UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                                  FORM 10-KSB/A
                                 Amendment No. 1

                                   (Mark One)
 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
     ACT OF 1934

                   For the fiscal year ended December 31, 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
             (Exact name of Registrant as specified in its charter)

          Nevada                                                75-2399477
--------------------------------                           ---------------------
(State or other jurisdiction of                              (IRS Employer
 Incorporation or organization)                             Identification No.)

  4265 Kellway Circle, Dallas, Texas                             75244
(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

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 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
issuer,  computed by reference to the closing sales price on March 31, 1998, was
approximately $34,713,000.

At March 31, 1998, the issuer had outstanding  approximately 6,769,000 shares of
par value $.01 Common Stock.

Documents Incorporated by Reference-None

This filing adds Part III detailed information as the definitive Proxy Statement
was not filed as planned.



Transitional Small Business Disclosure Format (check one):

                                 YES [ ] NO [X]


<PAGE>



                                    PART III
                                    --------
ITEM 9:           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------------------------

     Name                           Age             Position

James R. Gilley                     64       Chairman of the Board
Floyd B. Rhoades                    57       President & Chief Executive Officer
Gene S. Bertcher                    49       Executive Vice President
                                             Chief Financial Officer
Robert L. Griffis                   62       Senior Vice President
Don C. Benton                       43       Director
Paul G. Chrysson                    43       Director
Matthew G. Gallins                  42       Director
Victor L. Lund                      69       Director
Michael E. McMurray                 43       Director


James R. Gilley has been  Chairman of the Company  since  November  1989 and was
President and Chief  Executive  Officer from  November  1989 until  December 31,
1996.

Floyd B. Rhoades has been a Director and Chief Executive  Officer of the Company
since December 31, 1996. He has been the Chairman, President and Chief Executive
Officer of American Care Communities, Inc. ("American Care") since its inception
in 1992.  American  Care  became a wholly  owned  subsidiary  of the  Company on
December 31, 1996.  From 1985 to 1991 Mr.  Rhoades served as President of Living
Centers.  In 1992 Mr.  Rhoades  was the  recipient  of the  National  Council of
Aging's  Distinguished Service Award. He was the founding President of the North
Carolina  Assisted  Living  Association,  and  he  is  a  Board  Member  of  the
Accreditation Commission for Home Care.

Gene S. Bertcher has been Executive Vice President and Chief  Financial  Officer
and  Treasurer  of the  Company  since  November  1989 and was a  Director  from
November 1989 until September 1996. He is a certified public accountant.

Robert L. Griffis has been Senior Vice  President of the Company since  November
1992 and  Secretary  since  June 1994 and was a  Director  from June 1994  until
September  1996. For the nine years prior to becoming an officer of the Company,
he was  involved  in the  healthcare  industry,  as  Senior  Vice  President  of
Retirement  Corporation of America,  Senior Vice President of National Heritage,
Inc.,  President  of Health  Resources,  Inc.,  President  of the long term care
division  of  Clinitex  Corp.,  and  from  1991 to 1992 as a  consultant  to the
Company.

Don C. Benton has been a Director since June 1994. Mr. Benton  currently  serves
as a consultant  to various  twelve step ministry  programs.  He was Director of
Twelve Step Ministries,  Lovers Lane United Methodist Church of Dallas from 1991
until 1997 and has been a Consultant for Spiritual  Counseling and Education for
the  Addiction  Recovery  Center since 1993 and also served in that capacity for
the Argyle Specialty  Hospital.  He has served as unit  coordinator,  admissions
coordinator,   and  milieu  therapist  for  various   hospitals  and  facilities
throughout Texas since 1988. He is a Licensed Chemical Dependency Counselor, and
a Certified Alcohol and Drug Abuse Counselor.


                                        2

<PAGE>



Paul G.  Chrysson  has been a Director  since May 1995.  He is President of C.B.
Development Co., Inc., a North Carolina real estate developer, a position he has
held for over five years. Mr. Chrysson is a member of the boards of directors of
Boddie-Noell Properties, Inc. and the Board of Advisors of Wachovia Bank-Winston
Salem and has served on the boards of various charitable  organizations.  He has
been a licensed  real estate  agent since 1974 and a licensed  contractor  since
1978.

