<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.   20549

                                  FORM 10-QSB
(Mark One)

( X )    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999

                                      or

(   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
For  the transition period from  _______________ to  ___________________

Commission file number 0-20554

                          DYNACQ INTERNATIONAL, INC.
   (Exact name of registrant as specified in its charter)

                  NEVADA                                     76-0375477
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                               Identification No.)

10304 INTERSTATE 10 EAST, SUITE 369, HOUSTON, TEXAS 77029
(address of principal executive offices)            Zip Code

Registrants telephone number, including area code (713)673-6432

                                      N/A
(Former name, former address and former fiscal year, if changed since last
report)

   Check whether the issurer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirement for the past 90
days. Yes X. No __.

                     APPLICABLE ONLY TO CORPORATE ISSUERS
  State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable dates.

Title of Each Class                         Outstanding at  January 13, 2000
Common Stock, $0.001  par value             6,681,590 shares

   Transitional Small Business Disclosure Format (check one)
      Yes __         No X
<PAGE>

PART I. - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS

                  DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                    ASSETS
                                                                (Unaudited)       (Audited)
                                                                NOVEMBER 30,      AUGUST 31
                                                                    1999            1999
                                                                ------------     -----------
<S>                                                                 <C>             <C>
CURRENT ASSETS:
  Cash                                                             1,608,941      1,163,535
   Receivable (Net of Allowance for                                4,757,998      4,405,494
       Doubtful Accounts)
    Inventory                                                         28,466         31,869
   Notes Receivable                                                  135,000         75,000
    Due from related party                                            32,625         32,625
                                                                 -----------     ----------
Total Current Assets                                               6,563,030      5,708,523

FIXED ASSETS - NET                                                 9,771,636      9,579,207
OTHER ASSETS                                                         221,939        224,782
                                                                  ----------     ----------
TOTAL ASSETS                                                      16,556,605     15,512,512
                                                                  ==========     ==========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts Payable                                                  595,408      1,432,114
   Accrued Liabilities                                             1,892,492      1,146,745
   Notes Payable                                                           0        250,000
   Current Maturity of Notes Payable                                 204,040        268,657
   Income Taxes Payable                                            1,078,882      1,037,306
   Deferred Income Taxes Payable                                     495,000        585,000
                                                                  ----------     ----------
TOTAL CURRENT LIABILITIES                                          4,265,822      4,719,822

LONG-TERM DEBT, NET OF CURRENT MATURITY                              685,487        685,487
DEFERRED FEDERAL INCOME TAX  PAYABLE                                 489,647        244,000
MINORITY INTERESTS IN SUBSIDIARY                                   1,615,469      1,498,801

STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.01 Par Value,
     5,000,000 Shares Authorized,
     None Issued or Outstanding (1)
   Common Stock, $0.001 Par Value,
     300,000,000 Shares Authorized
     After 8 to 1 &4 to 1 reverse stock split, & 100% stock
     dividend on 1/10/2000, 7,213,256 Shares Issued and
     Outstanding (1)                                                   7,311          3,607
   Additional Paid In Capital (1)                                  3,819,230      3,552,761
   Retained Earnings (1)                                           6,403,486      5,537,881
LESS TREASURY STOCK; 531,666 shares at cost (1)                     (729,847)      (729,847)
                                                                  ----------     ----------
TOTAL STOCKHOLDERS' EQUITY                                         9,500,180      8,364,402
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        16,556,605     15,512,512
                                                                  ==========     ==========
</TABLE>

<PAGE>

                  DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                                     THREE MONTHS ENDED
                                                                         NOVEMBER 30
                                                                      1999           1998
                                                                    ----------------------
<S>                                                                <C>            <C>
INCOME                                                             5,243,612      2,417,625
COST OF SALE                                                         125,677         98,090
                                                                   ---------      ---------
   GROSS  PROFIT                                                   5,117,935      2,319,535

LESS EXPENSES :
    Contract payments to physicians                                  401,748        393,258
    Compensation and benefits                                        959,571        492,483
    Medical Supplies                                                 850,038        296,187
    Other general and administrative expense                       1,013,302        385,660
    Depreciation and Amortization                                    236,113        124,402
    Rent and occupancy                                                80,951        111,555
    Interest                                                          64,685         33,390
                                                                   ---------      ---------
     Total Expenses                                                3,606,408      1,836,935
                                                                   ---------      ---------
NET INCOME (LOSS) FROM OPERATIONS                                  1,511,527        482,600

