-----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, DZI3iz6svVoGWSAo3uyS0+mwb+hnQz3eeXLa8ylQ9IIUMlNULKSZH1n8YHtC3amZ QjQHrz11kDnxRyL4Bfqnzg== 0001010549-02-000490.txt : 20020814 0001010549-02-000490.hdr.sgml : 20020814 20020814180114 ACCESSION NUMBER: 0001010549-02-000490 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 02737742 BUSINESS ADDRESS: STREET 1: 14185 DALLAS PKWY STREET 2: STE 650 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9724078400 MAIL ADDRESS: STREET 1: 14185 DALLAS PKWY STREET 2: STE 650 CITY: DALLAS STATE: TX ZIP: 75204 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 10-Q 1 green10q063002.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-8187 Greenbriar Corporation (Exact name of Registrant as specified in its charter) Nevada 75-2399477 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification No.) 14185 Dallas Parkway, Suite 650, Dallas, TX 75254 (Address of principal executive offices) (Zip Code) Registrant'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 Indicate by check mark 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 [ ] At August 14, 2002 the issuer had outstanding approximately 359,000 shares of par value $.01 Common Stock. GREENBRIAR CORPORATION Index to Quarterly Report on Form 10-Q Period ended June 30, 2002 Part I: Financial Information..................................................3 ITEM 1: FINANCIAL STATEMENTS.................................................3 Consolidated Balance Sheets................................................3 Consolidated Statements Of Operations......................................5 Consolidated Statements Of Cash Flow.......................................6 Notes To Consolidated Financial Statements.................................7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........................13 Part II: Other Information....................................................17 2 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS Greenbriar Corporation Consolidated Balance Sheets (Amounts in thousands) June 30, December 31, Assets 2002 2001 (Unaudited) ------------ ------------ Current Assets Cash And Cash Equivalents $ 1,056 $ 1,246 Short-term investments -- 1,098 Accounts Receivable-Trade 68 106 Receivables from affiliated partnership 117 311 Prepaid expenses 451 572 Other Current Assets 553 541 ------------ ------------ Total Current Assets 2,245 3,874 Notes receivable, from sale of properties 6,400 6,400 Less deferred gains (6,090) (6,090) ------------ ------------ 310 310 Note receivable from affiliate partnership 1,600 1,600 Deferred Income Tax Benefit 2,350 2,350 Property And Equipment, At Cost Land And Improvements 3,522 4,430 Buildings And Improvements 28,763 32,675 Equipment And Furnishings 3,052 3,134 ------------ ------------ 35,337 40,239 Less Accumulated Depreciation 6,346 6,498 ------------ ------------ 28,991 33,741 Deposits 1,693 1,730 Other Assets 543 417 ------------ ------------ $ 37,732 $ 44,022 ============ ============ 3
Greenbriar Corporation Consolidated Balance Sheets - Continued (Amounts in thousands) June 30, December 31, Liabilities And Stockholders' Equity 2002 2001 (Unaudited) ------------ ------------ Current Liabilities Current Maturities Of Long-Term Debt $ 3,516 $ 4,316 Accounts Payable - Trade 862 1,042 Accrued Expenses 413 1,116 Other Current Liabilities 949 467 ------------ ------------ Total Current Liabilities 5,740 6,941 Long-Term Debt 12,679 16,693 Financing Obligations 10,815 10,815 Other Long Term Liabilities 722 304 ------------ ------------ Total Liabilities 29,956 34,753 Stockholders' Equity Preferred Stock 1 1 Common Stock $.01 Par Value; authorized,100,000 shares; 359 shares issued and outstanding 75 75 Additional Paid-In Capital 56,828 56,828 Accumulated Deficit (46,761) (45,268) ------------ ------------ 10,143 11,636 Less Stock Purchase Notes Receivable (Including $2,250 From Related Parties) (2,367) (2,367) ------------ ------------ Total Equity 7,776 9,269 ------------ ------------ $ 37,732 $ 44,022 ============ ============
4
Greenbriar Corporation Consolidated Statements Of Operations (Amounts in thousands, except per share data) For The Three Month For The Six Month Period Ended Period Ended June 30, June 30, 2002 2001 2002 2001 -------- -------- -------- -------- (Unaudited) (Unaudited) Revenue Assisted living operations $ 2,549 $ 9,247 $ 5,474 $ 19,223 -------- -------- -------- -------- 2,549 9,247 5,474 19,223 Operating Expenses Assisted living community operations $ 1,442 $ 5,722 $ 3,069 $ 11,726 Lease expense 404 923 813 2,077 Depreciation and amortization 373 794 704 1,659 Corporate general and administrative 438 1,948 869 3,132 -------- -------- -------- -------- 2,657 9,387 5,455 18,594 -------- -------- -------- -------- Operating