-----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, GtAmxwu4Xan+YjK5ecsLMEm36RU/7xUVuW6GQGqQNLwZltXDGweRtBsC3/3RmYoh FCVYU4PxegeJT8P+SPUVmA== 0001010549-97-000273.txt : 19971120 0001010549-97-000273.hdr.sgml : 19971120 ACCESSION NUMBER: 0001010549-97-000273 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971119 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIAR CORP CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-08187 FILM NUMBER: 97724220 BUSINESS ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 BUSINESS PHONE: 2144078400 MAIL ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 10QSB 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB (Mark One) ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the transition period from to Commission File Number: 0-8187 GREENBRIAR CORPORATION (Name of Small Business Issuer in its Charter) Nevada 75-2399477 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 4265 Kellway Circle, Addison, Texas, 75244 (Address of principal executive offices) (972) 407-8400 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO November 17,1997, the issuer had outstanding approximately 6,547,049 shares of par value $.01 common stock. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1997 and December 31, 1996............................3 Consolidated Statements of Earnings Three and Nine Months Ended September 30, 1997 and 1996.............5 Consolidated Statements of Cash Flows Nine Months Ended September 30, 1997 and 1996.......................6 Notes to Consolidated Financial Statements..........................8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................12 Part II. Other Information Item 3. Exhibits............................................................17 Signatures..........................................................18
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Greenbriar Corporation CONSOLIDATED BALANCE SHEETS (Amounts in thousands) September 30, December 31, 1997 1996 ---- ---- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 543 $ 2,784 Accounts receivable-trade 1,353 561 Assets held for sale, at lower of cost or market 8,869 5,379 Other current assets 1,474 665 ------ ------ TOTAL CURRENT ASSETS 12,239 9,389 Deferred Income Tax Benefit 2,348 868 Investment in Securities, at cost 4,325 4,086 Mortgage Notes Receivable 8,950 8,768 Property and Equipment, at cost Land and improvements 9,930 10,566 Buildings and improvements 69,683 69,369 Equipment and furnishings 5,511 4,317 Construction in progress 6,824 3,836 ------ ------ 91,948 88,088 Less accumulated depreciation 4,602 2,635 ------ ------ 87,346 85,453 Deposits 4,599 5,553 Goodwill and Other Intangibles 968 1,199 Other Assets 1,519 1,385 ------ ------ $122,294 $116,701 ======== ======== Greenbriar Corporation CONSOLIDATED BALANCE SHEETS - CONTINUED (Amounts in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31, 1997 1996 ---- ---- (Unaudited) CURRENT LIABILITIES Current maturities of long-term debt $ 1,861 $ 1,588 Notes payable-stockholder 1,585 930 Long-term debt collateralized by assets held for sale 5,940 901 Accounts payable-trade 2,334 3,810 Accrued expenses 2,780 3,482 Other current liabilities 1,399 1,223 --------- ------- TOTAL CURRENT LIABILITIES 15,899 11,934 Long-term Debt 58,365 54,717 Financing Obligations 10,815 10,815 Deferred Gain 3,083 3,083 STOCKHOLDERS' EQUITY Preferred stock, $.10 par value; liquidation value of $3,685 in 1997 and $5,705 in 1996; authorized, 775 shares; issued and outstanding, (in two series), 690 shares in 1997 and 698 shares in 1996 69 70 Common stock $.01 par value authorized, 20,000 shares; issued and outstanding, 6,564 and 6,471 shares respectively 66 65 Additional paid-in capital 51,502 51,232 Accumulated deficit (14,939) (12,642) --------- ------- 36,698 38,725 Less stock purchase note receivable (including $2,438 from related parties) (2,566) (2,573) --------- -------- 34,132 36,152 ---------- -------- $122,294 $116,701 ========== ========
Greenbriar Corporation CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except share data) For The Three Month For The Nine Month Period Ended Period Ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- (Unaudited) (Unaudited) Revenue Assisted Living Operations $ 9,806 $ 8,143 $ 27,932 $ 19,826 Other 57 86 121 86 -------- -------- -------- -------- 9,863 8,229 28,053 19,912 Operating Expenses Assisted Living Community Operations $ 6,625 $ 5,172 $ 18,385 $ 12,630 Lease Expense 1,222 1,021 3,486 2,640 Depreciation and Amortization 806 575 2,349 1,304 Corporate General and Administration 1,249 1,726 3,952 3,923 -------- -------- -------- -------- 9,902 8,494 28,172 20,497 -------- -------- -------- -------- Operating Loss (39) (265) (119) (585) Other Income (Expense): Interest and Dividend Income $ 98 $ 206 $ 331 $ 691 Interest Expense (1,725) (1,260) (4,894) (2,948) Gain on Sales of Assets -- -- -- 32 Other (21) (469) 482 (53) -------- -------- -------- -------- (1,648) (1,523) (4,081) (2,278) -------- -------- -------- -------- Loss from Continuing Operations before Income Taxes (1,687) (1,788) (4,200) (2,863) Income Tax Benefit (666) (469) (1,680) (1,088) -------- -------- -------- -------- Loss from Continuing Operations (1,021) (1,109) (2,520) (1,775) Discontinued Operations Earnings From Operations, Net of Income Taxes 18 54 141 183 Gain on Disposal, Net of Income Taxes -- -- 323 580 -------- -------- -------- -------- NET LOSS (1,003) (1,055) (2,056) (1,012) Preferred Stock Dividend Requirement (80) (99 (240) (247) Loss Allocable to Common Shareholders $ (1,083) $ (1,154) $ (2,296) $ (1,259) ======== ======== ======== ======== Loss Per Share Continuing Operations (.17) (.24) (.42) (.40) Net Loss (.16) (.23) (.35) (.25) Weighted average number of common and equivalent shares outstanding 6,564 5,054 6,564 5,054
Greenbriar Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) For the Nine Month Period Ended September 30, 1997 1996 ---- ---- (Unaudited) (Unaudited) Cash flows from operating activities Net loss $ (2,056) $ (1,012) Adjustments to reconcile net loss to net cash used in operating activities Discontinued operations (425) (750) Depreciation and amortization 2,349 1,304 Gain on sales of assets -- (32) Changes in operating assets and liabilities Accounts receivable (792) (137) Deferred income taxes (1,480) (197) Other current and noncurrent assets (245) (2,674) Accounts payable and other liabilities (1,639) 936 -------- -------- Net cash used in operating activities of continuing operations (4,288) (2,562) Net cash used in operating activities of discontinued operations (367) (10) -------- -------- Net cash used in Operating Activities (4,655) (2,572) -------- -------- Cash flows from Investing activities Proceeds from sale of assets 256 Collections of notes receivable 96 175 Purchase of property and equipment (9,772) (12,479) Additions to notes receivable (297) (347) Net Cash received in acquisition of business -- 739 Investing activities of discontinued operations 2,734 -- -------- -------- Net Cash used in Investing Activities (7,239) (11,656) Cash flows from Financing Activities Proceeds from borrowings 10,651 11,578 Payments on debt (1,035) (243) Dividends on preferred stock (225) (247) Purchase of common and preferred stock (1) (122) Exercise of stock options 263 -- -------- -------- Net Cash provided by Financing Activities 9,653 10,966 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,241) (3,262) Cash and cash equivalents at beginning of period 2,784 7,622 -------- -------- Cash and cash equivalents at end of period $ 543 $ 4,360 -------- -------- Greenbriar Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Unaudited Three and Nine Months Ended September 30,1997 and 1996 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 inter-company transactions and accounts have been eliminated. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for interim financial statements. These financial statements have not been examined by independent certified public accountants, 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 nine month periods ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996 as amended by Form 10-KSB/A. NOTE B - ACQUISITION OF WEDGWOOD RETIREMENT INNS, INC. In March 1996, Greenbriar acquired substantially all of the assets and liabilities of a number of companies under common control and management of Wedgwood Retirement Inns, Inc. ("Wedgwood"). The acquisition has been accounted for as a purchase transaction and Wedgwood's operations are reflected in the consolidated statement of earnings beginning April 1, 1996. The following table presents pro forma unaudited consolidated results of operations for the nine month period ended September 30,1996, assuming that the acquisition had taken place on January 1, 1996. The pro forma results are not necessarily indicative of the results of operations that would have occurred had the acquisition been made on January 1, 1996, or of future results of operations of the combined companies. (Amounts in Thousands, except per share data) For the Nine Month Period Ended September 30,1996 (Pro Forma) ----------- (Unaudited) Revenue $ 24,127 Loss from continuing operations $ (1,956) Net Earnings $ (1,193) Loss allocable to common shareholders $ (1,421) Loss per share from continuing operations $ (.39) NET LOSS PER SHARE $ (.24) NOTE C - ACQUISITION OF AMERICAN CARE COMMUNITIES, INC. In December 1996 Greenbriar acquired American Care Communities, Inc. The combination has been accounted for as a pooling of interests and, accordingly, the Company's consolidated financial statements for 1996 have been restated to include the accounts and operations of American Care Communities, Inc. NOTE D - ACQUISITION OF WINDSOR GROUP In October 1997, the Company acquired several entities