Matthew G. Gallins has been a Director since June 1994.  Since 1990, Mr. Gallins
has been a Director,  President and Chief Operations  Officer of Gallins Vending
Company,  Inc., a food services vending company.  He has also been the owner and
served as Vice President and Secretary of Exit Inc.  (d.b.a.  Tomatoz Grill),  a
restaurant, since 1993. He is a Foundation Board Director for Tanglewood Park in
North  Carolina,  a Member of the Annual  Campaign  Fund for the United Way, and
past Chairman of Special  Events  Solicitation  Committee for the Forsyth County
Mental  Health  Association.  He is  director  of  Southern  Community  Bank  in
Winston-Salem, North Carolina.

Victor L. Lund was the founder of Wedgwood Retirement Inns, Inc. ("Wedgwood") in
1977.  Wedgwood  became a wholly  owned  subsidiary  of the Company on March 31,
1996.  For most of  Wedgwood's  existence,  he was the  Chairman  of the  Board,
President  and Chief  Executive  Officer,  positions he held until  Wedgwood was
acquired by the  Company.  He  presently  continues  to serve as Chairman of the
Board of Wedgwood.

Michael E.  McMurray has been a Director  since May 1991.  Since July 1987,  Mr.
McMurray has been Vice President of Investments for Prudential Securities. Prior
to joining Prudential  Securities,  Mr. McMurray was a financial  consultant for
Shearson Lehman Hutton from 1983 until July 1987.


<TABLE>
<CAPTION>


ITEM 10:          EXECUTIVE COMPENSATION
----------------------------------------

                                            Summary Compensation Table


                                                                           Long Term
                                                                         Compensation-
            Name and                                                       Number of
           Principal                                                       Shares of
           Position                                 Annual                Common Stock                 All
           ---------                             Compensation-              Underlying                 Other
                                    Year            Salary                   Options             Compensation(1)
                                    ----         -------------           -------------           ---------------
<S>                                                                          <C>                      <C>     

James R. Gilley,                    1997           $460,000                  200,000                  $6,500
  Chairman(2)                       1996            460,000                  200,000                   8,500
                                    1995            460,000                  200,000                   7,500

Floyd B. Rhoades                    1997           200,000                   200,000                   6,500
 President and Chief                1996           152,000                      -                        -
 Executive Officer(2)               1995           153,000                      -                        -

Gene S. Bertcher,                   1997           180,000                      -                        -
  Executive Vice                    1996           180,000                      -                      7,500
  President and  Chief              1995           172,500                      -                      6,500
  Financial Officer




                                        3

<PAGE>



                                                                           Long Term
                                                                         Compensation-
            Name and                                                       Number of
           Principal                                                       Shares of
           Position                                 Annual                Common Stock                 All
           ---------                           Compensation-              Underlying                 Other
                                    Year            Salary                   Options             Compensation(1)
                                    ----       --------------            --------------          ---------------
Robert L. Griffis,                  1997           100,000                      -                        -
  Senior Vice President             1996           120,000                      -                      7,500
                                    1995           115,000                      -                      6,500

Paul W. Dendy (3)
  Executive Vice President          1997           125,000                      -                        -
                                    1996           131,250                   10,000                    7,500
                                    1995            75,000                      -                        -
-------------------------

</TABLE>

(1)    Constitutes directors' fees paid by the Company to the named individuals.

(2)    James R. Gilley served as President and Chief  Executive  Officer until
       December  31,  1996.  Floyd B.  Rhoades was named  President  and Chief
       Executive Officer on December 31, 1996.

(3)    Paul W.  Dendy  ceased to be an  executive  officer  in May  1998.  His
       compensation for 1995 and a portion of 1996 represent compensation paid
       by Wedgwood  Retirement  Inns,  Inc.  prior to its  acquisition  by the
       Company on March 31, 1996.


