UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K
(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, 2003

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                          Commission file number 0-8187

                             Greenbriar Corporation
             (Exact name of Registrant as specified in its charter)

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

1755 Wittington Place, Suite 340, Dallas, Texas                      75234
   (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (972) 407-8400

Securities registered pursuant to Section 12(b) of the Act:
                                                  Name of Each Exchange
      Title of Each Class                         on Which Registered
      ----------------------------                ------------------------
      Common Stock, $.01 par value                American Stock Exchange

Securities  registered  pursuant to Section  12(g) of the Act:  None Indicate by
check mark  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period  that the issuer was  required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. YES [X] NO [ ]

Indicate  by check  mark if there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of Regulation S-K 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-K
or any amendment to this Form 10-K. [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, 2004, was
approximately $3,732,000. At March 31, 2004, the issuer had outstanding
approximately 977,000 shares of par value $.01 Common Stock.

Documents Incorporated by Reference:
None


<PAGE>


                             GREENBRIAR CORPORATION
                       Index to Annual Report on Form 10-K
                       Fiscal year ended December 31, 2003


Part I                                                                      3

   Item 1:     Business and Properties                                      3
   Item 2:     Description of Properties                                   12
   Item 3:     Legal Proceedings                                           12
   Item 4:     Submission of Matters to A Vote of
               Security Holders                                            14
   Item 5:     Market for Common Equity and Related
               Stockholder Matters                                         15
   Item 6:     Selected Financial Data                                     15
   Item 7:     Management's Discussion and Analysis
               or Plan of Operation                                        16
   Item 7(a):  Quantitative And Qualitative Disclosures
               About Market Risk                                           21
   Item 8:     Financial Statements                                        21
   Item 9:     Changes In And Disagreements With Accountants
               On Accounting And Financial Disclosure                      21
   Item 9(a):     Controls and Procedures                                  22
Part III                                                                   23
   Item 10:       Directors And Executive Officers                         23
   Item 11:       Executive Compensation                                   24
   Item 12:       Security Ownership Of Certain Beneficial
                  Owners And Management                                    27
   Item 13:       Certain Relationships And Related Transactions           28
   Item 14:       Principal Accounting Fees and Services                   30
Part IV                                                                    31
   Item 15:       Exhibits, Financial Statement Schedules
                  And Reports On Form 8-K                                  31
Exhibits                                                                   38
   Exhibit 14      Code of Ethics for Senior Financial Officers            38
   Exhibit 21.1:   Subsidiaries of the Company                             40
   Exhibit 23.1:   Consent of Farmer, Fuqua & Huff, P.C.                   41
   Exhibit 23.2:   Consent of Grant Thornton, LLP                          42
   Exhibit 31.1    Certification of Chief Executive Officer and
                   Chief Financial Officer Pursuant to
                   Rule 13a-14(a) or Rule 15d-14(a)                        43
   EXHIBIT 32.1:   Certification of Chief Executive Officer and
                   Chief Financial Officer Pursuant to
                   Rule 13a-14(b), 18 U.S.C. Section 1350, as
                   Adopted Pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002                              44




<PAGE>



                                     PART I

ITEM 1: BUSINESS AND PROPERTIES
-------------------------------

Website Access to Reports
Through our Internet  website,  www.greenbriar.com,  we make  available  free of
charge our annual report on Form 10-K,  quarterly reports on Form 10-Q,  current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as
soon as reasonably  practicable after we electronically file such material with,
or furnish it to, the Securities and Exchange Commission.

Overview and Background of Operations
Greenbriar  Corporation,  its  subsidiaries  and affiliates  (the  "Company") is
principally a real estate company which owns or leases retirement  specific real
estate and an outlet  shopping  mall.  In addition  the Company owns oil and gas
leases The Company  strives to enhance the value of these  properties  by proper
operations and marketing.  The Company can then, if it wishes, sell or lease the
properties at their appreciated value.

As of March 31, 2004, the Company owns or leases three retirement communities in
three states.  The Company  operates two of the  retirement  communities  with a
capacity of 162 residents and leases one community to a third party. The Company
owns an outlet  shopping mall in Gainesville  Texas with  approximately  315,000
square feet of retail space  available  for lease.  In addition the Company owns
approximately  200 oil wells in East Texas.  These are low production wells with
maximum  production  limits of 20 barrels of oil per day.  As of March 31,  2004
there are 50 wells in operation.

The Assisted Living Industry
The Company  believes that the assisted living industry has become the preferred
alternative to meet the growing demand for a cost-effective  setting in which to
care  for the  elderly  who do not  require  more  intensive  medical  attention
provided by a skilled  nursing center but who cannot live  independently  due to
physical or  cognitive  frailties.  In general,  assisted  living  represents  a
combination  of housing,  general  support  services and full time personal care
services  designed to aid elderly  residents with the activities of daily living
("ADLs") on a scheduled and unscheduled  basis. Many assisted living communities
also provide  assistance to residents with low acuity medical needs or may offer
higher levels of personal assistance for incontinent residents or residents with
Alzheimer's  disease or other forms of dementia.  Another  growing  trend in the
industry  is the  provision  of care for  higher  levels of  acuity.  Generally,
assisted  living  residents  have  higher  levels  of  need  than  residents  of
independent  retirement  communities  but lower levels than residents in skilled
nursing centers.

The Oil and Gas Industry
Gaywood Oil & Gas,  LLC, of which the Company is the sole  member,  is in a very
narrow  niche of the oil and gas  industry.  Gaywood has  approximately  200 oil
wells in Gregg and Rusk counties in Texas of which 50 were operating as of March
31, 2004.  Gaywood has no natural gas leases.  Gaywood's  only gas production is
totally incidental to its oil production and has no significant value. Gaywood's
leases are all wells whose  potential  or actual  production  is low,  averaging
slightly  over four  barrels per day in March 2004.  Gaywood's  operation of low
volume  wells is only  feasible  if the  price of oil is above  $24 per  barrel.
Gaywood is neither a refiner nor a retailer of oil products. It sells its entire
production  to  companies  who, in turn,  either  resell or use the products for
their own purposes.


                                       3
<PAGE>


The oil and gas industry has experienced  significant commodity price volatility
in recent  years.  Price  decreases in 2002 were driven by weather  patterns,  a
recession  and actions by OPEC.  Price  increases in 2000 and again in 2003 were
driven  in part by  several  years of  accentuated  "boom  and  bust"  cycles of
drilling activity,  combined with strong growth in demand for energy commodities
and continued unrest in the Middle East.

The  Company  has no  strategy,  as  such,  for the  acquisition  of oil and gas
properties. Gaywood was an unusual opportunity and the Company decided to pursue
this particular acquisition to enhance cash flow and operating income streams.

Business Strategy
In  choosing  properties  to invest  in the  Company's  strategy  is to choose a
property  that can achieve and sustain a strong  competitive  position  within a
chosen market.  The Company also seeks to continue to enhance the performance of
the properties it operates directly. In its senior living properties the Company
seeks to enhance current  operations by (i) maintaining and improving  occupancy
rates at its communities  (ii)  opportunistically  increasing  resident  service
fees,  (iii)  improving   operating   efficiencies  and  (iv)  improving  market
positioning.

In its oil and gas properties the Company seeks to keep producing wells properly
maintained  and to  recondition  and, where  economically  feasible,  bring into
production non-operating leases it owns.

Assisted Living Services
The Company offers a wide range of full service  retirement and assisted  living
care and services to its  residents.  The  residents are allowed to select among
the services  offered beyond basic support services and are charged only for the
specific  services or level of services they need.  The services  offered by the
Company can generally be categorized as follows:

     Basic Support Services - These services include providing up to three meals
     per day in a common dining room, special dietary planning, laundry, general
     housekeeping,  organized  social  and  other  activities,   transportation,
     maintenance,  utilities (except telephone),  security and 24-hour emergency
     call monitoring.

     Supplemental Services - These services include performing,  coordinating or
     assisting with bill paying,  banking,  personal  shopping,  transportation,
     appointments, pet care and reminder services.


                                       4
<PAGE>
<TABLE>
<CAPTION>


     Personal Care Services - These services include  providing  assistance with
     activities of daily living (the ADLs) such as ambulation,  bathing, eating,
     dressing, personal hygiene and grooming.

     Wellness   Services  -  These   services   include   assistance   with  the
     administration of medication and health  monitoring,  which are provided as
     permitted by government regulation.

     Alzheimer's and Special Care Services - Alzheimer's  care includes a higher
     24-hour  staff ratio to provide  oversight and  around-the-clock  scheduled
     activities.  An  Alzheimer's  care  wing is  secured  from  the rest of the
     building.

Retirement Properties
Operating  Communities - The following table sets forth certain information with
respect to  communities  that were owned,  operated or managed by the Company at
March 31, 2004.  The Company  considers its  communities to be in good operating
condition and suitable for the purpose for which they are being used.

                                                                                  Community
                                                  Care               Resident    Operations
         Community               Location         Level     Units   Capacity(1)   Commenced    Ownership
----------------------------------------------------------------------------------------------------------
<S>                         <C>                  <C>        <C>         <C>        <C>         <C>
Graybrier                   Southern Pines, NC   FE, DC       55        90         Feb-94      Owned (2)
Pacific Pointe              King City, OR           S        114        114        Jan-93     Leased (3)
Windsor House Greenville    Greenville, SC       FE, DC       31        41         Nov-97        Owned
                                                                                                (2)(5)
</TABLE>

Total

     Key:

     S basic support and supplemental services are offered.

     FE basic  support,  supplemental,  personal care and wellness  services are
     offered ("Frail Elderly").

     DC Alzheimer's and special care services are offered ("Dementia Care").



     (1)  Reflects  licensed  capacity for Assisted Living and Dementia Care and
          actual number of units for Independent Living.

     (2)  Subject to first mortgage.  Historically, each community has generally
          been  pledged as  collateral  on a single  mortgage  and deed of trust
          securing a note payable to a bank, financial  institution,  individual
          or other lender.  The mortgages and deeds of trust mature between 2004
          and 2018 and  bear  interest  at fixed  and  variable  interest  rates
          ranging from 7.5% to 12% as of December 31, 2003

     (3)  Leased from a partnership. Initial lease term is 10 years, expiring in
          2012. The Company is responsible  for all costs  including  repairs to
          the community,  property taxes and other direct operating costs of the
          community.  The lease includes clauses that allow for rent to increase
          over time based on a specified schedule.

     (4)  Leased to a third party.

Repair and Maintenance - The Company  conducts  routine repairs and maintenance,
as needed,  of its  properties  on a regular  basis.  The  Company  has no other
current plans for significant  expenditures  relating to its existing properties
and considers them to be in good repair and working order.


                                       5
<PAGE>


Retirement Community Description
The Company's existing communities as of March 31, 2004 range in size from 41 to
114 units, are from one to three stories and from 20,800 to 106,250 square feet.
Most communities have a large family room, usually equipped with a fireplace,  a
spacious open dining area, library, TV room,  commercial kitchen,  beauty salon,
laundry and indoor and outdoor recreational areas. Units generally range in size
from  approximately  330 to 400 square feet for a studio unit, 470 to 650 square
feet for a one-bedroom  unit and 680 to 850 square feet for a two-bedroom  unit.
Assisted  living  units,  among  other  amenities,  typically  include a private
bathroom,  kitchenette,  closets,  living and sleeping  areas,  a lockable door,
emergency call system,  individual room temperature  controls and fire alarm and
sprinkler systems.

Retirement Operations
In properties  in the Company's  portfolio,  the  day-to-day  operations of each
community  are  managed by an  Executive  Director  who is  responsible  for all
operations  of the  community,  including  overseeing  the  quality  of care and
services,  marketing,   coordinating  social  activities,  monitoring  financial
performance  and ensuring  appropriate  maintenance of the grounds and building.
The Executive Director consults with outside providers,  such as pharmacists and
dieticians,  to assist  residents  with  medication  review,  menu  planning and
response  to  any  special  dietary  needs.  Personal  care,  dietary  services,
housekeeping and laundry services are performed  primarily by line staff who are
either part or full-time employees of the Company and who are trained to perform
a variety of such services.  Part or full-time  employees  perform most building
maintenance services,  while third party contractors generally perform elevator,
HVAC maintenance and landscaping services.

The  Company's  senior  management  and other  personnel  provide  some  support
services  to  each  of  the  Company's  communities,  including  development  of
operational  standards,  budgets and  quality  assurance  programs,  recruiting,
training and financial, accounting and data processing services such as accounts
payable,  billing and  payroll.  Corporate  personnel  and  community  executive
directors  collaborate with respect to the  establishment of community goals and
strategies,  quality  assurance  oversight,  development of Company policies and
procedures,  development and  implementation  of new programs,  cash management,
human resource management and community development.

The Company has attracted and continues to seek highly dedicated and experienced
personnel.  All  employees  are  required to complete  training  programs  which
include a core  curriculum  comprised  of  personal  care  basics,  job  related
specific  training,  Alzheimer's  disease  processes,  first aid,  fire  safety,
nutrition,  infection control and customer service.  Executive Directors receive
training in all of these areas, plus marketing, community relations,  healthcare
management and fiscal management.  In addition to some classroom  training,  the
Company's communities provide new employees with on the job training,  utilizing
experienced staff as trainers and mentors.


                                       6
<PAGE>



Summary Oil Reserve Data
The following table sets forth summary information  concerning  Gaywood's proved
oil reserves on December 31, 2003,  based on a report prepared by Haas Petroleum
Engineering  Services,  Inc., an independent  consulting and  engineering  firm.
Reserves were determined  using year-end  product prices,  held constant for the
life of the  properties.  Estimates  of  economically  recoverable  reserves and
future net  revenues are based on a number of  variables,  which may differ from
actual results.



Proved and Developed Reserves                        December 31, 2003
Oil (Mbbl)                                                   14,890.91

Productive Wells
The following  table  summarizes  our gross and net interests in productive  oil
wells at March 31, 2004.  Net  interests  represented  in the table are "working
interests"  which  bear the cost of  operations.  All  wells are in the State of
Texas.



           Gross Wells          Net Wells
                    53                 50


Oil Well Description
The  Company's oil wells have all been  "abandoned"  by the larger oil companies
and their leases have  devolved to other  persons or  entities.  The Company has
ninety  nine of these  leases  with a range of 67.63% to 80% of  ownership.  The
wells produce from 70 to 360 barrels per month.

Oil Well Operations
The  Company's  oil  wells  are  maintained  by  third  party  contractors,  its
production  is hauled by third party  contractors  and the entire  production is
sold under contract to a subsidiary of Black Hills Corporation. This contract is
renegotiated annually and is based on the average daily closing price of oil for
the previous month as published by Koch Supply & Trading plus a premium of $3.06
per barrel.

Quality Assurance
In retirement and assisted living a commitment to quality  assurance is designed
to achieve a high degree of resident  and family  member  satisfaction  with the
care and services the Company provides.  In addition to training and performance
reviews of all employees, the Company's quality control measures include:

Philosophy  of  Management  -  The  Company's  philosophy  of  management  is to
demonstrate  by its actions and require  from its  employees  high  standards of
personal  integrity,  to develop a climate of openness and trust, to demonstrate
respect  for  human  dignity  in every  circumstance,  to be  supportive  in all
relationships,  to promote teamwork by involving  employees in the management of
their own work and to promote the free expression of ideas and opinions..


                                       7
<PAGE>


Regular Community Inspections - Community inspections are conducted by corporate
personnel on a regular  basis.  These  inspections  cover the  appearance of the
exterior and grounds,  the  appearance  and  cleanliness  of the  interior,  the
professionalism  and friendliness of staff,  resident care plans, the quality of
activities and the dining program, observance of residents in their daily living
activities and compliance with governmental regulations.

In oil  production,  quality is a matter of proper  separation of crude oil from
saltwater.  These  processes  are  automated at each well and the Company is not
aware of any complaints as to the quality of its crude oil.

Marketing
In retirement and assisted living the Company's  marketing and sales efforts are
undertaken at the local level. These efforts are intended to create awareness of
a community and its services among prospective residents,  their families, other
key decision-makers and professional referral sources. The communities engage in
traditional  types of  marketing  activities,  such as  special  events,  direct
mailings, print advertising,  signs and yellow page advertising. These marketing
activities  and media  advertisements  are directed to potential  residents  and
their adult children, who often comprise the primary decision makers for placing
a frail elderly relative in an assisted living setting.

In its oil  business  the Company  sells its  production  of crude oil through a
contract  as  described  above.   The  Company  has  no  marketing   efforts  or
responsibility in this facet of its business.

Government Regulation
The assisted living industry is maturing and, accordingly, the manner and extent
to which it is  regulated  at the  Federal  and state  levels are  evolving at a
steady pace.  Currently,  most states have a licensure  category or statute that
uses the term "assisted living." Several states are proposing  regulations using
the term.  More than forty states have specific  language in statute,  licensure
regulations  (including  states with draft  regulations) or Medicaid policy that
addresses  the  philosophy  of  assisted  living.  Several  states  have  or are
reviewing  licensure  regulations  and increasing the role of state personnel in
monitoring and controlling the assisted living industry.

One of the  communities  the Company  operates is not required to have a license
for its independent retirement operation.  The other community is required to be
licensed by the state in which it operates.

Any community  acquired by the Company must be correctly licensed as required by
its state and  local  laws and must be in  compliance  with the  Americans  with
Disabilities  Act ("ADA").  Such community  must also be in compliance  with the
Fair Housing Amendments Act.