known as the Windsor Group ("Windsor"), headquartered in Spartanburg, South Carolina. The Company issued 108,049 shares of common stock for two communities currently operating and 60,049 shares of common stock for two communities under construction or development as of the date of the acquisition. The 60,049 shares associated with the communities under construction were issued into an escrow account to be released upon completion of the communities. The transaction will be accounted for as a purchase transaction. The four communities will have a total resident capacity of 284 with over 90 residents receiving special care for Alzheimer's disease or other forms of dementia. NOTE E - ASSETS HELD FOR SALE As of September 30, 1997 the Company owned three shopping centers in Georgia. While all the centers are profitable, they do not fit into the Company's long range strategic plans and commitment to the assisted living industry. The Company is actively attempting to sell all the centers. In April 1997 the Company sold a shopping center in North Carolina. The proceeds from the sale of the center were $2,734,000 and the Company recorded a gain, net of income taxes, of $323,000. As of September 30, 1997, the Company had one community in North Carolina with a construction loan which is due April 30, 1998. The Company anticipates that this loan will be refinanced, however, in the event that it is not, the Company intends to sell the property. The financial statements as of September 30, 1997 reflect the assets and liabilities of this community as current. The operations of the three shopping centers have been reflected as discontinued in the financial statements for all periods presented. NOTE F - LONG-TERM OBLIGATIONS Long-term debt is comprised of the following (in thousands): September 30, December 31, 1997 1996 ---- ---- Notes payable to financial institutions maturing through 2015; fixed and variable Interest rates ranging from 4.8% to 11.75%; collateralized by property, fixtures, equipment and the assignment of rents $ 21,278 $ 13,319 Notes payable to individuals and companies maturing through 2022; variable and fixed interest rates ranging from 7% to 12% collateralized by real property, personal property, fixtures, equipment and the assignment of rents 11,021 12,391 Note payable to the Redevelopment Agency of the City of Corona, California, payable into a sinking fund semi-annually in increasing amounts from $65 to $420 through May 1, 2015; variable interest rate of 5.725% at September 30, 1997; collateralized by personal property, land, fixtures and the 7,580 7,660 assignment of rents Notes payable to related parties maturing in 2001; interest rates ranging from 9.25% to 12% 897 1,196 Notes payable to a bank maturing in 2007; interest at prime (8.25% to December 31, 1996) plus 2.0%; collateralized by property and equipment 3,808 1,658 Notes payable to financial institution maturing in 1997 through 2000; bearing interest at prime plus .50% to 1.25%; collateralized by property and equipment 3,161 8,043 Mortgage note payable to a financial institution maturing in 2007; bearing interest at 11.35%; collateralized by 11,435 11,500 property and equipment Other 1,046 538 -------- -------- 60,226 56,305 Less: current maturities 1,861 1,588 ---------- -------- $ 58,365 $ 54,717 ========== ========
The Company operates two communities that are financed through sale-leaseback obligations. At the end of the tenth year of he fifteen-year leases, the Company has options to repurchase the communities for the greater of the sales prices 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 on its books and record depreciation. NOTE G - PREFERRED STOCK The following summarizes the various classes of preferred stock (amounts in thousands except per share data): September 30, December 31, 1997 1996 Series B cumulative convertible preferred ---- ---- stock, $.10 par value; liquidation value of $310 in 1997 and $1,330 in 1996; authorized, 100 shares; issued and outstanding, 3 and 13 shares in 1997 and 1996, respectively $ 1 $ 1 Series C cumulative convertible preferred stock, $.10 par value; liquidation value of $0 in 1997 and $1,000 in 1996; authorized, 20 shares; issued and outstanding, 0 and 10 shares in 1997 and 1 1996, respectively Series D cumulative preferred stock, $.10 par value; liquidation value of $3,375; authorized, issued and outstanding 675 shares 68 68 ---------- -------- $ 69 $ 70 ========== ========
