-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzxJys8mY8zsrQmV/0nGMV9FZ1jmusvMn1e+1dIsu96rzcAwQEwgUm4+96PR+QIF oyxP8PMlI1yDqHcVtme1tA== 0000930661-97-001147.txt : 19970507 0000930661-97-001147.hdr.sgml : 19970507 ACCESSION NUMBER: 0000930661-97-001147 CONFORMED SUBMISSION TYPE: 10KSB40/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970506 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIAR CORP CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB40/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 97596304 BUSINESS ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 BUSINESS PHONE: 2144078400 MAIL ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 10KSB40/A 1 FORM 10-KSB405/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-KSB/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 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 0-8187 GREENBRIAR CORPORATION (Name of Small Business Issuer in its charter) Nevada 75-2399477 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 4265 Kellway Circle, Dallas, Texas 75244 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (972) 407-8400 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock, $.01 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Check whether the issuer (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The issuer's revenues for its most recent fiscal year were: $29,785,000. The aggregate market value of the voting stock held by non-affiliates of the issuer, computed by reference to the closing sales price on April 30, 1997, was approximately $42,531,000. At April 30, 1997, the issuer had outstanding approximately 6,550,000 shares of par value $.01 Common Stock. Documents Incorporated by Reference Part III of this Annual Report on Form 10-KSB incorporates certain information by reference from the definitive Proxy Statement for the registrant's Annual Meeting of Stockholders to be held on May 22, 1997. Transitional Small Business Disclosure Format (check one): YES [ ] NO [X] ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------- -------------------------------------------------------- The Company's Common Stock is traded under the symbol "GBR" and is listed on the American Stock Exchange. The high and low closing sales prices of the Company's Common Stock on the American Stock Exchange during the last two fiscal years.
1996 1995 High Low High Low First Quarter $ 16 3/4 $ 9 7/16 $ 8 3/4 $ 5 Second Quarter 17 5/8 14 10 5/16 5 5/16 Third Quarter 17 3/8 15 5/8 13 7/16 9 1/16 Fourth Quarter 16 12 3/8 13 7/16 7 3/16
The above prices have been adjusted to reflect a one for five reverse split of the Common Stock that occurred on December 1, 1995. The Company has not paid cash dividends on its Common Stock during at least the last ten fiscal years and, for the foreseeable future, the Company expects to retain all earnings to finance the future expansion and development of its business. Any determination to pay cash dividends in the future will be at the discretion of the Board of Directors and will be dependent on the Company's financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the Board of Directors deems relevant. The Company's ability to pay dividends in the future may be limited by the terms of future debt financings and other arrangements. No dividends can be paid on the Company's common stock if dividends are in arrears on the Company's preferred stock. All dividend payments on preferred stock are current. The closing price on the Company's common stock on April 10, 1996 was $18.50 per share. As of April 21, 1996, there were 3,812 holders of record of the Company's common stock. On December 30, 1996, the Company closed the American Care acquisition and issued 1,300,000 shares of its common stock in xchange for all of the outstanding common stock of American Care (see Item 1). The Company relied upon the exemption from registration provided at Section 4(2) of the Securities Act of 1933, as amended. 18 PART III -------- The information required by Items 9, 10, 11 and 12 is incorporated by reference into this Form 10-KSB from the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held May 22, 1997, which definitive Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1997. ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K: - -------- --------------------------------- (a) The following exhibits required to be filed by Item 601 of Regulation S-B are filed as part of this Annual Report on Form 10-KSB: Exhibit Number Description of Exhibits - ------- ----------------------- 3.1 Articles of Incorporation of Medical Resource Companies of America ("Registrant") (filed as Exhibit 3.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 3.1.1 Restated Articles of Incorporation of Greenbriar Corporation. 3.2 Bylaws of Registrant (filed as Exhibit 3.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 3.2.1 Amendment to Section 3.1 of the Bylaws of Registrant adopted upon approval of the Merger (filed as Exhibit 3.2.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 3.3 Certificate of Decrease in Authorized and Issued Shares. 4.1 Certificate of Designations, Preferences and Rights of Preferred Stock dated October 7, 1992 relating to Registrant's Series A Preferred Stock (filed as Exhibit 4.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 4.1.2 Certificate of Designations, Preferences and Rights of Preferred Stock dated May 7, 1993, relating to Registrant's Series B Preferred Stock (filed as Exhibit 4.1.2 to Registrant's Form S-3 Registration Statement, Registration No. 33-64840, and incorporated herein by this reference. 4.1.3 Certificate of Designations, Preferences and Rights of Preferred Stock dated August 18, 1993, relating to Registrants' Series C Preferred Stock (filed as Exhibit 4.1.3 to Registrant's Form 10- KSB for the year ended December 31, 1993). 4.1.3.1 Amendment to Certificate of Designations, Preferences and Rights of Preferred Stock dated August 18, 1993, relating to Registrants' Series C Preferred Stock. 4.1.4 Certificate of Designations, Preferences and Rights of Preferred Stock dated March 15, 1996, relating to Registrants' Series D Preferred Stock. 4.1.5 Certificate of Designations, Preferences and Rights of Preferred Stock dated March 15, 1996, relating to Registrants' Series E Preferred Stock. 4.3.2 Registration Rights Agreement dated April 27, 1990 between Registrant's predecessor and International Health Products, Inc. (assumed by Registrant), which has been assigned to JRG Investments, Inc., relating to 4,150,000 shares (830,000 post December 1995 shares) of Registrant's Common Stock, the benefits of which were further assigned to Professional Investors Insurance, Inc. as to 600,000 shares (120,000 post December 1995 shares) in November 1992 (filed on June 5, 1990, as an Exhibit to the Registrant's predecessor's Current Report on Form 8-K and incorporated herein by reference). 24 4.3.3 Form of Assignment of Registration Rights Agreement dated September 30, 1992 between JRG Investments, Inc. and Professional Investors Insurance, Inc. relating to 600,000 shares (120,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 4.3.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 4.4 Form of Registration Rights Agreement dated December 1, 1991 between Registrant and W. Michael Gilley (filed as Exhibit 4.4 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 4.5.1 Stock Purchase Agreement dated May 7, 1993 for the purchase of Complete Corporation and Remuda Acquisition Corporation (filed as Exhibit 4.5.1 to Registrant's Form 10-KSB for the year ended December 31, 1993). 4.5.2 Registration Rights Agreement dated May 7, 1993 granted to the shareholders of Complete Corporation and Remuda Acquisition Corp. (filed as Exhibit 4.5.2 to Registrant's Form 10-KSB for the year ended December 31, 1993). 4.5.3 Agreement and Plan of Merger dated June 30, 1994 with New Life Treatment Centers, Inc. relating to the disposition of Remuda Ranch Center for Anorexia and Bulimia, Inc. (filed as Exhibit 4.5.3 to Registrant's Form 10-KSB for the year ended December 31, 1994). 4.5.4 Amended and Restated Certificate of Incorporation of New Life Treatment Centers, Inc. (filed as Exhibit 4.5.4 to Registrant's Form 10-KSB for the year ended December 31, 1994). 4.5.5 Registration Right Agreement dated July 29, 1994 re. New Life Treatment Centers, Inc. (filed as Exhibit 4.5.5 to Registrant's Form 10-KSB for the year ended December 31, 1994). 