income (loss) (108) (140) 19 629 Other income (expense) Interest and dividend income $ 66 $ 64 $ 230 $ 141 Interest expense (684) (1,252) (1,312) (2,674) Net gain (loss) on the sale of assets (19) (222) (19) 159 Loss due to partnership (292) -- (413) -- Other -- (61) -- (142) -------- -------- -------- -------- (929) (1,471) (1,514) (2,516) -------- -------- -------- -------- Net loss (1,037) (1,611) (1,495) (1,887) Preferred stock dividend requirement -- (80) -- (160) -------- -------- -------- -------- Loss allocable to common stockholders (1,037) (1,691) (1,495) (2,047) ======== ======== ======== ======== Net loss per common share - basic and diluted $ (2.89) $ (4.06) $ (4.16) $ (4.91) Weighted average number of common and equivalent shares outstanding 359 417 359 417
5
Greenbriar Corporation Consolidated Statements Of Cash Flow (Amounts in thousands) For the six month Period Ended June 30, 2002 2001 ------- ------- (Unaudited) (Unaudited) Cash flows from operating activities Net loss $(1,495) $(1,887) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 704 1,659 Loss on sale of assets 19 (159) Loss on partnership 413 -- Changes in operating assets and liabilities Accounts receivable 248 74 Other current and noncurrent assets 4 (207) Accounts payable and other liabilities (395) (1,360) ------- ------- Net cash used in operating activities (502) (1,880) ------- ------- Cash flows used in investing activities Proceeds from sale of property 4,236 7,550 Purchase of property and equipment (208) (477) ------- ------- Net cash provided by investing ......activities 4,028 7,073 Cash flows from financing activities Payments on debt (4,993) (4,379) Dividends on preferred stock -- (160) New borrowings 179 -- ------- ------- Net cash used in financing activities (4,814) (4,539) ------- ------- NET INCREASE (DECREASE) IN CASH AND (1,288) 654 CASH EQUIVALENTS Cash and cash equivalents at beginning of period 2,344 2,287 ------- ------- Cash and cash equivalents at end of period $ 1,056 $ 2,941 ======= =======
6 Notes To Consolidated Financial Statements For the Unaudited Three and Six Months Ended June 30, 2002 and 2001 Note A: Basis of Presentation The accompanying unaudited 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. The Company records its investment in certain affiliated partnerships using the equity method of accounting. (see "Note C"). The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles. These financial statements are unaudited but in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of consolidated results of operations, consolidated financial position and consolidated cash flows at the dates and for the periods indicated, have been included. Operating results for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. Note B: Notes Receivable During 2001, the Company sold three assisted living communities for cash and $6,400,000 of tax-free notes bearing interest at 9.5%. The notes mature on April 1, 2032, March 20, 2037 and August 1, 2031 respectively. The repayment of the notes is limited to the cash flow of the respective communities either from operations, refinance or sale. The Company has deferred gains from the sale of the communities in the amount of $6,090,000. The deferred gains and interest income will be recognized as cash is received. Note C: Affiliated Partnerships In October 2001, the Company became a limited partner in Corinthians Real Estate Investors LP (CREI), a partnership formed to acquire two properties. The general partner is a limited liability corporation whose controlling member is James Gilley. Mr. Gilley is also CEO of the Company. The Company is a 56% limited partner. Mr. Gilley has a 25.9% interest, the general partner has a .1% interest, the Company's chief financial officer has a 10.5% interest, and other employees of the Company have interests aggregating 7.5%. In October 2001, the Partnership acquired a retirement community for approximately $9,100,000 and in January 2002, it acquired an assisted living community for approximately $2,800,000. 7 The Company issued a $1,600,000 note to the seller as partial payment for the purchase of the retirement community. The balance of the purchase price was funded by borrowings by CREI from a third party in the amount of $7,840,000, which was guaranteed by the Company. CREI gave the Company a $1,600,000 note in consideration for payment of that amount of the purchase price. The notes bear interest at 8.75% and are due December 30, 2003. CREI also has debt in the amount of $3,975,000 collateralized by the assisted living community that has been guaranteed by the Company. As of June 30, 2002 Messrs Gilley and Bertcher have received cash advances from the partnership of $195,000 and $87,000 respectively. Messrs Gilley and Bertcher currently