NOTE H - NEW ACCOUNTING PRONOUNCEMENT The FASB has issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, which is effective for financial statements issued after December 15, 1997. Early adoption of the new standard is not permitted. The new standard eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts were computed. The adoption of this new standard is not expected to have a material impact on the disclosure of earnings per share in the financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview During 1994 the Company began a series of steps to focus its business on the development, management and ownership of assisted living communities. The Company's historical businesses during the past five years have included ownership and operation of skilled nursing and retirement centers, real estate investments and manufacture and leasing of electric convenience vehicles and wheelchairs. The nursing and retirement centers and convenience vehicle businesses have been sold, and the real estate investments are being liquidated. During 1994, the Company began independently to develop its assisted living business, began construction of its first assisted living community in July 1995, and opened such community to residents on May 30, 1996. By July 1, 1996, the Company (not including the communities of Wedgwood and American Care) had three additional assisted living communities under construction. In order to increase the Company=s presence in the assisted living industry, create geographic diversity and obtain experienced personnel, the Company acquired Wedgwood in March 1996 and American Care in December 1996. The Wedgwood Acquisition has been accounted for as a purchase, and the historical financial statements of the Company do not include any revenues or earnings (losses) attributed to Wedgwood prior to the acquisition. The American Care acquisition has been accounted for as a pooling of interests and accordingly, the Company=s financial statements have been restated to include the accounts and operations of American Care for all periods prior to the acquisition. Results of Operations Three and nine month periods ended September 30, 1997 compared to three and nine month periods ended September 30, 1996. Revenues and Operating Expenses from Assisted Living Operations Revenues were $9,863,000 and $28,053,000 for the three and nine months ended September 30, 1997 as compared to $8,229,000 and $19,912,000 for the three and nine months ended September 30, 1996. Community operating expenses, which consists of assisted living community expenses, lease expense and depreciation and amortization, were $8,653,000 and $24,220,000 for the three and nine months ended September 30, 1997 as compared to $6,768,000 and $16,574,000 for the three and nine months ended September 30, 1996. Wedgwood was acquired effective March 31, 1996 in a transaction accounted for as a purchase. The revenue and related expenses for the three month period ended March 31, 1996 for the 16 communities acquired through the Wedgwood acquisition are not included in the amounts for the nine month period ended September 30, 1996. The revenues and related expenses for Wedgwood for the three months ended March 31, 1996 were $4,262,000 and $3,670,000, respectively. The balance of the increases are due to the opening of new communities and increased census at the existing communities. Three Month Period Ended September 30, 1997 (Amounts in thousands) Stabilized Start-up Total Communities Communities (1) (2) ----------- ----------- -------- Assisted Living Community Income $ 9,050 $ 813 $ 9,863 Assisted Living Community Operating Expenses 5,835 790 6,625 -------- -------- -------- Gross Operating Income 3,215 23 3,238 Lease Expense 1,133 89 1,222 Community depreciation and amortization 610 196 806 -------- -------- -------- Income (loss) from community operations $ 1,472 $ (262) $ 1,210 ========= ========= =========
1. Stabilized communities are those communities that have been operating for one year or have achieved stabilized occupancy of 95%. 2. Start-up communities are those communities that have not been operating for one year and have not achieved a stabilized occupancy of 95% or more. 3. The Company has 29 stabilized and 4 start-up communities. 4. The community operating expense does not include corporate general and administrative expense or lease expense for the respective communities. Corporate General and Administrative Expenses General and administrative expenses were $1,249,000 and $3,952,000 for the three and nine months ended September 30, 1997 compared to $1,726,000 and $3,923,000 for the three and nine months ended September 30, 1996. The decrease in the corporate general and administrative expenses for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 was a result of the consolidation of the Company's administrative functions in the Dallas Corporate Office. The increase in the expenses for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996 was due primarily to the acquisition of Wedgwood. Interest and Dividend Income Interest and dividend income for the three and nine months ended September 30, 1997 was $98,000 and $331,000 compared to $206,000 and $691,000 for the comparable period in 1996. The decrease in interest and dividend income is due to a decrease in cash available for investment purposes. Interest Expense Interest