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.
<PAGE>
Part I. Financial Information
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
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
======== ========
<PAGE>
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
========== ========
<PAGE>
<TABLE>
<CAPTION>
Greenbriar Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except share data)
<S> <C> <C>
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
</TABLE>
<PAGE>
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
-------- --------
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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):
<TABLE>
<S> <C>
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
========== ========
</TABLE>
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):
<TABLE>
<S> <C>
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
========== ========
</TABLE>
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.
<PAGE>
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.
<PAGE>
<TABLE>
<S> <C> <C>
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
========= ========= =========
</TABLE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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