-----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, GfsAPanUNwi9VCje/J0FP0N+OIWVVpu1wu9HIwMhdkAkTfBhvjXAWZA/FqT0970S aXnpg3Wk4W4fL9/JZU7sZg== 0001010549-04-000313.txt : 20040517 0001010549-04-000313.hdr.sgml : 20040517 20040517122602 ACCESSION NUMBER: 0001010549-04-000313 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 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: 04810754 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: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 10-Q 1 green10q033104.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 31, 2004 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.) 1755 Wittington Place, Suite 340, Dallas, Texas 75234 (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 May, 14, 2004 the issuer had outstanding approximately 977,000 shares of par value $.01 Common Stock. GREENBRIAR CORPORATION Index to Quarterly Report on Form 10-Q Period ended March 31, 2004 PART I: FINANCIAL INFORMATION..................................................3 ITEM 1: FINANCIAL STATEMENTS................................................3 CONSOLIDATED BALANCE SHEETS..............................................3 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 THREE MONTH PERIOD ENDED MARCH 31, 2004 COMPARED TO THREE MONTH PERIOD ENDED MARCH 31, 2003............................................14 FORWARD LOOKING STATEMENTS..............................................16 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........16 ITEM 4: CONTROLS AND PROCEDURES............................................16 PART II: OTHER INFORMATION....................................................18 SIGNATURES.................................................................18 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)....................19 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(B), 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.......21 2
PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS Greenbriar Corporation Consolidated Balance Sheets (Amounts in thousands) March 31, December 31, Assets 2004 2003 (Unaudited) ------------ ------------ Current Assets Cash and cash equivalents $ 295 $ 688 Accounts receivable-trade 176 100 Notes receivable 1,797 2,435 Other current assets 169 198 ------------ ------------ Total Current Assets 2,437 3,421 Notes receivable, from sale of properties 4,107 4,107 Less deferred gains (3,720) (3,720) ------------ ------------ 387 387 Deferred income tax benefit 1,161 1,161 Property and equipment, at cost Land and improvements 2,752 2,758 Buildings and improvements 8,997 9,410 Equipment and furnishings 1,118 1,317 Proven oil and gas properties (full cost method) 1,430 1,361 ------------ ------------ 14,297 14,846 Less accumulated depreciation (2,086) (2,233) ------------ ------------ 12,211 12,613 Deposits 258 232 Other Assets 381 317 ------------ ------------ $ 16,835 $ 18,131 ============ ============
3
Greenbriar Corporation Consolidated Balance Sheets - Continued (Amounts in thousands) March 31, December 31, Liabilities and Stockholders' Equity 2004 2003 (Unaudited) ------------ ------------ Current Liabilities Current maturities of long-term debt $ 4,611 $ 4,690 Current notes payable 5,481 5,571 Accounts payable - trade 374 503 Accrued expenses 658 633 Other current liabilities 272 931 ------------ ------------ Total Current Liabilities 11,396 12,328 Long-term debt 2,143 2,053 Deferred Gain 740 740 Other long term liabilities 177 456 ------------ ------------ Total Liabilities 14,456 15,577 Stockholders' Equity Preferred stock 1 1 Common stock $.01 par value; authorized, 4,000,000 shares; shares issued and outstanding, 977,000 shares in 2004 and 688,000 in 2003 10 10 Additional paid-in capital 55,966 55,966 Accumulated deficit (53,598) (53,423) ------------ ------------ 2,379 2,554 $ 16,835 $ 18,131 ============ ============
4 Greenbriar Corporation Consolidated Statements of Operations (Amounts in thousands, except per share data) For The Three Month Period Ended March 31, 2004 2003 ----------- ----------- (Unaudited) (Unaudited) Revenue Real estate operations $ 1,491 $ 745 Oil and gas operations 315 ----------- ----------- 1,806 745 ----------- ----------- Operating expenses Real estate operations 828 416 Oil and gas operations 246 -- Lease expense 224 287 Depreciation and amortization 122 75 Corporate, general and administrative 289 142 ----------- ----------- 1,709 920 ----------- ----------- Operating income (loss) 97 (175) Other income (expense) Interest income 74 54 Interest expense (356) (196) Equity in net income of affiliated partnership 15 18 Other 9 58 ----------- ----------- (258) (66) ----------- ----------- Loss from continuing operation (161) (241) Discontinued operations Loss from operations (14) (21) ----------- ----------- $ (175) $ (262) NET (LOSS) Basic and diluted (loss) per common share - Continuing operations $ (.16) $ (.35) Discontinued operations (.02) (.03) ----------- ----------- Net (loss) per share $ (.18) $ (.38) Weighted average number of common and equivalent shares outstanding 977 688 5