In compliance  with underlying  state bond financing,  rents at one community in
Oregon must be approved by an agency of the state.

The operations of any facility  gathering,  transporting,  processing or storing
natural  gas and  crude  oil is  subject  to  stringent  and  complex  laws  and
regulations  pertaining to health,  safety and the  environment.  As an owner or
operator of these  facilities,  the Company must comply with federal,  state and
local  laws that  relate to air and water  quality,  hazardous  and solid  waste


                                       8
<PAGE>

management and disposal, and other environmental matters. Costs of operating oil
wells must  incorporate  compliance  with  environmental  laws,  regulations and
safety standards.  Failure to comply with these laws and regulations may trigger
a  variety  of  administrative,   civil  and  potentially  criminal  enforcement
measures.

The  Company is subject to the Fair Labor  Standards  Act,  which  governs  such
matters as minimum  wage,  overtime and other  working  conditions.  Many of the
Company's  employees are paid at rates  related to the Federal  minimum wage and
accordingly,  increases  in the minimum wage will result in an increase in labor
costs.

Management  is  not  aware  of any  non-compliance  by the  Company  as  regards
applicable regulatory  requirements that would have a material adverse effect on
the Company's financial condition or results of operations.

Competition
The long-term care industry is highly  competitive  and the assisted  living and
Alzheimer's  care  businesses  in  particular  have and will  continue to become
increasingly competitive in the future. The Company competes with other assisted
living companies and numerous other companies  providing  similar long-term care
alternatives such as home healthcare agencies, community-based service programs,
retirement  communities and convalescent  centers (nursing homes).  In addition,
the Company competes with a number of tax-exempt  nonprofit  organizations which
can finance  capital  expenditures on a tax-exempt  basis or receive  charitable
contributions  unavailable  to the Company and which are  generally  exempt from
income tax. In the markets where the Company  operates the level of  competition
is has increased both from regional,  national and local providers.  Many of the
Company's present and potential competitors have, or may have access to, greater
financial,  management and other resources than those of the Company.  There can
be no assurance  that  competitive  pressures  will not have a material  adverse
effect  on  the  two  properties  the  Company  operates.  However,  these  same
circumstances  provide a  substantial  opportunity  for the  Company  to acquire
communities  at a price  that  will  allow a  profitable  resale or lease if the
community is operated  properly.  The Company also competes with other providers
of long-term care in the acquisition and development of additional communities.

The Company also competes with other  providers of long-term  care in attracting
and retaining qualified and skilled personnel. In recent years, the industry has
experienced  a shortage of qualified  professionals.  The  Company's  operations
require  some  professionally  certified  (RN or LPN)  services,  primarily  for
supervision and training of care staff.  The Company has been able to retain the
services of an adequate number of professional  third party contractors to staff
its communities appropriately and maintain its standards of quality care.

Insurance
The  provision  of  personal  services  entails an  inherent  risk of  liability
compared to more  institutional  long-term  care  communities.  Assisted  living
communities of the type operated by the Company,  especially as regards dementia
care,  offer  residents a greater degree of  independence  in their daily lives.
This increased level of independence,  however, may subject the resident and the


                                       9
<PAGE>

Company  to  certain  risks  that  would be  reduced  in more  institutionalized
settings.  The Company currently maintains liability insurance intended to cover
such claims.  However, the number of insurance carriers who offer such insurance
has diminished since 1999 and the costs of such insurance continues to escalate.
The Company also carries property insurance on each of its properties.

Environmental Matters
Under  various  Federal,  state and local  environmental  laws,  ordinances  and
regulations,  a current or  previous  owner or  operator  of real  estate may be
required to investigate and clean up hazardous or toxic  substances or petroleum
product  releases  at the  property,  and may be held  liable to a  governmental
entity or to third parties for property damage and for  investigation  and clean
up costs  incurred by such parties in connection  with the  contamination.  Such
laws typically impose clean up  responsibility  and liability  without regard to
whether the owner or operator knew of or caused the presence of the contaminants
and the liability  under such laws has been  interpreted to be joint and several
unless the harm is divisible and there is a reasonable  basis for  allocation of
responsibility.  The costs of  investigation,  remediation  or  removal  of such
substances may be substantial and the presence of such substances or the failure
to remediate  properly such property may adversely affect the owner's ability to
sell or lease the  property or to borrow using the  property as  collateral.  In
addition,  some  environmental  laws create a lien on the  contaminated  site in
favor of the government  for damages and costs it incurs in connection  with the
contamination. Persons who arrange for the disposal or treatment of hazardous or
toxic  substances  also may be liable for the costs of removal or  redemption of
such  substances  at the  disposal or treatment  community,  whether or not such
community is owned or operated by that person or corporation. Finally, the owner
or operator of a site may be subject to common law claims by third parties based
on damages and costs resulting from environmental contamination emanating from a
site.

The Company has  conducted  environmental  assessments  on most of its  existing
owned  or  leased   properties.   These   assessments   have  not  revealed  any
environmental  liability that the Company believes would have a material adverse
effect on the Company's business,  assets or results of operations.  The Company
is not aware of any such environmental  liability. The Company believes that all
of its properties  are in compliance in all material  respects with all Federal,
state and local laws,  ordinances and regulations  regarding  hazardous or toxic
substances  or  petroleum  products.  The Company  has not been  notified by any
governmental   authority,   and  is  not  otherwise   aware,   of  any  material
non-compliance,  liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of its communities.

Control by Insiders
As of March 31, 2004, the Company's officers,  directors and affiliated entities
owning more than 5% of the Company's  outstanding stock owned  approximately 62%
of  the  outstanding  shares  of  Common  Stock.  Warwick  Summit  square,  from
purchases,  owns  approximately  21%  of the  outstanding  Common  Stock  of the
Company.  Sylvia  M.  Gilley,  widow of  former  Chairman,  President  and Chief
Executive  Officer  James R. Gilley,  and one  corporation  wholly owned by Mrs.
Gilley, beneficially owned an aggregate of approximately 16 % of the outstanding
Common Stock of the  Company.  Victor L. Lund, a director of the Company and the
founder of Wedgwood Retirement Inns (a company acquired by the Company in 1996),


                                       10
<PAGE>

beneficially owned  approximately 12% of the outstanding shares of Common Stock.
Floyd Rhoades,  as a result of the stock he received when the Company  purchased
American Care  Communities,  Inc.,  beneficially  owns  approximately  6% of the
Company's  outstanding  stock.  Gene  S.  Bertcher,  Chairman  of the  Board  of
Directors and Chief Executive  Officer,  from purchases owns approximately 7% of
the outstanding Common Stock of the Company.  Accordingly, such individuals will
have the ability, by voting their shares in concert, to significantly  influence
(i) the election of the Company's  Board of Directors  and,  thus, the direction
and future operations of the Company,  and (ii) the outcome of all other matters
submitted to the Company's stockholders,  including mergers,  consolidations and
the sale of all or substantially all of the Company's  assets. In addition,  the
parties  listed above  currently  hold options or  conversion  rights to acquire
80,000 shares of Common Stock. The issuance of additional shares of Common Stock
pursuant to the  exercise of these stock  options  granted  under the  Company's
stock  option plan would  increase  the number of shares  held by the  Company's
executive officers, directors and affiliated entities in the future.

Anti-Takeover Provisions
The Company's Articles of Incorporation and Bylaws contain,  among other things,
provisions (i)  authorizing  shares of preferred stock with respect to which the
Board of Directors has the power to fix the rights, preferences,  privileges and
restrictions  without  any  further  vote or  action  by the  stockholders  (ii)
requiring  holders  of at  least  80% of the  outstanding  Common  Stock to join
together in requesting a special meeting of stockholders  and (iii)  prohibiting
removal of a director  other than for "cause" and then only if the holders of at
least 80% of the outstanding Common Stock vote for such removal.  The Company is
also  subject to Sections  78.411-78.444  of the Nevada  Revised  Statutes  (the
"Control Act") which in general prohibits any business combination involving the
Company  and a person  that  beneficially  owns  10% or more of the  outstanding
Common  Stock or an  affiliate  or  associate of the Company who within the past
three years was the beneficial owner, directly or indirectly,  or 10% or more of
the  outstanding  Common  Stock,   except  under  certain   circumstances.   The
application of the Control Act and/or the  provisions of the Company's  Articles
of   Incorporation   and  Bylaws  could  delay,   deter  or  prevent  a  merger,
consolidation,  tender offer or other business  combination or change of control
involving  the  Company  that some or a majority of the  Company's  stockholders
might  consider to be in their  personal  best  interests,  including  offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price of the Common Stock and may  adversely  affect the
market price of and the voting and other rights of, the holders of Common Stock.

Employees
At March 31, 2004, the Company employed 86 employees, including 39 full-time and
47 part-time  employees.  The Company  believes it maintains good  relationships
with  its  employees.  None of the  Company's  employees  are  represented  by a
collective bargaining group.

Corporate Offices
The  Company's  principal  office is  approximately  2,500 square feet of leased
space in Dallas,  Texas.  The Company  believes  the leased  space will meet the
Company's needs for the foreseeable future.


                                       11
<PAGE>



ITEM 2: DESCRIPTION OF PROPERTIES
---------------------------------

See Item 1 for a discussion of properties owned or leased by the Company.


ITEM 3: LEGAL PROCEEDINGS
-------------------------

Benetic Financial vs. Wedgwood et al:
This action is against a  subsidiary  of the Company as well as other  corporate
and individual  defendants.  In 1993,  Wedgwood  Retirement  Inns entered into a
financing  arrangement with a third party lender.  The plaintiff alleged that he
had a verbal  brokerage  agreement  with Wedgwood and was entitled to a fee. The
Company acquired Wedgwood in 1996.

In a  jury  trial  the  plaintiff  was  awarded  $150,000  on one  count  of his
complaint.  However,  the jury found for the defendants on all other counts.  In
his final ruling the judge awarded the defendants legal fees that were in excess
of the  judgment.  The plaintiff  appealed and on April 30, 2003 the  California
Court of Appeals let the $150,000  stand but reversed the judge's award of legal
fees. Based upon the ruling of the Court of Appeals the defendants are obligated
for the judgment plus $165,093 in interest  since 1993.  The judgment is against
all the defendants as a group.

The defendants  filed an appeal to the  California  Supreme Court but the appeal
was  denied.  There are no further  legal  defenses  available.  A 1995  sharing
arrangement  exists whereby  Wedgwood and Victor Lund,  the former  President of
Wedgwood and a current  director of Greenbriar  were obligated to pay 2/3 of any
judgment.  Greenbriar had previously agreed to indemnify Mr. Lund for any losses
in this matter.

The Company has recorded its share of the loss in prior years.

Internal Revenue Service Pre-Assessment Letter
In  December  1991 the  Company  sold  four  nursing  homes to a  not-for-profit
corporation  in exchange for tax exempt bonds issued on behalf or the  acquiring
corporation by government  authorities.  The bonds were issued in three lettered
series. The aggregate principal amount of the Series A bonds was $8,700,000, the
aggregate  principal  amount  of the  series  B  bonds  was  $1,000,000  and the
aggregate amount of the series C bonds was $6,700,000. Interest on the bonds was
payable semi-annually. A nationally recognized law firm opined that the interest
on the bonds would be tax-exempt.

In March 1992,  pursuant to a plan  promulgated  and recommended by a nationally
recognized  investment  banking firm,  the Series C bonds were converted to zero
coupon  status  and their  value  was  enhanced  by  substituting  higher  grade
collateral.  The  substitute  collateral,  which  consisted  of zero coupon U.S.
Treasury  obligations,  was  placed in trust to defease  the Series C bonds,  in
exchange  for the  underlying  mortgage.  The  Series C bonds were then sold for
approximately $47,000,000. A gain was recorded equal to the proceeds received by
the Company of $6,252,000 after deducting  transaction costs and the cost of the
higher  grade  collateral.  A  nationally  recognized  law firm  opined that the
defeasance of the bonds would not adversely affect the tax exempt status.

In December 1992,  again  pursuant to a plan  promulgated  and  recommended by a
nationally recognized investment banking firm, the Series A bonds were converted
to zero coupon  status,  their value enhanced by  substituting  zero coupon U.S.


                                       12
<PAGE>

Treasury  obligations  as  collateral  and the  collateral  placed  in  trust in
exchange for the mortgage underlying the Series A bonds in a transaction similar
to the sale of the  Series C  bonds.  The  Series  A bonds  were  then  sold for
approximately $20,000,000. A gain was recorded equal to the proceeds received by
the Company of $2,081,000 after deducting  transaction costs and the cost of the
higher grade collateral.

On January 8, 2004 the Company  was  notified by the  Internal  Revenue  Service
(IRS) in the  form of a  Section  6700  Pre-Assessment  Letter  that the IRS was
considering  assessing penalties under Section 6700 of the Internal Revenue Code
as a result of the Company's  organization  or assistance in connection with the
issuance and sale of the Series A and Series C bonds.

In  general,  Section  6700 of the IRS Code  imposes a penalty  on any person or
organization who organizes or assists in organizing an entity or participates in
the sale of any interest in an entity and makes or  furnishes or causes  another
person to make or  furnish a  statement  with  respect to the  allowably  of any
deduction,  the excludability of any income which the person knows or has reason
to know is false or fraudulent as to any material matter.

The penalty prescribed in Section 6700 is the lesser of 100% of the gross income
derived  from the  activity  or $1,000 for each such  activity.  Each  entity or
arrangement shall be treated as a separate activity.

If it is ultimately  determined  that the Company is subject to a fine that fine
would be the lesser of $1,000 per  activity  or the gross  proceeds  the Company
received. Effectively the fine would be calculated based upon a determination as
to what  constitutes  an  activity.  The IRS has  informed  the Company that the
Series A and C bonds were  purchased  by 266  individuals  or  entities.  If the
penalty is computed by considering each sale an activity the maximum exposure to
the  Company  would be  $267,000.  However,  neither  Section  6700 nor,  to the
Company's knowledge,  relevant authorities specify what constitutes an activity.
The IRS has  indicated  that the $1,000 per  activity  should be  computed  in a
manner other than the number of individuals who purchased the bonds however they
have not indicated to the Company any basis or authority for their position.  If
the IRS's  assertions  as to the number of activities  exceeds 8,333  activities
then the Company  believes  the  maximum  exposure  would be the total  proceeds
received and income recorded of $8,333,000.

The  transactions  which  the  IRS is  examining  involved  technically  complex
financial and legal issues and were  undertaken on the advice of and reliance on
the investment banking firm, the law firms that issued the tax exempt bond legal
opinions  and  other  professionals.  The  Company  believed  in 1992 and  still
believes that its actions were appropriate in all respects.

The Company  and the IRS are engaged in  negotiations  regarding  settling  this
twelve year old matter.  However, there is no assurance that any settlement will
be achieved. In the absence of a settlement,  the Company intends to contest the


                                       13
<PAGE>

IRS's position in court.  Any  litigation  may be expensive and time  consuming.
However,  if this matter is litigated the Company  believes that it will prevail
on the  merits.  Should it not  prevail in this  matter the  Company  intends to
pursue actions against the  professionals  who advised the Company regarding the
sale of the bonds.


Other
The  Company  has been named as a defendant  in other  lawsuits in the  ordinary
course of business.  Management  is of the opinion that these  lawsuits will not
have a material effect on the financial condition, results of operations or cash
flows of the Company.


ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
The Company held its annual meeting on December 16, 2003. At that meeting the
shareholders elected three new members to the Board of Directors.

                                       14
<PAGE>
<TABLE>
<CAPTION>


                                     PART II


ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

The Company's Common Stock is traded under the symbol "GBR" and is listed on the
American Stock Exchange.  The high and low closing sales prices of the Company's
Common Stock on the American  Stock  Exchange  during the last two fiscal years,
adjusted for the January 2002 stock dividend and the October 2003 stock split

                                    2003                       2002
                                High       Low              High       Low
                            ----------- ----------     ----------- ----------

   First Quarter                 $8.30       7.25          $24.50      12.50
   Second Quarter                 9.00       7.30           21.00       8.00
   Third Quarter                  8.00       4.30            9.50       7.50
   Fourth Quarter                13.00       2.60           10.00       5.50

The Company has not paid cash  dividends on its Common Stock during at least the
last ten  fiscal  years and it has been the  Company's  practice  to retain  all
earnings  to pay down  long-term  debt and to finance the future  expansion  and
development  of its business.  Any  determination  to pay cash  dividends in the
future will be at the discretion of the Board of Directors and will be dependent
on  the  Company's  financial  condition,  results  of  operations,  contractual
restrictions, capital requirements, business prospects and such other factors as
the Board of Directors deems relevant. The Company's ability to pay dividends in
the  future  may be  limited  by the terms of future  debt  financing  and other
arrangements.

The closing price on the Company's common stock on March 31, 2004, was $3.82 per
share.  As of March 31, 2004,  there were 478 holders of record of the Company's
common stock.


