10-Q 1 green10q063004.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 June 30, 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 August 12, 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 June 30, 2004 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 THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2004 COMPARED TO THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2003...................................13 FORWARD LOOKING STATEMENTS..............................................16 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........17 ITEM 4: CONTROLS AND PROCEDURES............................................17 PART II: OTHER INFORMATION....................................................18 SIGNATURES.................................................................18 2
PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS ----------------------------- Greenbriar Corporation Consolidated Balance Sheets (Amounts in thousands) June 30, December 31, Assets 2004 2003 (Unaudited) ------------ ------------ Current assets Cash and cash equivalents $ 310 $ 688 Accounts receivable-trade 218 100 Note receivable 1,556 2,435 Property held for sale 650 -- Other current assets 236 198 ------------ ------------ Total current assets 2,970 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 Investment in Affiliate 17 -- Property and equipment, at cost Land and improvements 2,552 2,758 Buildings and improvements 8,546 9,410 Equipment and furnishings 1,140 1,317 Proven oil and gas properties (full cost method) 1,474 1,361 ------------ ------------ 13,712 14,846 Less accumulated depreciation and depletion 2,203 2,233 ------------ ------------ 11,509 12,613 Deposits 282 232 Other assets 403 317 ------------ ------------ $ 16,729 $ 18,131 ============ ============
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Greenbriar Corporation Consolidated Balance Sheets - Continued (Amounts in thousands) June 30, December 31, Liabilities and Stockholders' equity 2004 2003 (Unaudited) ------------ ------------ Current liabilities Current maturities of long-term debt $ 5,614 $ 4,690 Current notes payable -- 5,571 Accounts payable - trade 427 503 Accrued expenses 546 633 Other current liabilities 434 931 ------------ ------------ Total current liabilities 7,021 12,328 Long-term debt 6,612 2,053 Deferred Gain 740 740 Other long term liabilities 183 456 ------------ ------------ Total liabilities 14,556 15,577 Stockholders' equity Preferred stock 1 1 Common stock $.01 par value; authorized, 4,000 shares; 703 shares issued and outstanding 10 10 Additional paid-in capital 55,966 55,966 Accumulated deficit (53,804) (53,423) ------------ ------------ 2,173 2,554 ------------ ------------ $ 16,729 $ 18,131 ============ ============
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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, 2004 2003 2004 2003 --------- --------- --------- --------- (Unaudited) (Unaudited) Revenue Real Estate operations $ 1,397 $ 803 $ 2,888 $ 1,548 Oil and gas operations 323 638 --------- --------- --------- --------- 1,720 803 3,526 1,548 --------- --------- --------- --------- Operating expenses Real estate operations 917 392 1,745 807 Oil and gas operations 245 491 Lease expense 231 260 455 547 Depletion, depreciation and 134 88 256 164 amortization Corporate general and administrative 272 149 561 290 --------- --------- --------- --------- 1,799 889 3,508 1,808 --------- --------- --------- --------- Operating earning (loss) (79) (86) 18 (260) Other income (expense) Interest income 54 60 128 114 Interest expense (246) (190) (602) (386) Net gain on sale of assets Equity in net income of Affiliated partnership 16 15 31 33 Other 57 55 66 112 --------- --------- --------- --------- (119) (60) (377) (127) --------- --------- --------- --------- Earnings (loss) from continuing (198) (146) (359) (387) Operations Discontinued operations Loss from operations (7) (31) (21) (52) --------- --------- --------- --------- Net earnings (loss) (205) (177) (380) (439) --------- --------- --------- --------- Net (loss) per common share - basic and diluted $ (.21) $ (.51) $ (.39) $ (1.28) Weighted average of common and equivalent shares outstanding - 977 344 977 344 basic and diluted
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Greenbriar Corporation Consolidated Statements of Cash Flow (Amounts in thousands) For the six month Period Ended June 30, 2004 2003 ----------- ----------- (Unaudited) (Unaudited) Cash flows from operating activities Net earnings (loss) $ (380) $ (439) Adjustments to reconcile net earnings (loss) to net cash used in operating activities Depreciation and amortization 256 173 (Gain) on partnership (31) (33) Changes in operating assets and liabilities Accounts receivable (118) (13) Other current and non current assets (195) 153 Accounts payable and other liabilities (648) (291) ----------- ----------- Net cash used in operating activities (1,116) (450) ----------- ----------- Cash flows used in investing activities Repayment of notes receivable 879 Purchase of property and equipment (52) (50) ----------- ----------- Net cash provided by (used in) investing activities 827 (50) Cash flows from financing activities Payments on debt (89) (20) ----------- ----------- Net cash provided by (used in) financing activities (89) (20) ----------- ----------- NET DECREASE IN CASH AND (378) (520) CASH EQUIVALENTS Cash and cash equivalents at beginning of period 688 661 ----------- ----------- Cash and cash equivalents at end of period $ 310 $ 141 =========== ===========