LESS PROVISION FOR FEDERAL INCOME TAXES                              525,647        157,690

NET INCOME BEFORE MINORITY INTEREST                                  985,880        324,910

MINORITY INTERESTS IN (PROFITS)/LOSS
OF SUBSIDIARY                                                       (116,668)       (33,698)

NET INCOME (LOSS)                                                    869,212        291,212
                                                                   =========      =========
BASIC EARNINGS/ (LOSS) PER COMMON SHARE:                               $0.13          $0.04

DILUTED EARNINGS/ (LOSS) PER COMMON SHARE:                             $0.13          $0.04
                                                                   =========      =========
WEIGHTED AVERAGE COMMON SHARES-BASIC                               6,519,222 (1)  6,935,084 (2)
WEIGHTED AVERAGE COMMON SHARES-DILUTED                             6,684,836 (1)  6,935,084 (2)

</TABLE>

Note:
(1) Common shares presented in the Consolidated Balance Sheets and Consolidated
Statement of Operations for the first quarter ended November 30, 1999 in
calculating both the common share par value, additional paid-in capital,
retained earnings, and earnings per share reflect the 2 for 1 stock split
effected in the form of a 100% stock dividend, although the 100% stock dividend
will not take effect until January 10, 2000. Management elected to restate and
present the number of common shares outstanding and other per share information
giving effect to the 100% stock dividend on January 14, 2000, the ex-dividend
date, which coincides with the filing date of this Form 10Q-SB for the quarterly
period ended November 30, 1999 in order to avoid possible confusion.

(2) Common shares presented in the corresponding quarter of the previous year in
computing the earnings per share are restated as if the 2 for 1 stock split
effected in the form of a 100% stock dividend has been retroactively applied for
comparison purpose.
<PAGE>

                  DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED NOVEMBER 30
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                             1999          1998
                                                           --------      --------
<S>                                                         <C>            <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES:
Net Income (Loss)                                            869,212      291,212
ADD:  ITEMS NOT REQUIRING CASH:
      DEPRECIATION                                           236,113      124,402

Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
    (Increase) Decrease in Accounts Receivable              (352,504)     273,040
    (Increase) Decrease in Inventory                           3,403        1,000
    (Increase) Decrease in Other Current Assets              (60,000)           0
    (Increase) Decrease in Due from related party                  0           30
    (Increase) Decrease in Other Assets                        2,843        4,439
    Increase (Decrease) in Accounts Payable                 (836,706)      (6,395)
    Increase (Decrease) in Accrued Liabilities               745,747      (37,492)
    Increase (Decrease) in Current Notes Payable            (250,000)     (39,896)
    Increase (Decrease) in Current Maturity                  (64,617)           0
    Increase (Decrease) in Current Income Taxes               41,576      (64,000)
    Increase (Decrease) in Deferred Income Taxes             155,647      157,690
                                                           ---------    ---------
Net Cash Provided (Used) by Operating Activities             490,714      704,030

CASH FLOW FROM INVESTING ACTIVITIES:
    Purchase of Fixed Assets                                (428,542)    (404,801)
    (Decrease) Increase of Minority Interests                116,668       18,783
     in subsidiaries
                                                           ---------    ---------
    Net Cash Provided (Used) by Investing Activities        (311,874)    (386,018)

CASH FLOW FROM FINANCING ACTIVITIES:
    Retirement of Long -Term Debt                                  0            0
     Issuance of exercised option shares from                266,566            0
     Treasury Stock
    Acquisition of Treasury Stock                                  0      (11,346)
                                                           ---------    ---------
     Net Cash Provided (Used) by Financing Activities        266,566      (11,346)
                                                           ---------    ---------
     Net Increase/(Decrease) in Cash                         445,406      306,666

CASH BALANCE AT BEGINNING OF YEAR                          1,163,535    2,413,257
                                                           ---------    ---------
CASH BALANCE AT END OF THE QUARTER                         1,608,941    2,719,923
                                                           =========    =========
</TABLE>
<PAGE>

                          DYNACQ INTERNATIONAL, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               NOVEMBER 30, 1999
                                  (UNAUDITED)

NOTE 1. - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by Dynacq
International, Inc. without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by such
rules and regulations, and management believes that the disclosures are adequate
to make the information presented not misleading. These financial statements
include all of the adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position and results of
operations. All such adjustments are of a normal and recurring nature. These
unaudited financial statements should be read in conjunction with the audited
financial statements at August 31, 1999. Operating results for the three months
period ended November 30,1999 are not necessarily indicative of the results that
may be expected for the year ending August 31, 2000.

