On October 24, 2012, Dynacq Healthcare Inc. announced that James G. Gerace sent a letter of resignation to the chief executive officer of the company, which letter was dated October 19, 2012, stating that Mr. Gerace is resigning from the Board effective immediately. Mr. Gerace served as the chairman of the audit committee of the board and as a member of the board's compensation committee. In the letter of resignation, Mr. Gerace alleged certain failures of the chief executive officer of the company as being among his reasons for resigning.

The company disagrees with the allegations set forth in the letter of resignation.