<TABLE>
<CAPTION>

                                                Option Grants Table
                                        (Option Grants in Last Fiscal Year)


                                                           Percent of
                         Number of Securities            Total Options               Exercise or
                              Underlying            Granted to Employees in           Base Price          Expiration
        Name                Options Granted                Fiscal Year                 Per Share             Date
        ----               -----------------              ------------                ----------            -----
<S>                                                                                     <C>                <C>     

James R. Gilley                 200,000                       50%                       $17.50             12/31/07
Floyd B. Rhoades                200,000                       50%                        17.50             12/31/07


</TABLE>









                                        4

<PAGE>


<TABLE>
<CAPTION>

                                    Aggregated Option Exercises in Last Fiscal
                                           Year and FY-End Option Values


                                                                                                      Value of Unexercised
                                                                 Number of Securities                     In-the-Money
                                                                Underlying Unexercised                  Options at 1997
                         Shares Acquired        Value           Options at 1997 FY-End                       FY-End
                                                                ----------------------                      -------
        Name               on Exercise        Realized         Exercisable Unexercisable           Exercisable Unexercisable
        ----               -----------        --------         -------------------------           ----------- -------------
<S>                                                                                 <C>           <C>                 <C>     

James R. Gilley                 -                 -             600,000             -             $2,244,000           $-
Floyd B. Rhoades                -                 -             200,000             -                 -                 -

Gene S. Bertcher                -                 -              20,000             -                127,500            -
Paul W. Dendy                   -                 -              10,000             -                 63,750            -

Stock Option Plan
</TABLE>

         The Compensation  Committee administers the Company's 1992 Stock Option
Plan,  as amended  (the "1992  Plan"),  and 1997  Stock  Option  Plan (the "1997
Plan"),  each of which provides for grants of incentive and non-qualified  stock
options to the Company's executive officers,  as well as its directors and other
key employees,  and consultants in the case of the 1997 Plan.  Under both Plans,
options are granted to provide  incentives to participants to promote  long-term
performance  of the  Company and  specifically,  to retain and  motivate  senior
management in achieving a sustained  increase in stockholder  value.  Currently,
neither  Plan has a pre-set  formula or criteria for  determining  the number of
options that may be granted. The exercise price for an option granted under both
Plans is determined by the  Compensation  Committee,  in an amount not less than
100 percent of the fair market value of the  Company's  Common Stock on the date
of  grant.  The  Compensation   Committee  reviews  and  evaluates  the  overall
compensation  package of the executive  officers and determines the awards based
on the overall performance of the Company and the individual  performance of the
executive officers.  The Company currently has reserved 217,500 shares of Common
Stock for issuance  under the 1992 Plan and 500,000 shares of Common Stock under
the 1997 Plan. As of the date of this Proxy Statement,  options had been granted
for all but 63,500 shares  reserved  under the 1992 Plan and no options had been
granted under the 1997 Plan.

Employment Agreements

         Effective  December 31, 1996,  the Company  entered into an  employment
agreement  with Floyd B.  Rhoades to become the  President  and Chief  Executive
Officer of the  Company.  Mr.  Rhoades'  agreement is for a term of three years,
with an annual salary of $200,000.

         Effective  January 1, 1997,  the  Company  entered  into an  Employment
Agreement  with James R. Gilley to serve as Chairman  for a three year term that
recommences  each day.  The  Agreement  provides for base salary of $460,000 and
200,000 fully vested,  non-qualified stock options each year in lieu of any cash
bonus.  The  Agreement  may be terminated  early only upon  resignation,  mutual
consent or for good cause.

         Also effective  January 1, 1997, the Company entered into an Employment
Agreement  with Gene S. Bertcher to serve as Executive  Vice President for a two
year term that recommences  each day. The Agreement  provides for base salary of
$180,000  and  discretionary  bonus,  and  may be  terminated  early  only  upon
resignation, mutual consent, or for good cause.