Greenbriar Corporation Consolidated Statements Of Cash Flow (Amounts in thousands) For the three month Period Ended March 31, 2004 2003 ----------- ----------- (Unaudited) (Unaudited) Cash flows from operating activities Net loss $ (175) $ (262) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 123 79 (Gain) from affiliate (18) (18) Changes in operating assets and liabilities Accounts receivable (76) (13) Other current and non current assets (61) 84 Accounts payable and other liabilities (258) (334) ----------- ----------- Net cash used in operating activities (465) (464) Cash flows provided by (used in) investing activities Repayment of Notes Receivable 638 -- Purchase of property and equipment, net 13 (45) ----------- ----------- Net cash provided by (used in) investing Activities 651 (45) Cash flows from financing activities Proceeds from borrowings -- 14 Payments on debt (579) -- ----------- ----------- Net cash provided by (used in) financing activities (579) 14 ----------- ----------- Net increase (decrease) in cash and (393) (495) cash equivalents Cash and cash equivalents at beginning of period 688 661 ----------- ----------- Cash and cash equivalents at end of period $ 295 $ 166 =========== ===========
6 Notes To Consolidated Financial Statements For the Unaudited Three Months Ended March 31, 2004 and 2003 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 unaudited financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with 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, 2003. Operating results for the three month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for any subsequent quarter or the year ended December 31, 2004. Note B: Notes Receivable and Deferred Gain From Sale Of Property As a result of the sale of two communities in 2001 the Company holds tax-exempt notes in the amount of $4,030,000 bearing interest at 9.5%. The notes mature on April 1, 2032, 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 in the amount of $3,720,000. The deferred gains and interest income will be recognized as cash is received. Note C: Affiliated Partnerships In October 2001, the Company became a 56% 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 sole member is W. Michael Gilley, the son of a former CEO of the Company. Sylvia Gilley, W. Michael Gilley's mother, has a 25.9% interest, the general partner has a .1% interest, the Company's current chief executive 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. CREI gave the Company a $1,600,000 note as consideration for payment of that amount of the purchase price. The balance of the purchase price was funded by CREI's borrowings from a third party. In September 2002 CREI sold its two properties for cash and notes and paid off its third party debt. As part of the proceeds, CREI received a note for $1,600,000 due September 30, 2004, which was transferred to the Company in satisfaction of its $1,600,000 note receivable from CREI. CREI also assigned to the Company a $400,000 participation in another note due September 30, 2004, in payment of all other CREI debt to the Company. The Company transferred the $1,600,000 note it received to the original owner of the retirement community in payment of the Company's $1,600,000 debt. The Company guaranteed payment of the $1,600,000 note. The Company has deferred recognition of its $740,000 share of the gain from the 2002 sale of CREI's property because of the aforementioned guaranty. In addition, CREI has deferred a gain of $994,000 that will be recognized on the installment method. The Company will realize its $557,000 (56%) portion of the $994,000 upon collection of the notes held by CREI. The notes are due September 30, 2004. Following are unaudited, condensed financial statements of CREI (in thousands): Balance Sheet March 31, 2004 Current assets $ 84 Other assets 171 Notes receivable 994 ---------- $ 1,249 Current liabilities $ 70 Other liabilities 157 Deferred gain 994 ---------- 1,221 Partners' equity 28 ---------- $ 1,249 Statement of Operations Nine months ended March 31, 2004 Interest Income $ 28 Expenses 1 ---------- Net Income $ 27 ---------- 8
Note D: Long-Term Obligations Long-term debt is comprised of the following (in thousands): March 31, December 31, 2004 2003 ------------ ------------ 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 $ 2,073 $ 2,090 Notes payable to individuals and companies maturing through 2023; variable and fixed interest rates ranging from 7% to 12% collateralized by real property, personal property, fixtures, equipment and the assignment of rents 1,849 1,851 Notes payable to Sylvia M. Gilley, bearing interest at 10% and maturing on July 1, 2004 2,255 2,255 Notes payable to current and former executive officers, non-interest bearing at 8.5% and maturing on December 31, 2004, net of discount of $163 and $260 respectively, representing interest imputed at 8.5% 561 528 Other 16 19 ------------ ------------ 6,754 6,743 Less: current maturities 4,611 4,690 ============ ============ $ 2,143 $ 2,053
As discussed in Note C the company is a guarantor of debt in the amount of $1,600,000. Note E - Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" (APB 25) in its primary financial statements and has provided supplemental disclosures required by Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation" and by Statement of Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure an Amendment of SFAS No. 123." SFAS 123 requires disclosure of pro forma net earnings (loss) and pro forma net earnings (loss) per share as if the fair value method had been applied in measuring compensation cost for stock based awards. There was no pro forma stock based compensation expense for any period presented. 