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

                             RESULTS OF OPERATIONS
            COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1999
                 TO THE THREE MONTHS ENDED NOVEMBER 30, 1998

Consolidated revenues for the three months ended November 30, 1999 increased
$2,825,987 or 117% from that for the corresponding previous quarter ended
November 30, 1998.  Notwithstanding this significant increase in consolidated
revenues, there were a number of significant increases and decreases in the
component revenue categories.  For instance,  revenue attributable to Doctors
Practice Management, Inc. ("DPMI") increased significantly $319,502 or 183% from
the corresponding previous quarter primarily derived from increased management
fee of a specialist physician under management.  Revenue attributable to home
infusion therapy operations increased $86,257 or 20% in the current quarter due
to higher patient load as a result of more referrals and higher reimbursable
insurance charges per patient compared to the corresponding quarter of the
previous fiscal year.   Revenue attributable to Vista operations significantly
increased by  $876,763 or 41% from the corresponding previous quarter due to
increased in patient referrals, primarily as a result of the marketing effort.
The hospital which was not opened in the corresponding quarter of the previous
fiscal year recorded revenue of about $1,516,000 in the current quarter.

Consolidated costs of sale for the three months ended November 30, 1999
increased  $27,587 or 28% from that for the corresponding previous quarter ended
November 30, 1998, was  primarily attributable to the increased Vista and
hospital operations.

Consolidated operating expenses for the three months ended November 30, 1999
increased $1,801,083 or 98% from that for the corresponding previous quarter
ended November 30, 1998 primarily due to increase in the activities of Vista and
the hospital. The significant increases and decreases in the component expense
categories of the consolidated operating expenses are explained as follows:

(1)  The increase in salaries expenses of $467,088 or 95% was primarily
     attributable to the hospital, which was not in operation in the
     corresponding quarter of the previous year.

(2)  The increase in medical supplies expense of $553,851 or 187% was primarily
     attributable to the hospital, which was not in operation in the
     corresponding quarter of the previous year.
<PAGE>

(3)  The increase in other general & administrative expense of $627,642 or 163%,
     of which $126,000 was attributable to the hospital, and the remaining
     balance of the increase was primarily attributable to the increase in
     management and consulting fee paid to outside management company for
     overall operation improvement and enhancement in the current quarter.

(4)  The increase in depreciation and amortization expense of 111,711 or 90% was
     primarily due to addition of the hospital building, equipment and furniture
     and fixture.

(5)  The increase in interest expense of $31,295 or 94% was primarily due to
     paid off of a temporary loan for working capital.

Net Income increased $578,000 or 198% from $291,212 in the corresponding quarter
of the previous fiscal year to $869,212 in the current quarter.

Basic Earnings per share increased $0.09 per share or 225% from $0.04 per share
in the corresponding quarter of the previous fiscal year to $0.13 per share in
the current quarter.

Diluted Earnings per share increased $0.09 per share or 225% from $0.04 per
share in the corresponding quarter of the previous fiscal year to $0.13 per
share in the current quarter.

                              FINANCIAL CONDITION
   COMPARISON OF THE BALANCE SHEETS AT THREE MONTHS ENDED NOVEMBER 30, 1999
      TO THE AUDITED BALANCE SHEET AT FISCAL YEAR ENDED AUGUST 31, 1999.

Consolidated cash for the three months ended November 30, 1999 increased
$445,406 or 38% from that of the previous audited balance sheet ending August
31, 1999 was due to $490,714 provided by operating activities, $311,874 used by
investing activities and $266,566 provided by financing activities. Consolidated
accounts receivable for the three months ended November 30, 1999 increased
$352,504 or 129% from that of the previous audited balance sheet ended August
31, 1999.

Liquidity and Capital Resources

Working Capital of $2,297,208 at November 30, 1999 increased $1,308,507 or 132%
from working capital at August 31, 1999 primarily due to increase in cash and
receivable, and decrease in accounts payable. At November 30, 1999, the Company
maintained a liquid position evidenced by a current ratio of 1.54 to 1 and total
debt to equity of 0.52 to 1.

Management believes that available cash funds and funds generated from
operations will be sufficient for the Company to finance working capital
requirements for the foreseeable future and to meet its payment obligations on
its long-term indebtedness.

Inflation.  Inflation has not significantly impacted the Company's financial
position or operations.