4.5.6 Restricted Stock Agreement dated July 29, 1994 re. New Life Treatment Centers, Inc. (filed as Exhibit 4.5.6 to Registrant's Form 10-KSB for the year ended December 31, 1994). 4.6.1 Stock Purchase Agreement dated August 16, 1993 for the issuance of Series C Preferred Stock (filed as Exhibit 4.6.1 to Registrant's Form 10-KSB for the year ended December 31, 1993). 4.6.2 Stock Purchase Agreement dated August 16, 1993 between Clay Capital Corporation and Altman Nursing, Inc. (filed as Exhibit 4.6.2 to Registrant's Form 10-KSB for the year ended December 31, 1993). 4.7.1 Stock Purchase Agreement dated January 30, 1996 between Joseph L. Durant, Innovative Health Services, Inc. and Medical Resource Companies of America (filed as Exhibit 4.7.1 to Registrant's Form 8-K, dated February 20, 1996, and incorporated herein by this reference). 4.8.1 Stock Purchase Agreement dated March 15, 1996 between Wedgwood Retirement Inns, Inc., Victor L. Lund, Paul Dendy, Mark Hall, Frank R. Reeves, Doris Thornsbury, Teresa Waldroff and Medical Resource Companies of America (filed with Registrant's 8-K, dated March 15, 1996, and incorporated herein by this reference). 4.8.2 Amendment to Stock Purchase Agreement (dated March 15, 1996) dated March 15, 1996 between Wedgwood Retirement Inns, Inc., Victor L. Lund, Paul Dendy, Mark Hall, Frank R. Reeves, Doris Thornsbury, Teresa Waldroff and Medical Resource Companies of America (filed with Registrant's 8-K, dated March 15, 1996, and incorporated herein by this reference). 4.9.1 Amendment to Agreement and Plan of Merger dated November 21, 1996, among Registrant and American Care Communities, Inc., Floyd B. Rhoades and Gary L. Smith (filed with Registrant's Form 8-K dated December 31, 4.9.2 and incorporated herein by reference). 25 4.9.3 Amendment to Agreement and Plan of Merger dated December 30, 1996. 4.9.4 Registration Rights Agreement dated December 30, 1996 between Registrant and Floyd B. Rhoades. 4.9.5 Employment Agreement dated December 30, 1996 with Floyd B. Rhoades. 10.1 Real Estate Lease of Alpha Mobility, Inc. (filed as Exhibit 10.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.3.2 Form of $62,500 Promissory Note dated December 27, 1991 payable to Registrant by Gene S. Bertcher representing the purchase price for 250,000 shares (50,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.3.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.3.3 Form of Renewal of Promissory Note dated October 14, 1992 extending the maturity date of the Promissory Note referenced in Exhibit 10.3.2 (filed as Exhibit 10.3.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.3.4 Form of Security Agreement - Pledge (non-recourse) between Gene S. Bertcher and Registrant securing the Promissory Note referenced in Exhibit 13.3.2. (Filed as Exhibit 10.3.4 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.4.1 Form of Stock Option to purchase 150,000 shares (30,000 post December 1995 shares) of Registrant's Common Stock issued to Robert L. Griffis on October 12, 1992 (filed as Exhibit 10.4.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.4.2 Form of $75,000 Promissory Note dated October 12, 1992 payable to Registrant by Robert L. Griffis representing the purchase price for 150,000 shares (30,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.4.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.4.3 Form of Security Agreement - Pledge (non-recourse) between Registrant and Robert L. Griffis securing the Promissory Note referenced in Exhibit 10.4.2 (filed as Exhibit 10.4.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.6.1 Form of Stock Option to purchase 100,000 shares (20,000 post December 1995 shares) of Registrant's Common Stock issued to Oscar Smith on October 1, 1992 (filed as Exhibit 10.6.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.6.2 Form of $50,000 Promissory Note dated October 1, 1992 payable to Registrant by Oscar Smith representing the purchase price for 100,000 shares (20,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.6.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.6.3 Form of Security Agreement - Pledge (non-recourse) between Registrant and Oscar Smith securing the Promissory Note referenced in Exhibit 10.6.2 (filed as Exhibit 10.6.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.7.1 Form of Stock Option to purchase 80,000 shares (16,000 post December 1995 shares) of Registrant's Common Stock issued to Lonnie Yarbrough on October 12, 1992 (filed as Exhibit 10.7.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 26 10.7.2 Form of $40,000 Promissory Note dated October 12, 1992 payable to Registrant by Lonnie Yarbrough representing the purchase price for 80,000 shares (16,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.7.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.7.3 Form of Security Agreement - Pledge (non-recourse) between Registrant and Lonnie Yarbrough securing the Promissory Note referenced in Exhibit 10.7.2 (filed as Exhibit 10.7.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.8.1 Form of Stock Option to purchase 80,000 shares (16,000 post December 1995 shares) of Registrant's Common Stock issued to Dennis McGuire on October 1, 1992 (filed as Exhibit 10.8.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.8.2 Form of $40,000 Promissory Note dated October 1, 1992 payable to Registrant by Dennis McGuire representing the purchase price for 80,000 shares (16,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.8.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.8.3 Form of Security Agreement - Pledge (non-recourse) between Registrant and Dennis McGuire securing the Promissory Note referenced in Exhibit 10.8.2 (filed as Exhibit 10.8.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.9.1 Form of Stock Option to purchase 10,000 shares (2,000 post December 1995 shares) of Registrant's Common Stock issued to Michael Merrell on October 12, 1992 (filed as Exhibit 10.9.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.9.2 Form of $5,000 Promissory Note dated October 12, 1992 payable to Registrant by Michael Merrell representing the purchase price for 10,000 shares (2,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.9.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.9.3 Form of Security Agreement - Pledge (non-recourse) between Registrant and Michael Merrell securing the Promissory Note referenced in Exhibit 10.9.2 (filed as Exhibit 10.9.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.9.4 Form of $187,000 promissory note dated December 29, 1994, payable to Registrant by W. Michael Gilley representing the purchase price for 150,000 shares (30,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.9.4 to Registrant's Form 10-KSB for the year ended December 31, 1994). 10.9.5 Form of Security Agreement-Pledge between Registrant and W. Michael Gilley securing the promissory note referenced in Exhibit 10.9.4 (filed as Exhibit 10.9.5 to Registrant's Form 10- KSB for the year ended December 31, 1994). 10.9.6 Form of $62,500 promissory note dated December 29, 1994, payable to Registrant by L.A. Tuttle representing the purchase price of 50,000 shares (10,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.9.6 to Registrant's Form 10- KSB for the year ended December 31, 1994). 10.9.7 For of Security Agreement-Pledge between Registrant and L.A. Tuttle securing the promissory note reference in Exhibit 10.9.6 (filed as Exhibit 10.9.7 to Registrant's Form 10-KSB for the year ended December 31, 1994). 27 10.11 Stock Exchange Agreement dated December 31, 1991 for the acquisition of CareAmerica, Inc. (filed as Exhibit 10.13 to Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1991 and incorporated herein by reference). 10.12 Employment Agreement and Agreement Not to Compete between Registrant and Dennis McGuire dated November 1, 1990 (filed as Exhibit 10.12 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.13 Registrant's 1992 Stock Option Plan (filed as Exhibit 10.13 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.13.1 Amendment to Registrant's 1992 Stock Option Plan (filed as Exhibit 10.13.1 to Registrant's Form 10-KSB for year ended December 31, 1994). 10.20.2 Contract of Sale dated December 28, 1994 with Autumn America Retirement, Ltd. regarding the sale of Fountainview Retirement Center (filed as Exhibit 10.20.2 to Registrant's Form 10-KSB for year ended December 31, 1994). 