6 Notes To Consolidated Financial Statements For the Unaudited Three and Six Months Ended June 30, 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 and six month periods ended June 30, 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: Property Held for Sale In August 2004 the Company sold a property in Ellensburg, WA. The carrying value of the property had been written down in prior years to $675,000. The terms of the sale included the Company paying the buyer $25,000 and the buyer paying off the existing mortgages of approximately $900,000. The Company will record a non-cash gain of approximately $200,000 in the third quarter of 2004. 7 Note D: 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 the 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. The Company issued a $1,600,000 note to the seller as partial payment for the purchase of one of the retirement communities. 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. CREI recognized a gain of $1,322,000. The Company has deferred recognition of its $740,000 share of the gain because of the aforementioned guaranty. 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. 8 Following are unaudited, condensed financial statements of CREI (in thousands): Balance Sheet June 30, 2004 Current assets $ 80 Other assets 172 Notes receivable 994 ------ $1,246 Other liabilities $ 126 Deferred gain 1,064 ------ 1,190 Partners' equity 56 ------ $1,246 Statement of Operations Six months ended June 30, 2004 Interest Income $ 57 Expenses 2 ------ Net Income $ 55 ------ 9
Note E: Long-Term Obligations Long-term debt is comprised of the following (in thousands): June 30, December 31, 2004 2003 ------------ ------------ Notes payable to financial institutions maturing through 2015; fixed and variable interest rates ranging from 8.25% to 15%; collateralized by property, fixtures, equipment and the assignment of rents $ 7,527 $ 2,090 Notes payable to individuals and companies maturing through 2023; variable and fixed interest rates ranging from 7% to 14% collateralized by real property, personal property, fixtures, equipment and the assignment of rents 1,848 1,851 Notes payable to Sylvia M. Gilley, bearing interest at 10% and maturing on July 1, 2004 2,255 2,255 Note payable to a former executive officer, non-interest bearing at 8.5% and maturing on December 31, 2004, net of discount of $47 and $103 respectively, representing interest imputed at 8.5% 584 528 Other 12 19 --------------------------- 12,226 6,743 Less: current maturities 5,614 4,690 =========================== $ 6,612 $ 2,053
As discussed in Note C the company is a guarantor of debt in the amount of $1,600,000. Subsequent to June 30, 2004, the Company contributed the Gainesville Outlet Mall and the associated debt to a controlled partnership in order to facilitate a refinancing of the debt to a more favorable term. This refinancing resulted in the debt being moved from short term to long term in the accompanying financial statements. Note F - 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." 10 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. Note G - Discontinued Operations On January 31, 2004 the Company negotiated, at no cost, the termination 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 H - Segments The Company and its subsidiaries are principally engaged in the business of acquiring, enhancing and selling real estate properties. From 1996 through 2002 those activities were almost exclusively involved assisted living facilities. By the end of 2002 the Company had disposed of the bulk of its assisted living facilities and was actively seeking to acquire real estate properties other than assisted living. In December 2003 the Company acquired a shopping mall in Gainesville, Texas 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 June 30, 2004 -------------------------------- Real Estate Oil and Gas Consolidated Operations Operations Revenue $ 1,397,000 $ 323,000 $ 1,720,000 Depletion, depreciation and amortization 93,000 41,000 134,000 Operating income (loss) (175,000) 36,000 (139,000) Total assets $ 15,327,000 $ 1,402,000 $ 16,729,000 11 Six months ended June 30, 2004 ------------------------------ Real Estate Oil and Gas Consolidated Operations Operations Revenue $ 2,888,000 $ 638,000 $ 3,526,000 Depletion, depreciation and amortization 190,000 66,000 256,000 Operating income (loss) (339,000) 80,000 (259,000) Total assets $ 15,327,000 $ 1,402,000 $ 16,729,000 Note I - 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. The plaintiff 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. It was ultimately determined that the Company's portion of the judgment including interest was approximately $230,000.The Company had established a reserve for this obligation prior to 2004. In May 2004 the Company paid the amount due which under the terms of the agreement completely concluded this matter. 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 12 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 August 2004 the Company and the IRS concluded a settlement whereby the Company admitted no guilt in the matter and paid a fine of $216,000. 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 June 30, 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 to and operated by an independent third party with a capacity of 41 residents. The Company acquired the Gainesville Factory Outlet Mall in Gainesville, TX in December 2003. 