012, and based on the hospital’s valuation, expected sale proceeds, and expected cash flows, has determined that there is no impairment charge required in connection with the foregoing operating and/or disposal activities.

The Corporate Division includes interest and other income related to these investments in available-for-sale securities, corporate personnel compensation expenses, and general and administrative expenses. Such expenses and income are not allocated to our operating division, as they relate to our general corporate activities.

We generally evaluate performance based on profit or loss from operations before income taxes and non-recurring charges and other criteria. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. There are no transfers between segments.

Summarized financial information concerning the business segments from continuing operations is as follows:

	Year Ended August 31,
	2012			2011
Revenues from external customers
Net patient service revenues
U.S. Division	$	5,531,233		$	(1,977,207	)
Corporate		—			—
Consolidated	$	5,531,233		$	(1,977,207	)
Loss before taxes and discontinued operations
U.S. Division	$	(4,040,738	)	$	(13,809,269	)
Corporate		(2,515,232	)		(4,936,556	)
Consolidated	$	(6,555,970	)	$	(18,745,825	)
	August 31,
	2012			2011
				(Restated)
Total Assets
U.S. Division	$	8,072,893		$	8,763,015
Corporate		32,711,311			48,756,664
Assets of continuing operations		40,784,204			57,519,679
Assets of discontinued operations		5,401,092			6,909,527
Consolidated	$	46,185,296		$	64,429,206

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Property and Equipment (Tables)

12 Months Ended

Aug. 31, 2012

Property and Equipment [Abstract]

Schedule of Property and equipment

	2012			2011
Land	$	497,110		$	497,110
Buildings and improvements		8,989,115			9,281,245
Equipment, furniture and fixtures		10,058,232			10,518,364
		19,544,457			20,296,719
Less accumulated depreciation and amortization		(12,888,637	)		(13,127,855	)
Net property and equipment	$	6,655,820		$	7,168,864

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Notes Payable (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Mar. 31, 2010	Aug. 31, 2012	Nov. 30, 2011	Sep. 30, 2010
Notes Payable (Textual) [Abstract]
Investment for the purchase of apartment	$ 2,014,207	$ 2,014,207
Maturity Period of Mortgage Loan	18 years	18 years
Mortgage loan	1,245,775	1,245,775
Base period to be considered for variable interest rate		3 months
Mortgage loan basis spread on Hang Seng inter bank offered rates	0.70%	0.70%
Percentage of interest rate below Hong Kong interest rate	2.90%	2.90%
Effective interest rate		1.12%
Notes Payable Secured by Equipment			116,339	65,000
Interest rate			4.50%	6.00%
Principal payments due on the note payable in fiscal years 2013		105,735
Principal payments due on the note payable in fiscal years 2014		105,529
Principal payments due on the note payable in fiscal years 2015		72,872
Principal payments due on the note payable in fiscal years 2016		66,729
Principal payments due on the note payable in fiscal years 2017		67,470
Principal payments due on the note payable in fiscal years there after		$ 761,587

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Significant Accounting Policies (Details 3) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Gross revenues and contractual allowances for Pasadena facility
Gross billed charges	$ 19,619,903	$ 22,138,821
Contractual allowance	14,088,670	24,116,028
Net Revenue	$ 5,531,233	$ (1,977,207)
Contractual allowance percentage	72.00%	109.00%