                                        5

<PAGE>

<TABLE>
<CAPTION>


ITEM 11:          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------

                                           Preferred Stock                                        Common Stock
                                      ------------------------       ---------------------------------------------------------------
                                                                                                       Number of Shares
                                        Number         Percent        Number       Percent           Assuming Full           Percent
          Name & Address                  of             of             of            of        Conversion of Preferred         of
        of Beneficial Owner             Shares         Series         Shares        Class      Stock & Options By Holder      Class
<S>                                                                                 <C>                <C>                    <C> 

                                      Series D Preferred Stock(1)
                                      ------------------------ 
James R. Gilley                        675,0002         100%        3,607,1513      35.0%              2,944,651              37.9%
4265 Kellway Circle
Addison TX 75244
Sylvia M. Gilley                       675,0002         100%        2,607,1513      35.0%              2,944,651              37.9%
6211 Georgian Court
Dallas TX 75240
Victor L. Lund                            -               -          1,214,961      18.0%              1,214,961              18.0%
816 NE 87th Avenue
Vancouver WA 98664
Floyd B. Rhoades                          -               -         1,022,0004      14.7%              1,022,000              14.7%
4265 Kellway Circle
Addison TX 75244
Gene S. Bertcher                          -               -           74,0005        1.1%                74,000                1.1%
4265 Kellway Circle
Addison TX 75244
Robert L. Griffis                         -               -           30,0006         *                  30,000                 *
4265 Kellway Circle
Addison TX 75244
Michael E. McMurray                       -               -           10,0007         *                  10,000                 *
5330 Merrick Road
Massapequa NY 11758
Matthew G. Gallins                        -               -           15,0008         *                  15,000                 *
715 Stadium Drive
Winston-Salem NC 27101
Paul G. Chrysson                          -               -           10,0009         *                  10,000                 *
1045 Burke Street
Winston-Salem NC 27101
Don C. Benton                             -               -          10,00010         *                  10,000                 *
Arrowhead Ranch
Route 1
Clarksville TX 75246
William A. Shirley, Jr.                   -               -          568,44611       7.7%               568,446                 *
2621 State Street
Dallas TX 75204
                                    Series F & G Preferred Stock(12)
                                    ----------------------------
Lone Star Opportunity Fund, LP       2,200,00013        100%             -            -                1,257,143              15.7%
600 N Pearl Street, Suite 1550
Dallas TX 75201
American Realty Trust, Inc.14             -               -           197,500        2.9%               197,500                2.9%
10670 North Central Expressway
Suite 300
Dallas TX 75231


                                        6

<PAGE>



                                           Preferred Stock                                     Common Stock
                                      -------------------------      ---------------------------------------------------------------
                                                                                                   Number of Shares
                                        Number         Percent        Number       Percent           Assuming Full           Percent
          Name & Address                  of             of             of            of        Conversion of Preferred         of
        of Beneficial Owner             Shares         Series         Shares        Class      Stock & Options By Holder      Class
Basic Capital Management, Inc.14          -               -           141,260        2.1%               141,260                2.1%
10670 North Central Expressway
Suite 300
Dallas TX 75231
Nevada Sea Investments, Inc.14            -               -           72,800         1.1%                72,800                1.1%
10670 North Central Expressway
Suite 300
Dallas TX 75231
International Health Products, Inc.14     -               -           249,085        3.7%               249,085                3.7%
10670 North Central Expressway
Suite 300
Dallas TX 75231
Davister Corporation 14                   -               -           251,200        3.7%               251,200                3.7%
10670 North Central Expressway
Suite 300
Dallas TX 75231
Institutional Capital Corporation 14      -               -           242,500        3.6%               242,500                3.6%
10670 North Central Expressway
Suite 300
Dallas TX 75231
All executive officers & directors & 675,0001 & 2       100%         5,561,558      68.1%              5,899,058              69.4%
director  nominees as a group (10
persons)
</TABLE>

---------------------------------

* Less than one percent

(1)  Represents  Series D Preferred  Stock  which  votes with  Common  Stock and
     Series  B  Preferred  Stock  as one  class.  Series  D  Preferred  Stock is
     convertible  into Common  Stock at a rate of one share of Common  Stock for
     two shares of Series D Preferred Stock.