10.20.3 Exchange Agreement dated December 20, 1994 to settle the Fountainview second mortgage profit participation, (filed as Exhibit 10.20.3 to Registrant's Form 10-KSB for year ended December 31, 1994). 10.21.1 Extended and Consolidated Promissory Note in the principal amount of $5,700,000 dated effective May 23, 1992 payable by JRG Investment Co., Inc. to M.S. Holding Co. Corp. (filed as Exhibit 10.22.1 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.2 Extended and Consolidated Pledge Agreement dated effective May 23, 1992 between JRG Investment Co., Inc. and M.S. Holding Co. Corp. securing the Note referenced in Exhibit 10.22.1 (filed as Exhibit 10.22.2 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.3 Pledge Agreement dated as of May 23, 1992 between James R. Gilley and M.S. Holding Co. Corp. (filed as Exhibit 10.22.3 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.4 Irrevocable Proxy from James R. Gilley to M.S. Holding Co. Corp. relating to shares of capital stock of JRG Investment Co., Inc. (filed as Exhibit 10.22.4 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.5 Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to 482,000 (96,400 post December 1995 shares) shares of Registrant's Common Stock (filed as Exhibit 10.22.5 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.6 Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to 1,268,000 shares (236,600 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.22.6 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.7 Three Blank Assignments and Powers of Attorney signed by JRG Investment Co., Inc., each relating to 600,000 shares (120,000 post December 1995 shares) of Registrant's Common Stock (filed as Exhibit 10.22.7 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.21.8 Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to 2,281,818 shares of Registrant's Common Stock (filed as Exhibit 10.22.8 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 28 10.21.9 Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to 905,557 shares of Registrant's Series A Preferred Stock (filed as Exhibit 10.22.9 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.22 Purchase and Sale Agreement dated February 1, 1993 for the purchase of nursing homes in Houston and San Antonio, Texas (filed as Exhibit 10.23 to Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this reference). 10.23.3 Assets Purchase Agreement dated December 13, 1994 with Hermann Park Manor and HCCI-Houston, Inc. for the Sale of Hermann Park manor (filed as Exhibit 10.23.3 to Registrant's Form 10-KSB for the year ended December 31, 1994). 10.23.4 Assets Purchase Agreement dated December 13, 1994 with Alta Vista Nursing Center, Inc. and HCCI-Houston, Inc. for the Sale of Alta Vista Nursing Center (filed as Exhibit 10.23.4 to Registrant's Form 10-KSB for the year ended December 31, 1994). 10.25.1 Agreement dated September 14, 1994 to terminate and settle Executive Employment Agreement with Arthur G. Weiss (filed as Exhibit 10.25.1 to Registrant's Form 10-KSB for the year ended December 31, 1994). 10.30.2 Memorandum of Understanding amending Exhibit 10.30.1. (Filed as Exhibit 10.30.2 to Registrant's Form 10-KSB for the year ended December 31, 1993). 10.30.3 Letter dated January 6, 1995, terminating Stock Purchase Agreement relating to Bankers Protective Life Insurance Company. (Filed as Exhibit 10.30.3 to Registrant's Form 10-KSB for the year ended December 31, 1994). 10.33 Stock Option Agreement dated November 21, 1993 between Registrant and Arthur G. Weiss. (Filed as Exhibit 10.33 to Registrant's Form 10-KSB for the year ended December 31, 1993). 10.34 Stock Option Agreement dated November 21, 1993 between Registrant and Gene S. Bertcher. (Filed as Exhibit 10.34 to Registrant's Form 10-KSB for the year ended December 31, 1993). 10.35.1 Purchase Agreement dated December 6, 1994 with Arizona Baptist Retirement Centers, Inc. for the Sale of Rivermont at the Trails. (Filed as Exhibit 10.35.1 to Registrant's Form 10-KSB for the year ended December 31, 1994). *10.36 Stock Option Agreement dated December 31, 1996 between Registrant and James R. Gilley covering 200,000 shares of Common Stock. *10.37 Employment Agreements dated December 31, 1996 *10.38 Stock Purchase Warrant dated December 31, 1996 between registrant and The April Trust *22.1 Subsidiaries of Registrant. **23.1 Consent of Grant Thornton. **27.1 Financial Data Schedule required by Item 601 of Regulation S-B. * Filed with original version of Form 10-KSB ** Filed herewith. (b) Reports on Form 8-K - none 29 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Act"), the Company has duly caused this Annual Report on Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized. GREENBRIAR CORPORATION April 30, 1997 By: /s/ Gene S. Bertcher ------------------------------------ Gene S. Bertcher Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 30 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREENBRIAR CORPORATION April 10, 1997 By: /s/ James R. Gilley -------------------------------------------- James R. Gilley, Chairman In accordance with 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. April 10, 1997 /s/ James R. Gilley -------------------------------------------------------- James R. Gilley, Chairman of the Board and Director /s/ Floyd B. Rhoades -------------------------------------------------------- April 10, 1997 Floyd B. Rhoades, President, Chief Executive Officer and Director /s/ Richards D. Barger -------------------------------------------------------- April 10, 1997 Richards D. Barger, Director /s/ Don C. Benton -------------------------------------------------------- April 10, 1997 Don C. Benton, Director /s/ Paul G. Chrysson -------------------------------------------------------- April 10, 1997 Paul G. Chrysson, Director /s/ Matthew G. Gallins -------------------------------------------------------- April 10, 1997 Matthew G. Gallins, Director /s/ Steven R. Hague -------------------------------------------------------- April 10, 1997 Steven R. Hague, Director /s/ Michael E. McMurray -------------------------------------------------------- April 10, 1997 Michael E. McMurray, Director /s/ Victor L. Lund -------------------------------------------------------- April 10, 1997 Victor L. Lund, Director 31 Report of Independent Certified Public Accountants Board of Directors and Stockholders Greenbriar Corporation We have audited the accompanying consolidated balance sheets of Greenbriar Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Greenbriar Corporation and subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ GRANT THORNTON LLP Dallas, Texas April 25, 1997 Greenbriar Corporation CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) December 31,
ASSETS 1996 1995 ------ ---- ---- CURRENT ASSETS Cash and cash equivalents $ 2,784 $ 7,623 Accounts receivable - trade 561 259 Deferred income tax benefit - 2,150 Real estate operations held for sale, at lower of cost or market 5,379 - Other current assets 665 1,899 -------- ------- Total current assets 9,389 11,931 REAL ESTATE OPERATIONS HELD FOR SALE, AT LOWER OF COST OR MARKET - 3,190 NET ASSETS OF MOBILITY GROUP - 3,371 DEFERRED INCOME TAX BENEFIT 868 - INVESTMENT IN SECURITIES, AT COST 4,086 1,853 MORTGAGE NOTES RECEIVABLE 8,768 7,368 PROPERTY AND EQUIPMENT, AT COST Land and improvements 10,566 2,394 Buildings and improvements 69,369 10,773 Equipment and furnishings 4,317 1,491 Construction in progress 3,836 2,953 -------- ------- 88,088 17,611 Less accumulated depreciation 2,635 834 -------- ------- 85,453 16,777 DEPOSITS 5,553 1,007 GOODWILL AND OTHER INTANGIBLES 1,199 1,484 OTHER ASSETS 1,385 775 -------- ------- $116,701 $47,756 ======== =======