ITEM 6: SELECTED FINANCIAL DATA
-------------------------------

                                      2003         2002         2001        2000          1999
<S>                               <C>          <C>          <C>          <C>          <C>
Operating revenue                 $   5,034    $   4,422    $  23,568    $  33,482    $  33,587
Operating expenses                    5,811        6,767       27,543        6,378       33,606
Operating profit (loss)                (777)      (2,345)      (3,975)     (10,115)         (19)

Earnings (loss) from continuing
operations before income taxes
                                  $     222    $  (2,996)   $   9,559    $ (10,115)   $     709

Income tax expense                      749        2,824         --           --

         Earnings (loss)                                                                   from
continuing                                                                            operations
                                        222       (3,745)       6,735      (10,115)         709

         Loss from
discontinued                                                                          operations
                                                  (4,628)        (317)        (508)        (627)

         NET EARNINGS                                                                    (LOSS)
                                        222       (8,373)       6,418      (10,623)          82

</TABLE>

                                       15
<PAGE>
<TABLE>
<CAPTION>

<S>                               <C>          <C>          <C>          <C>          <C>
Earnings (loss) per common
Share-basic and diluted
                                  $    0.31    $  (23.32)   $   15.53    $  (39.17)   $  (12.33)

BALANCE SHEET DATA:
Total assets                      $  18,131    $  12,624    $  44,022    $ 102,588    $ 119,908
Long-term debt                        2,053        8,479       16,693       50,887       50,477
Total liabilities                    15,577       11,273       34,753       68,944       69,425
Preferred stock redemption           26,988       27,763
obligation
Total stockholders' equity            2,554        1,351        9,269        6,656       22,720
</TABLE>



ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview
As of March 31, 2004 the Company owns one assisted  living  community and leases
one community in two states with total capacity of 204  residents..  In addition
the Company owns one community  that is operated by an  independent  third party
with a capacity of 41  residents.  The  Company  also owns 200 oil wells in East
Texas and a 315,000 square foot outlet mall in Gainesville, Texas

Since 1996 the  Company  has  owned,  leased and  operated  assisted  living and
retirement  communities throughout the United States. During that period of time
the Company has both acquired and sold over seventy  communities.  The acquiring
and  disposing  of its  real  estate  assets  has been an  integral  part of the
Company's business.

During the past several years the Company's  business  strategy has evolved into
one of  focusing  on the  real  estate  component  and  reducing  its  operating
activities.  The Company objective is to become an investor in various entities,
principally partnerships, whose intent is to acquire properties and either sell,
lease or enter into joint venture  agreements  with third party  operators  with
respect to these properties

Critical Accounting Policies and Estimates
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. Certain of the Company's accounting policies require the
application of judgment in selecting the appropriate assumptions for calculating
financial estimates. By their nature, these judgments are subject to an inherent
degree of uncertainty. These judgments and estimates are based upon the
Company's historical experience, current trends, and information available from
other sources that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

The  Company  believes  the  following  critical  accounting  policies  are more
significant  to the  judgments  and  estimates  used in the  preparation  of its
consolidated  financial statements.  Revisions in such estimates are recorded in
the period in which the facts that give rise to the revisions become known.

Deferred Tax Assets
Significant  management  judgment is required in  determining  the provision for
income taxes,  deferred tax assets and liabilities  and any valuation  allowance
recorded  against net  deferred  tax assets.  The future  recoverability  of the


                                       16
<PAGE>

Company's  net deferred tax assets is dependent  upon the  generation  of future
taxable income prior to the expiration of the loss carry  forwards.  The Company
believes that it will generate  future  taxable  income to fully utilize the net
deferred tax assets.

Fiscal 2003 as Compared to Fiscal 2002
Revenues and Operating Expenses from Assisted Living  Operations:  Revenues were
$4,585,000 in 2003 compared to $4,422,000 in 2002. Community operating expenses,
which  consist  of  assisted  living  operations  expense,   lease  expense  and
depreciation and amortization, were $4,131,000 in 2003 as compared to $3,872,000
in 2002.

During the first quarter of 2002 leases held by the company for the operation of
two properties were not renewed. As of May 31, 2002 one property was contributed
to a partnership  in which the Company has a 56% limited  partnership  interest.
The  partnership  is accounted  for using the equity  method of  accounting.  On
September 30, 2002 the company sold two  properties  and on November 1, 2002 the
Company sold two subsidiaries each of whom owned an assisted living property. On
November  1, 2002 the Company  reacquired  a property  that had been  previously
leased to a third party.

On a same store basis for properties held for all of 2003 and 2002 Revenues were
$3,587,000 in 2003 and  $3,500,000 in 2002.  Community  operating  expenses were
$3,149,000 in 2003 and $3,145,000 in 2002.

Revenues and Operating Expenses from Oil & Gas Operations:  The Company acquired
it's oil & gas  operations  effective  August 1, 2003.  Revenues were  $449,000,
operating expenses were $400,000 and depletion and depreciation was $41,000.

Corporate General and Administrative Expenses: These expenses were $1,111,000 in
2003 as compared to  $2,329,000 in 2002.  The decrease in the corporate  general
and administrative  expenses is primarily a result of a decrease in salaries and
related  payroll  expenses.  Due to a  significant  reduction  in the  number of
Communities  operated by the Company the number of  employees  on the  corporate
staff was reduced. The downsizing also resulted in an overall decrease in almost
all general and administrative cost categories.

Write-off of Impaired Assets and Related Expenses: During 2002 the Company wrote
down the recorded value of a property it was attempting to sell.

Interest and Dividend  Income  Interest and dividend income was $304,000 in 2003
as compared to $412,000 in 2002. The decrease in interest and dividend income is
a result of a reduction in the notes receivable held by the Company

Interest  Expenses:  These expenses decreased to $705,000 in 2003 as compared to
$840,000 in 2002.  The decrease is due  primarily to the reduction in the number
of Communities.

Gain on Sale of  Assets:  In 2001  the  Company  sold a  property  and  received
proceeds of both cash and a bond bearing  interest at 9.5%.  The payment of both
principal and interest on the bond was based  exclusively  on the cash flow from
the property sold. For financial statement purposes the bond was valued at zero.

In August  2003 the Company  exchanged  the bond for 100% of Gaywood Oil and Gas
LLC.  Gaywood was valued by independent  engineers as having a fair market value
of $1,169,000 which was recorded as a gain by the Company. In September 2003 the
Company  sold land it was  holding  for  $125,000  cash and  recorded  a loss of
$111,000 on the sale.


                                       17
<PAGE>


In November  2002 the Company  sold its 56% interest in MREI to Sylvia M. Gilley
in  exchange  for a  reduction  of  $1,120,000  owed to Ms Gilley and a one year
extension  on the  remaining  portion  of the  note due her of  $2,255,000.  The
Company recorded income of $930,000.

Other Income ( Expense):  Other income was $342,000 in 2003 and  ($1,153,000) in
2002

Other income in 2003 includes reimbursement of a prior year insurance claim, the
settlement of a lawsuit as well as  settlements  for certain prior year accounts
payable.

In  September  2002 the  Company  entered  into a venture  with a third party to
secure  partnership   interests  in  future   acquisitions  of  assisted  living
communities.  The  agreement  required the Company to pay $660,000 over the next
twelve  months to fund the cost of the due  diligence  for  these  acquisitions.
There can be no assurance  that this venture will be successful  and the Company
has therefore  charged the entire cost to expense.  The Company  records its 56%
investment  CREI by the equity method of accounting.  The Company's share of the
operating  losses of this  partnership was $621,000.  On September 30, 2002 CREI
sold it's two properties to a third party for a gain of $2,315,000.  The Company
has deferred recognition of its 56% participation in the gain.

Discontinued  Operations In October 2001the Financial  Accounting Standard Board
issued  Statement of Financial  Accounting  Standards  #144  Accounting  for the
Impairment or Disposal of long Lived Assets.  (SFAS #144).  The Company  adopted
SFAS # 144 effective January 1, 2002 which resulted in a presentation of the net
operating  results of these  qualifies  properties  sold in 2002 as (loss)  from
discontinued  operations  for all  periods  presented.  During  2002 the Company
disposed of six properties.  Revenue for the six properties  were  approximately
$4,698,000 in 2002. Operating expenses for the six properties were approximately
$5,325,000 in 2002.

The loss on sale of these six  properties in 2002 was  $4,001,000which  includes
income tax expense of $440,000.

Fiscal 2002 as Compared to Fiscal 2001
Revenues and  Operating  Expenses  from  Assisted  Living  Operations:  Revenues
decreased to  $9,120,000  in 2002  compared to  $30,861,000  in 2001.  Community
operating expenses,  which consist of assisted living operations expense,  lease
expense and depreciation and  amortization,  were $8,070,000 in 2002 as compared
to $25,417,000 in 2001.

During the last six months of 2001 the  Company  disposed of 11  Communities  as
part of redemption of its Series E and F Preferred  Stock. The Company also sold
three  Communities  to not for profit  organizations.  The Company also sold one
Community and leased one Community to independent third parties. In addition the
Company entered into a sub-management  contract for three properties whereby the
sub-manager  is  retaining  the revenue and paying the expenses as their fee for
being  a  sub-manager.  The  sub-manager  also  had an  option  to  acquire  the
communities upon approval of the third party lenders. For reporting purposes the
Company for the duration of the sub management  agreement no longer recorded the
revenue and operating expenses of the three Communities.  In May 2002 one of the
properties with a  sub-management  contract was sold and one was returned to the
Company and  immediately  leased to a third party.  The final  property was shut
down and is in the process of being turned over to the lender.


                                       18
<PAGE>


During the first quarter of 2002 leases held by the company for the operation of
two properties were not renewed. As of May 31, 2002 one property was contributed
to a partnership  in which the Company has a 56% limited  partnership  interest.
The partnership is accounted for using the equity method of accounting.

On September  30, 2002 the company sold two  properties  and on November 1, 2002
the Company sold two subsidiaries each of whom owned an assisted living property

In  October  2001 and May 2002 the  Company  obtained  56%  limited  partnership
interests in two partnerships which own four communities.  These communities are
accounted for using the equity  method of  accounting  and therefore the Company
does not record the revenue and expenses of the communities.

Overall the Company recorded revenue and expenses for 24 fewer  communities 2002
than the comparable  periods in the prior year. The reduction in the revenue and
operating  expenses  for 2002 as compared to 2001 is almost  entirely due to the
reduction in the number of Communities owned and leased by the company

Corporate General and Administrative Expenses: These expenses were $2,329,000 in
2002 as compared to  $4,875,000 in 2001.  The decrease in the corporate  general
and administrative  expenses is primarily a result of a decrease in salaries and
related  payroll  expenses.  Due to a  significant  reduction  in the  number of
Communities  operated by the Company the number of  employees  on the  corporate
staff was reduced.  In addition  salaries for members of senior  management have
been reduced.  Also during 2001 the Company was incurring legal and professional
fees with respect to a lawsuit with a preferred  shareholder  in addition to its
customary  expenses.  Legal fees  decreased by $155,052 in 2002 when compared to
2001.

Write-off of Impaired Assets and Related Expenses: During 2002 the Company wrote
down the recorded value of a property it is attempting to sell.

Interest and Dividend Income:  Interest and dividend income was $412,000 in 2002
as compared to $212,000 in 2001. The increase in interest and dividend income is
a result of interest  recorded on a $1,600,000  note  receivable  related to the
Company's  investment in the Corinthian  Real Estate  Investors L.P. in November
2001.

Interest Expense:  These expenses decreased to $2,279,000 in 2001 as compared to
$4,958,000 in 2000. The decrease is due primarily to the reduction in the number
of Communities.

Gain on Sale of Assets: In August 2003 the Company exchanged a bond, which had a
zero value for  accounting  purposes for 100% of Gaywood Oil & Gas LLC.  Gaywood
was valued by independent  engineers as having a fair market value of $1,169,000
which was recorded as a gain by the Company.  In September 2003 the Company sold
land it was holding  for  $125,000  cash and  recorded a loss of $111,000 on the
sale

In November  2002 the Company sold it's 56% interest in MREI to Sylvia M. Gilley
in  exchange  for a  reduction  of  $1,120,000  owed to Ms Gilley and a one year
extension  on the  remaining  portion  of the  note due her of  $2,255,000.  The
Company recorded income of $930,000.


                                       19
<PAGE>


Other Income Expenses: In September 2002 the Company entered into a venture with
a third party to secure partnership interests in future acquisitions of assisted
living communities.  The agreement required the Company to pay $660,000 over the
next twelve months to fund the cost of the due diligence for these acquisitions.
There can be no assurance  that this venture will be successful  and the Company
has therefore  charged the entire cost to expense.  The Company  records its 56%
investment  CREI by the equity method of accounting.  The Company's share of the
operating  losses of this  partnership was $621,000.  On September 30, 2002 CREI
sold it's two properties to a third party for a gain of $2,315,000.  The Company
has deferred recognition of its 56% participation in the gain.

Discontinued Operations:  In October 2001the Financial Accounting Standard Board
issued  Statement of Financial  Accounting  Standards  #144  Accounting  for the
Impairment or Disposal of long Lived Assets.  (SFAS #144).  The Company  adopted
SFAS # 144 effective January 1, 2002 which resulted in a presentation of the net
operating  results of these  qualifies  properties  sold in 2002 as (loss)  from
discontinued  operations  for all  periods  presented.  During  2002 the Company
disposed of six properties.  Revenue for the six properties  were  approximately
$4,698,000  in 2002 and  $7,293,000  in  2001.  Operating  expenses  for the six
properties were approximately $5,325,000 in 2002 and $7,610,000 in 2001.

The loss on sale of these six properties in 2002 was  $4,001,000  which includes
income tax expense of $440,000.

Liquidity and Capital Resources
At December 31, 2003 the Company had current  assets of  $3,421,000  and current
liabilities of $12,328,000.

In  December  2003  the  Company   acquired  the  Gainesville   Outlet  Mall  in
Gainesville,  Texas. The Company paid approximately $800,000 in cash and a short
term  obligation  to pay the seller  approximately  $5,571,000.  The Company has
negotiated  long term financing and  anticipates  closing on or before April 30,
2004.

Also included in current  liabilities  is an obligation of principal and accrued
interest to Sylvia  Gilley,  wife of the former  President of the  Company,  for
$2,580,000.  The terms of this obligation are similar to that of preferred stock
whereby  the  Company  can only  pay this  obligation  out of  available  earned
surplus.

Future  acquisitions  by the Company are dependent  upon  obtaining  capital and
financing  through  various  means,  including  financing  obtained  from loans,
sale/leaseback  transactions,  long-term  state bond  financing,  debt or equity
offerings and, to the extent  available,  cash generated from operations.  There
can be no assurance that the Company will be able to obtain adequate  capital to
finance its projected growth.

Effect of Inflation
The  Company's  principal  sources  of  revenues  are from  resident  fees  from
Company-owned  or leased  assisted  living  communities and management fees from
communities  operated by the Company for third  parties.  The  operation  of the
communities  is affected by rental rates that are highly  dependent  upon market
conditions and the  competitive  environment in the areas where the  communities
are located. Compensation to employees is the principal cost element relative to


                                       20
<PAGE>

the  operations of the  communities.  Although the Company has not  historically
experienced  any adverse  effects of  inflation  on salaries or other  operating
expenses,  there can be no  assurance  that such  trends  will  continue or that
should inflationary pressures arise that the Company will be able to offset such
costs by increasing rental rates or management fees.

Forward Looking Statements
"Safe Harbor"  Statement under the Private  Securities  Litigation Reform Act of
1995:  A number of the matters and subject  areas  discussed in this filing that
are not  historical or current facts deal with potential  future  circumstances,
operations,  and prospects.  The discussion of such matters and subject areas is
qualified  by  the  inherent   risks  and   uncertainties   surrounding   future
expectations   generally,   and  also  may  materially  differ  from  Greenbriar
Corporation's actual future experience involving any one or more of such matters
and subject  areas  relating to interest  rate  fluctuations,  ability to obtain
adequate debt and equity financing, demand, pricing, competition,  construction,
licensing,  permitting,  construction delays on new developments contractual and
licensure, and other delays on the disposition,  transition, or restructuring of
currently or previously  owned,  leased or managed  communities in the Company's
portfolio,  and the ability of the Company to  continue  managing  its costs and
cash flow while maintaining high occupancy rates and market rate assisted living
charges in its assisted living communities. Greenbriar Corporation has attempted
to identify, in context,  certain of the factors that they currently believe may
cause  actual  future   experience   and  results  to  differ  from   Greenbriar
Corporation's  current  expectations  regarding  the relevant  matter or subject
area.  These and other risks and  uncertainties  are  detailed in the  Company's
reports  filed with the  Securities  and Exchange  Commission  (SEC),  including
Greenbriar  Corporation's  Annual Reports on Form 10-K and Quarterly  Reports on
Form 10-Q.

ITEM 7(A): QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
---------------------------------------------------------------------
Nearly  all of the  Company's  debt is  financed  at fixed  rates  of  interest.
Therefore,  the Company has  minimal  risk from  exposure to changes in interest
rates.


ITEM 8: FINANCIAL STATEMENTS
----------------------------
The financial statements required by this Item begin at page F-1 hereof.


ITEM 9:  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
     FINANCIAL DISCLOSURE
     --------------------
Effective  February 5, 2004, the Company's Board of Directors engaged the Plano,
Texas firm of Farmer,  Fuqua& Huff, P.C. as the independent  accountant to audit
Greenbriar's  financial  statements.  During the  Registrant's  two most  recent
fiscal years, and any subsequent interim period, Greenbriar did not consult with
Farmer,  Fuqua & Huff,  PC.  or any of its  members  about  the  application  of
accounting  principles to any  specified  transaction  or any other matter.  The
engagement  effective  February 5, 2004, of Farmer,  Fuqua & Huff, P.C. as a new
independent  accountant for Greenbriar necessarily results in the termination or
dismissal of the  principal  accountant  which  audited  Greenbriar's  financial
statements in the past two fiscal years ended December 31, 2001 and 2002,  Grant
Thornton,  LLP.  During the  Registrant's  two most recent  fiscal years and any
subsequent  interim period,  Grant Thornton's  report on Greenbriar's  financial
statements for those two years did not contain an adverse  opinion or disclaimer
of opinion, nor was such opinion qualified or modified as to uncertainty,  audit
scope  or  accounting  principles,  and  no  disagreement  existed  between  the
Registrant and Grant Thornton concerning any matter of accounting  principles or
practices,  financial statement disclosure,  or auditing scope or procedure. The
decision to change  accountants  was approved by the Company's  Audit  Committee
consisting of Dan Locklear, Chairman, James Huffstickler and Victor Lund.