expense for the three and nine months ended September 30, 1997 was $1,725,000 and $4,894,000 compared to $1,260,000 and $2,948,000 for the comparable period in 1996. The increase in interest expense represents the interest incurred on the mortgage debt and financing obligations on the Wedgwood communities, as well as debt incurred on new communities which opened in 1997 and 1996. Discontinued Operations Earnings from discontinued operations consist of the Real estate operations that are classified as held for sale. The Real estate operations had net earnings of $18,000 and $141,000 for the three and nine months ended September 30, 1997 and earnings of $54,000 and $183,000 for the comparable period in 1996. The decrease in 1997 was due to the sale of the North Carolina Shopping Center which occurred in April 1997. That sale resulted in a gain of $323,000 net of income tax, in 1997. The sale in the first quarter of 1996 of the Mobility Group resulted in a gain on sale, net of tax, of $580,000. Liquidity and Capital Resources At September 30, 1997, the Company had a deficit in working capital of $3,660,000. As of September 30, 1997, the Company had assets of $122,294,000,liabilities of $88,162,000 and stockholders' equity of $34,132,000. In October 1997, the Company obtained a short term line of credit for $3,500,000. Borrowings from this line of credit will bear interest at an annual rate of 7% and are due on March 15, 1997 In October 1997, the Company announced plans to spin-off to it's shareholders it's wholly owned subsidiary Residential Healthcare Properties, Inc. (RHP). The details of the spin-off are included in a Form 10 filing, which has been filed with the Securities and Exchange Commission. RHP has an agreement to sell $15,000,000 of preferred stock. This transaction is contingent upon completion of the spin-off. In addition, the Company is currently negotiating financing with various financial institutions and other lenders. The Company owns three shopping centers in Georgia. While the centers are profitable, they do not fit into the Company=s long range strategic plans and commitment to the assisted living industry. The Company is actively attempting to sell all the centers. In addition the Company has a contract to sell one of its assisted living communities in North Carolina. The proceeds from this sale will be used to pay property related debts. Management expects that the proceeds from the sale of the assets will be at least equal to their book value. As of September 30, 1997, the Company has loans in place or has received commitments for future financing, subject, in the case of the commitments, to final documentation, as follows: I. Health Care REIT, Inc. has issued a commitment to provide $60 million over three years to acquire and pay 100% of the construction costs of assisted living communities to be leased to the Company. The term of the leases will range from 11 years to 14 years plus two five-year renewal options, with lease payments based upon the interest rate on U.S. Treasury notes plus 3.75%, subject to inflation adjustments not to exceed .25% per year. A 1% commitment fee is required, as each lease is entered into. The Company will have the option to purchase each community at the end of the term for its original cost plus 50% of the difference between the amount financed and the fair market value. As additional security to the lessor, the Company will provide a letter of credit for 5% of the amount financed, a first lien on personal property and receivables of the community, and subordination of management fees and rentals from subtenants. The commitment is in three segments of $20 million each, with approval of the REIT=s Investment Committee before using the second and third segments. As of September 30, 1997, the Company had utilized $5.3 million of the commitment for funding the Oak Park property under construction in Clermont, Florida. II. In 1995 Health Care REIT, Inc. provided mortgage loan commitments for two communities totaling $16,891,000. Of that amount, $4,536,000 was used to refinance one of the communities (Camelot) and $5,625,000 was used to construct another community (La Villa) which opened in the fourth quarter of 1996. The balance includes $5,160,000 to fund construction of the Camelot Assisted Living community, which is under construction, and $645,000 to fund certain improvements to the existing Camelot community that are complete, along with $925,000 for the construction of a second phase of La Villa, which is not presently scheduled for development. The construction loans convert to term loans upon completion of construction. The term loans mature in seven to ten years, initially bear interest at a rate of 4.5% over the corresponding U.S. Treasury Note rate and are secured by the communities, an assignment of leases, rents and management contract, letters of credit and an assignment of the communities