The accompanying notes are an integral part of these statements. F- 2 Greenbriar Corporation CONSOLIDATED BALANCE SHEETS - CONTINUED (Amounts in thousands, except per share data) December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 ---- ---- CURRENT LIABILITIES Current maturities of long-term debt $ 1,588 $ 826 Notes payable - stockholder 930 - Long-term debt collateralized by properties under contract of sale 901 - Accounts payable - trade 3,810 1,217 Accrued expenses 3,482 1,032 Other current liabilities 1,223 130 -------- ------- Total current liabilities 11,934 3,205 LONG-TERM DEBT 54,717 16,485 NOTES PAYABLE - STOCKHOLDER - 358 FINANCING OBLIGATIONS 10,815 - DEFERRED GAIN 3,083 3,083 STOCKHOLDERS' EQUITY Series B cumulative convertible preferred stock, $.10 par value; liquidation value of $310 and $1,330, respectively; authorized, 100 shares; issued and outstanding, 3 shares and 13 shares, respectively 1 1 Series C cumulative convertible preferred stock, $.10 par value; liquidation value of $1,000 and $2,000 respectively; authorized, issued and outstanding, 10 and 20 shares, respectively 1 2 Series D cumulative convertible preferred stock, $.10 par value; liquidation value of $3,375; authorized, issued and outstanding, 675 shares in 1996 68 - Common stock, $.01 par value; authorized, 20,000 shares; issued and outstanding, 6,471 and 4,752 shares, respectively 65 48 Additional paid-in capital 51,232 34,565 Accumulated deficit (12,642) (7,418) -------- ------- 38,725 27,198 Less stock purchase notes receivable (including $2,438 from related parties) (2,573) (2,573) -------- ------- 36,152 24,625 -------- ------- $116,701 $47,756 ======== =======
The accompanying notes are an integral part of these statements. F- 3 Greenbriar Corporation CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) Year ended December 31,
1996 1995 1994 ---- ---- ---- Revenue Assisted living operations $29,673 $ 7,368 $11,647 Other 112 596 193 ------- ------- ------- 29,785 7,964 11,840 Operating expenses Assisted living operations 19,439 4,731 7,613 Lease expense 3,712 406 212 Community depreciation and amortization 2,001 483 233 General and administrative 6,731 3,948 4,118 Merger and transition expense 2,836 - - ------- ------- ------- 34,719 9,568 12,176 ------- ------- ------- Operating loss (4,934) (1,604) (336) Other income (expense) Interest and dividend income 771 1,199 216 Interest expense (4,457) (1,548) (2,761) Gain (loss) on sales of assets (21) 6,950 2,803 Other 646 289 - ------- ------- ------- (3,061) 6,890 258 ------- ------- ------- Earnings (loss) from continuing operations before income taxes (7,995) 5,286 (78) Income tax expense (benefit) (2,400) 94 (201) ------- ------- ------- Earnings (loss) from continuing operations (5,595) 5,192 123 Discontinued operations Earnings from operations, net of income taxes 238 19 241 Gain on disposal, net of income taxes 520 61 1,178 ------- ------- ------- NET EARNINGS (LOSS) (4,837) 5,272 1,542 Preferred stock dividend requirement (365) (225) (327) ------- ------- ------- Earnings (loss) allocable to common stockholders $(5,202) $ 5,047 $ 1,215 ======= ======= ======= Earnings (loss) per share Continuing operations $(1.13) $1.03 $(.04) Net earnings (loss) $(.99) $1.04 $.24 Weighted average number of common and equivalent shares outstanding 5,259 4,839 4,979
The accompanying notes are an integral part of these statements. F- 4 Greenbriar Corporation CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Amounts in thousands)
Stock Preferred stock Common stock Additional purchase --------------- ---------------- paid in Accumulated notes Treasury Shares Amount Shares Amount capital deficit receivable stock Total ------ ------ ------ ------ ---------- ----------- ---------- -------- ----- Balances at January 1, 1994 - as previously reported 1,075 $ 107 18,395 $ 183 $36,132 $(13,616) $(2,250) $(7) $20,549 Merger with American Care Communities, Inc. - - 6,500 65 556 (63) (57) - 501 ------ ----- ------- ----- ------- -------- ------- --- ------- Balances at January 1, 1994 - restated 1,075 107 24,895 248 36,688 (13,679) (2,307) (7) 21,050 Issuance of shares - - 147 2 179 - (188) 7 - Dividends on preferred stock, including imputed dividends of $42 44 4 - - 131 (328) - - (193) Net earnings - - - - - 1,542 - - 1,542 ------ ----- ------- ----- ------- -------- ------- --- ------- Balances at December 31, 1994 1,119 111 25,042 250 36,998 (12,465) (2,495) - 22,399 Issuance of shares - - 116 1 77 - (78) - - Conversion of preferred stock (1) - 19 - - - - - - Conversion of subordinated debt - - 67 1 199 - - - 200 Purchase of common stock - - (1,226) (12) (1,998) - - - (2,010) Purchase of preferred stock (1,085) (108) - - (976) - - - (1,084) Dividends on preferred stock 1 - - - 73 (225) - - (152) One-for-five reverse stock split - - (19,266) (192) 192 - - - - Net earnings - - - - - 5,272 - - 5,272 ------ ----- ------- ----- ------- -------- ------- --- ------- Balances at December 31, 1995 34 3 4,752 48 34,565 (7,418) (2,573) - 24,625 Issuance of preferred stock 2,625 264 - - 15,938 - - - 16,202 Conversion of preferred stock (1,970) (197) 1,731 17 180 - - - - Purchase of common stock - - (12) - (123) - - - (123) Dividends on preferred stock 1 - - - 72 (387) - - (315) Capital contribution - - - - 600 - - - 600 Net loss - - - - - (4,837) - - (4,837) ------ ----- ------- ----- ------- -------- ------- --- ------- Balances at December 31, 1996 690 $ 70 6,471 $ 65 $51,232 $(12,642) $(2,573) $ - $36,152 ====== ===== ======= ===== ======= ======== ======= === =======
The accompanying notes are an integral part of this statement. F- 5 Greenbriar Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year ended December 31,
1996 1995 1994 ---- ---- ---- Cash flows from operating activities Net earnings (loss) $(4,837) $ 5,272 $ 1,542 Adjustments to reconcile net earnings (loss) to net cash used in operating activities Discontinued operations (758) (80) (1,419) Depreciation and amortization 2,001 483 233 (Gain) loss on sales of assets 19 (7,043) (4,633) Recognition of deferred gain - - (1,070) Stock dividends on investment securities (133) (175) - Capital contributions as payment for services 600 - - Deferred income taxes (1,979) 35 369 Changes in operating assets and liabilities, net of effect of acquisition Accounts receivable 255 1,434 (92) Refundable income taxes - - 945 Other current and noncurrent assets 905 154 (1,105) Accounts payable and other liabilities 2,893 (2,493) 1,217 ------- ------- ------- Net cash used in operating activities of continuing operations (1,034) (2,413) (4,013) Net cash provided by (used in) operating activities of discontinued operations (85) 387 627 ------- ------- ------- Net cash used in operating activities (1,119) (2,026) (3,386)
The accompanying notes are an integral part of these statements. F- 6 Greenbriar Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Amounts in thousands) Year ended December 31,
1996 1995 1994 ---- ---- ---- Cash flows from investing activities Proceeds from sales of assets $ - $ 21,885 $ 32,196 Collections of notes receivable 123 - - Proceeds from sales of discontinued operations - - 6,557 Additions to real estate - (54) (462) Purchase of property and equipment (16,534) (9,178) (5,298) Net cash effect of sale of subsidiary - - (273) Additions to notes receivable (23) (668) - Investing activities of discontinued operations - (348) (344) Net cash received in acquisition of business 739 - - Other - (70) (73) -------- -------- -------- Net cash provided by (used in) investing activities (15,695) 11,567 32,303 Cash flows from financing activities Proceeds from borrowings 15,461 18,455 16,008 Payments on debt Affiliates - - (1,625) Other (1,426) (23,910) (35,713) Dividends on preferred stock (315) (152) (193) Purchase of common and preferred stock (123) (3,094) - Deposits on financing obligations (1,622) (1,000) - Deferred financing and acquisition costs - (782) (32) -------- -------- -------- Net cash provided by (used in) financing activities 11,975 (10,483) (21,555) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,839) (942) 7,362 Cash and cash equivalents at beginning of year 7,623 8,565 1,203 -------- -------- -------- Cash and cash equivalents at end of year $ 2,784 $ 7,623 $ 8,565 ======== ======== ========