hold notes receivable from the Company of $1,380,000 and $360,000 respectively. Both Messrs Gilley and Bertcher have pledged their notes as collateral for the advances they have received. Neither the cash advances received nor the notes receivable issued by the Company bear interest. The Company accounts for its investment in CREI by the equity method, however because of its debt guarantees the company records the greater of 100% of the cash losses or 56% of the accounting losses of CREI, which were $393,000 for the six months ended June 30, 2002. The Company had a receivable from CREI of $100,746 at June 30, 2002 resulting from the normal course of business. This amount was repaid in the subsequent month. Following are unaudited condensed financial statements of CREI at June 30, 2002 and the six-month period ended June 30, 2002 (in thousands): Balance Sheet Current Assets $ 243 Property and Equipment 12,031 Other Assets 931 -------- $ 13,205 ======== Payable to Greenbriar $ 101 Other Liabilities 490 Notes Payable to Greenbriar Corp. 1,600 Mortgages Payable 11,815 -------- 14,006 Partners' Deficit (801) -------- $ 13,205 ======== 8 Statement of Operations Revenue $ 1,498 Expenses Operating 825 Depreciation 377 General and Administrative 116 Interest 885 ------- $ 2,203 Net loss $ (705) ======= Effective May 31 2002, the Company became a limited partner in Muskogee Real Estate Investors LP (MREI), a partnership formed to acquire two properties. The general partner is a limited liability corporation whose controlling member is James Gilley. Mr. Gilley is also CEO of the Company. The Company is a 56% limited partner. Mr. Gilley has a 25.9% interest, the general partner has a .1% interest, the Company's chief financial officer has a 10.5% interest, and other employees of the Company have interests aggregating 7.5%. In May 2002, the Partnership acquired two assisted living communities in close proximity to one another. One property was acquired from an independent third party for $1,600,000 and one property was acquired from Greenbriar for a 56% limited partnership interest in the partnership. The debt on the two properties is $4,000,000, which is guaranteed by Mr. Gilley. Greenbriar recorded no gain or loss on the exchange from ownership of one property for its 56% limited partnership interest. The Company accounts for its investment in MREI by the equity method and recorded earnings of $6,700 for the one month ended June 30, 2002. The Company had a receivable from MREI of $15,500 at June 30, 2002 resulting from the normal course of business. This amount has been repaid in the subsequent month. Following are unaudited condensed financial statements of MREI at June 30, 2002 and the one- month period ended June 30, 2002 (in thousands): 9 Balance Sheet Current Assets $ 141 Property and Equipment 3,940 Other Assets 37 ------ $4,118 ====== Current Liabilities $ 29 Payables to Greenbriar 16 Other Liabilities 61 Mortgages Payable 4,000 ------ 4,106 Partners' Equity 12 ------ $4,118 ====== Statement of Operations Revenue $ 147 Expenses Operating 86 Depreciation 12 General and Administrative 13 Interest 24 ------ $ 135 ------ Net Income $ 12 ====== 10
Note D: Long-Term Obligations Long-term debt is comprised of the following (in thousands): June 30, December 31, 2002 2001 ------------ ------------ Notes payable to financial institutions maturing through 2015; fixed and variable interest rates ranging from 5.25% to 10.50%; collateralized by property, fixtures, equipment and the assignment of rents $ 9,752 $ 8,947 Notes payable to individuals and companies maturing through 2023; variable and fixed interest rates ranging from 7% to 8.75% collateralized by real property, personal property, fixtures, equipment and the assignment of rents 1,654 1,655 Mortgage note payable to a financial institution maturing in 2010; bearing interest rates ranging from 7.5% through 14.5%; collateralized by property and equipment -- 5,253 Notes payable to wife of Chief Executive Officer, bearing interest at 10% and maturing on July 1, 2003 3,375 3,375 Notes payable to executive officers, non-interest bearing at 8.5% and maturing on December 31, 2004, net of discount of $328 and $391 respectively, representing interest imputed at 8.5% 1,412 1,349 Other 2 430 ------------ ------------ 16,195 21,009 Less: current maturities 3,516 4,316 ------------ ------------ $ 12,679 $ 16,693