                                       21
<PAGE>


ITEM 9(A): CONTROLS AND PROCEDURES

Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-K, the Chief Executive  Officer/Chief  Financial  Officer
has  concluded  that  the  Company's  disclosure  controls  and  procedures  are
effective  to insure that  information  required to be disclosed in reports that
the  Company  files or  submits  under the  Securities  Exchange  Act of 1934 is
recorded,  processed,  summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. There were no significant
changes  in  the  Company's  internal  controls  or  other  factors  that  could
significantly  affect these  disclosure  controls  subsequent to the date of the
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.





                                       22
<PAGE>



                                    PART III

ITEM 10:      DIRECTORS AND EXECUTIVE OFFICERS
----------------------------------------------

Term Expires in 2004

Gene S.  Bertcher   Mr.  Bertcher  was  elected  President  and Chief  Executive
Age 55              Officer on January 3, 2003. Mr.  Bertcher has been Executive
                    Vice President, Chief Financial Officer and Treasurer of the
                    Company since November 1989 and was a director from November
                    1989 until  September  1996 and  re-elected  to the board in
                    1999. He is a certified public accountant

Roz Campisi Beadle  Ms.  Beadle  has  a  background  in  public   relations  and
Age 47              marketing.  She is self  employed  and has, in the past five
                    years,  worked with III Forks  Restaurant and RB Ranch.  Ms.
                    Beadle  is  also  extremely  active  in  various  civic  and
                    community   services  and  is  currently  working  with  the
                    Congressional  Medal of Honor  Society  and on the  Medal of
                    Honor Host City  Committee  (Gainesville,  Texas,  USA). Ms.
                    Beadle  is a  Cutting  Horse  breeder  specializing  in  the
                    registration,  buying,  selling and  veterinary  care of the
                    breed.


James E.            Mr.  Huffstickler  is Chief  Financial  Officer of  Sunchase
Huffstickler        America, Ltd., a multi-state property management company. He
Age 61              is a graduate of the  University  of South  Carolina and has
                    worked for  Southmark  Management,  Inc., a nationwide  real
                    estate management  company.  Mr. Huffstickler is a certified
                    public accountant.

Dan Locklear        Mr.  Locklear  is  chief   financial   officer  of  Sunridge
Age 51              Management  Group,  a real estate  management  company.  Mr.
                    Locklear has worked for Johnstown  Management Company,  Inc.
                    and Trammel Crow Company. Mr. Locklear is a certified public
                    accountant and a licensed real estate broker in the State of
                    Texas.
Term Expires in
2005

Victor L. Lund      Mr. Lund has been a director of the Company  since 1996 when
Age 75              a  company  he  founded,   Wedgwood  Retirement  Inns,  Inc.
                    (Wedgwood), became a wholly owned subsidiary of the Company.
                    At the time the  Company  acquired  Wedgwood,  Mr.  Lund was
                    Chairman of the Board, President and CEO


                                       23
<PAGE>
<TABLE>
<CAPTION>


Oscar Smith         Other Executive  Officers and Business  Experience Mr. Smith
Age 61              has been  Secretary of the Company since  December  2001. He
                    has been Vice  President  of the  Company  since  June 1994.
                    Prior to  joining  the  Company  he  owned  and  operated  a
                    multi-unit  retail and  manufacturing  business  in Norfolk,
                    Virginia..


Organization  of the Board of directors The board of directors has the following
committee:

                      Committee                 Members

                      Audit                     Dan Locklear - Chairman
                                                Roz Campesi Beadle
                                                James Huffstickler

                      Compensation              James E. Huffstickler, Chairman
                                                Roz Beadle
                                                Dan J. Locklear
                                                Victor L. Lund

Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company pursuant
to Rule  16a-3(e)  promulgated  under the  Securities  Exchange Act of 1934 (the
"Exchange Act"), or upon written  representations  received by the Company,  the
Company is not aware of any failure by any director, officer or beneficial owner
of more than 10% of the Company's  common stock to file with the  Securities and
Exchange Commission, on a timely basis.

ITEM 11: EXECUTIVE COMPENSATION
-------------------------------
The following tables set forth the compensation paid by the Company for services
rendered  during the fiscal years ended December 31, 2003,  2002 and 2001 to the
Chief Executive  Officer of the Company and to the other  executive  officers of
the Company whose total annual salary in 2003 exceeded  $100,000,  the number of
options  granted  to any of  such  persons  during  2003  and the  value  of the
unexercised options held by any of such persons on December 31, 2003.

                           Summary Compensation Table

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

------------------------------   ----          --------          --------          --------
<S>                              <C>            <C>                                <C>
Gene S. Bertcher,                2003           134,000              --            $  6,500
Chairman, President and Chief    2002            14,000              --               6.500
Executive Officer since 1/3/03   2001           155,000              --               8,000
and Chief Financial Officer
James R. Gilley,                 2002          $ 12,000              --            $  5,500
Chairman, President and Chief    2001           386,000            10,000             8,000
</TABLE>




                                       24
<PAGE>
<TABLE>
<CAPTION>

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

                                                     Option Grants Table
                                             (Option Grants in Last Fiscal Year)
<S>        <C>          <C>                           <C>                         <C>                    <C>
---------------------------    -------------------    -------------------------    ------------------    -------------------


                                   Percent of
                       Number of Total Options Exercise or
                                   Securities         Granted to Employees in         Base Price             Expiration
           Name                    Underlying                Fiscal Year               Per Share                Date
                                    Options
                                    Granted
---------------------------    -------------------    -------------------------    ------------------    -------------------
                                                                          NONE
---------------------------    -------------------    -------------------------    ------------------    -------------------

                                         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 2002
                        Shares Acquired        Value           Options at 2002 FY-End                   FY-End
                                                               ----------------------                   ------
        Name              on Exercise        Realized        Exercisable Unexercisable        Exercisable Unexercisable

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

---------------------- ------------------- -------------- -------------- ------------------ -------------- ----------------
                                      NONE
---------------------- ------------------- -------------- -------------- ------------------ -------------- ----------------
</TABLE>

Stock Option Plan
The Board of Directors administers the Company's 1997 Stock Option Plan (the
"1997 Plan") and the 2000 Stock Option Plan (the "2000 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. Under the two 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, none of the Plans has a pre-set
formula or criteria for determining the number of options that may be granted.
The exercise price for an option granted 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's stock plans
total 50,000 shares of common stock under the 1997 Plan and 50,000 shares of
common stock under the 2000 Plan. As of March 31, 2004 options have been granted
for all shares reserved under the 1997 Plan and 10,000 shares for the 2000 Plan.

Compensation of Directors
The Company pays each director a fee of $2,500 per year, plus a meeting fee of
$2,000 for each board meeting attended . Performance Graph The following graph
compares the cumulative total return on a $100 investment in the company's
common stock on December 31, 1999 through December 31, 2003, based on the
company's closing stock price on December 31, for each of those years. The same
information is provided using the Standard & Poor's 500 index and for an
industry peer group1.





[GRAPHIC OMITTED][GRAPHIC OMITTED]



<PAGE>


ITEM 12:      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following table sets forth as of March 31, 2004, certain information with
respect to all stockholders known by the company to own beneficially more than
5% of the outstanding common stock (which is the only outstanding class of
securities of the company, except for Series B preferred stock, the ownership of
which is immaterial), as well as information with respect to the company's
common stock owned beneficially by each director, director nominee, and current
executive officer whose compensation from the company in 2003 exceeded $100,000,
and by all directors and executive officers as a group. Unless otherwise
indicated, each of these stockholders has sole voting and investment power with
respect to the shares beneficially owned. All share numbers have been adjusted
to reflect the company's one for twenty-five reverse stock split at the close of
business on November 30, 2001, the company's one for four stock dividend on
February 4, 2002 and the Company's 2 for 1 stock split on October 20, 2003.

                                            Common Stock
                                 ------------------------------------
        Name and Address                 Number         Percent
      of Beneficial Owner                  of              of
                                         Shares          Class
-----------------------------------------------------------------

Sylvia M.  Gilley(1 & 2)                        186,884    17.7%
6211 Georgian Court
Dallas TX 75240

Victor L.  Lund(3)                              121,496    12.2%
816 NE 87th Avenue
Vancouver WA 98664

Floyd B.  Rhoades(4)                             78,023     7.7%
95 Argonaut Street
Aliso Viego CA 92656

Gene S.  Bertcher(5)                             72,811     7.3%
1755 Wittington Place
Dallas TX 75234

Warwick Summit Square, Inc..(6)                  200130    20.2%


TacCo Financial, Inc.(7)                         28,596     2.9%
One Hickory Center
1800 Valley View Lane
Dallas TX 75234

International Health Products,                    9,970     1.0%
Inc.(7)
One Hickory Center
1800 Valley View Lane
Dallas TX 75234

All executive officers and                      194,307    19.5%
directors as a group(five
persons)

(1)  The  shares  are owned by a  grantor  trust  for the  benefit  of Sylvia M.
     Gilley, the widow of James R. Gilley.

(2) Consists of 92,284 shares of common stock owned by JRG Investments Co.,
Inc., a corporation wholly owned by Sylvia M. Gilley ("JRG"); 11,000 shares of
common stock owned by a grantor trust for the benefit of Sylvia M. Gilley,
53,600 shares of common stock owned of record by Mrs. Gilley options to James R.
Gilley to purchase 20,000 shares of common stock at $6.90 per share exercisable
through December 31, 2009; options to James R. Gilley to purchase 20,000 shares
of common stock at $3.75 per share, exercisable through December 31, 2010;
options to James R. Gilley to purchase 20,000 shares of common stock at $6.40
per share, exercisable through December 31, 2011;.
            The shares owned by JRG are pledged to TacCO Financial, Inc.
(formerly known as Institutional Capital Corporation and more 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 $2,996,373.

(3)      Consists of 121,496 shares of common stock owned by Mr. Lund.

(4) Consists of 58,023 shares of common stock owned by Mr. Rhoades, options to
Mr., Rhoades to purchase 20,000 shares of common stock at $175.00 per share, and
58 shares owned by his spouse. Mr. Rhoades disclaims beneficial ownership of
shares owned by his spouse.

(5)      Consists of 72,811 shares of common stock owned by Mr. Bertcher

(6)  Consists of 200130 shares of common stock owned by Warrick  Summit  Square,
     Inc (Warrick).

(7) Based on a Schedule 13D, dated March 17, 2004, 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 acknowledge they filed such Schedule 13D as a "group".
According to the Schedule 13D, TacCo Financial, Inc. may be deemed to
beneficially own 28,596 shares. and International Health Products, Inc. may be
deemed to beneficially own 9,970 shares. The Schedule 13D further indicates that
Warrick has a note payable to a subsidiary of TacCo Financial, Inc. in the
amount of $1,752,984.The note is secured by a pledge of all the outstanding
shares of Warwick .


ITEM 13:      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships and Related Transactions
The following paragraphs describe certain transactions between the company and
any stockholder beneficially owning more than 5% of the outstanding common
stock, the executive officers and directors of the company and members of the
immediate family or affiliates of any of them, which occurred since the
beginning of the 1999 fiscal year.

On November 19, 1993 the company sold 10,000 unregistered shares of its common
stock to The April Trust, a grantor trust for the benefit of James R. Gilley,
Chairman, President and Chief Executive Officer 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 ($281.25) 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 $450,000 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
non-recourse. The note bears interest at a 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 the note to November 18, 2008.

Effective December 31, 2002 April Trust and the Company agreed to cancel the
$2,250,000 promissory note. The 10,000 shares were returned to the Company. From
an unrelated matter the Company has a note due James R Gilley's estate of
$1,081,000. This note was reduced to $631,000 to reflect the $450,000 recourse
portion of the $2,250,000 promissory note.

Gene S. Bertcher, an officer of the company, was indebted to the company for an
aggregate of $92,500, for notes issued in 1993 as payment for shares of Common
Stock. Mr. Bertcher's notes were secured by a pledge of 650 shares of common
stock. Such notes bore interest at a rate equal to any cash or stock dividends
declared on the purchased stock and were due in a single installment for each
such note on or before October 1, 2002. Upon maturity of the note the stock was
returned to the Company in full satisfaction of the obligation.

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 27,000 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. 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. On July 1, 2001 the Series D Preferred
Stock was converted to a note due June 30, 2004. The note bears interest at the
rate of 10% per annum.

The Company owned a 56% interest in a partnership, which owned two assisted
living communities in Oklahoma. The partnership leased the two communities to an
independent third party for three years and entered into a future sales contract
that obligated the lessee to purchase the two communities at the end of the
lease. If the transaction were completed as planned the Company would receive
$1,120,000 for its 56% interest. To reduce its debt the Company entered into an
agreement with Sylvia Gilley to transfer its 56% interest to the Sylvia Gilley
in exchange for a reduction in the debt of $1,120,000, which reduced its
obligation to Sylvia Gilley to $2,255,000.

It is anticipated that in the future the company's executive officers will
participate in the profits or losses derived from the company's involvement in
real estate and senior living property partnerships. The company feels that
allowing these officers to participate as partners instead of drawing large
salaries will allow the company to hold down its overhead while rewarding those
executive officers who help the company prosper.

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
non-management members of the board of directors of the company. All of the
transactions described above were so approved.



<PAGE>



ITEM 14:      PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees
Farmer, Fuqua & Huff's fees for our 2003 annual audit and review of interim
financial statements is estimated to be $40,000.

All Other Fees
Grant Thornton's fees for all other professional services rendered to the
Company during 2003 were $136,783, including audit related services of $94,259
and non-audit services of $42,524. Audit related services included fees for
statutory audits, lender required audits and accounting consultations. Non-audit
services included fees for tax preparation and tax consultations.

Audit Committee
Under the Sarbanes-Oxley Act of 2002 (the "SO Act"), and the rules of the
Securities and Exchange Commission (the "SEC"), the Audit Committee of the Board
of Directors is responsible for the appointment, compensation and oversight of
the work of the independent auditor. The purpose of the provisions of the SO Act
and the SEC rules for the Audit Committee role in retaining the independent
auditor is two-fold. First, the authority and responsibility for the
appointment, compensation and oversight of the auditors should be with directors
who are independent of management. Second, any non-audit work performed by the
auditors should be reviewed and approved by these same independent directors to
ensure that any non-audit services performed by the auditor do not impair the
independence of the independent auditor. To implement the provisions of the SO
Act, the SEC issued rules specifying the types of services that an independent
may not provide to its audit client, and governing the Audit Committee's
administration of the engagement of the independent auditor. As part of this
responsibility, the Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor in order to assure that
they do not impair the auditor's independence. Accordingly, the Audit Committee
has adopted a pre-approval policy of audit and non-audit services (the
"Policy"), which sets forth the procedures and conditions pursuant to which
services to be performed by the independent auditor are to be pre-approved.
Consistent with the SEC rules establishing two different approaches to
pre-approving non-prohibited services, the Policy of the Audit Committee covers
Pre-approval of audit services, audit-related services, international
administration tax services, non-U.S. income tax compliance services, pension
and benefit plan consulting and compliance services, and U.S. tax compliance and
planning. At the beginning of each fiscal year, the Audit Committee will
evaluate other known potential engagements of the independent auditor, including
the scope of work proposed to be performed and the proposed fees, and the
approve or reject each service, taking into account whether services are
permissible under applicable law and the possible impact of each non-audit
service on the independent auditor's independence from management. Typically, in
addition to the generally pre-approved services, other services would include
due diligence for an acquisition that may or may not have been known at the
beginning of the year. The Audit Committee has also delegated to any member of
the Audit Committee designated by the Board or the financial expert member of
the Audit Committee responsibilities to pre-approve services to be performed by
the independent auditor not exceeding $25,000 in value or cost per engagement of
audit and non-audit services, and such authority may only be exercised when the
Audit Committee is not in session.

<PAGE>
<TABLE>
<CAPTION>


                                     PART IV

ITEM 15:      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)               The following documents are filed as a part of the report:

(1)               FINANCIAL STATEMENTS: The following financial statements of
                  the Registrant and the Report of Independent Public
                  Accountants therein are filled as part of this Report on Form
                  10-K:

                  Report of Farmer, Fuqua & Huff, P.C......................F-1
                  Report of Grant Thornton, LLP............................F-1a
                  Consolidated Balance Sheets..............................F-2
                  Consolidated Statement of Operations.....................F-4
                  Consolidated Statement of Changes in Stockholders' EquityF-5
                  Consolidated Statements of Cash Flows....................F-6
                  Notes to Consolidated Financial Statements...............F-8

(2)......FINANCIAL STATEMENT SCHEDULES: Other financial statement schedules have
                  been omitted because the information required to be set forth
                  therein is not applicable, is immaterial or is shown in the
                  consolidated financial statements or notes thereto.



(b) REPORTS ON FORM 8-K: The Company did not file any reports on Form 8-K during
the quarterly period ended December 31, 2002.