Forward-Looking Information.  Information in this Form 10-QSB contains forward-
looking statements and information relating to the Company that are based on the
beliefs of the Company's management, as well as assumptions made by, and
information currently available to the Company's management.  When used in this
Form 10-QSB, words such as "anticipate", "believe", "estimate", "expect",
"intend", "will", "will be" and similar expressions, as they related to the
Company or the Company's management, identify forward-looking statements.  Such
statements reflect the current views of the Company with respect to future
events, and are subject to certain risks, uncertainties, and assumptions
relating to the operations and results of operations of the Company, competitive
factors and pricing pressures, costs of products and services, general economic
conditions, and the acts of third parties, as well as other factors described in
this Form 10-QSB, and, from time to time, in the Company's periodic earnings
releases and other reports filed with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, believed, estimated,
intended, or will be or the like.
<PAGE>

PART II.
ITEM 1. - LEGAL PROCEEDINGS

          The Company is not a party to any material litigation.

ITEM 2. - CHANGES IN SECURITIES
          None

ITEM 3. - DEFAULT UPON SENIOR SECURITIES
          None

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None

ITEM 5. - OTHER INFORMATION

          The Board of Directors of the Company in the best interests of the
Company and its shareholders unanimously authorized and declared as of December
30, 1999 a stock split effected in the form of a 100% stock dividend on all
issued shares of its common stock, 0.001 par value, whether outstanding or not,
including its treasury shares, effective as of 5:00 p.m. on January 10, 2000
(the "Record Date") as to all shareholders of record as of such date. The
distribution date for the 100% stock dividend was January 13, 2000 and the ex-
dividend date is January 14, 2000. Pursuant to SEC Rule, Form 10b-17 was filed
with NASDAQ on December 30, 1999

          On November 15, 1999, a consultant exercised 47,500 option common
shares at $4.00 per share, and three employees exercised an aggregate of 50,000
option common shares at $1.375 per share including 22,500 option common shares
exercised by Mr. Glenn Rodriguez pursuant to the Company's 1995 Incentive Stock
Option Plan.
<PAGE>

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

          The Board of Directors of the Company in the best interests of the
Company and its shareholders unanimously authorize and declare as of December
30, 1999 a stock split effected in the form of a 100% stock dividend on all
issued shares of its common stock, 0.001 par value, whether outstanding or not,
including its treasury shares, effective as of 5:00 p.m. on January 10, 2000
(the "Record Date") as to all shareholders of record as of such date and hereby
authorize the proper officers of the Company to undertake, complete and execute
all filings and notifications which may be required in connection herewith
including NASDAQ, the SEC, the Secretary of State, and press releases as
determined to be necessary in their sole discretion.

Exhibits.
Unanimous Consent of Board of Directors of Dynacq International, Inc.

                             UNANINOUS CONSENT OF
               BOARD OF DIRECTORS OF DYNACQ INTERNATIONAL, INC.

    Whereas, the Board of Directors of Dynacq International, Inc. a Nevada
corporation (the "Company") believe it is in the best interests of the Company
and its shareholders to declare as of the effective date hereof  (the
"Declaration Date") a stock split effected as a 100% stock dividend (the
"Dividend") on all issued shares of its common stock, 0.001 par value (the
"Common Stock"). NOW THEREFORE IT IS

    RESOLVED, that the Board of Directors hereby authorize and declare as of
the Declaration Date a stock split effected as a 100% stock dividend on all
issued shares of its common Stock, whether outstanding or not, including its
treasury shares, effective as of 5:00 p.m. on January 10, 2000 (the "Record
Date") as to all shareholders of record as of such date and hereby authorize the
proper officers of the Company to undertake, complete and execute all filings
and notifications which may be required in connection herewith including with
NASDAQ, the SEC, the Secretary of State, and press releases as determined to be
necessary in their sole discretion; and further

    RESOLVED, that the officers of the Company are directed to proceed to file
an application to list the Company's shares on the NASDAQ National Market if the
Company so qualifies.

    IN WITNESS, WHEREOF the undersigned have executed this Unanimous Consent
effective as of December 30, 1999.

                                                  DIRECTORS:

                                                  /s/ Chiu Moon Cham
                                                  ----------------------
                                                      Chiu Moon Chan

                                                  /s/ Philip S. Chan
                                                  ----------------------
                                                      Philip S. Chan

                                                  /s/ Stephen L. Huber
                                                  ----------------------
                                                      Stephen L. Huber

                                                  /s/ Earl R. Votaw
                                                  ----------------------
                                                      Earl R. Votaw
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                       DYNACQ INTERNATIONAL, INC.



DATE:  January  14, 2000               BY: /s/ Philip Chan
                                       ----------------------
                                           Philip Chan
                                           VP-Finance/Treasurer &
                                           Chief Financial Officer