See Note D for supplemental disclosure of cash flows and noncash investing and financing transactions. The accompanying notes are an integral part of these statements. F- 7 Greenbriar Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - -------------------- Greenbriar Corporation's business consists of development and operation of assisted living communities located throughout the United States, which provide housing, hospitality and personal and healthcare services to elderly individuals. At December 31, 1996, the Company had 31 communities in operation, and managed two for third parties, in a total of 10 states with a total capacity for 2,600 residents. Prior to 1996, Greenbriar Corporation's business consisted of various segments not related to the assisted living business (see Note C). A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows. Principles of Consolidation - --------------------------- The consolidated financial statements include the accounts of Greenbriar Corporation and its majority-owned subsidiaries (collectively, the Company). All significant intercompany transactions and accounts have been eliminated. Assisted Living Community Revenue - --------------------------------- Assisted living community revenue is reported at the estimated net realizable value based upon expected amounts to be recovered from residents, third party payors, and others for services rendered. Services provided by certain of the Company's communities are reimbursed under a state assistance plan. Depreciation - ------------ Depreciation is provided for in amounts sufficient to relate the cost of property and equipment to operations over their estimated service lives, ranging from 3 to 40 years. Depreciation is computed by the straight-line method. Profit Recognition on Sales of Real Estate - ------------------------------------------ Gains on sales of real estate are recognized when the requirements of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate," are met. Until the requirements for full profit recognition have been met, a transaction is accounted for using either the deposit, cost recovery, installment sale, or financing method, whichever is appropriate under the circumstances. Use of Estimates - ---------------- In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. F-8 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Cash Equivalents - ---------------- The Company considers all short-term deposits and money market investments with a maturity of less than three months to be cash equivalents. Impairment of Notes Receivable - ------------------------------ A note receivable is identified as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the note agreement. The accrual of interest is discontinued on such notes, and no income is recognized until all past due amounts of principal and interest are recovered in full. Impairment of Long-Lived Assets - ------------------------------- The Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In reviewing recoverability, the Company estimates the future cash flows expected to result from using the assets and eventually disposing of them. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the asset's fair value. Stock Options - ------------- The Company measures stock-based compensation cost as the excess of the quoted market price of the Company's common stock over the amount the employee must pay for the stock. The Company's policy generally is to grant stock options at fair market value at the date of grant. Goodwill and Other Intangibles - ------------------------------ Goodwill is being amortized on the straight-line method over a period of fifteen years. Other intangibles include deferred financing costs, which are being amortized over the terms of the related borrowings under a method which approximates the interest method. Reclassifications - ----------------- Certain reclassifications have been made to the financial statements for 1994 and 1995 to classify revenues and expenses in a manner consistent with the Company's assisted living operations as presented in the financial statements as of and for the year ended December 31, 1996. F-9 NOTE B - ACQUISITIONS Wedgwood Retirement Inns, Inc. and Affiliates - --------------------------------------------- In March 1996, the Company acquired substantially all of the assets and liabilities of a number of companies under common control and managed by Wedgwood Retirement Inns, Inc. (Wedgwood). The business of these companies consists of the operation of 16 assisted living, congregate and Alzheimer's communities. To structure the Wedgwood acquisition as a tax-free exchange, the Company also acquired a shopping center in North Carolina from James R. Gilley and members of his family (the Gilley Group). Due to the fact that the Gilley Group is a majority stockholder of Greenbriar and owner of the shopping center, the property was recorded at the Gilley Group's historical cost basis of approximately $2,300,000. Consideration given was 675,000 shares of Series D preferred stock. Wedgwood's assets were valued at approximately $58,000,000 ($54,000,000 of property and equipment) and liabilities assumed were approximately $44,000,000. In exchange, Greenbriar issued 1,949,950 shares of Series E preferred stock, valued at approximately $14,000,000, to the Wedgwood shareholders. In 1996, the stockholders of the Company granted conversion rights to the series E preferred stock and it was converted into approximately 1,600,000 shares of the Company's common stock. The operations of Wedgwood have been reflected in the consolidated financial statements of the Company since April 1, 1996. The following table presents pro forma unaudited consolidated results of operations for the years ended December 31, 1996 and 1995, assuming that the acquisition had taken place on January 1, 1995. The pro forma results are not necessarily indicative of the results of operations that would have occurred had the acquisition been made on January 1, 1995, or of future results of operations of the combines companies (in thousands except per share data):
Year ended December 31, ----------------- 1996 1995 ------- ------- Revenue $34,047 $22,904 Earnings (loss) from continuing operations (5,885) 4,662 Net earnings (loss) (5,127) 4,742 Preferred stock dividend requirement (445) (545) Earnings (loss) from continuing operations allocable to common stockholders (6,330) 4,117 Net earnings (loss) allocable to common stockholders $(5,572) $ 4,197 Earnings (loss) per share Continuing operations $ (1.20) $ .61 Net earnings (loss) $ (1.06) $ .62
F-10 NOTE B - ACQUISITIONS - Continued American Care Communities, Inc. - ------------------------------ On December 31, 1996, the Company issued 1,300,000 shares of its common stock in exchange for all of the outstanding common stock of American Care Communities, Inc. (American Care). American Care, based in Cary, North Carolina currently owns or leases 15 assisted living communities with approximately 1,350 units, located primarily in North Carolina. The merger has been accounted for as a pooling of interests and accordingly, the Company's consolidated financial statements have been restated to include the operations of American Care for all periods prior to the merger. In connection with the merger, a shareholder of American Care settled certain of American Care's obligations in exchange for approximately 45,000 shares of the Company's common stock received in the merger. For accounting purposes, this transaction, valued at $600,000, has been reflected as a contribution of capital with a corresponding charge to operations. Additionally, the Company incurred expenses related to the merger of $983,000, expenses related to attempted capital market activities of $774,000 and accrued severance costs related to the closure of the administrative offices of American Care and Wedgewood of $1,079,000. These amounts have been included in the statement of operations as merger and transition expense. Separate results of operations for the periods prior to the merger with American Care are as follows (in thousands):
Year ended December 31, -------------------------- 1996 1995 1994 ------- ------ ------- Revenue Greenbriar $13,523 $ 557 $ 7,939 American Care 16,262 7,407 3,901 ------- ------ ------- Combined $29,785 $7,964 $11,840 ======= ====== ======= Earnings (loss) from continuing operations Greenbriar $(3,483) $5,717 $ 369 American Care (2,112) (525) (246) ------- ------ ------- Combined $(5,595) $5,192 $ 123 ======= ====== ======= Net earnings (loss) Greenbriar $(2,725) $5,797 $ 1,788 American Care (2,112) (525) (246) ------- ------ ------- Combined $(4,837) $5,272 $ 1,542 ======= ====== =======