licenses and permits. III. The Company has two loans from First National Bank & Trust Co. of McAlester, Oklahoma totaling $5.2 million to provide mortgage financing for the two assisted living Communities in Muskogee, Oklahoma and Sherman, Texas. Such loans require a 2% commitment fee and are payable in 10 years (but callable at the discretion of the bank in 5 years) based on a 20 year amortization, with interest at prime plus 2% (subject to a minimum interest rate of 8.70% and a maximum interest rate of 12.75%). As of September 30, 1997, the Company had utilized $2.6 million for the Muskogee community and $1,208,000 for the Sherman community. The community in Muskogee was completed in March 1997 and the Sherman community is in the early stages of construction. In addition to development and construction financing, described above, Comerica Bank-Texas has issued a commitment to provide $1,600,000 to finance buses and other vehicles to transport residents of the Company's communities. Each vehicle will be financed at 90% of cost and the loan for each vehicle will be amortized over 48 months. The interest rate will be prime plus one percent. The Company believes it has adequate resources to complete its communities currently under construction and development and plans to use the balance of such committed resources for future development of assisted living communities. Future development activities of the Company are dependent upon obtaining capital and financing through various means, including financing obtained from sale/leaseback transactions, construction financing, 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 Certain statements included in this Managements= Discussion and Analysis are forward looking statements that predict the future development of the Company. The realization of these predictions will be subject to a number of variable contingencies, and there is no assurance that they will occur or be realized in the time frame proposed. The risks associated with the potential actualization of the Company's plans include: contractor delays, the availability and cost of financing, availability of manageria oversight and regulatory approvals, to name a few. PART II. OTHER INFORMATION Item 1: Legal Proceedings Health Care Property Investors vs. Greenbriar, et al. In October, 1996, Health Care Property Investors, Inc. filed a complaint for unspecified damages against the Company, Victor Lund, a director of the Company, and related entities and others. Health Care Property Investors alleges that entities related to the Company had breached terms of two leases of communities through a transfer of control of the tenant without the payment of "transfer consideration" called for in the leases. In addition, Health Care Property Investors alleged that the Company tortiuously interfered with the leases because of the transfer. An order was entered on or about October 31, 1997 granting a motion for summary judgment which was filed on behalf of all of the defendants in the case. Subject to an approval this order disposes of all matters in this case. HCPI has not filed an appeal, however, the deadline for an appeal has not yet expired. Benetic Financial vs. Wedgwood et al. The plaintiff seeks to collect in excess of $1,000,000 on an alleged loan brokerage agreement. There is no signed loan brokerage agreement between Wedgwood and the plaintiff in this action. Plaintiff alleged that he delivered a loan brokerage agreement to Wedgwood, which they verbally accepted. On or about October 16, 1997 a directed verdict was entered in favor of Wedgwood and all other defendants. Subject to an appeal, this order disposes of all matters in this case. Benetic has not filed an appeal, however, the deadline for an appeal has not yet expired. Subsequent to September 30, 1997 the Company and Victor L. Lund (former majority owner of Wedgwood) entered into an agreement to whereby Mr. Lund conveyed to the Company 125,000 shares of common stock of the Company, and the Company agreed to indemnify Lund for all liabilities and expenses incurred by him arising out of the above referenced litigation. Item 4: Item 6: Exhibits and Reports on Form 8-K a) The following exhibits are filed with this report: 27.1 Financial schedule required by Item 601 of Regulation S-B b) There were no reports on Form 8-K filed by the company during the quarter ended September 30, 1997. Greenbriar Corporation 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: November 17, 1997 By: /s/ Gene S. Bertcher --------------------- Executive Vice President Chief Financial Officer EX-27 2 FDS --
5 0000105744 Greenbriar Corporation 1 US Dollars 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 543 0 1,353 0 0 12,239 91,948 4602 122,294 15,899 58,365 0 69 66 33,997 122,294 0 9,863 0 9,902 0 0 1,725 (1,687) (666) (1,021) 18 0 0 (1,003) (.16) (.16)
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