9 Note F - Discontinued Operations On January 31, 2004 the Company terminated a lease for an assisted living community in Georgia. The operations of that community have been reflected as discontinued operations for 2004 and 2003. Note G - Segments The Company and its subsidiaries are principally engaged in the business of acquiring, enhancing and selling real estate properties. Since 1996 those activities have, almost exclusively, involved assisted living facilities. In December 2003 the Company acquired an outlet mall. Effective August 1, 2003 the Company acquired 100% of the stock in Gaywood Oil & Gas LLC, a limited liability company that owns working interests in certain oil producing wells. The acquisition was done for investment purposes and substantially all costs associated with the oil and gas operations are operating expenses incurred directly by Gaywood. The Company continues to allocate all of its corporate overhead expenses to its core real estate operation. Segment information and reconciliation to income (loss) from operations are as follows: Three months ended March 31, 2004 Real Estate Oil and Gas Consolidated Operations Operations Revenue $ 1,607,000 $ 315,000 $ 1,922,000 Depletion, depreciation and amortization 56,000 67,000 123,000 Operating income 39,000 44,000 83,000 Total assets $15,443,000 $ 1,392,000 $16,835,000 Note H - Contingencies Benetic Financial vs. Wedgwood et al: This action is against a subsidiary of the Company as well as other corporate and individual defendants who are unrelated to the Company. In 1993, Wedgwood Retirement Inns entered into a financing arrangement with a third party lender. Plaintiff Benetic alleged that he had a verbal brokerage agreement with Wedgwood and was entitled to a fee. The Company acquired Wedgwood in 1996. In a jury trial the plaintiff was awarded $150,000 on one count of his complaint. However, the jury found for the defendants on all other counts. In his final ruling the judge awarded the defendants legal fees that were in excess of the judgment. The plaintiff appealed and on April 30, 2003 the California Court of Appeals let the $150,000 stand but reversed the judge's award of legal fees. Based upon the ruling of the Court of Appeals the defendants are obligated for the judgment plus $165,093 in interest since 1993. The judgment is against all the defendants as a group. 10 It was ultimately determined that the Company's portion of the judgment including interest was approximately $230,000. The Company established a reserve for this obligation prior to 2004. Internal Revenue Service Pre-Assessment Letter In December 1991 the Company sold four nursing homes to a not-for-profit corporation in exchange for tax exempt bonds issued on behalf of the acquiring corporation by government authorities. The bonds were issued in three lettered series: A, B and C. The aggregate principal amount of the Series A bonds was $8,700,000, the aggregate principal amount of the series B bonds was $1,000,000 and the aggregate amount of the series C bonds was $6,700,000. Interest on the bonds was payable semi-annually. A nationally recognized law firm opined that interest on the bonds would be tax-exempt. In March 1992, pursuant to a plan promulgated and recommended by a nationally recognized investment banking firm, the Series C bonds were converted to zero coupon status and their value was enhanced by substituting higher grade collateral. The substitute collateral, which consisted of zero coupon U.S. Treasury obligations, was placed in trust to defease the Series C bonds, in exchange for the underlying mortgage. The Series C bonds were then sold for approximately $47,000,000. A gain was recorded equal to the proceeds received by the Company of $6,252,000 after deducting transaction costs and the cost of the higher grade collateral. A nationally recognized law firm opined that the defeasance of the bonds would not adversely affect the tax exempt status. In December 1992, again pursuant to a plan promulgated and recommended by a nationally recognized investment banking firm, the Series A bonds were converted to zero coupon status, their value enhanced by substituting zero coupon U.S. Treasury obligations as collateral and the collateral placed in trust in exchange for the mortgage underlying the Series A bonds in a transaction similar to the sale of the Series C bonds. The Series A bonds were then sold for approximately $20,000,000. A gain was recorded equal to the proceeds received by the Company of $2,081,000 after deducting transaction costs and the cost of the higher grade collateral. On January 8, 2004 the Company was notified by the Internal Revenue Service (IRS) in the form of a Section 6700 Pre-Assessment Letter that the IRS was considering assessing penalties under Section 6700 of the Internal Revenue Code as a result of the Company's organization or assistance in connection with the issuance and sale of the Series A and Series C bonds. In general, Section 6700 of the IRS Code imposes a penalty on any person or organization who organizes or assists in organizing an entity or participates in the sale of any interest in an entity and makes or furnishes or causes another person to make or furnish a statement with respect to the allowably of any deduction, the excludability of any income which the person knows or has reason to know is false or fraudulent as to any material matter. The penalty prescribed in Section 6700 is the lesser of 100% of the gross income derived from the activity or $1,000 for each such activity. Each entity or arrangement shall be treated as a separate activity. 