F-11 NOTE C - DISCONTINUED OPERATIONS In 1994, management concluded that operation of skilled medical care facilities, consisting of nursing homes and eating disorder clinics, was not in the best interest of the Company. In September 1994, the Company sold its investment in Remuda Ranch Center for Anorexia and Bulimia, Inc. for shares of the buyer's preferred stock, which is not marketable, valued at $1,678,000. The sale resulted in a gain of $804,000. The preferred stock bears a cumulative dividend of 8% and is convertible into shares of common stock equal to approximately 5% of the outstanding shares at December 31, 1996. Valuation was based on discounted future cash flows. In December 1994, the Company's subsidiary, Altman Nursing, Inc., sold its two skilled nursing facilities for an aggregate price of $6,400,000, which resulted in a gain of $981,000. The aggregate gain of $1,785,000 for both transactions, net of applicable income taxes of $607,000, was recorded in 1994. In 1995, management decided to sell the mobility products segment. The segment was sold in February 1996 for 8% preferred stock, which is not marketable, and notes valued at approximately $4,300,000, based upon fair value as determined by the Board of Directors. A gain of approximately $788,000, less applicable income taxes, of $268,000 was recorded in 1996. In 1996, the Company entered into negotiations to sell its remaining real estate assets and anticipates completing the sales in 1997. Accordingly, the Company's real estate operations have been reflected as discontinued operations. Management expects that the proceeds from the sales will be at least equal to the $5,379,000 carrying value of the real estate assets. The operations of the skilled medical care segment, mobility products segment and real estate segment have been presented in the accompanying financial statements as discontinued operations. Summarized operating results of these segments are as follows (in thousands):
1996 1995 1994 ----- ------ ------ Revenues $ 864 $2,815 $17,650 ===== ====== ======= Earnings before income taxes 361 28 362 Income tax expense 123 9 121 ----- ------ ------- Net earnings $ 238 $ 19 $ 241 ===== ====== =======
F-12 NOTE D - CASH FLOW INFORMATION Supplemental information on cash flows and noncash investing and financing transactions is as follows (in thousands):
Year ended December 31, ---------------------------- 1996 1995 1994 -------- ------- ------ Supplemental cash flow information Interest paid $ 4,460 $ 1,579 $4,221 Income taxes paid 95 46 27 Supplemental data on noncash investing and financing activities Stock dividend paid on preferred shares $ 72 $ 73 $ 93 Sale of stock in exchange for notes receivable from employees and officers - 78 186 Conversion of subordinated debt to common stock - 200 - Goodwill associated with acquisition of assets - 493 452 Sale of subsidiary Securities and note received $ (4,300) $(1,678) Assets sold 3,780 4,462 Liabilities transferred - (3,861) Gain on sale 520 804 -------- ------ Net cash effect of sale of subsidiary $ - $ (273) ======== ====== Business acquired Fair value of assets acquired $ 59,890 Cash received 739 Stock issued (16,202) -------- Liabilities assumed $ 44,427 ========
F-13 NOTE E - DEBT Long-term debt is comprised of the following (in thousands):
December 31, ---------------- 1996 1995 ------- ------- Notes payable to financial institutions maturing through 2015; fixed and variable interest rates ranging from 4.8% to 11.75% ; collateralized by, property, fixtures, equipment and the assignment of rents $13,319 $ - Notes payable to individuals and companies maturing in 2022; variable and fixed interest rates ranging from 7% to 12% collateralized by real property, personal property, fixtures, equipment and the assignment of rents 12,391 - Note payable to the Redevelopment Agency of the City of Corona, California, payable into a sinking fund semi-annually in increasing amounts from $65 to $420 through May 1, 2015; variable interest rate of 5.6% at December 31, 1996; collateralized by personal property, land, fixtures and rents 7,660 - Notes payable to related parties maturing in 2001; interest rates ranging from 9.25% to 12%. 1,196 - Notes payable to a bank maturing in 2007; interest at prime (8.25% to December 31, 1996) plus 2.0%; collateralized by property and equipment 1,658 - Notes payable to financial institution maturing in 1997 through 2000; bearing interest at prime plus .50% to 1.25%; collateralized by property and equipment 8,043 3,254 Mortgage note payable to a financial institution maturing in 2007; bearing interest at 11.35%; collateralized by property and equipment 11,500 11,500 Other 538 2,557 ------- ------- 56,305 17,311 Less: current maturities 1,588 826 ------- ------- $54,717 $16,485 ======= =======
F-14 NOTE E - DEBT - Continued Aggregate annual principal maturities of long-term debt at December 31, 1996 are as follows (in thousands):
1997 $ 1,588 1998 7,568 1999 2,750 2000 4,529 2001 4,990 Thereafter 34,880 ------- $56,305 =======
Certain of the loan agreements contain various restrictive covenants, which require, among others things, the maintenance of certain financial ratios, as defined. NOTE F - FINANCING OBLIGATIONS The Company operates two properties that are financed through sale-leaseback obligations. At the end of the tenth year of fifteen-year leases, the Company has options to repurchase the communities for the greater of the sales prices or their fair market values. Accordingly, these transactions have been recorded as financings, and the Company has recorded the proceeds from the sales as financing obligations, classified the lease payments as interest expense and continued to carry the communities and record depreciation. Minimum payments under the lease agreements are $1,167 for each of the years 1997 through 2001. At December 31, 1996, the Company had a financing arrangement with a real estate investment trust (the REIT). Under this arrangement, the REIT would provide up to $60,000,000 over the next three years to be used to construct assisted living communities, which, upon completion, would be sold to the REIT and leased back by the Company. The leases would have terms ranging from 11 to 14 years, with two five-year renewal options and rates based upon the yield of United States Treasury notes plus 3.75%. At December 31, 1996, the only amount outstanding under this arrangement was a $5,300,000 commitment for construction. NOTE G - OPERATING LEASES The Company leases certain retirement centers under operating leases which expire through the year 2011 and has various equipment operating leases. The leases provide that the Company pay for property taxes, insurance, and maintenance. F-15 NOTE G - OPERATING LEASES - Continued Future minimum payments following December 31, 1996 are as follows (in thousands):
1997 $ 5,327 1998 5,458 1999 5,189 2000 4,461 2001 3,651 Thereafter 27,959 ------- $52,045 =======
Lease expense in 1996, 1995 and 1994 was $5,153,000, $2,082,000, and $212,000, respectively. Certain leases contain rent escalation clauses which are based upon future events or changes in indices. NOTE H - INCOME TAXES At December 31, 1996, the Company had net operating loss carryforwards of approximately $16,000,000 which expire between 1999 and 2011. However, approximately $5,100,000 of these net operating loss carryforwards have limitations that restrict utilization to approximately $600,000 for any one year. Also, carryforwards of $1,800,000, which expire between 2006 and 2008, may only be used to offset future taxable income of the subsidiaries in which the losses were generated. The following is a summary of the components of income tax expense (benefit) from continuing operations (in thousands):
Year ended December 31, ------------------------ 1996 1995 1994 ------- ------ ----- Current $ 23 $ 151 $ 160 Deferred (2,423) (57) (361) ------- ----- ----- $(2,400) $ 94 $(201) ======= ===== =====
F-16 NOTE H - INCOME TAXES - Continued Deferred tax assets, liabilities and associated valuation allowances were comprised of the following (in thousands):
December 31, ----------------- 1996 1995 ------- ------- Deferred tax assets: Net operating loss carryforwards $ 5,422 $ 2,783 Real estate 40 141 Charitable contribution carryforwards 207 606 Tax credits 436 220 Accrued expenses 407 103 Financing obligations 1,802 - Other 609 221 ------- ------- Total deferred tax assets 8,923 4,074 Valuation allowance (418) (1,624) Deferred tax liabilities: Investment in securities (104) (237) Property and equipment (7,476) (45) Other (57) (18) ------- ------- Total deferred tax liabilities (7,637) (300) ------- ------- Net deferred tax asset $ 868 $ 2,150 ======= =======
Management expects the net deferred tax asset will be recovered within two to three years from the Company's earnings from operations or gains on sales of assets. Following is a reconciliation of income tax expense from continuing operations with the amount of tax computed at the statutory rate (in thousands):