(c) Exhibits: The following exhibits are filed as part of, or incorporated by
reference into, this Report on Form 10-K:

         Exhibit
         Number         Description of Exhibit
         -------------- --------------------------------------------------------------------------------------------
<S>      <C>            <C>
         2.1.1          Stock Purchase Agreement between Villa Residential Care Homes, Inc., William A. Shirley,
                        Jr. and Greenbriar Corporation ("Registrant") (filed as Exhibit 2.1.1 to Registrant's Form
                        8-K Current Report on January 13, 1998 and incorporated herein by this reference).
         2.1.2          Exchange Agreement between Villa Residential Care Homes-Corpus Christi South, L.P. and
                        Greenbriar Corporation ("Registrant") (filed as Exhibit 2.1.2 to Registrant's Form 8-K
                        Current Report on January 13, 1998 and incorporated herein by this reference).
         2.1.3          Exchange Agreement between Villa Residential Care Homes-Granbury, L.P. and Greenbriar
                        Corporation ("Registrant") (filed as Exhibit 2.1.3 to Registrant's Form 8-K Current Report
                        on January 13, 1998 and incorporated herein by this reference).
         2.1.4          Exchange Agreement between Villa Residential Care Homes-Oak Park, L.P. and Greenbriar
                        Corporation ("Registrant") (filed as Exhibit 2.1.4 to Registrant's Form 8-K Current Report
                        on January 13, 1998 and incorporated herein by this reference).
         2.1.5          Exchange Agreement between Villa Residential Care Homes-Fort Worth East, L.P. and
                        Greenbriar Corporation ("Registrant") (filed as Exhibit 2.1.5 to Registrant's Form 8-K
                        Current Report on January 13, 1998 and incorporated herein by this reference).
         2.1.6          Exchange Agreement between William A. Shirley, Jr., Lucy M. Brody and C. Kent Harrington
                        and Greenbriar Corporation ("Registrant") (filed as Exhibit 2.1.6 to Registrant's Form 8-K
                        Current Report on January 13, 1998 and incorporated herein by this reference).
         2.1.7          Certificate of Decrease in Authorized and Issued Shares
                        dated November 27, 2001, and filed with the State of
                        Nevada on November 30, 2001.
         2.2.1          Stock Purchase Agreement between Lone Star Opportunity Fund, L.P. and Greenbriar
                        Corporation ("Registrant") filed as Exhibit 2.2.1 of Registrant's Form 10-KSB for the year
                        ended December 31, 1997.
         2.2.4          Form of Registration Rights Agreement between Registrant
                        and Lone Star Opportunity Fund, L.P. as regards
                        1,400,000 shares of Registrant's Series F Senior
                        Convertible Preferred Stock and 800,000 shares of
                        Registrant's Series G Senior Non-Voting Preferred Stock
                        filed as Exhibit 2.2.4 of Registrant's Form 10-KSB for
                        the year ended December 31, 1997.
         2.2.5          Agreement between Lone Star Opportunity Fund, L.P. and
                        Registrant regarding certain minimum values of
                        Registrant's stock filed as Exhibit 2.2.5 of
                        Registrant's Form 10-KSB for the year ended December 31,
                        1997.
         3.1            Articles of Incorporation of Medical Resource Companies
                        of America ("Registrant") (filed as Exhibit 3.1 to
                        Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by
                        this reference).
         3.1.1          Restated Articles of Incorporation of Greenbriar Corporation.
         3.2            Bylaws of Registrant (filed as Exhibit 3.2 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated herein by this reference).
         3.2.1          Amendment to Section 3.1 of the Bylaws of Registrant adopted upon approval of the Merger
                        (filed as Exhibit 3.2.1 to Registrant's Form S-4 Registration Statement, Registration No.
                        33-55968, and incorporated herein by this reference).
         3.3            Certificate of Decrease in Authorized and Issued Shares.
         4.1.2          Certificate of Designations, Preferences and Rights of
                        Preferred Stock dated May 7, 1993, relating to
                        Registrant's Series B Preferred Stock (filed as Exhibit
                        4.1.2 to Registrant's Form S-3 Registration Statement,
                        Registration No. 33-64840, and incorporated herein by
                        this reference.
         4.1.4          Certificate of Designations, Preferences and Rights of
                        Preferred Stock dated March 15, 1996, relating to
                        Registrants' Series D Preferred Stock.
         4.1.6          Certificate of Voting Powers, Designations, Preferences
                        and Rights of Registrant's Series F Senior Convertible
                        Preferred Stock dated December 31, 1997, filed as
                        Exhibit 2.2.2 of Registrant's Form 10-KSB for the year
                        ended December 31, 1997.
         4.1.7          Certificate of Voting Powers, Designations, Preferences
                        and Rights of Registrant's Series G Senior Non-Voting
                        Convertible Preferred Stock dated December 31, 1997,
                        filed as Exhibit 2.2.3 of Registrant's Form 10-KSB for
                        the year ended December 31, 1997.
         10.3.2         Form of $62,500 Promissory Note dated December 27, 1991
                        payable to Registrant by Gene S. Bertcher representing
                        the purchase price for 250,000 shares (50,000 post
                        December 1995 shares) of Registrant's Common Stock
                        (filed as Exhibit 10.3.2 to Registrant's Form S-4
                        Registration Statement, Registration No. 33-55968, and
                        incorporated herein by this reference).
         10.3.3         Form of Renewal of Promissory Note dated October 14,
                        1992 extending the maturity date of the Promissory Note
                        referenced in Exhibit 10.3.2 (filed as Exhibit 10.3.3 to
                        Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by
                        this reference).
         10.3.4         Form of Security Agreement - Pledge (Non-recourse)
                        between Gene S. Bertcher and Registrant securing the
                        Promissory Note referenced in Exhibit 13.3.2. (Filed as
                        Exhibit 10.3.4 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).




                                       25

                                       26
<PAGE>


         10.4           Form of Umbrella Agreement between Greenbriar Corporation, James R. Gilley and Jon Harder,
                        Sunwest Management, Inc. et al.
         10.4.2         Form of $75,000 Promissory Note dated October 12, 1992
                        payable to Registrant by Robert L. Griffis representing
                        the purchase price for 150,000 shares (30,000 post
                        December 1995 shares) of Registrant's Common Stock
                        (filed as Exhibit 10.4.2 to Registrant's Form S-4
                        Registration Statement, Registration No. 33-55968, and
                        incorporated herein by this reference).
         10.4.3         Form of Security Agreement - Pledge (Non-recourse)
                        between Registrant and Robert L. Griffis securing the
                        Promissory Note referenced in Exhibit 10.4.2 (filed as
                        Exhibit 10.4.3 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.6.1         Form of Stock Option to purchase 100,000 shares (20,000
                        post December 1995 shares) of Registrant's Common Stock
                        issued to Oscar Smith on October 1, 1992 (filed as
                        Exhibit 10.6.1 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.6.2         Form of $50,000 Promissory Note dated October 1, 1992
                        payable to Registrant by Oscar Smith representing the
                        purchase price for 100,000 shares (20,000 post December
                        1995 shares) of Registrant's Common Stock (filed as
                        Exhibit 10.6.2 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.6.3         Form of Security Agreement - Pledge (Non-recourse)
                        between Registrant and Oscar Smith securing the
                        Promissory Note referenced in Exhibit 10.6.2 (filed as
                        Exhibit 10.6.3 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.7.1         Form of Stock Option to purchase 80,000 shares (16,000
                        post December 1995 shares) of Registrant's Common Stock
                        issued to Lonnie Yarbrough on October 12, 1992 (filed as
                        Exhibit 10.7.1 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.7.2         Form of $40,000 Promissory Note dated October 12, 1992
                        payable to Registrant by Lonnie Yarbrough representing
                        the purchase price for 80,000 shares (16,000 post
                        December 1995 shares) of Registrant's Common Stock
                        (filed as Exhibit 10.7.2 to Registrant's Form S-4
                        Registration Statement, Registration No. 33-55968, and
                        incorporated herein by this reference).
         10.7.3         Form of Security Agreement - Pledge (non-recourse)
                        between Registrant and Lonnie Yarbrough securing the
                        Promissory Note referenced in Exhibit 10.7.2 (filed as
                        Exhibit 10.7.3 to Registrant's Form S-4 Registration
                        Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.9.6         Form of $62,500 promissory note dated December 29, 1994,
                        payable to Registrant by L.A. Tuttle representing the
                        purchase price of 50,000 shares (10,000 post December
                        1995 shares) of Registrant's Common Stock (filed as
                        Exhibit 10.9.6 to Registrant's Form 10-KSB for the year
                        ended December 31, 1994).
         10.9.7         Form of Security Agreement-Pledge between Registrant and
                        L.A. Tuttle securing the promissory note reference in
                        Exhibit 10.9.6 (filed as Exhibit 10.9.7 to Registrant's
                        Form 10-KSB for the year ended December 31, 1994).
         10.13.1        Registrant's 1992 Stock Option Plan (filed as Exhibit
                        10.13 to Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by
                        this reference).
         10.13.2        Registrant's 1997 Stock Option Plan  (filed as Exhibit 4.1 to Registrant's Form S-8
                        Registration Statement, Registration No. 333-33985 and incorporated herein by this
                        reference).
         10.13.3        Registrant's 2000 Stock Option Plan (filed as Exhibit 4.1 to Registrant's Form S-8
                        Registration Statement, Registration No. 333-50868 and incorporated herein by this
                        reference).
         10.21.1        Extended and Consolidated Promissory Note in the principal amount of $5,700,000 dated
                        effective May 23, 1992 payable by JRG Investment Co., Inc. to M.S. Holding Co. Corp.
                        (filed as Exhibit 10.22.1 to Registrant's Form S-4 Registration Statement, Registration
                        No. 33-55968, and incorporated herein by this reference).
         10.22.2        Extended and Consolidated Pledge Agreement dated effective May 23, 1992 between JRG
                        Investment Co., Inc. and M.S. Holding Co. Corp. securing the Note referenced in Exhibit
                        10.22.1 (filed as Exhibit 10.22.2 to Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by this reference).
         10.22.3        Pledge Agreement dated as of May 23, 1992 between James R. Gilley and M.S. Holding Co.
                        Corp. (filed as Exhibit 10.22.3 to Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by this reference).
         10.22.4        Irrevocable Proxy from James R. Gilley to M.S. Holding Co. Corp. relating to shares of
                        capital stock of JRG Investment Co., Inc. (filed as Exhibit 10.22.4 to Registrant's Form
                        S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by this
                        reference).
         10.22.5        Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to
                        482,000 (96,400 post December 1995 shares) shares of Registrant's Common Stock (filed as
                        Exhibit 10.22.5 to Registrant's Form S-4 Registration Statement, Registration No.
                        33-55968, and incorporated herein by this reference).
         10.22.6        Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to
                        1,268,000 shares (236,600 post December 1995 shares) of Registrant's Common Stock (filed
                        as Exhibit 10.22.6 to Registrant's Form S-4 Registration Statement, Registration No.
                        33-55968, and incorporated herein by this reference).
         10.22.7        Three Blank Assignments and Powers of Attorney signed by JRG Investment Co., Inc., each
                        relating to 600,000 shares (120,000 post December 1995 shares) of Registrant's Common
                        Stock (filed as Exhibit 10.22.7 to Registrant's Form S-4 Registration Statement,
                        Registration No. 33-55968, and incorporated herein by this reference).
         10.22.8        Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to
                        2,281,818 shares of Registrant's Common Stock (filed as Exhibit 10.22.8 to Registrant's
                        Form S-4 Registration Statement, Registration No. 33-55968, and incorporated herein by
                        this reference).
         10.22.9        Blank Assignment and Power of Attorney signed by JRG Investment Co., Inc. relating to
                        905,557 shares of Registrant's Series A Preferred Stock (filed as Exhibit 10.22.9 to
                        Registrant's Form S-4 Registration Statement, Registration No. 33-55968, and incorporated
                        herein by this reference).
         10.37          Employment Agreements dated December 31, 1996
         10.37.1        Modified Employment Contract between the Company and James R. Gilley
         10.37.2        Modified Employment Contract between the Company and Gene S. Bertcher
         10.38          Stock Purchase Warrant dated December 31, 1996 between registrant and The April Trust
         10.39          Portfolio Divestiture Agreement between certain subsidiaries of the Company, the Company,
                        Health Care REIT and HCRI Texas Properties, Ltd.
         14*            Code of Ethics for Senior Financial Officers
         16.1           Letter from Grant Thornton, LLP agreeing with statements filed with the Company's Form
                        8-K, dated February 9, 2004 and incorporated herein by reference.
         21.1*          Subsidiaries of Registrant.
         23.1*          Consent of Farmer, Fuqua & Hunt, P.C.
         23.2*          Consent of Grant Thornton, LLP
         31.1*          Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule
                        13a-14(a) or Rule 15d-14(a)
         32.1*          Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule
                        13a-14(b), 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002
         99.1           Press Release regarding a pre-assessment letter from the
                        Internal Revenue Service dated January 8, 2004, filed
                        with the Company's Form 8-K on January 8, 2004, and
                        incorporated herein by reference.
          *           Filed herewith.
</TABLE>



<PAGE>


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-K to be
signed on its behalf by the undersigned, thereunto duly authorized

                          GREENBRIAR ORPORATION


April 11, 2003        by:    /s/ Gene S. Bertcher
                          Gene S. Bertcher, President, Chief Executive Officer\
                           and Chairman of the Board
                          of Directors


In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.



      April 11, 2003             ____/s/ Gene S. Bertcher___________
                                     --------------------
                                      Gene S. Bertcher, President, Chief
                                      Executive Officer and Director
      April 11, 2003             ___/s/ Roz Campesi Beadle________
                                    ----------------------
                                      Roz Campesi Beadle, Director
      April 11, 2003             ___/s/ James Huffstickler__________
                                      James Huffstickler, Director
      April 11, 2003             ___/s/ Dan Locklear______________
                                      Dan Locklear, Director
      April 11, 2003             ___/s/ Victor Lund_______________
                                      Victor. Lund, Director




                                       27
<PAGE>




               Report of Independent Certified Public Accountants




Board of Directors and Stockholders
Greenbriar Corporation


We have  audited  the  accompanying  consolidated  balance  sheet of  Greenbriar
Corporation (a Nevada  corporation) and subsidiaries as of December 31, 2003 and
the related  consolidated  statements of  operations,  changes in  stockholders'
equity and cash flows for the year ended  December  31,  2003.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  We believe our audits  provide a reasonable
basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  Greenbriar
Corporation  and  subsidiaries  as of December  31, 2003,  and the  consolidated
results of their operations and their consolidated cash flows for the year ended
December 31, 2003, in conformity with accounting  principles  generally accepted
in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note P to the
consolidated  financial  statements,  the Company was  notified by the  Internal
Revenue Service of potential  penalties that may be assessed against the Company
as a result of the sale of certain  bonds in 1992.  The Company is  currently in
discussions with the Internal Revenue Service to resolve the matter. The Company
cannot  predict the outcome of these  discussions,  nor the  ultimate  amount of
penalties,  if any,  which may be assessed.  This condition  raises  substantial
doubt  about  the  Company's  ability  to  continue  as a going  concern.  These
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.


/s/ FARMER, FUQUA & HUFF, P.C.

Plano, Texas
April 13, 2004



<PAGE>



               Report of Independent Certified Public Accountants




Board of Directors and Stockholders
Greenbriar Corporation


We have  audited  the  accompanying  consolidated  balance  sheet of  Greenbriar
Corporation (a Nevada corporation) and subsidiaries as of December 31, 2002, and
the related  consolidated  statements of  operations,  changes in  stockholders'
equity and cash flows for each of the two years in the period ended December 31,
2002.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  We believe our audits  provide a reasonable
basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  Greenbriar
Corporation  and  subsidiaries  as of December  31, 2002,  and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
two years in the period ended December 31, 2002, in conformity  with  accounting
principles generally accepted in the United States of America.

As discussed in Note O to the consolidated financial statements, on January 1,
2002, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets."