(2)  The  shares  are owned by a grantor  trust for the  benefit of Mr. and Mrs.
     Gilley. Sylvia M. Gilley is the spouse of James R. Gilley.

(3)  Consists of 972,851  shares of Common Stock owned by JRG  Investments  Co.,
     Inc., a corporation wholly owned by James R. Gilley ("JRG"); 390,300 shares
     of Common  Stock  owned by a grantor  trust for the benefit of James R. and
     Sylvia M. Gilley;  options to James R. Gilley to purchase 200,000 shares of
     Common  Stock at $10.75 per share,  exercisable  through  December 1, 2000;
     options to James R. Gilley to purchase  200,000  shares of Common  Stock at
     $13.275 per share,  exercisable through December 31, 2006; options to James
     R. Gilley to purchase  200,000  shares of Common Stock at $17.50 per share,
     exercisable through December 31, 2007; a warrant to purchase 108,000 shares
     at an exercise price of $12.98 per share,  exercisable  through  October 1,
     2006,  owned by the grantor  trust for the benefit of Mr. and Mrs.  Gilley;
     and 536,000  shares of Common Stock owned of record by Mrs.  Gilley.  Other
     than  shares  owned  by  the  grantor  trust,  Mrs.  Gilley  disclaims  any
     beneficial  ownership of the shares owned by Mr. Gilley and JRG. Mr. Gilley
     and JRG disclaim  beneficial  ownership of the shares owned by Mrs. Gilley.
     Mr.  Gilley has pledged all of his shares in JRG to  Institutional  Capital
     Corporation (formerly known as MS Holding Corp.), a non-affiliated  entity,
     as  collateral  for  repayment  of a  promissory  note  payable  by  JRG to
     Institutional Capital Corporation in the remaining principal amount of

                                        7

<PAGE>



     $2,996,373.  The note  requires  payment  of  annual  interest  only  until
     December 31, 1998, when the principal  balance and all accrued  interest is
     due and payable.  Of the shares of Common Stock owned by the grantor trust,
     200,000 shares were acquired by the trust from the Company in November 1993
     in consideration of a $2,250,000 partial recourse  promissory note executed
     by the grantor trust and Mr. Gilley (as co-maker). This note bears interest
     at an annual rate of 5.5% until  November 2003,  when the entire  principal
     balance and all accrued interest is due. The note is  collateralized by the
     200,000 shares  purchased by the grantor  trust,  and the grantor trust and
     Mr. Gilley (as co-maker)  have personal  recourse only for the first 20% of
     the principal balance.

(4)  Consists of 820,000 shares of Common Stock owned by Mr. Rhoades, options to
     Mr. Rhoades to purchase 200,000 shares of Common Stock at $17.50 per share,
     and 2,000  shares owned by his spouse.  Mr.  Rhoades  disclaims  beneficial
     ownership of the shares owned by his spouse.

(5)  Consists of 54,000  shares of Common Stock issued for  promissory  notes of
     $92,500,  for which 13,000 shares are currently pledged as collateral,  and
     options to purchase 20,000 shares of Common Stock for $11.25 per share, all
     of which are vested.

(6)  In November 1992, Mr. Griffis  obtained a loan from the Company for $75,000
     which  was used to  exercise  options  to  purchase  30,000  shares  of the
     Company's Common Stock. The loan is  collateralized by the shares purchased
     by Mr. Griffis.

(7)  Consists of options to purchase  10,000  shares of Common  Stock for $17.75
     per share.

(8)  Consists of 3,000  shares of Common  Stock owned by Matthew G. Gallins LLC,
     2,000  shares of Common Stock owned by Mr.  Gallins'  minor  children,  for
     which he serves as custodian, and options to Mr. Gallins to purchase 10,000
     shares of Common Stock for $17.75 per share.