Year ended December 31, ------------------------- 1996 1995 1994 ------- ------- ----- Tax expense (benefit) at the statutory rate $(2,718) $ 1,797 $ (27) Amortization of intangibles - 30 113 Change in deferred tax asset valuation allowance, exclusive of reductions for business sold in 1994 and business purchased in 1996 418 (1,716) (463) Correction of prior period estimates - - 138 Other (100) (17) 38 ------- ------- ----- Tax expense $(2,400) $ 94 $(201) ======= ======= =====
Reductions in the deferred tax valuation allowance result from assessments made by the Company each year of its expected future taxable income available to absorb its carryforwards. F-17 NOTE I - STOCKHOLDERS' EQUITY Stock Split - ----------- On November 17, 1995, the Board of Directors authorized a one-for-five reverse stock split effective December 1, 1995. All share and per share data have been retroactively restated to give effect to the reverse stock split. Preferred Stock - --------------- The Series B preferred stock has a liquidation value of $100 per share and is convertible into common stock over a ten-year period at prices escalating from $25.00 per share in 1993 to $55.55 per share by 2001. Cumulative dividends at a rate of 6% are payable in cash or preferred shares at the option of the Company. The Series C preferred stock has a liquidation value of $100 per share and is convertible into common stock at a price of $15.00 per share. Cumulative dividends are payable in cash at a rate of 6%. The Series D preferred stock has a liquidation value of $5 per share and is convertible into common stock at $10.00 per share. Cumulative dividends are payable in cash in the amount of $320,000 per year Stock Options - ------------- In 1993, the Company established a long-term incentive plan (the Plan) for the benefit of certain key employees. Under the Plan, up to 217,500 shares of the Company's common stock are reserved for issuance. Options granted to employees under the Plan become exercisable over a period as determined by the Company and may be exercised up to a maximum of 10 years from date of grant. In 1995 and 1996, the Company granted to the Chairman of the Board options, not covered by the Plan, for a total of 400,000 shares of common stock which are exercisable immediately and expire in 2006 through 2008. Effective in 1996, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock- Based Compensation". As permitted under SFAS 123, the Company will continue to measure stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. SFAS 123 requires disclosure of pro forma net earnings (loss) and pro forma net income (loss) per share as if the fair value based method had been applied in measuring compensation cost for stock-based awards granted in 1996 and 1995. Management believes that 1996 and 1995 pro forma amounts are not representative of the effects of stock-based awards on future pro forma net income (loss) and pro forma net income (loss) per share because those pro forma amounts exclude the pro forma compensation expense related to unvested stock options granted before 1995. F-18 NOTE I - STOCKHOLDERS' EQUITY - Continued Reported and pro forma net income (loss) and net income (loss) per share amounts are set forth below (in thousands, except per share data):
1996 1995 ------- ------ Net earnings (loss) allocable to common stockholders (amounts in thousands) As reported $(4,837) $5,272 Pro forma $(8,153) $5,173 Net earnings (loss) per share As reported $ (.99) $ 1.03 Pro forma $ (1.55) $ 1.02
The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 35 percent for 1996 and 66 percent for 1995; risk-free interest rates of 7.0 percent for 1996 and 6.5 percent for 1995; no dividend yield; and expected lives of 10 years. Additional information with respect to options outstanding at December 31, 1996, and changes for the three years then ended was as follows:
1996 ------------------ Weighted average exercise Shares price -------- -------- Outstanding at beginning of year 155,500 $ 12.83 Granted 432,000 11.98 ------- -------- Outstanding at end of year 587,500 $ 12.20 ======= ======== Options exercisable at December 31, 1996 577,500 $ 12.21 ======= ======== Weighted average fair value per share of options granted during 1996 $ 7.72 ========
F-19 NOTE I - STOCKHOLDERS' EQUITY - Continued
1995 ------------------ Weighted average exercise Shares price -------- -------- Outstanding at beginning of year 155,500 $ 13.63 Granted 10,000 12.50 Expired (10,000) 25.00 -------- Outstanding at end of year 155,500 $ 12.83 ======== ======== Options exercisable at December 31, 1995 141,500 $ 12.96 ======== ======== 1994 ------------------ Weighted average exercise Shares price -------- -------- Outstanding at beginning of year 327,500 $ 13.04 Cancelled (30,000) 12.50 Reacquired (142,000) 12.50 -------- Outstanding at end of year 155,500 $ 13.63 ======== ======== Options exercisable at December 31, 1994 141,500 $ 13.86 ======== ========
Information about stock options outstanding at December 31, 1996 is summarized as follows:
Options outstanding ------------------------------ Weighted average Number remaining Weighted average Range of exercise prices outstanding contractual life exercise price ------------------------ ----------- ---------------- ---------------- $11.25 to $15.75 587,500 8.3 $12.20 Options exercisable --------------------------------- Number Weighted average Range of exercise prices exercisable exercise price ------------------------ ----------- ---------------- $11.25 to $15.75 577,500 $12.21
In 1994, the Company purchased options covering 142,000 shares of common stock from a former employee director for $178,000. F-20 NOTE J - EARNINGS PER SHARE Earnings (loss) per share are determined by dividing net earnings or net loss, after deduction of preferred stock dividends, by the weighted average number of common and dilutive equivalent shares outstanding during the period. Dilutive stock options are included in weighted average shares outstanding. Fully diluted earnings per share, giving effect to assumed conversion of convertible preferred stock and notes, are not presented because the effect of these securities is insignificant in 1995 and 1994 and anti-dilutive in 1996. NOTE K - SALES OF ASSETS Gains on the sale of assets in 1995 and 1994 (sales in 1996 were not material) result from the following transactions (in thousands):
1995 Gain ---- ------ Sale of Fountainview retirement center for cash of approximately $18,000 $5,149 Sale of economic interest in legal claim for cash of $1,085 654 Sale of rights to the interest on escrow funds for cash of $1,140 1,140 Other 7 ------ $6,950 ====== 1994 ---- Sale of Rivermont retirement center for cash of approximately $6,900 $1,720 Recognition of deferred gain on long-term care facilities sold in 1991 for approximately $15,400 in notes 1,070 Other 13 ------ $2,803 ======
The sale of the economic interest in a legal claim resulted from a claim the Company held against Wespac Investors Trust III ("Wespac") based upon an award of legal fees following a protracted lawsuit. Wespac subsequently filed for protection under Chapter 11 of the Bankruptcy Code. The Company then sold its claim for $1,085,000. The buyer required the acquisition of the interest of an unrelated 49% Wespac shareholder as a condition precedent to the purchase of the claim. To facilitate the transaction, the Company acquired the 49% equity interest from the shareholder and immediately conveyed the interest to such buyer. The Company recorded a gain on the sale of its claim of $654,000, the excess of the proceeds of $1,085,000 over the Company's cost of the claim of $431,000. At December 31, 1996 and 1995, the balance sheet reflects a deferred gain of $3,083,000. This gain resulted from the sale in 1991 of four nursing homes in exchange for notes receivable of $15,400,000. The original gain of $7,259,000 was deferred and is being accounted for by the installment method. Sales in previous years by the Company of some of the notes resulted in a reduction of the deferred gain to $3,083,000. F-21 NOTE L - RELATED PARTY TRANSACTIONS 1994 - ---- The Company sold to W. Michael Gilley, Executive Vice-President/Director of the Company, 30,000 shares of common stock for a non interest bearing note of $187,500; principal is due in December 1999. Additional loans to executives and directors of $55,000 were made in 1994. Also, a former executive of the Company was paid commissions of $145,000 relating to the sale of property. Sylvia Gilley, wife of the Company's Chief Executive Officer, James R. Gilley, made a loan of $1,000,000 to the Company. The loan was repaid during 1994. 