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Consolidated Statements of Stockholders' Equity (USD $)	Total	Common Stock	Additional Paid-In Capital	Foreign currency translation	Unrealized gains (losses) on securities	Retained Earnings
Beginning Balance at Aug. 31, 2010	$ 63,003,491	$ 14,177	$ 9,039,624	$ 366,918	$ 8,306,657	$ 45,276,115
Beginning Balance, Shares at Aug. 31, 2010		14,176,960
Stock issued on acquisition and employee compensation	465,000	250	464,750
Stock issued on acquisition and employee compensation, Shares		250,000
Charge for granting stock options to employees	276,463		276,463
Foreign currency translation adjustment, net of taxes of $315,465 for 2011 and $(12,530) for 2012	585,864			585,864
Unrealized losses on securities available-for-sale, net of taxes of $(972,334) for 2011 and $(3,500,481) for 2012	(1,805,763)				(1,805,763)
Net loss	(21,016,125)					(21,016,125)
Ending Balance at Aug. 31, 2011	41,508,930	14,427	9,780,837	952,782	6,500,894	24,259,990
Ending Balance, Shares at Aug. 31, 2011		14,426,960
Stock issued value for non-controlling interest sale and employee compensation	116,666	117	116,549
Stock issued shares for non-controlling interest sale and employee compensation, Shares		116,666
Charge for granting stock options to employees	275,408		275,408
Reclassification adjustment for foreign currency gains included in net income, net of taxes of $(501,273)	(921,318)			(921,318)
Foreign currency translation adjustment, net of taxes of $315,465 for 2011 and $(12,530) for 2012	(23,268)			(23,268)
Unrealized losses on securities available-for-sale, net of taxes of $(972,334) for 2011 and $(3,500,481) for 2012	1,910,234				1,910,234
Net loss	(12,151,496)					(12,151,496)
Ending Balance at Aug. 31, 2012	$ 30,715,156	$ 14,544	$ 10,172,794	$ 8,196	$ 8,411,128	$ 12,108,494
Ending Balance, Shares at Aug. 31, 2012		14,543,626

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Discontinued Operations

12 Months Ended

Aug. 31, 2012

Discontinued Operations [Abstract]

Discontinued Operations

3. 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 $5,401,092 of assets of discontinued operations and $-0- of liabilities of discontinued operations as of August 31, 2012.

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 years ended August 31, 2012 and 2011 continue to be classified as discontinued operations. The Company signed a commercial contract of sale on March 7, 2013 to sell its Garland facility. The sale is expected to close in May 2013. Based on the sales price, the Company has taken an impairment charge of approximately $1.1 million as of August 31, 2012.

The Company obtained an independent appraisal for both the hospitals in October 2012, 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 foreign subsidiary, Sino Bond, is the only company classified as continuing operations in the Corporate Division, 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 years ended August 31, 2012 and 2011.

Discontinued Operations

	Year Ended August 31, 2012									Year Ended August 31, 2011
	U.S. Division			Corporate Division			Total			U.S. Division			Corporate Division			Total
Net patient service revenue	$	397,278		$	—		$	397,278		$	1,086,455		$	831,232		$	1,917,687
Costs and expenses:
Compensation and benefits		181,693			22,644			204,337			2,473,738			610,399			3,084,137
Medical services and supplies		235,977			—			235,977			773,448			406,452			1,179,900
Other operating expenses		957,090			(363,148	)		593,942			3,007,084			890,222			3,897,306
Asset impairment charge		1,058,056			—			1,058,056			—			—			—
Depreciation and amortization		—			82,353			82,353			—			90,734			90,734
Total costs and expenses		2,432,816			(258,151	)		2,174,665			6,254,270			1,997,807			8,252,077
Operating income (loss)		(2,035,538	)		258,151			(1,777,387	)		(5,167,815	)		(1,166,575	)		(6,334,390	)
Other income (expense), net		304,673			77,730			382,403			(129,505	)		1,060,920			931,415
Income (loss) before income taxes		(1,730,865	)		335,881			(1,394,984	)		(5,297,320	)		(105,655	)		(5,402,975	)
Benefit for income taxes		—			—			—			1,850,654			30,152			1,880,806
Income (loss) on discontinued operations, net of taxes		(1,730,865	)		335,881			(1,394,984	)		(3,446,666	)		(75,503	)		(3,522,169	)
Loss on disposal of discontinued assets		—			(229,201	)		(229,201	)		—			(187,041	)		(187,041	)
Benefit for income taxes		—			—			—			—			65,464			65,464
Loss on disposal of discontinued operations, net of taxes		—			(229,201	)		(229,201	)		—			(121,577	)		(121,577	)
Total income (loss) on discontinued operations, net of taxes	$	(1,730,865	)	$	106,680		$	(1,624,185	)	$	(3,446,666	)	$	(197,080	)	$	(3,643,746	)
	August 31, 2012									August 31, 2011
	U.S. Division			Corporate Division			Total			U.S. Division			Corporate Division			Total
Current assets	$	—		$	—		$	—		$	260,020		$	118,734		$	378,754
Property and equipment, net		5,401,092			—			5,401,092			6,530,773			—			6,530,773
Total assets	$	5,401,092		$	—		$	5,401,092		$	6,790,793		$	118,734		$	6,909,527
Current liabilities:
Accounts payable and accrued liabilities	$	—		$	—		$	—		$	—		$	604,302		$	604,302
Total liabilities	$	—		$	—		$	—		$	—		$	604,302		$	604,302