/s/ GRANT THORNTON, LLP

Dallas, Texas
March 18, 2003


<PAGE>
<TABLE>
<CAPTION>




                     Greenbriar Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in thousands)

                                  December 31,



                   ASSETS                                          2003        2002
                                                                 --------    --------
<S>                                                              <C>         <C>
CURRENT ASSETS
    Cash and cash equivalents                                    $    688    $    661
    Accounts receivable - trade                                       100          22
    Notes receivable                                                2,435       1,238
    Other current assets, net                                         198         323
                                                                 --------    --------

               Total current assets                                 3,421       2,244

NOTES RECEIVABLE, from sale of properties                           4,107       7,997
    Less deferred gains                                            (3,720)     (6,127)
                                                                 --------    --------
                                                                      387       1,870

PROPERTY AND EQUIPMENT, AT COST
    Land and improvements                                           2,758         678
    Buildings and improvements                                      9,410       6,850
    Equipment and furnishings                                       1,317       1,387
    Proven oil and gas properties (full cost method)                1,361        --
                                                                 --------    --------
                                                                   14,846       8,915
    Less accumulated depreciation, depletion, and amortization     (2,233)     (2,282)
                                                                 --------    --------
                                                                   12,613       6,633

DEFERRED INCOME TAX BENEFIT                                         1,161       1,161

DEPOSITS                                                              232         311

OTHER ASSETS, NET                                                     317         405
                                                                 --------    --------

                                                                 $ 18,131    $ 12,624
                                                                 ========    ========
</TABLE>


                                      F-2

<PAGE>
<TABLE>
<CAPTION>




                     Greenbriar Corporation and Subsidiaries

                     CONSOLIDATED BALANCE SHEETS - CONTINUED
                  (Amounts in thousands, except share amounts)

                                  December 31,



    LIABILITIES AND STOCKHOLDERS' EQUITY                          2003        2002
                                                                --------    --------
<S>                                                             <C>         <C>
CURRENT LIABILITIES
    Current maturities of long-term debt, including amounts
       To related parties of $2,783,000                         $  4,690    $    113
    Current notes payable                                          5,571        --
    Accounts payable - trade                                         503         405
    Accrued expenses                                                 633         367
    Other current liabilities                                        931         668
                                                                --------    --------

               Total current liabilities                          12,328       1,553

LONG-TERM DEBT 2,053                                               8,479

INVESTMENT IN AFFILIATE                                             --            46

DEFERRED GAIN                                                        740         740

OTHER LONG-TERM LIABILITIES                                          456         455
                                                                --------    --------

               Total liabilities                                  15,577      11,273

CONTINGENCIES                                                       --          --

STOCKHOLDERS' EQUITY
    Preferred stock (liquidation value of $100)                        1           1
    Common stock, $.01 par value; authorized, 4,000,000
       shares; issued and outstanding, 977,000 shares in 2003
       and 688,000 in 2002                                            10           7
    Additional paid-in capital                                    55,966      54,988
    Accumulated deficit                                          (53,423)    (53,645)
                                                                --------    --------

                                                                   2,554       1,351
                                                                --------    --------

                                                                $ 18,131    $ 12,624
                                                                ========    ========
</TABLE>



                   The accompanying notes are an integral part
                              of these statements.

                                       F-3

<PAGE>
<TABLE>
<CAPTION>




                     Greenbriar Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Amounts in thousands, except share amounts)

                             Year ended December 31,


                                                                 2003        2002        2001
                                                               --------    --------    --------
<S>                                                            <C>         <C>         <C>
Revenue
    Assisted living operations                                 $  4,585    $  4,422    $ 23,568
    Oil and gas operations                                          449        --          --
                                                               --------    --------    --------
                                                                  5,034       4,422      23,568
                                                               --------    --------    --------

Operating expenses
    Assisted living operations                                    2,522       2,233      15,006
    Oil and gas operations                                          400        --          --
    Lease expense 1,412                                           1,618       2,391
    Depreciation, depletion, and amortization                       331         321       2,035
    Termination of employment contracts                            --          --         1,349
    General and administrative                                    1,111       2,329       4,875
    Management fees                                                  35        --          --
    Write-down of assets                                           --           266       1,887
                                                               --------    --------    --------
                                                                  5,811       6,767      27,543
                                                               --------    --------    --------

                  Operating loss                                   (777)     (2,345)     (3,975)

Other income (expense)
    Interest and dividend income                                    304         412         212
    Interest expense                                               (705)       (840)     (3,280)
    Net gain on sale of assets                                    1,058         930        --
    Other income (expense), net                                     342      (1,153)     16,602
                                                               --------    --------    --------
                                                                    999        (651)     13,534
                                                               --------    --------    --------

                  Earnings (loss) before income taxes               222      (2,996)      9,559

Income tax expense                                                 --           749       2,824
                                                               --------    --------    --------

                  Earnings (loss) from continuing operations        222      (3,745)      6,735

Discontinued operations
    Loss from operations                                           --          (627)       (317)
    Loss on disposal, including taxes of $440                      --        (4,001)       --
                                                               --------    --------    --------

                  Loss from discontinued operations                --        (4,628)       (317)
                                                               --------    --------    --------

                  NET EARNINGS (LOSS)                               222      (8,373)      6,418

Preferred stock dividend requirement                               --            (4)       (160)
                                                               --------    --------    --------

Net earnings (loss) allocable to common stockholders           $    222    $ (8,377)   $  6,258
                                                               ========    ========    ========
</TABLE>



                   The accompanying notes are an integral part
                              of these statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>


                     Greenbriar Corporation and Subsidiaries

                CONSOLIDATED STATEMENTS OF OPERATIONS - Continued
                  (Amounts in thousands, except share amounts)

                             Year ended December 31,


                                                             2003          2002           2001
                                                        -----------   -----------    -----------
<S>                                                     <C>           <C>            <C>
Basic and diluted earnings (loss) per share
    Continuing operations                               $       .31   $     (4.88)   $      8.15
    Discontinued operations                                    --           (6.79)          (.39)
                                                        -----------   -----------    -----------

                  Net earnings (loss) per share         $       .31   $    (11.67)   $      7.76
                                                        ===========   ===========    ===========


Weighted average number of common shares outstanding:
    Basic and diluted
                                                            706,000       718,000        806,000
</TABLE>



















                  The accompanying notes are an integral part
                              of these statements.

                                       F-4


<PAGE>
<TABLE>
<CAPTION>



                     Greenbriar Corporation and Subsidiaries

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                             (Amounts in thousands)



                                                       Preferred stock         Common stock
                                                   --------------------    --------------------
                                                    Shares      Amount      Shares      Amount
                                                   --------    --------    --------    --------

<S>                                                <C>         <C>         <C>         <C>
Balance at January 1, 2001                            2,521         254         730           7

    Accretion of redemption obligation -
       preferred stock                                 --          --          --          --
    Conversion of preferred stock to
       common stock                                  (1,845)       (185)        106           1
    Conversion of preferred stock
       to debt                                         (675)        (68)       --          --
    Dividends on preferred stock                       --          --          --          --
    Common stock acquired                              --          --          (118)         (1)
    Net earnings                                       --          --          --          --
                                                   --------    --------    --------    --------

Balance at December 31, 2001                              1           1         718           7

    Write-off of stock purchase notes receivable       --          --           (30)       --
    Dividend on preferred stock                        --          --          --          --
    Other                                              --          --          --          --
    Stock purchase notes receivable reclassified
       as a reduction of related party debt            --          --          --          --
    Net loss                                           --          --          --          --
                                                   --------    --------    --------    --------

Balance at December 31, 2002                              1           1         688           7

    Dividend on preferred stock                        --          --          --          --
    Conversion of obligation to common stock           --          --            23        --
    Common stock acquired                              --          --            (5)       --
    Common stock issued                                --          --           271           3
    Net earnings                                       --          --          --          --
                                                   --------    --------    --------    --------

Balance at December 31, 2003                              1    $      1         977    $     10
                                                   ========    ========    ========    ========
</TABLE>
                   The accompanying notes are an integral part
                               of this statement.

                                       F-5

<PAGE>
<TABLE>
<CAPTION>




                     Greenbriar Corporation and Subsidiaries

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                             (Amounts in thousands)


                                                                            Stock
                                                  Additional               purchase
                                                   paid in   Accumulated    notes
                                                   capital      deficit   receivable    Total
                                                   --------    --------    --------    --------

<S>                                                <C>         <C>         <C>         <C>
Balance at January 1, 2001                           60,288     (51,526)     (2,367)      6,656

    Accretion of redemption obligation -
       preferred stock                                 (179)       --          --          (179)
    Conversion of preferred stock to
       common stock                                     184        --          --          --
    Conversion of preferred stock
       to debt                                       (3,307)       --          --        (3,375)
    Dividends on preferred stock                       --          (160)       --          (160)
    Common stock acquired                               (90)       --          --           (91)
    Net earnings                                       --         6,418        --         6,418
                                                   --------    --------    --------    --------

Balance at December 31, 2001                         56,896     (45,268)     (2,367)      9,269

    Write-off of stock purchase notes receivable     (1,908)       --         1,905          (3)
    Dividend on preferred stock                        --            (4)       --            (4)
    Other                                              --          --            12          12
    Stock purchase notes receivable reclassified
       as a reduction of related party debt            --          --           450         450
    Net loss                                           --        (8,373)       --        (8,373)
                                                   --------    --------    --------    --------

Balance at December 31, 2002                         54,988     (53,645)       --         1,351

    Dividend on preferred stock                        --          --          --          --
    Conversion of obligation to common stock           --          --          --          --
    Common stock acquired                                (9)       --          --            (9)
    Common stock issued                                 987        --          --           990
    Net earnings                                       --           222        --           222
                                                   --------    --------    --------    --------

Balance at December 31, 2003                       $ 55,966    $(53,423)   $   --      $  2,554
                                                   ========    ========    ========    ========
</TABLE>






<PAGE>
<TABLE>
<CAPTION>



                     Greenbriar Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)





                                                               Year ended December 31,
                                                          --------------------------------
                                                            2003        2002        2001
                                                          --------    --------    --------
<S>                                                       <C>         <C>         <C>
Cash flows from operating activities
    Net earnings (loss)                                   $    222    $ (8,373)   $  6,418
    Adjustments to reconcile net earnings (loss) to net
       cash provided by (used in) operating activities
          Depreciation and amortization                        330         321       2,329
          (Gain) loss from affiliate                          (131)        612        --
          (Gain) loss on sale of properties                 (1,058)      3,561     (16,635)
          Employment contract termination                     --          --         1,349
          Write down of impaired assets                       --           266       1,887
          Deferred income taxes                               --         1,189       2,400
          Changes in operating assets and liabilities
                Accounts receivable - trade                    (45)        395         252
                Other current and noncurrent assets            174        (927)        809
                Accounts payable and other liabilities          22        (929)     (1,391)
                                                          --------    --------    --------

                  Net cash provided by (used in)
                    operating activities                      (486)     (3,885)     (2,582)

Cash flows from investing activities
    Purchase of property and equipment                      (1,225)       (285)    (24,294)
    Net repayment of notes receivable                          334        --          --
    Proceeds from sale of investments                         --         1,098        --
    Purchase of investments                                   --          --        (1,098)
    Proceeds from sales of properties                          126       7,460      33,550
                                                          --------    --------    --------

                   Net cash provided by (used in)
                      investing activities                    (765)      8,273       8,158
</TABLE>


                   The accompanying notes are an integral part
                              of these statements.

                                       F-7
<PAGE>
<TABLE>
<CAPTION>


                     Greenbriar Corporation and Subsidiaries

                CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
                             (Amounts in thousands)





                                                                                  Year ended December 31,
                                                                      ---------------------------------------------
                                                                2003        2002        2001
                                                              --------    --------    --------

<S>                                                           <C>         <C>          <C>
Cash flows from financing activities
    Proceeds from common stock issuance                            792        --          --
    Proceeds from borrowings                                       500       1,730      15,788
    Payments on debt                                               (90)     (6,699)    (18,045)
    Distributions from equity partnership's
       financing cash flow                                          85        --          --
    Dividends on preferred stock                                  --            (4)       (160)
    Repurchase of common stock                                      (9)       --          --
    Extinguishment of preferred stock redemption obligation       --          --        (4,200)
                                                              --------    --------    --------

                Net cash provided by (used in)
                   financing activities                          1,278      (4,973)     (6,617)
                                                              --------    --------    --------

                Net increase (decrease) in cash
                   and cash equivalents                             27        (585)     (1,041)

Cash and cash equivalents at beginning of year                     661       1,246       2,287
                                                              --------    --------    --------

Cash and cash equivalents at end of year                      $    688    $    661    $  1,246
                                                              ========    ========    ========
</TABLE>

                                      F-8

<PAGE>



                     Greenbriar Corporation and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Operations
     --------------------

     Greenbriar Corporation,  its subsidiaries and affiliates (the "Company") is
     principally a real estate company which owns or leases retirement  specific
     real estate and an outlet  shopping  mall. In addition the Company owns oil
     and gas  leases.  The  Company  strives  to  enhance  the  value  of  these
     properties by proper operations and marketing.  The Company can then, if it
     wishes, sell or lease the properties at their appreciated value.

     As of December  31,  2003,  the  Company  owns or leases  three  retirement
     communities  in three states.  The Company  operates two of the  retirement
     communities  with a capacity of 162 residents and leases one community to a
     third party. The Company owns an outlet shopping mall in Gainesville, Texas
     with approximately 315,000 square feet of retail space available for lease.
     In addition  the Company  owns  approximately  200 oil wells in East Texas.
     These are low production wells with maximum production limits of 20 barrels
     of oil per day. As of March 31, 2004 there are 50 wells in operation.

     A summary of the significant accounting policies applied in the preparation
     of the accompanying consolidated financial statements follows:

     Principles of Consolidation
     ---------------------------

     The consolidated  financial  statements  include the accounts of Greenbriar
     Corporation and its majority-owned subsidiaries (collectively, the Company)
     and are prepared on the basis of accounting  principles  generally accepted
     in the United States of America. All significant intercompany  transactions
     and accounts have been eliminated.

     Assisted Living Community Revenue
     ---------------------------------

     Assisted  living  community  revenue  is  reported  at  the  estimated  net
     realizable   value  based  upon  expected  amounts  to  be  recovered  from
     residents,  third party payors, and others for services rendered.  Services
     provided  by certain of the  Company's  communities  are  reimbursed  under
     various state assistance plans.

     Depreciation
     ------------

     Depreciation  is provided for in amounts  sufficient  to relate the cost of
     property and equipment to operations  over their  estimated  service lives,
     ranging from 3 to 40 years.  Depreciation is computed by the  straight-line
     method.


                                      F-9

<PAGE>


                     Greenbriar Corporation and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED





NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES -
     Continued

     Use of Estimates
     ----------------

     In preparing financial statements in conformity with accounting  principles
     generally accepted in the United States of America,  management is required
     to make  estimates  and  assumptions  that affect the  reported  amounts of
     assets  and  liabilities  and  the  disclosure  of  contingent  assets  and
     liabilities  at the  date of the  financial  statements  and  revenues  and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.


     Cash Equivalents
     ----------------

     The Company considers all short-term  deposits and money market investments
     with a maturity of less than three months to be cash equivalents.

     Impairment of Notes Receivable
     ------------------------------

     Notes  receivable  are  identified  as impaired  when it is  probable  that
     interest and principal will not be collected  according to the  contractual
     terms of the note  agreements.  The accrual of interest is  discontinued on
     such  notes,  and no income is  recognized  until all past due  amounts  of
     principal  and interest are  recovered in full.  No notes were deemed to be
     impaired at December 31, 2002 and 2003.

     Impairment of Long-Lived Assets
     -------------------------------

     The  Company  reviews  its  long-lived  assets  and  certain   identifiable
     intangibles for impairment when events or changes in circumstances indicate
     that the carrying amount of the assets may not be recoverable. In reviewing
     recoverability,  the Company  estimates  the future cash flows  expected to
     result from use of the assets and eventually  disposing of them. If the sum
     of the  expected  future  cash flows  (undiscounted  and  without  interest
     charges) is less than the carrying  amount of the asset, an impairment loss
     is recognized based on the asset's fair value.

     The  Company  determines  the fair  value of assets to be  disposed  of and
     records  the  asset  at the  lower of fair  value  less  disposal  costs or
     carrying value. Assets are not depreciated while held for disposal.

     Reclassifications
     -----------------

     Certain  prior year  amounts  have been  reclassified  to conform  with the
     current year presentation.

                                      F-10

<PAGE>
<TABLE>
<CAPTION>


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES -
     Continued

     Stock Options
     -------------

     The Company has elected to follow  Accounting  Principles Board Opinion No.
     25,  Accounting  for Stock  Issued  to  Employees  (APB 25) in its  primary
     financial statements and has provided supplemental  disclosures required by
     Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
     for  Stock-Based  Compensation"  and by Statement  of Financial  Accounting
     Standards No. 148,  "Accounting for  Stock-Based  Compensation - Transition
     and Disclosure an Amendment of SFAS No. 123."

     Options  were  granted  at market  during  2003 and 2001,  are  exercisable
     immediately, and expire 5 and 10 years from date of grant, respectively.

     SFAS 123 requires disclosure of pro forma net earnings (loss) and pro forma
     net earnings  (loss) per share as if the fair value method had been applied
     in measuring compensation cost for stock-based awards.


     Reported  and pro forma net  earnings  (loss) and net  earnings  (loss) per
     share amounts are set forth below (in thousands, except per share data):

                                                        2003       2002       2001
                                                       -------    -------    -------
<S>                                                    <C>        <C>        <C>
Net earnings (loss) allocable to common stockholders
     As reported                                       $   222    $(8,377)   $ 6,258
     Deduct:  total stock-based compensation under
         fair value based method for all awards            (43)      (464)      (369)
                                                       -------    -------    -------

     Pro forma                                         $   179    $(8,841)   $ 5,889
                                                       =======    =======    =======

Net earnings (loss) per share
     As reported                                       $   .31    $(11.67)   $  7.76
     Pro forma                                         $   .25    $(12.31)   $  7.31
</TABLE>


     The fair value of these  options was  estimated at the date of grant during
     2003 and  2001  using  the  Black-Scholes  option  pricing  model  with the
     following weighted-average  assumptions: no dividends;  expected volatility
     of 20 percent in 2003, and 317 percent in 2001; risk-free interest rates of
     4.24 percent for 2003, 5.0 percent for 2001; and weighted  average expected
     lives of 5 years for 2003 and 6.8 years for 2001.

                                      F-11

<PAGE>


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES -
     Continued

     Earnings (Loss) Per Common Share
     --------------------------------

     Basic  earnings  (loss) per common share is based on the  weighted  average
     number of common shares  outstanding.  Diluted earnings (loss) per share is
     computed based on the weighted average number of common shares  outstanding
     plus  the  number  of  additional   common  shares  that  would  have  been
     outstanding if dilutive  potential common shares had been issued.  In 2003,
     2002 and 2001,  stock  options  for  approximately  140,000,  280,000,  and
     280,000 shares, respectively, were excluded from diluted shares outstanding
     because their effect was anti-dilutive.