The Company operates two communities that are financed through sale-leaseback obligations. At the end of the tenth year of the fifteen-year leases (March 31, 2004), the Company has options to repurchase the communities for the greater of the sales prices at the date of the sale-leaseback which was $10,815,000 or their current replacement costs less depreciation plus land at current fair market values. Accordingly, these transactions have been accounted for as financings, and the Company has recorded the proceeds from the sales as financing obligations, classified the lease payments as interest expense and continues to carry the communities and record depreciation. 11 Note E: Contingencies Lifestyles Matter: In 1995 Lifestyles Senior Housing Managers, LLC (Lifestyles) entered into a contract to manage an assisted living community in Seaside, OR which is leased by Neawanna by the Sea, LP (Neawanna) from a REIT. In 1996 the Company acquired its interest in the lease for Neawanna. In March 2000 Lifestyles organized and held a meeting with the executive director of Neawanna for the purpose of offering her the position of manager of an assisted living community not affiliated with Greenbriar. Greenbriar believes the action of Lifestyles represented a breach of their fiduciary duty as the manager and terminated the management contract. Lifestyles contended their termination was unjustified. The matter was taken to arbitration and on April 9, 2001, the Company was notified that the arbitration panel had awarded Lifestyles $498,000 for damages plus expenses. One of the terms of the Neawanna lease is that any unsatisfied debt exceeding $250,000 is an event of default. Rather than lose the lease on Neawanna, on July 12, 2001 Neawanna filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for The District of Nevada. In addition Villa del Rey - Roswell LP (Roswell) filed for Chapter 11 in the same court. Although unrelated to the Lifestyles matter Roswell has a lease for an assisted living community, which is cross-collateralized with the lease held by Neawanna. The Company is attempting to work out a settlement with Lifestyles but has thus far been unsuccessful. Concurrently the entities in the bankruptcy have presented a plan of reorganization to the court. Both Lifestlyes and the REIT have filed objections to the plan. The Company's net book value in the Neawanna and Roswell is approximately $4,700,000. Insurance: Due to the escalating costs of liability insurance in the assisted living industry the Company is currently self-insured at three of the Communities that it owns and operates. The Company is continuing to seek out insurance coverage. 12 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- Overview The Company owns and manages assisted living communities that provide housing, healthcare, hospitality and personal services to seniors. As of July 31, 2002 the Company operates 13 communities in seven states with a capacity of 1,160 residents, consisting of two communities that are owned, four that are leased, four that are managed for affiliated partnerships, and three that are managed under contract to one of the Company's subsidiaries for third party owners. In addition the Company has three Communities that are operated by independent third parties. Three and six month periods ended June 30, 2002 compared to three and six-month periods ended June 30, 2001. Revenues and Operating Expenses from Assisted Living Operations Revenues were $2,549,000 and $5,474,000 for the three and six months ended June 30, 2002 as compared to $9,247,000 and $19,223,000 for the three and six months ended June 30, 2001. Community operating expenses, which consist of assisted living community operations, lease expense and depreciation and amortization, were $2,219,000 and $4,586,000 for the three and six months ended June 30, 2002 as compared to $7,439,000 and $15,462,000 for the three and six months ended June 30, 2001. During the last six months of 2001 the Company disposed of 11 Communities as part of redemption of its Series E and F Preferred Stock. The Company also sold three Communities to not for profit organizations and retained long term management contracts. The Company also sold one Community and leased one Community to independent third parties. In addition the Company entered into a sub-management contract for three properties whereby the sub-manager is retaining the revenue and paying the expenses as their fee for being a sub-manager. The sub-manager also has an agreement to acquire the communities upon approval of the third party lenders. For reporting purposes the Company no longer records the revenue and operating expenses of the three Communities. In May 2002 one of the properties with a sub-management contract was sold. During the first quarter of 2002 leases held by the company for the operation of two properties were not renewed. As of May 31, 2002 one property was contributed to a partnership that the Company has a 56% limited partnership interest. The partnership is accounted for using the equity method of accounting. In October 2001 and May 2002 the Company obtained 56% limited partnership interests in two partnerships which own four Communities. These Communities are accounted for using the equity method of accounting and therefore the Company does not record the revenue and expenses of the Communities. 