(9)  Consists of options to purchase  10,000  shares of Common  Stock for $17.75
     per share.

(10) Consists of options to purchase  10,000  shares of Common  Stock for $17.75
     per share.

(11) Includes  85,155 shares of Common Stock owned of record by Mr.  Shirley and
     483,291  shares  of  Common  Stock  which  Mr.  Shirley  may  acquire  upon
     conversion of certain limited partnership units.

(12) The holders of Series F Convertible  Preferred  Stock  ("Series F Preferred
     Stock") are entitled to elect one  memberto  the Board,  but this right has
     not  been  exercised  by such  holders.  Series  F  Preferred  Stock is not
     otherwise  entitled  to vote except  with  regard to certain  matters  that
     effect changes to its rights and  preferences.  Series G Senior  Non-Voting
     Convertible Preferred Stock ("Series G Preferred Stock") is not entitled to
     vote  except  with regard to certain  matters  that  effect  changes to its
     rights and preferences.

(13) There are  1,400,000  shares of Series F Preferred  Stock  outstanding  and
     800,000  shares  of  Series  G  Preferred  Stockoutstanding.  The  Series F
     Preferred Stock and Series G Preferred Stock presently are convertible into
     800,000  shares  of  Common  Stock and  457,143  shares  of  Common  Stock,
     respectively.

(14) Based  on a  Schedule  13D,  dated  April 8,  1998,  filed by each of these
     entities and by Gene E. Phillips, each of these entities owns of record the
     number of shares set forth for such  entity in the table  above and each of
     such entities and Mr.  Phillips  disclaim they filed such Schedule 13D as a
     "group". According to the Schedule 13D, Basic Capital Management,  Inc. may
     be deemed to beneficially own 311,560 shares, including the shares owned of
     record by American Realty Trust, Inc. and Nevada Sea Investments, Inc., and
     Mr. Phillips may be deemed to beneficially  own all 1,154,345  shares owned
     of record and beneficially by these six entities.  In the Schedule 13D, Mr.
     Phillips does not affirm beneficial ownership of any of these shares.


                                        8

<PAGE>



ITEM 12:      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following  paragraphs describe certain  transactions between the Company and
(i) any stockholder  beneficially  owning more than 5% of the outstanding Common
Stock,  (ii) the  executive  officers  and  directors  of the  Company and (iii)
members of the immediate  family or affiliates  of any of the  foregoing,  which
transactions occurred since the beginning of the 1996 fiscal year.

On November 19, 1993 the Company sold 200,000  unregistered shares of its Common
Stock,  to The April Trust,  a grantor trust for the benefit of James R. Gilley,
Chairman  of the Board of the  Company,  and his wife,  at a price  equal to the
closing price of the shares on the American Stock Exchange on that date ($11.25)
per share for  consideration  consisting  of a $2,250,000  promissory  note (for
which Mr. Gilley is a co-maker) for the full purchase  price  thereof,  of which
20% of the principal  amount of the note is a recourse  obligation of Mr. Gilley
and the  grantor  trust and the  balance of the note is  nonrecourse.  Such note
bears interest at the rate of 5.5% per annum, which accrues and is payable along
with all  principal  upon  maturity on November  18,  2003,  and is secured by a
pledge of the stock back to the Company to hold as collateral for payment of the
note pending payment in full. On December  16,1996,  the Compensation  Committee
extended the due date of such note to November 18, 2008.

Gene S. Bertcher and Robert L. Griffis, officers of the Company, are indebted to
the Company for an  aggregate of $92,500 and  $75,000,  respectively,  for notes
issued in payment for shares of Common Stock.  Mr.  Bertcher's notes are secured
by a pledge of 13,000 shares of Common Stock.  Mr. Griffis" note is secured by a
pledge of his 30,000  shares.  Such notes bear  interest  at a rate equal to any
cash or stock dividends declared on the purchased stock, and are due in a single
installment for each such note on or before December 31, 1999.