     Investment in Affiliate
     -----------------------

     The Company  accounts for its  investment  in  affiliate,  in which it is a
     limited partner, by the equity method of accounting.

     Stock Split and Stock Dividend
     ------------------------------

     The Company  declared a  one-for-twenty-five  reverse stock split effective
     December 1, 2001.  Due to the reduced  stock float  available in the public
     market,  the  Company  declared a  twenty-five  percent  stock  dividend to
     stockholders of record on January 25, 2002 and a two-for-one stock split on
     October 31,  2003.  All share data has been  restated to give effect to the
     stock split and stock dividend.

     Sales of Real Estate
     --------------------

     Gains on sales of real estate are  recognized  to the extent  permitted  by
     SFAS No. 66,  "Accounting for Sales of Real Estate." Until the requirements
     of SFAS No.  66 have  been  met for  full  profit  recognition,  sales  are
     accounted  for by the  installment  or cost recovery  method,  whichever is
     appropriate.

     New Accounting Pronouncements
     -----------------------------

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
     Impairment or Disposal of Long-Lived  Assets," which addresses how and when
     to  measure  impairment  on  long-lived  assets  and  how  to  account  for
     long-lived  assets that an entity plans to dispose of either  through sale,
     abandonment,  exchange, or distribution to owners. The Company adopted SFAS
     No. 144 as of January 1, 2002. See Note O for a discussion of the impact on
     the Company from the adoption of SFAS No. 144.

                                      F-12


<PAGE>


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES -
     Continued


     In November  2002,  the FASB  issued  Interpretation  No. 45,  "Guarantor's
     Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
     Guarantees of  Indebtedness  of Others" (FIN 45). FIN 45 requires that upon
     issuance of a guarantee,  a guarantor  must  recognize a liability  for the
     fair value of an obligation assumed under a guarantee. FIN 45 also requires
     additional  disclosures by a guarantor in its interim and annual  financial
     statements  about the obligations  associated with guarantees  issued.  The
     recognition provisions of FIN 45 are effective for any guarantees issued or
     modified after December 31, 2002. .

     The  disclosure  requirements  are effective  for  financial  statements of
     interim or annual  periods  ending after December 15, 2002. The adoption of
     FIN 45 is not expected to have a material effect on the Company's financial
     position or results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No.
     123,  "Accounting for  Stock-Based  Compensation,"  to provide  alternative
     methods of transition for a voluntary change to the fair value based method
     of accounting for stock-based employee compensation.  In addition, SFAS No.
     148 amends the disclosure requirements of SFAS No. 123 to require prominent
     disclosures  in both  annual and  interim  financial  statements  about the
     method of accounting for stock-based  employee  compensation and the effect
     of the method  used on  reported  results.  SFAS No. 148 is  effective  for
     fiscal years  beginning  after  December 15, 2002.  The interim  disclosure
     provisions  are  effective  for  financial  reports  containing   financial
     statements  for interim  periods  beginning  after  December 15, 2002.  The
     Company has adopted the disclosure provisions of this statement.

     In  December  2003,  the FASB issued a revised  FIN 46,  "Consolidation  of
     Variable Interest Entities." FIN 46 clarifies the application of Accounting
     Research  Bulletin 51,  "Consolidated  Financial  Statements."  For certain
     entities  that do not have  sufficient  equity  at risk for the  entity  to
     finance its activities  without additional  subordinated  financial support
     from  other  parties  or  in  which  equity   investors  do  not  have  the
     characteristics  of a controlling  financial interest  ("variable  interest
     entities").  Variable  interest entities within the scope of FIN 46 will be
     required  to be  consolidated  by their  primary  beneficiary.  The primary
     beneficiary  of a variable  interest  entity is  determined to be the party
     that  absorbs a  majority  of the  entity's  expected  losses,  receives  a
     majority of its expected  returns,  or both. FIN 46 applies  immediately to
     variable interest entities created after December 31, 2003, and to variable
     interest  entities in which an  enterprise  obtains an interest  after that
     date. It applies in the first fiscal year or interim period beginning after
     March 15, 2003, to variable  interest entities in which an enterprise holds
     a  variable   interest  that  it  acquired  before  January  1,  2004.  Our
     determination  is that the  adoption of the  provisions  of FIN 46 will not
     have  a  material  impact  upon  our  financial  condition  or  results  of
     operations.

                                      F-13

<PAGE>
<TABLE>
<CAPTION>


NOTE B - CASH FLOW INFORMATION

     Supplemental information on cash flows is as follows (in thousands):

                                                              Year ended December 31,
                                                             ------------------------
                                                             2003     2002     2001
                                                             ------   ------   ------

<S>                                                          <C>      <C>      <C>
Interest paid                                                $  515   $2,215   $4,958
Income taxes paid                                              --        129       82

Noncash investing and financing activities (in thousands):
   Assets transferred in settlement of preferred stock
       redemption obligations, net of mortgage loans
       of $36,981                                              --       --      6,837
   Notes received from sale of assets                          --      1,050    6,400
   Note given in connection with purchase of
       property by affiliated partnership                      --       --      1,600
   Notes given in connection with purchase of property        5,804     --       --
   Common stock received in payment of note receivable         --       --         80
   Common stock received in settlement of preferred stock
       obligation                                              --       --         11
   Common stock issued in connection with satisfaction
       of note to executive officer                             198     --       --
   Purchase of oil and gas property in exchange
       for note receivable                                    1,169     --       --
</TABLE>



NOTE C - DEFERRED GAINS ON SALE OF PROPERTY

     As a  result  of the sale of two  communities  in 2001  the  Company  holds
     tax-exempt  notes for a total of $4,030,000  bearing  interest at 9.5%. The
     notes mature on April 1, 2032, and August 1, 2031 respectively.

     The  repayment  of the notes is limited to the cash flow of the  respective
     properties  either from  operations,  refinancing  or sale. The Company has
     deferred gains in the amount of $3,720,000 and $6,127,000 in 2003 and 2002,
     respectively.  The deferred gains and interest income will be recognized as
     cash is received.

                                      F-14


<PAGE>


NOTE D - EMPLOYMENT CONTRACT TERMINATIONS

     In January 1997,  the Company  negotiated  employment  contracts with James
     Gilley (the then Chief Executive Officer) and Gene Bertcher (the then Chief
     Financial  Officer) of the Company.  Both  individuals had been employed by
     the Company since 1989. The employment contracts called for combined annual
     salaries of $640,000  per year and provided  that,  if the  contracts  were
     terminated or amended,  the individuals would be entitled to a cash payment
     of three  years  salary for Gilley and two years  salary for  Bertcher.  In
     light of the reduced size of the Company, the independent directors and the
     officers in October 2001 agreed to modify the  employment  agreements  with
     the two officers.  The two officers each agreed to continue  their roles in
     the  Company for $12,000 per year for three  years.  The  revisions  in the
     contracts triggered contract  termination payments requiring the Company to
     immediately  pay the two  officers  $1,740,000.  However,  the two officers
     agreed to accept  non-interest  bearing notes due December 31, 2004.  These
     notes have  certain  acceleration  provisions  if the Company  violates the
     terms  of  the  revised  employment  contracts.  For  accounting  purposes,
     interest has been imputed on the notes at 8.5%,  resulting in a discount of
     $391,000.  The net amount of the notes of $1,349,000  was expensed in 2001.
     In 2002,  the notes were  reduced by  $881,600 as an offset for amounts due
     the  company.  During 2003,  the note to Bertcher was  satisfied by issuing
     stock in the amount of  $197,809,  net of discount of $29,591.  At December
     31,  2003,  the balance of the notes  payable to Gilley,  net of  remaining
     discount of $103,000, was $528,000.


NOTE E - AFFILIATED PARTNERSHIPS

     In October 2001,  the Company  became a 56% limited  partner in Corinthians
     Real  Estate  Investors  LP (CREI),  a  partnership  formed to acquire  two
     properties.  The general partner is a limited  liability  corporation whose
     controlling  member was James Gilley.  Mr. Gilley was the former CEO of the
     Company. Mr. Gilley's estate has a 25.9% interest,  the general partner has
     a .1% interest, the Company's chief financial officer has a 10.5% interest,
     and other  employees of the Company have  interests  aggregating  7.5%.  In
     October  2001,  CREI  acquired a  retirement  community  for  approximately
     $9,100,000  and in January 2002, it acquired an assisted  living  community
     for approximately $2,800,000.

     The  Company  issued a  $1,600,000  note to the  seller in 2001 as  partial
     payment for the purchase of the retirement community. CREI gave the Company
     a  $1,600,000  note in  consideration  for  payment  of that  amount of the
     purchase  price.  The note bears interest at 8.75% and was due December 30,
     2003.  The balance of the purchase  price was funded by  borrowings by CREI
     from a third party in the amount of $7,840,000, which was guaranteed by the
     Company.  CREI also had debt in the amount of  $3,975,000  at December  31,
     2001 collateralized by the assisted living community that was guaranteed by
     the Company. CREI paid both of the latter two amounts in 2002.

     The Company  accounts for its investment in CREI by the equity method.  The
     Company  recorded  income of $131,733  in 2003 and losses of  $692,338  and
     $95,947 for 2002 and 2001,  respectively.  These  amounts  are  included in
     other income (expense), net in the accompanying financial statements.

     In September 2002, CREI sold its two properties for cash and notes and paid
     off its debt. As part of the proceeds,  CREI received a note for $1,600,000
     which was transferred to the Company in satisfaction of its $1,600,000 note
     receivable  from  CREI.  CREI  also  assigned  to the  Company  a  $400,000
     participation in another note in payment of other CREI debt to the Company.

                                      F-15

<PAGE>


NOTE E - AFFILIATED PARTNERSHIPS - Continued

     The  Company  transferred  the  $1,600,000  note it received in 2002 to the
     original  owner of the  retirement  community  in payment of the  Company's
     $1,600,000 debt. The Company guaranteed payment of the $1,600,000 note.

     CREI recognized a gain on sale in the amount of $1,322,000. The Company has
     deferred  recognition  of its share  ($740,000)  of the gain because of the
     aforementioned  guaranty.  CREI has  deferred  a gain on sale in the amount
     $994,000  that will be recognized on the  installment  method.  The Company
     will realize its $577,000 (56%) portion of the $944,000 upon  collection of
     the notes held by CREI. The notes are due September 30, 2004.

     In January 2002 the Company became a 56% limited  partner in a partnership,
     Muskogee Real Estate Investors  (MREI),  which acquired two assisted living
     communities  in Muskogee,  OK,  including one  community  acquired from the
     Company. In September 2002 MREI leased the two communities to a third party
     for three years.  The lessee has  committed to purchase the two  properties
     during  the  three-year  period for  $6,000,000.  The  current  debt on the
     property is approximately $4,000,000.

     The Company had a note to Sylvia M.  Gilley,  wife of the former CEO of the
     Company, for $3,375,000.  In November 2002, the Company transferred its 56%
     interest in MREI to Mrs.  Gilley in exchange for a reduction of  $1,120,000
     on the debt and a one-year  extension on the due date of the Company's note
     to  Mrs.  Gilley.  The  Company  recognized  a  gain  of  $929,956  on  the
     transaction.

     The Company  accounted for its  investment in MREI using the equity method.
     The Company recorded income of $80,215 during 2002.

     In September 2002 the Company entered into an agreement with an independent
     third party to jointly  acquire  properties in the future.  The third party
     entity is affiliated with the various  entities that acquired or leased the
     properties  from CREI and MREI  mentioned  above.  Affiliates of this group
     also purchased properties in Harlingen, TX and Sherman, TX from the Company
     on September 30, 2002 and acquired the Company's  interest in entities that
     operated properties in Roswell, NM and Seaside, OR.

     The agreement  provides that the Company will be allowed to  participate in
     the  acquisition  of  twelve  communities  and  receive  a 50%  partnership
     interest.  The Company has agreed to pay  $660,000,  payable at $55,000 per
     month from October 2002 through  September 2003, to cover the due diligence
     expenses incurred by the third party. The Company's $660,000 obligation has
     been accrued and charged to expense in 2002. The agreement further provides
     that at any time during the twenty-four  months subsequent to the formation
     of a partnership  and the  acquisition of  properties,  the third party can
     purchase the  Company's  partnership  interest in each of the 12 properties
     for a stipulated amount per property.

                                      F-17

<PAGE>


NOTE E - AFFILIATED PARTNERSHIPS - Continued

     Following are unaudited condensed financial  statements of CREI at December
     31, 2002 and 2003 and the years ended  December  31, 2002 and  December 31,
     2003(in thousands):

                                 Balance Sheets

                                                              2003       2002
                                                             -------    -------

Current assets                                               $    63    $    67
Notes receivable                                                 994        994
Other assets                                                     165        171
                                                             -------    -------

                                                             $ 1,222    $ 1,232
                                                             =======    =======

Current liabilities                                          $   228    $   248
Deferred gain                                                    994        994
                                                             -------    -------
                                                               1,222      1,242
Partners' equity (deficit)                                       142        (10)
Distributions                                                   (142)      --
                                                             -------    -------

                                                             $ 1,222    $ 1,232
                                                             =======    =======

                     Statements of Operations

Revenue                                                      $   164    $ 2,233

Expenses
   Operating                                                    --        1,284
   Depreciation                                                 --          747
   General and administrative                                     12        111
   Interest                                                     --        1,328
                                                             -------    -------
                                                                 152      3,470
                                                             -------    -------

Gain on sale of properties                                      --        1,322
                                                             -------    -------

   Net income                                                $   152    $    85
                                                             =======    =======


                                      F-18

<PAGE>


NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following  methods and assumptions were used to estimate the fair value
     of each  class of  financial  instruments  for which it is  practicable  to
     estimate values at December 31, 2003 and 2002:

     Cash and cash  equivalents - The carrying  amount  approximates  fair value
     because of the short maturity of these instruments.

     Long-term  debt  - The  fair  value  of the  Company's  long-term  debt  is
     estimated  based on  market  rates  for the  same or  similar  issues.  The
     carrying value of long-term debt approximates its fair value.

     Notes  receivable - The fair value of the note receivable from an affiliate
     partnership  is  estimated  to  approximate  fair value  based on its short
     maturity.  It is  not  practical  to  estimate  the  fair  value  of  notes
     receivable  from sale of  properties  because no quoted  market  exists and
     there are no comparable debt instruments to provide a basis for valuation.


NOTE G - ACQUISITION AND SALE OF ASSETS

     ACQUISITION OF GAYWOOD OIL AND GAS, LLC

     Effective  August 1,  2003 the  Company  acquired  Gaywood  Oil & Gas,  LLC
     (Gaywood)  a company  that has oil and gas leases in the East Texas  Field.
     The oil wells in this field have low but steady oil  production.  The Texas
     Railroad  Commission,  which  regulates  the oil & gas  industry  in Texas,
     limits  production  in this  field  to 20  barrels  of oil per day for each
     operating well.  There are  approximately  200 existing wells on the leases
     owned by Gaywood.  At December  31, 2003  Gaywood had 50  operating  wells,
     generating approximately 4,000 barrels of oil per month.

     Greenbriar has elected to account for it's oil and gas operations using the
     full cost method of accounting.

     Gaywood  was formed and  acquired  the leases in October  2002  however the
     production was insignificant until January of 2003. The following pro forma
     financial  information  reflects Greenbriar as if Gaywood had been acquired
     on January 1, 2003.

                                                                     Twelve
                                                                     Months
                                                                      Ended
                                                               December 31, 2003
                                                               -----------------

Revenue                                                            $5,723,000

Net Earnings                                                       $  247,000

Net Earnings per share                                             $      .35

                                      F-19

<PAGE>
<TABLE>
<CAPTION>


     ACQUISITION OF GAYWOOD OIL AND GAS, LLC - Continued

     The Company  purchased  Gaywood with 9.5% interest bearing bonds which were
     carried at zero in the Company's financial  statements.  Gaywood was valued
     by  independent  reserve  engineers  as  having  a  fair  market  value  of
     $1,169,000 which was recorded as a gain by the Company. The purpose of this
     acquisition was to acquire a cash flowing asset with future potential value
     in excess of purchase price.

     Gaywood was acquired from a trust for the benefit of Mr. Gene E.  Phillips'
     spouse  and  children.  On  October  16,  2003 Mr.  Phillips  and six other
     entities filed a Schedule 13D with the  Securities and Exchange  Commission
     indicating  that  the  six  entities   owned,   in  total,   55,000  shares
     (approximately 8% of the Company's outstanding common stock) and the entire
     group may be deemed to  constitute  a person  within the meaning of Section
     13d of the Securities act of 1934.


     SALE OF UNDEVELOPED LAND

     On  September  10, 2003 the Company  sold on acre of  undeveloped  land for
     $125,000 in cash to an entity  which has been deemed to be an  affiliate of
     Gene E. Phillips. The sale resulted in a loss of approximately $111,000.


     ACQUISITION OF GAINESVILLE OUTLET MALL, LLC

     Effective  December 10, 2003 the Company acquired  Gainesville Outlet Mall,
     LLC (Gainesville) a company that has  approximately  315,000 square feet of
     retail space  available  for lease in  Gainesville,  Texas.  At the time of
     acquisition  Gainesville had  approximately 65% of its retail space leased,
     generating approximately $180,000 of gross rent revenue per month.