11 If it is ultimately determined that the Company is subject to a fine, that fine would be the lesser of $1,000 per activity or the gross proceeds the Company received. Effectively the fine would be calculated based upon a determination as to what constitutes an activity. The IRS has informed the Company that the Series A and C bonds were purchased by 266 individuals or entities. If the penalty is computed by considering each sale an activity the maximum exposure to the Company would be $267,000. However, neither Section 6700 nor, to the Company's knowledge, relevant authorities specify what constitutes an activity. The IRS has indicated that the $1,000 per activity should be computed in a manner other than the number of individuals who purchased the bonds however they have not indicated to the Company any basis or authority for their position. If the IRS's assertions as to the number of activities exceeds 8,333 activities then the Company believes the maximum exposure would be the total proceeds received and income recorded of $8,333,000. The transactions which the IRS is examining involved technically complex financial and legal issues and were undertaken on the advice of and reliance on the investment banking firm, the law firms that issued the tax exempt bond legal opinions and other professionals. The Company believed in 1992 and still believes that its actions were appropriate in all respects. The Company and the IRS are engaged in negotiations regarding settling this twelve year old matter. However, there is no assurance that any settlement will be achieved. In the absence of a settlement, the Company intends to contest the IRS's position in court. Any litigation may be expensive and time consuming. However, if this matter is litigated the Company believes that it will prevail on the merits. Should it not prevail in this matter the Company intends to pursue actions against the professionals who advised the Company regarding the sales of the bonds. Other The Company has been named as a defendant in other lawsuits in the ordinary course of business. Management is of the opinion that these lawsuits will not have a material effect on the financial condition, results of operations or cash flows of the Company. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview As of March 31, 2004, the Company owned one assisted living community and leased one assisted living community in two states with a capacity of 200 residents. In addition, the Company owns one assisted living community that is leased and operated by an independent third party with a capacity of 41 residents. On December 10, 2003 the Company acquired the Gainesville Factory Outlet Mall in Gainesville, TX. The mall has approximately 315,000 sq ft. of retail space which is leased to a number of nationally know retail operations as well as local vendors 12 Effective August 1, 2003 the Company acquired Gaywood Oil & Gas, LLC (Gaywood) a company that has oil and gas leases in the East Texas field. The oil wells in this field have low but steady production. There are approximately 200 existing wells on the leases owned by Gaywood. As of May 14, 2004 Gaywood had 52 operating wells, generating approximately 4,000 barrels of oil per month. Gaywood, based upon the price of oil and available financing, intends to open additional wells. However, Greenbriar does not, at this time, anticipate acquiring additional oil and gas properties. The purpose of this acquisition was to acquire a cash flowing asset with future potential value in excess of the purchase price. Three month period ended March 31, 2004 compared to three month period ended March 31, 2003. Revenues and operating expenses from assisted living operations Revenues for the assisted living communities were $909,000 for the three months ended March 31, 2004 as compared to $745,000 for the three months ended March 31, 2003. Community operating expenses, which consist of assisted living community expenses, lease expense, depreciation and amortization, were $753,000 for the three months ended March 31, 2004 as compared to $778,000 for the months ended March 31, 2003 The increase in revenue is due principally to increased census at the communities. The reduction in expenses represents an overall reduction in operating costs. Corporate General and Administrative Expenses General and administrative expenses were $289,000 for the three and nine months ended September 30, 2003 compared to $142,000 for the three months ended March 31, 2003. During the later part of 2001 and 2002 the Company sold, leased or disposed of 26 communities. In October 2001, principally to help the Company's cash flow due to its reduced size, the senior officers agreed to substantial salary reductions. In lieu of salary the Company agreed to allow the officers to participate in future acquisitions. In October 2003 the Company's Board of Directors decided that the officers would no longer participate in the ownership of acquired entities. The Board agreed to increase certain officers' salaries effective January 1, 2003. The increase in salaries as compared to the prior year period accounted for approximately $50,000 in increased expenses. The balance of the additional expenses is due to additional administrative salaries and expenses due to the additions of the outlet mall and the oil and gas operations as well as additional legal fees due to the Company's dispute with the Internal Revenue Service. Interest Income Interest income increased to $74,000 for the three months ended March 31, 2004 as compared to $54,000 for the three months ended March 31, 2004. The increase in interest income is due to an increase in interest from the sale of properties which occurred in the prior two years. 