As part of the Wedgwood  Acquisition and as an  accommodation  to the Sellers to
assist them to help achieve a tax-free acquisition,  James R. Gilley and members
of his family  agreed to contribute a retail  property in North  Carolina to the
Company in  exchange  for  675,000  shares of the  Company's  Series D Preferred
Stock.  Mr.  Gilley and his family had owned the retail  property  for over five
years. The consideration  received by James R. Gilley and members of his family,
valued at  $3,375,000,  was based  upon an  independent  appraisal  of the North
Carolina shopping center.  The Series D Preferred Stock is unregistered,  has no
trading market unless converted to Common Stock, and is entitled to one vote per
share on all  matters  to come  before a meeting of  stockholders.  The Series D
Preferred Stock bears a cumulative  quarterly  dividend of 9.5% per year,  which
approximates the cash flow Mr. Gilley and his family members were receiving from
the retail  property  prior to its  contribution  to the  Company.  The Series D
Preferred  Stock is convertible  into  unregistered  shares of Common Stock at a
ratio of one share of Common  Stock for two shares of Series D Preferred  Stock.
Mr. Gilley and his family members and affiliates  transferred  all of the shares
of Series D Preferred Stock to The April Trust effective April 1997.

The Company  agreed to register the shares of Common Stock into which the Series
D Preferred Stock is convertible under limited  circumstances,  as follows:  (i)
the  Company  agreed  to give the  holders  of such  shares  the right to demand
registration  of all or a portion of the Common Stock upon  conversion  provided
holders of at least a majority of the shares join in such  demand;  and (ii) the
Company  agreed to give the holders of Common  Stock  "piggy-back"  registration
rights to  include  all or a  portion  of the  shares in any other  registration
statement  filed by the Company under the Securities Act (other than on Form S-8
or Form S-4),  subject to certain  rights of the Company not to include all or a
portion of such shares under certain  circumstances.  The Company  agreed to pay
all expenses of the demand or piggy-back  registration,  other than underwriting
fees, discounts or commissions.

The Company  agreed to register the shares of Common Stock into which the Series
E Preferred Stock was converted in connection with the Wedgwood  Acquisition,  a
large   percentage   of  which  is  held  by  Victor  L.  Lund,   under  limited
circumstances,  as follows:  (i)  commencing  two years after the closing of the
Wedgwood Acquisition,  the Company agreed to give the holders of such shares the
right to demand registration of all or a portion of the Common Stock provided at
least a majority of the shares join in such demand;  and (ii) the Company agreed
to give the  holders of the Common  Stock  "piggy-back"  registration  rights to
include all or a portion of the shares in any other registration statement filed
by the Company  under the  Securities  Act (other than on Form S-8 or Form S-4),
subject to certain rights of the Company not to include all or a portion of such
shares under certain circumstances.

                                        9

<PAGE>



The Company agreed to pay all expenses of the demand or piggy-back registration,
other than underwriting fees, discounts or commissions.

In  connection  with  the  Wedgwood  Acquisition,  the  Company  entered  into a
Construction Management Agreement with Victor L. Lund pursuant to which Mr. Lund
agreed to serve, for three years following closing of the Wedgwood  Acquisition,
as a construction  manager to oversee  construction  for the Company of up to 20
assisted  living  facilities,  including  those that provide  Alzheimer's  care,
during the term of the  agreement.  The  Construction  Management  Agreement was
terminated by mutual  agreement in October 1997. Mr. Lund received  monthly fees
based on the  percentage  of  completion  of each  facility  with a total fee of
$150,000 for each facility successfully  completed,  less any distributions paid
to Mr. Lund from any partnership or limited  liability company in which Mr. Lund
and the Company both own equity  interests.  Mr. Lund was responsible for paying
the costs of any construction  supervisors or similar on-site personnel employed
by him to satisfy  his  oversight  duties to the  Company.  Mr.  Lund owns a 51%
equity  interest  and the  Company  owns a 49% equity  interest  in two  limited
partnerships.  The Company has an option to buy Mr.  Lund's  interests  in these
partnerships for $10,000.