13 Overall the Company recorded revenue and expenses for 22 fewer Communities during the three and six months ended June 30, 2002 than the comparable periods in the prior year. On a "same store basis" revenue for the three and six months ended June 30, 2001 would have been $2,407,000 and $5,059,000 respectively and operating expenses for the three and six months ended June 30, 2002 would have been $2,048,000 and $4,244,000 respectively. Corporate General and Administrative Expenses General and administrative expenses were $438,000 and $869,000 for the three and six months ended June 30, 2002 as compared to $1,948,000 and $3,132,000 for the three and six months ended June 30, 2001. The decrease in the corporate general and administrative expenses is primarily a result of a decrease in salaries and related payroll expenses. Due to a significant reduction in the number of Communities operated by the Company the number of employees on the corporate staff was reduced. In addition salaries for members of senior management has been reduced. Also during the three and six months ended June 30, 2001 the Company was incurring legal and professional fees with respect to a lawsuit with a preferred shareholder. Legal fees decreased by $142,500 and $285,000 for the three and six months ended June 30, 2002 when compared to the comparable periods in 2001. Interest and Dividend Income Interest and dividend income for the three and six months ended June 30, 2002 was $66,000 and $230,000 compared to $64,000 and $141,000 for the comparable periods in 2001. The increase in interest and dividend income for both the three and six month periods is a result of interest recorded on a $1,600,000 note receivable related to the Company's investment in the Corinthian Real Estate Investors L.P. in November 2001. Interest Expense Interest expense for the three and six months ended June 30, 2002 was $684,000 and $1,312,000 as compared to $1,252,000 and $2,674,000 for the comparable periods in 2001. Due to the reduction in the number of Communities the company's long-term debt has been reduced significantly. The interest expense on a "same store basis" for the three and six months ended June 30, 2001 would have been $610,000 and $1,094,000 respectively. The increase in interest expense on a "same store basis" is due principally to higher interest rates on existing borrowings when compared to the previous year. Net Gain (Loss) on the Sale of Assets The net gain (loss) on the sale of assets for the three and six months ended June 30, 2001 was $(222,000) and $159,000 respectively and was $(19,000) for the six months ended June 30, 2002. 14 The Company sold its corporate office building in 2001, which resulted in a gain of $406,000. In addition, certain garden homes and related property that were adjacent to Camelot Retirement were sold in 2001 resulting in a loss of $296,000. In 2001 the Company also exercised purchase options on two leased communities in Fort Worth, Texas, Palm House and Oak Park Retirement, and simultaneously sold both of the two communities to unrelated third parties. The gains on the sales of assets generated from these two transactions were $49,000. Other Income (Expense) Other Income (Expense) for the three and six months ended June 30, 2001 was ($61,000) and ($142,000) respectively. The expenses for 2001 are the minority interest in a Community. The Community was sold in August 2001. Liquidity and Capital Resources At June 30, 2002, the Company had current assets of $2,245,000 and current liabilities of $5,740,000. Included in current liabilities is a $3,360,000 mortgage for an assisted living community, which matures in October 2002. The Company intends to either sell the Community or refinance the mortgage prior to its maturity date. During 2001 the Company reduced its long-term debt from $50,887,000 to $16,693,000. The reduction was due to the sale of properties and the repayment of the mortgages related to the properties. In January 1997 the Company negotiated employment contracts with the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the Company. Both individuals had been employed by the Company since 1989. The employment contracts called for combined salaries of $640,000 per year and provided that if the contracts were terminated or amended the individuals would be entitled to cash payment of three years salary for the CEO and two years salary for the CFO. In light of the reduced size of the Company the independent directors and the officers in October 2001 agreed to modify the employment agreements with the two officers. The two officers