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Stockholders Equity and Stock Option Plan (Details 2) (USD $)	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Estimated fair value	$ 0.52	$ 1.12
Expected life (years)	4 years 1 month 6 days	4 years 1 month 6 days
Risk free interest rate	0.79%	1.55%
Volatility	78.00%	81.00%
Dividend yield

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Concentrations of Credit Risk and Fair Value of Financial Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Concentration Risk [Line Items]
Concentration Risk, Percentage	100.00%	100.00%
Concentrations of Credit Risk and Fair Value of Financial Instruments (Textual) [Abstract]
Cash Balance of the Company	$ 8
Gross receivables from third-party	90.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Third Party Payor One [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	14.00%	14.00%
Revenue [Member] | Customer Concentration Risk [Member] | Major Customers One [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		17.00%
Revenue [Member] | Customer Concentration Risk [Member] | Major Customers Two [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	10.00%	10.00%
Revenue [Member] | Customer Concentration Risk [Member] | US Discontinued Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		31.00%
Revenue [Member] | Customer Concentration Risk [Member] | China Discontinued Operations [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		10.00%

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Discontinued Operations (Tables)

12 Months Ended

Aug. 31, 2012

Discontinued Operations [Abstract]

Financial information related to discontinued operations

	Year Ended August 31, 2012									Year Ended August 31, 2011
	U.S. Division			Corporate Division			Total			U.S. Division			Corporate Division			Total
Net patient service revenue	$	397,278		$	—		$	397,278		$	1,086,455		$	831,232		$	1,917,687
Costs and expenses:
Compensation and benefits		181,693			22,644			204,337			2,473,738			610,399			3,084,137
Medical services and supplies		235,977			—			235,977			773,448			406,452			1,179,900
Other operating expenses		957,090			(363,148	)		593,942			3,007,084			890,222			3,897,306
Asset impairment charge		1,058,056			—			1,058,056			—			—			—
Depreciation and amortization		—			82,353			82,353			—			90,734			90,734
Total costs and expenses		2,432,816			(258,151	)		2,174,665			6,254,270			1,997,807			8,252,077
Operating income (loss)		(2,035,538	)		258,151			(1,777,387	)		(5,167,815	)		(1,166,575	)		(6,334,390	)
Other income (expense), net		304,673			77,730			382,403			(129,505	)		1,060,920			931,415
Income (loss) before income taxes		(1,730,865	)		335,881			(1,394,984	)		(5,297,320	)		(105,655	)		(5,402,975	)
Benefit for income taxes		—			—			—			1,850,654			30,152			1,880,806
Income (loss) on discontinued operations, net of taxes		(1,730,865	)		335,881			(1,394,984	)		(3,446,666	)		(75,503	)		(3,522,169	)
Loss on disposal of discontinued assets		—			(229,201	)		(229,201	)		—			(187,041	)		(187,041	)
Benefit for income taxes		—			—			—			—			65,464			65,464
Loss on disposal of discontinued operations, net of taxes		—			(229,201	)		(229,201	)		—			(121,577	)		(121,577	)
Total income (loss) on discontinued operations, net of taxes	$	(1,730,865	)	$	106,680		$	(1,624,185	)	$	(3,446,666	)	$	(197,080	)	$	(3,643,746	)
	August 31, 2012									August 31, 2011
	U.S. Division			Corporate Division			Total			U.S. Division			Corporate Division			Total
Current assets	$	—		$	—		$	—		$	260,020		$	118,734		$	378,754
Property and equipment, net		5,401,092			—			5,401,092			6,530,773			—			6,530,773
Total assets	$	5,401,092		$	—		$	5,401,092		$	6,790,793		$	118,734		$	6,909,527
Current liabilities:
Accounts payable and accrued liabilities	$	—		$	—		$	—		$	—		$	604,302		$	604,302
Total liabilities	$	—		$	—		$	—		$	—		$	604,302		$	604,302