Various representations were made to the Company in connection with the Wedgwood
Acquisition.  Subsequent to the acquisition, two lawsuits were filed against the
Company and Victor L. Lund.  In October  1997,  the Company and Mr. Lund entered
into an  agreement  whereby  the  Company  would  indemnify  him for any damages
resulting from the lawsuits and to agree to assume  responsibility for all legal
fees  associated  with the  lawsuits.  In return,  Mr.  Lund  agreed to give the
Company  125,000  shares of  Common  Stock.  Subsequent  to  entering  into this
agreement,  the  Company  and Mr.  Lund were  awarded a summary  judgment  and a
directed verdict, including legal fees, by the respective courts.

Victor L. Lund and Mark W. Hall, a former officer of the Company,  made loans to
Wedgwood of $880,158 during several years prior to the Company's  acquisition of
Wedgwood to partially fund  construction and acquisition of facilities,  and for
working  capital.  The notes bear interest at rates ranging from 9.25% to 10.50%
and were due on demand.  The remaining balances of these loans were paid in full
in March  1998.  In  addition,  as of June 30,  1998,  Mr.  Lund has  guaranteed
repayment of approximately  $11,000,000 of Wedgwood indebtedness and the Company
has agreed to indemnify Mr. Lund against any liability under his guarantees.

In 1996, The April Trust purchased a Stock Purchase Warrant from an unaffiliated
holder to purchase 108,000 shares of Common Stock at an exercise price of $12.98
per share. Such warrant contains  anti-dilution clauses requiring a reduction in
the exercise  price to adjust for any  issuances of Common Stock at a price less
than the exercise  price,  which had occurred and would occur in connection with
the  merger  with  American   Care.  To  eliminate  any  future   conflicts  and
negotiations  of changes in the exercise  price,  the warrant was amended to fix
the exercise price at $10.00 and to extend the termination date until October 1,
2006.

On January 13, 1998, Lone Star  Opportunity  Fund, L.P. ("Lone Star")  purchased
1,400,000  shares of Series F  Preferred  Stock and  800,000  shares of Series G
Preferred  Stock for an aggregate  purchase price of  $22,000,000.  The Series F
Preferred  Stock and Series G Preferred  Stock are  convertible  into  1,257,143
shares of Common  Stock.  The Company  agreed to  register  the shares of Common
Stock into which the Series F Preferred  Stock and Series G Preferred  Stock are
convertible under limited  circumstances,  as follows: (i) the Company agreed to
give the  holders  of such  shares  the  right  to  demand  registration  on two
occasions  of all or a portion of the  Common  Stock  upon  conversion  provided
holders  of at  least a  majority  of the  shares  join in such  demand  and the
aggregate  offering  price is equal to at  least $3  million;  (ii) the  Company
agreed to give the holders of Common Stock "piggy-back"  registration  rights to
include all or a portion of the shares in any other registration statement filed
by the Company  under the  Securities  Act (other than on Form S-8 or Form S-4),
subject to certain rights of the Company not to include all or a portion of such
shares under certain circumstances; and (iii) the Company agreed to register the
shares on Form S-3 upon conversion,  if Form S-3 is available to the Company, as
long as the aggregate  offering price for the shares registered on such Form S-3
were at least equal to $3 million and  provided the Company will not be required
to effect more than one registration on Form S-3 during any twelve month period.
The Company  agreed to pay all  expenses of any demand,  piggy-back  or Form S-3
registration, other than underwriting fees, discounts or commissions.

                                       10

<PAGE>


It is the policy of the Company  that all  transactions  between the Company and
any officer or  director,  or any of their  affiliates,  must be approved by the
Conflict of Interest Committee,  which is comprised of non-management members of
the Board of Directors of the Company.  All of the transactions  described above
were approved.

SIGNATURES


In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of 1934
(the "Act"), the Company has duly caused this Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                          GREENBRIAR CORPORATION

July 8, 1998                              By:    /s/ Gene S. Bertcher
                                               ----------------------
                                                   Gene S. Bertcher
                                                   Executive Vice President and
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)

















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