13 Interest Expense Interest expense increased to $356,000 for the three months ended March 31, 2004 as compared $196,000 for the three months ended March 31, 2003. The increase in interest expense is due almost entirely to the financing of the acquisition of the Gainesville Factory Outlet Mall Other Income (Expense) Other Income for the three months ended March 31, 2004 was $9,000 as compared to $58,000 for the three months ended March 31, 2003 $109,000 respectively. The other income in 2003 represents income from the settlement of a lawsuit. Discontinued Operations On January 31, 2004 the company terminated a lease for the operation of an assisted living community in Georgia. The operating losses for the community were $14,000 and $21,000 for the three months ended March 31, 2004 and 2003 respectively. Liquidity and Capital Resources At March 31, 2004, the Company had current assets of $2,437,000 and current liabilities of $11,396,000 In December 2003 the Company acquired the Gainesville Outlet Mall in Gainesville, Texas. The Company paid approximately $800,000 in cash and a short term obligation to pay the seller approximately $5,571,000. In addition, the Company has spent approximately $400,000 for purchase costs, financing costs and working capital for the mall. The Company has negotiated long term financing and anticipates closing during the second quarter of 2004. Also included in current liabilities is an obligation of principal and accrued interest to Sylvia Gilley, wife of a former president of the Company, for $2,548,000. The terms of this obligation are similar to that of preferred stock whereby the Company can only pay this obligation out of available earned surplus. Future acquisitions by 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. 14 Operating activities used $465,000 of cash in the three months ended March 31, 2004 and $464,000 in the similar period in 2003. Investing Activities provided $651,000 of cash in the three months ended March 31, 2004 and used $45,000 of cash in the similar period in 2003. The cash provided in 2004 includes $638,000 from the collection of certain notes receivable. These notes were from the sale of certain properties in 2002 and 2003. Financing activities used $579,000 in cash in the three months ended March 31, 2004 and provided $14,000 in cash in the similar period in 2003. The cash used in 2004 was for the repayment of short term debt incurred by the Company in the latter part of 2003. 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 filing 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 the Company'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. The Company has attempted to identify, in context, certain of the factors that they currently believe may cause actual future experience and results to differ from the Company'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 the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Nearly all of the Company's debt is financed at fixed rates of interest. Therefore the Company has minimal risk from exposure to changes in interest rates. ITEM 4: CONTROLS AND PROCEDURES The Company maintains a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in the Company's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms. Our principal executive and financial officer has evaluated our disclosure control procedures within 90 days prior to the filing of this Quarterly report on Form 10-Q and have determined that such disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or, to its knowledge, in other factors that could significantly affect its disclosure controls and procedures subsequent to the Evaluation Date. 15 PART II: OTHER INFORMATION ITEMS 1-6: ARE NOT APPLICABLE. EXHIBITS - -------- Exhibit 31.1 - Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) Exhibit 32.1 - Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b), 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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: May 15, 2004 By: /s/ Gene S. Bertcher ------------------------ Chief Executive Officer Chief Financial Officer EX-31.2 2 green10qex311033104.txt SECTION 302 CERTIFICATION OF CEO & CFO Exhibit 31.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) I, Gene S. Bertcher, Chief Executive Officer and Chief Financial Officer of Greenbriar Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Greenbriar Corporation ("Registrant"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and /S/ Gene S. Bertcher ------------------------------ Chief Executive Officer Chief Financial Officer May 15, 2004 EX-32.1 3 green10qex321033104.txt SECTION 906 CERTIFICATION OF CEO & CFO EXHIBIT 32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b), 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the filing by Greenbriar Corporation (the "Company") of the Quarterly Report on Form 10-Q for the period ending March 31, 2004 (the "Report"), I, Gene S. Bertcher, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) and15(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 results of operation of Company. /S/ Gene S. Bertcher ------------------------------ Chief Executive Officer Chief Financial Officer May 15, 2004 -----END PRIVACY-ENHANCED MESSAGE-----