have each agreed to continue their roles in the Company for $12,000 per year for three years. The revisions in the contracts triggered the contract termination payments requiring the Company to immediately pay the two officers $1,740,000. However, the two officers agreed to accept non-interest-bearing notes due December 31, 2004. These notes have certain acceleration provisions if the Company violates the terms of the revised contracts. In the future the two officers will participate with the Company in partnerships or other entities formed to acquire and sell real estate properties during the period of their contracts. The Company believes that this arrangement will allow it to maintain experienced senior management at a cost that will not overburden its resources while at the same time allowing it to realize significant profits through management fees, operating profits and the ultimate sale of the properties. 15 It is anticipated that the Company will acquire additional properties through investments in third party entities, which for the most part, will be partnerships. The Company may or may not be the controlling party with respect to these investments. It is anticipated that the two senior officers will bring potential acquisitions and financing to Greenbriar. The Company has no obligation to participate. The Company conducts its property management operations through its subsidiary Senior Living Management, Inc (SLM). SLM expects to manage properties, which are owned or leased by the Company or are owned by partnerships or other entities where Greenbriar is an investor, for a fee. To a far lesser degree SLM will manage properties for independent third parties. Future acquisitions by of the Company are dependent upon obtaining capital and financing through various means, including financing obtained from loans, sale/leaseback transactions, long-term state bond financing, debt or equity offerings and, to the extent available, cash generated from operations. There can be no assurance that the Company will be able to obtain adequate capital to finance its projected growth. Forward Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: A number of the matters and subject areas discussed in this form 10Q that are not historical or current facts deal with potential future circumstances, operations, and prospects. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from Greenbriar Corporation's actual future experience involving any one or more of such matters and subject areas relating to interest rate fluctuations, ability to obtain adequate debt and equity financing, demand, pricing, competition, construction, licensing, permitting, construction delays on new developments contractual and licensure, and other delays on the disposition, transition, or restructuring of currently or previously owned, leased or managed communities in the Company's portfolio, and the ability of the Company to continue managing its costs and cash flow while maintaining high occupancy rates and market rate assisted living charges in its assisted living communities. Greenbriar Corporation has attempted to identify, in context, certain of the factors that they currently believe may cause actual future experience and results to differ from Greenbriar Corporation's current expectations regarding the relevant matter of subject area. These and other risks and uncertainties are detailed in the Company's reports filed with the Securities and Exchange Commission (SEC), including Greenbriar Corporation's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. 16 PART II: OTHER INFORMATION ITEMS 1-5: ARE NOT APPLICABLE - ------------------------------ ITEM 6: EXHIBITS AND REPORT ON FORM 8-K A) EXHIBITS: 99.1: CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 99.2: CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 B) REPORTS ON FORM 8-K: NONE 17 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by undersigned, thereunto duly authorized. Greenbriar Corporation Date: August 14, 2002 By: /s/ Gene S. Bertcher ------------------------ Executive Vice President Chief Financial Officer 18 EX-99.1 3 green10qex991063002.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Greenbriar Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I James R. Gilley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ James R. Gilley - ----------------------- James R. Gilley Chief Executive Officer August 14, 2002 EX-99.2 4 green10qex992063002.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Greenbriar Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I Gene S. Bertcher, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Gene S. Bertcher - ----------------------- Gene S. Bertcher Chief Financial Officer August 14, 2002, 2002 -----END PRIVACY-ENHANCED MESSAGE-----