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 The Company acquired Gaywood Oil & Gas, LLC (Gaywood) which has oil and gas leases in the East Texas field effective August 31, 2003. 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 August 12, 2004 Gaywood had 52 operating 13 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. At this time Greenbriar does not 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 and six month periods ended June 30, 2004 compared to three and six-month periods ended June 30, 2003. Revenues and Operating Expenses Revenues for the assisted living communities were $909,000 and $1,745,000 for the three and six months ended June 30, 2004 as compared to $846,000 and $1,523,000 for the three and six months ended June 30, 2003. Community operating expenses, which consist of assisted living community expenses, lease expense, depreciation and amortization, were $683,000 and $1,436,000 for the three and six months ended June 30, 2004 as compared to $660,000 and $1,338,000 for the three and six months ended June 30, 2003. The increase in revenue is due principally to increased census at the communities. Revenues for the outlet mall were $479,000 and $1,060,000 for the three and six months ended June 30, 2004. Operating expenses were $452,000 and $817,000 for the comparable periods. The outlet mall was not owned by the Company during the three and six month period ended June 30, 2003 Revenues for the oil & gas operations were $323,000 and $628,000 for the three and six month periods ending June 30, 2004. Operating expenses were $246,000 and $491,000 for the comparable periods. The oil & gas operations were not owned by the Company during the three and six month periods ending June 30, 2003 Corporate General and Administrative Expenses General and administrative expenses were $272,000 and $561,000 for the three and six month periods ending June 30, 2004 compared to $149,000 and $290,000 for the three and six months ending June 30, 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 and $100,000 in increased expenses for the three and six month periods ending June 30, 2003, respectively. The balance of the additional expenses is due to additional administrative salaries and expenses due to the addition 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. 14 Interest Income Interest income was to $54,000 and $128,000 for the three and six month periods ending June 30, 2004 as compared to $60,000 and $114,000 for the three and six months ending June 30, 2003. Interest was $20,000 higher for the first quarter of 2004 due to increased interest rates on certain notes held by the Company. During April 2004 the Company received certain principal payments which reduced the level of interest bearing notes outstanding. During the second quarter interest income was $34,000 less than that of the comparable period during 2003. 15 Interest Expense Interest expense was $246,000 and $602,000 for the three and six month periods ended June 30, 2004 as compared to $190,000 and $386,000 for the three and six months periods ended June 30, 2003. The increase is due almost entirely to the financing of the Gainesville Outlet Mall. When the mall was acquired in December 2003 it was initially financed with a short term note which escalated form 3% to 15% during the six months ended June 30, 2004. The short term note was refinanced in August 2004 with a five year note requiring interest at 5.85% Other Income (Expense) Other Income (expense) for the three and six month periods ending June 30, 2004 was $57,000 and $66,000 as compared to $55,000 and $112,000 for the three and six months ending June 30, 2003. In 2002 the Company sold a property in California and was required to establish an escrow fund for certain repairs to the building. The escrowed amounts were written off when the building was sold. The 2004 amount represents the return of a portion of escrow funds that were in excess of the amount required. Also included in 2004 is a $216,000 expense to provide for the settlement of the Company's dispute with the IRS. The 2003 amounts principally represent income from the reimbursement of a prior year insurance claim as well as the settlement of a lawsuit. Discontinued Operations On January 31, 2004 the company terminated a lease for an assisted living community in Georgia. The operating losses for the community were $7,000 and $21,000 for the three and six month periods ending June 30, 2004 and $31,000 and $52,000 for the three and six months ending June 30, 2003. Liquidity and Capital Resources On June 30, 2004, the Company had current assets of $2,970,000 and current liabilities of $7,021,000. Included in current liabilities is a $2,600,000 note plus accrued interest to Sylvia M. Gilley, wife of a former President of the Company. Under the terms of the note the obligation will only be due if the Company has sufficient cash to pay the note. Also included in current liabilities is $900,000 in mortgages for a property in Ellensburg WA. This property was sold during the third quarter and the buyer paid off the existing mortgages. Also included in current liabilities is a $1,700,000 mortgage for a property in North Carolina which is due in December 2004. The Company anticipates that the mortgage will be refinanced prior to the due date. 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. 16 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. 17 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: August 16, 2004 By: /s/ Gene S. Bertcher ----------------------- Chief Executive Officer Chief Financial Officer 18