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Restatement (Details Textual) (USD $)	12 Months Ended
	Aug. 31, 2011
Restatement (Textual) [Abstract]
Income tax refunded over stated	$ 1,794,294

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Significant Accounting Policies (Details)	12 Months Ended
	Aug. 31, 2012
Land [Member]
Estimated useful lives of assets
Property plant and equipment useful life average	0 years
Buildings and improvements [Member]
Estimated useful lives of assets
Property plant and equipment useful life average	39 years
Equipment, furniture and fixtures [Member]
Estimated useful lives of assets
Property plant and equipment useful life average	5 years

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Concentrations of Credit Risk and Fair Value of Financial Instruments

12 Months Ended

Aug. 31, 2012

Concentrations of Credit Risk and Fair Value of Financial Instruments [Abstract]

Concentrations of Credit Risk and Fair Value of Financial Instruments

13. Concentrations of Credit Risk and Fair Value of Financial Instruments

The Company has financial instruments that are exposed to concentrations of credit risk and consist primarily of cash investments and trade accounts receivable. The Company routinely maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”) insurance limits in the U.S. and in financial institutions overseas. The management believes that these financial institutions are of high quality and the risk of loss is minimal. At August 31, 2012, the Company had cash balances in excess of the FDIC and SIPC limits in the U.S. and in financial institutions overseas of $8 million.

As is customary in the healthcare business, the Company has accounts receivable from various third-party payers. The Company does not request collateral from its customers and continually monitors its exposure for credit losses and maintains allowances for anticipated losses. Gross receivables from third-party payers are normally in excess of 90% of the total receivables at any point in time. The mix of gross receivables from our facilities in the United States from self-pay patients and third-party payers at August 31, 2012 and 2011 is as follows:

	2012			2011
Workers’ compensation		1	%		1	%
Workers’ compensation subject to Medical Dispute Resolution process		84	%		85	%
Commercial		9	%		8	%
Medicare / Government		1	%		—	%
Self-pay		4	%		4	%
Other		1	%		2	%
		100	%		100	%

We had one third-party payer (customer) who represented 14% of our gross receivables as of August 31, 2012 and 2011. We had one third-party payers (customers) representing 10% of the Company’s gross revenue for the year ended August 31, 2012. We had two third-party payers (customers) representing 17% and 10% of the Company’s gross revenue for the year ended August 31, 2011.

With respect to our discontinued operations in the U.S., we had one third-party payer (customer) representing 31% of the Company’s gross revenue for the year ended August 31, 2011.

With respect to our discontinued operations in China, the majority of our gross receivables as at August 31, 2012 and 2011 are from the local government Department of Health. We had 10% of our gross revenues in China from the local government Department of revenue for the fiscal year ended August 31, 2011.

The carrying amounts of cash and cash equivalents, current receivables, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of the Company’s short-term borrowings at August 31, 2012 and 2011 approximate their fair value.