1995 - ---- The Company purchased land from Sylvia Gilley for $221,000. 1996 - ---- See Note B with respect to related party transactions for 1996. NOTE M - CONTINGENCIES Southern Care Corp. Litigation - ------------------------------ The Company and a subsidiary, CareAmerica, Inc. (CareAmerica) are defendants in lawsuits brought by a corporation that purchased nursing homes from the Company in 1991. The plaintiff alleges mismanagement of the homes during the period that CareAmerica provided management services and, seeks damages in excess of $1,500,000, cancellation of $6,700,000 of mortgage notes payable to the Company and secured by the nursing homes, and recovery of interest payments made on the mortgage notes. The Company has filed a counterclaim for breach of the management contract and to confirm the indebtedness. The plaintiff terminated the contract and claimed that the mortgage notes had previously been discharged. The Company believes that the plaintiff's actions, including payments against the indebtedness, are inconsistent with the plaintiff's claims that the notes have been discharged. The Company intends to vigorously contest those lawsuits and pursue its counterclaims. In October 1996, the trial court granted plaintiff's motion for summary judgment on the issue of whether the indebtedness was discharged. A notice of appeal has been filed by the Company on that ruling and an appeal will be filed. The Company does not believe that the court's ruling is correct, and believes that it will prevail on its appeal, although there can be no assurance. F-22 NOTE M - CONTINGENCIES - Continued IRS Audit - --------- The Company's 1993 federal income tax return has been audited by the Internal Revenue Service (IRS). The IRS has assessed an additional tax liability of $321,000. Management of the Company believes that the Company is not liable for additional taxes and plan to contest the IRS assessment. Other Litigation - ---------------- The Company is also defendant in several other lawsuits arising in the ordinary course of business. Management of the Company is of the opinion that these lawsuits will not have a material effect on the consolidated results of operations or financial position of the Company. NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate values at December 31, 1996: Cash and cash equivalents - The carrying amount approximates fair value because of the short maturity of these instruments. Investment in securities - The investment in securities consists of convertible preferred stock of private companies. Fair value, based on estimated future discounted cash flows, approximates carrying value. Mortgage notes receivable - The mortgage notes receivable consist primarily of $6,700,000 of notes with a stated interest rate of 14% due in 2021 from Southern Care Corp., the plaintiff in the lawsuit discussed in Note M. The obligor has brought suit to cancel the notes, and as a result, future cash flows are not predictable. Management believes the value of the underlying collateral is adequate to recover the carrying value of the note. Long-term debt - The fair value of the Company's long-term debt is estimated based on market rates for the same or similar issues. The carrying amount of long-term debt approximates its fair value. Accounts receivable and payable - The carrying amount approximates fair value because of their short maturity. F-23 NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued The estimated fair value of the Company's financial instruments are as follows (in thousands):
December 31, ----------------------------------------- 1996 1995 ------------------- ------------------- Carrying Fair Carrying Fair amount value amount value -------- -------- -------- -------- Financial assets Cash and cash equivalents $ 2,784 $ 2,784 $ 7,626 $ 7,623 Accounts receivable - trade 561 561 259 259 Investment in securities 4,086 4,086 1,853 1,853 Mortgages receivable 8,768 8,768 7,368 7,368 Financial liabilities Accounts payable - trade (1,588) (1,588) (820) (826) Notes payable - stockholder (930) (930) (358) (358) Long-term debt collateralized by properties under contract of sale (901) (901) - - Long-term debt (56,305) (56,305) (17,311) (17,311) NOTE O - NOTES RECEIVABLE Stock Purchase Notes - -------------------- December 31, ------------------- 1996 1995 -------- -------- (In thousands) Related party Note from James R. Gilley, chief executive officer, principal and interest at 5-1/2%, due November 2003 $ 2,250 $ 2,250 Note from W. Michael Gilley, executive vice-president/director, noninterest-bearing and due in December 1999 (Note L) 188 188 Other 135 135 -------- -------- $ 2,573 $ 2,573 ======== ========
All stock purchase notes are collateralized by common stock of the Company and are presented in the balance sheet as a deduction from stockholders' equity. F-24 NOTE O - NOTES RECEIVABLE - Continued Mortgage Notes - --------------
December 31, -------------- 1996 1995 ------ ------ (In thousands) Notes receivable from a corporation, collateralized by a third lien on real property, interest at 14% due annually, principal due in 2021 $6,700 $6,700 Note receivable from a corporation, collateralized by its common stock, interest at prime plus 1% (effective rate of 9.25% at December 31, 1996) due quarterly, principal due in annual installments equal to the lesser of 25% of its net earnings or $400,000 through maturity in 2000. 2,000 - Other 68 668 ------ ------ $8,768 $7,368 ====== ======
In connection with certain litigation in which the Company is defendant (see Note M), the maker of the $6,700,000 note stopped making the interest payments required under the note. As a result, the Company ceased recording the accrual of interest income. Had the Company been accruing interest on this note, the amount recognized would have been approximately $900,000 in 1996 and 1995. No interest income was recognized on this note in 1996 or 1995. Based on the value of the underlying collateral at December 31, 1996, no impairment reserve is required for this note. NOTE P - FOURTH QUARTER ADJUSTMENTS During the fourth quarter of 1996, the Company wrote off certain offering costs of approximately $670,000 and notes receivable of approximately $400,000. Additionally, the Company made other adjustments reducing earnings by approximately $200,000. During the fourth quarter of 1995, the Company made an adjustment to reduce the deferred tax valuation allowance by $1,895,000. During the fourth quarter of 1994, the Company wrote off goodwill related to a 1992 acquisition of approximately $150,000, made other adjustments reducing earnings by approximately $175,000 and reduced the deferred tax valuation allowance by approximately $550,000. The goodwill write off resulted from the decision to discontinue the sale of mobility products to third parties. The adjustments to the deferred tax valuation allowance resulted from assessments made by the Company of its expected future taxable income available to absorb its net operating loss carryfowards. F-25 EX-23.1 2 CONSENT OF GRANT THORNTON Exhibit 23.1 Consent of Independent Certified Public Accountants We have issued our report dated April 25, 1997 accompanying the consolidated financial statements included in the Annual Report of Greenbriar Corporation on Form 10-KSB for the year ended December 31, 1996. We hereby consent to the incorporation by reference of said report in the Registration Statements of Greenbriar Corporation on Form S-3 (File No. 33-64840) and Form S-8 (File No. 33-65856). /s/ Grant Thornton LLP - ---------------------- GRANT THORNTON LLP Dallas, Texas April 25, 1997 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Form 10-KSB audited consolidated balance sheet as of December 31, 1996 and the audited consolidated statement of earnings for the year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 2,784 0 561 0 0 10,257 88,088 2,635 116,701 11,934 54,717 0 70 65 36,017 116,701 0 29,785 0 34,719 0 0 4,457 (7,995) 2,400 (5,595) 758 0 0 (4,837) (.99) 0
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