    The Company paid approximately $800,000 in cash at closing, $200,000 in
    earnest money and due diligence fees, and two short term obligations to pay
    the seller approximately $5,571,000. The Company has negotiated long term
    financing and anticipates closing on or before April 30, 2004.


NOTE H - NOTES PAYABLE

     LONG TERM DEBT

     Long-term debt is comprised of the following (in thousands):

                                                                                        December 31,
                                                                                    --------------------
                                                                                     2003          2002
                                                                                    ------        ------
<S>                                                                                 <C>           <C>
       Notes payable to financial institutions maturing through 2015; fixed and
          variable interest rates ranging from 5.25% to 10.5% ; collateralized
          by real property, fixtures, equipment and the assignment of rents         $2,090        $3,956
</TABLE>

                                      F-20


<PAGE>
<TABLE>
<CAPTION>


LONG TERM DEBT - Continued

                                                                                         December 31,
                                                                                        ---------------
                                                                                        2003     2002
                                                                                        ------   ------
<S>                                                                                     <C>      <C>
Notes payable to individuals and companies maturing through 2023;
   variable and fixed interest rates ranging from 7% to 14%;
   collateralized by real property, personal property, fixtures,
   equipment and the assignment of rents                                                 1,851    1,753

Notes payable to wife of former Chief Executive Officer, bearing
   interest at 10% and maturing on July 1, 2004                                          2,255    2,255

Notes payable to executive officers, noninterest-bearing and maturing
   December 31, 2004, net of discount of $260 and $391 at December 31, 2002 and 2001,
   respectively, representing interest imputed at 8.5%                                     528      598

Line of credit with bank, bearing interest at 8% and maturing
   March 31, 2005                                                                           19       30
                                                                                        ------   ------
                                                                                         6,743    8,592
   Less current maturities                                                               4,690      113
                                                                                        ------   ------

                                                                                        $2,053   $8,479
                                                                                        ======   ======
</TABLE>


    Aggregate annual principal maturities of long-term debt at December 31, 2002
are as follows (in thousands):

          2004                                                          4,690
          2005                                                             95
          2006                                                            104
          2007                                                            890
          2008                                                             96
          Thereafter                                                      868
                                                                      -------

                                                                      $ 6,743

CURRENT NOTES PAYABLE

     The  Company  has two notes  payable  to  institutions  of  $4,800,000  and
     $771,000 at December  31,  2003,  bearing  interest at a rate of 15% and is
     presently due by April 30, 2004, as prescribed under the extension terms of
     the  original  notes.  These notes are secured by real estate and  fixtures
     with a net book value of $6,800,000,  as well as an assignment of rents and
     leases associated with said property.


                                      F-21
<PAGE>


NOTE I - OPERATING LEASES

     The Company leases certain  communities under operating leases which expire
     through 2011 and has operating  leases for equipment and office space.  The
     leases  generally  provide that the Company pay property taxes,  insurance,
     and maintenance.

     Future  minimum  payments  following  December  31, 2003 are as follows (in
     thousands):

      2004                                                                $  827
      2005                                                                   827
      2006                                                                   827
      2007                                                                   844
      2008                                                                   853
      Thereafter                                                           3,588
                                                                          ------

                                                                          $7,766

     Lease  expense  in 2003,  2002 and 2001 was  $1,412,  $1,650,  and  $3,139,
     respectively.


NOTE J - INCOME TAXES

     At December 31, 2003, the Company had net operating loss  carryforwards  of
     approximately  $21,500,000,  which expire  between 2003 and 2021.  However,
     approximately  $7,900,000 of these net operating  loss  carryforwards  have
     limitations that restrict  utilization to approximately  $1,530,000 for any
     one year.

     The  following  is a summary of the  components  of income  tax  expense of
     continuing operations (in thousands):

                                                             Year ended
                                                             December 31,
                                                        ------------------------
                                                        2003     2002     2001
                                                        ------   ------   ------
Current - state                                         $ --     $ --     $  424
Deferred - federal                                        --        749    2,400
                                                        ------   ------   ------

                                                        $ --     $  749   $2,824
                                                        ======   ======   ======


                                      F-22

<PAGE>


NOTE J - INCOME TAXES - Continued

     Deferred tax assets and  liabilities  were  comprised of the  following (in
     thousands):

                                                               December 31,
                                                           --------------------
                                                             2003        2002
                                                           --------    --------

Deferred tax assets:
   Net operating loss carryforwards                        $  7,163    $  7,308
   Note receivable                                              680         680
   Alternative minimum tax credit carryforwards                 235         235
   Accounts receivable                                         --          --
   Accrued expenses                                           2,241       2,285
   Financing obligations                                       --          --
   Other                                                        583         583
                                                           --------    --------

   Total deferred tax assets                                 10,902      11,091

Deferred tax liabilities - property and equipment            (3,198)     (3,198)
Valuation allowance                                          (6,543)     (6,732)
                                                           --------    --------

   Net deferred tax asset                                  $  1,161    $  1,161
                                                           ========    ========

     Following  is a  reconciliation  of  income  tax  expense  attributable  to
     continuing  operations  with the  amount  of tax  computed  at the  federal
     statutory rate of 34% (in thousands):

                                                      Year ended December 31,
                                                  ------------------------------
                                                   2003       2002       2001
                                                  -------    -------    -------

Tax expense (benefit) at the statutory rate       $    75    $(1,019)   $ 3,250
State taxes net of federal benefit                   --         --          380
Change in deferred tax asset valuation allowance,
   attributable to continuing operations              (75)     1,768       (431)
Other                                                --         --         (375)
                                                  -------    -------    -------

Tax expense                                       $  --      $   749    $ 2,824
                                                  =======    =======    =======

     Changes in the deferred tax  valuation  allowance  result from  assessments
     made  by the  Company  each  year of its  expected  future  taxable  income
     available to absorb its carryforwards. The Company believes that it is more
     likely than not that the net  deferred  tax asset at  December  31, 2003 of
     $1,161,000  will  be  realized.  However,  this  evaluation  is  inherently
     subjective as it requires  estimates  that are  susceptible  to significant
     revision as more information becomes available.  Accordingly,  the ultimate
     realization  of the net  deferred tax asset could be less than the carrying
     amount.

                                      F-23

<PAGE>
<TABLE>
<CAPTION>


NOTE K - STOCKHOLDERS' EQUITY

     Outstanding Preferred Stock
     ---------------------------

     Preferred stock consists of the following (amounts in thousands):

                                                                               Year ended
                                                                               December 31,
                                                                               -----------
                                                                               2003   2002
                                                                               ----   ----
<S>                                                                            <C>    <C>
Series B cumulative convertible preferred stock, $.10 par value; liquidation
   value of $100; authorized, 100 shares; issued and outstanding, 1 share      $  1   $  1
                                                                               ====   ====
</TABLE>


     The Series B preferred stock has a liquidation  value of $100 per share and
     is  convertible  into  common  stock  over  a  ten-year  period  at  prices
     escalating  from $500 per share in 1993 to  $1,111  per share by 2002.  The
     right to convert  expires  April 30,  2003.  Dividends  at a rate of 6% are
     payable in cash or preferred shares at the option of the Company.


     Stock Options
     -------------

     In 1997, the Company established a long-term incentive plan (the 1997 Plan)
     for the  benefit of certain key  employees.  Options  granted to  employees
     under the 1997 Plan become  exercisable  over a period as determined by the
     Company and may be exercised up to a maximum of 5 years from date of grant.
     The 1997 Plan allowed up to 50,000 shares of the Company's  common stock to
     be reserved  for  issuance.  In 2000,  the  Company  adopted the 2000 Stock
     Option Plan,  under which up to 50,000 shares of the Company's common stock
     are reserve for issuance.

     The Company  granted  options to two  officers  during 1996  through  2001,
     aggregating  80,000  shares not covered by either plan.  These options were
     granted at market, were exercisable  immediately,  and expire 10 years from
     date of grant.



<PAGE>


NOTE K - STOCKHOLDERS' EQUITY - Continued

    Information with respect to stock option activity is as follows:

                                                                        Weighted
                                                                         average
                                                                        exercise
                                                             Shares       price
                                                             -------    --------

Outstanding at January 1, 2001                               140,850    $  91.90

   Granted                                                    20,000        6.40
                                           -                 -------    --------

Outstanding at December 31, 2001                             160,850    $  81.28

   Expired                                                    (5,050)     182.58
                                           -                 -------    --------

Outstanding at December 31, 2002                             155,800    $  78.00

   Granted                                                    60,000        2.60
   Cancelled, rescinded, or annulled                         (70,800)     109.27
   Expired                                                    (3,000)     112.50

Outstanding at December 31, 2003                             142,000    $  30.27
                                           =                 =======    ========

Options exercisable at December 31, 2001                     160,850    $  81.28
                                           =                 =======    ========

Options exercisable at December 31, 2002                     155,800    $  78.00
                                           =                 =======    ========

Options exercisable at December 31, 2003                     142,000    $  30.27
                                           =                 =======    ========

Weighted  average fair value per share of options  granted  during 2003 and 2001
was $0.71 and $7.60, respectively.

Additional  information about stock options  outstanding at December 31, 2003 is
summarized as follows:

                                   Options outstanding and exercisable
                           ---------------------------------------------------
                                                              Weighted average
                               Number            remaining    Weighted average
Range of exercise prices   outstanding    contractual life     exercise price
------------------------   -----------   ------------------   ----------------

$2.60                           60,000            5.0           $   2.60
$3.75 to $6.90                  60,000            7.0               5.68
$100.00 to $150.39               2,000            2.0             150.39
$175.00                         20,000            4.0             175.00

                                      F-25

<PAGE>


NOTE L - OTHER INCOME (EXPENSE)

Other income (expenses) consists of the following: (amounts in thousands)

                                                  Year ended December 31,
                                              --------------------------------
                                                2003        2002        2001
                                              --------    --------    --------

Gain on sale of properties                    $   --      $   --      $ 16,635
Equity Earnings in CREI                            131        --          --
Property acquisition due diligence expenses       --          (660)       --
Accrued tenant revenue                             121        --          --
Other                                               90        (493)        (33)
                                              --------    --------    --------

                                              $    342    $ (1,153)   $ 16,602
                                              ========    ========    ========


NOTE M - WRITE-OFF OF IMPAIRED ASSETS

     During 2001, the Company  identified  four properties that were not meeting
     performance  expectations.  These  properties  are in a  geographic  region
     where,  after the transfer to LSOF, the Company does not have a significant
     presence. In the fourth quarter of 2001, the Company wrote these properties
     down to their net realizable  value of $5,066,000 with a charge to earnings
     of  $1,887,000.  One of these  properties  was sold in  2002.  The  Company
     continues to hold the other three properties.

     During 2002,  the Company  wrote off  $266,000  related to a property it is
     attempting  to sell.  As of  December  31, 2003 the Company is not aware of
     further impairment of remaining assets.

                                      F-26

<PAGE>


NOTE N - DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE

     In October 2001,  the  Financial  Accounting  Standards  Board (the "FASB")
     issued  Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 144,
     "Accounting for the Impairment or Disposal of Long-Lived  Assets." SFAS No.
     144  supersedes  FASB  SFAS No.  121,  "Accounting  for the  Impairment  of
     Long-Lived  Assets and for  Long-Lived  Assets to be  Disposed  Of" and the
     accounting  and  reporting  provisions  for  disposals  of a  segment  of a
     business as  addressed  in APB Opinion  No. 30,  "Reporting  the Results of
     Operations-Reporting  the  Effects of  Disposal of a Segment of a Business,
     and   Extraordinary,   Unusual  and   Infrequently   Occurring  Events  and
     Transactions".  SFAS No.  144  establishes  a single  accounting  model for
     long-lived  assets  to  be  disposed  of  by  sale  and  addresses  various
     implementation  issues of SFAS No. 121. In  addition,  SFAS No. 144 extends
     the reporting requirements of discontinued operations to include components
     of an entity that have either been  disposed of or are  classified  as held
     for sale. The Company adopted SFAS No. 144 as of January 1, 2002.

     During 2002, the Company  disposed of six properties.  Revenues for the six
     properties were $4,698,000 and $7,293,000 in 2002 and 2001, respectively.

     The Company's  adoption of SFAS No. 144 resulted in the presentation of the
     net operating  results of these qualifying  properties sold during 2002, as
     loss from discontinued operations for all periods presented. Losses on sale
     of these properties  totaling  $4,001,000  (including income tax expense of
     $440,000) are reflected as losses on sales of real estate from discontinued
     operations  in the  accompanying  consolidated  statements  of  operations.
     Financial  statements  for 2001  have  been  reclassified  to  reflect  the
     operations of these properties as discontinued operations.  The adoption of
     SFAS No. 144 did not have an impact on net earnings or loss.

     Pursuant to SFAS No. 144, the results of operations  and gains or losses on
     properties sold prior to the adoption of SFAS No. 144, are not reflected in
     discontinued   operations.   Therefore,  the  presentation  of  results  of
     operations for 2002 is not comparable with 2001.


NOTE O - SEGMENTS

     The Company and its subsidiaries are principally engaged in the business of
     acquiring,  enhancing and selling real estate properties.  Since 1996 those
     activities have, almost  exclusively,  involved assisted living facilities.
     Effective  August 1, 2003 the Company acquired 100% of the stock in Gaywood
     Oil & Gas LLC, a limited  liability  company that owns working interests in
     certain  oil  producing  wells.  The  acquisition  was done for  investment
     purposes  and  substantially  all  costs  associated  with  the oil and gas
     operations are operating expenses incurred directly by Gaywood. The Company
     continues to allocate all of its  corporate  overhead  expenses to its core
     real estate operation.

                                      F-27

<PAGE>


NOTE O - SEGMENTS - Continued

     Segment information and reconciliation to income (loss) from operations are
as follows:

    Twelve months ended December 31, 2003 (amounts in thousands)
    -------------------------------------

                                          Real Estate         Oil & Gas
                                           Operations   Operations  Consolidated
                                           -------------------------------------

Revenue                                      $ 4,585    $   449      $ 5,034
Depletion, depreciation and amortization         290         41          331
Net income 214                                     8        222
Total assets                                  16,626      1,361       17,987


NOTE P - CONTINGENCIES

BENETIC FINANCIAL VS. WEDGWOOD ET AL:

     This  action  is  against  a  subsidiary  of the  Company  as well as other
     corporate and individual  defendants  who are unrelated to the Company.  In
     1993, Wedgwood Retirement Inns entered into a financing  arrangement with a
     third party lender.  The plaintiff  alleged that he had a verbal  brokerage
     agreement  with  Wedgwood and was  entitled to a fee. The Company  acquired
     Wedgwood in 1996.

     In a jury trial the  plaintiff  was  awarded  $150,000  on one count of his
     complaint.  However, the jury found for the defendants on all other counts.
     In his final ruling the judge awarded the  defendants  legal fees that were
     in excess of the judgment. The plaintiff appealed and on April 30, 2003 the
     California Court of Appeals let the $150,000 stand but reversed the judge's
     award of legal  fees.  Based upon the  ruling of the Court of  Appeals  the
     defendants  are obligated for the judgment plus $165,093 in interest  since
     1993. The judgment is against all the defendants as a group.

     The defendants have filed an appeal to the California Supreme Court but the
     appeal was denied.  There are no further legal  defenses  available.  There
     remains  the issue of the  allocation  of the award  among the  defendants.
     Management  has provided a reserve that it believes is  sufficient to cover
     its expected liability in this matter.

                                      F-28

<PAGE>


INTERNAL REVENUE SERVICE EXAMINATION

     In December  1991 the Company sold four nursing  homes to a  not-for-profit
     corporation  in  exchange  for tax  exempt  bonds  issued  on behalf or the
     acquiring  corporation by government  authorities.  In 1992, the bonds were
     converted   to  zero  coupon   status  and  their  value  was  enhanced  by
     substituting  higher grade  collateral.  The  substitute  collateral  which
     consisted of zero coupon U.S.  Treasury  obligations was placed in trust to
     defease the bonds, in exchange for the underlying mortgage.  The bonds were
     then sold for approximately  $67,000,000.  A gain was recorded equal to the
     proceeds received by the Company of $8,333,000 after deducting  transaction
     costs and the cost of the higher grade collateral.

     On January 8, 2004 the Company was notified by the Internal Revenue Service
     (IRS) in the form of a Section 6700 Pre-Assessment  Letter that the IRS was
     considering  assessing penalties under Section 6700 of the Internal Revenue
     Code as a result of the Company's  organization or assistance in connection
     with the issuance and sale of the bonds.

     The transactions  which the IRS is examining involved  technically  complex
     financial  and  legal  issues  and were  undertaken  on the  advise  of and
     reliance on the investment  banking firm, the law firms that issued the tax
     exempt bond legal opinions and other professionals. The Company believed in
     1992 and still believes that its actions were appropriate in all respects.

     The Company and the IRS are engaged in negotiations regarding settling this
     twelve year old matter,  however there is no assurance  that any settlement
     will be achieved.  In the absence of a settlement,  the Company  intends to
     contest the IRS's  position in court.  Any  litigation may be expensive and
     time  consuming  however if this matter is litigated  the Company  believes
     that it will  prevail on the merits.  If the Company were  unsuccessful  in
     their  negotiations  or  litigation,  the loss could range from $267,000 to
     $8,333,000.

OTHER

     The  Company is  defendant  in various  lawsuits  generally  arising in the
     ordinary  course of business.  Management  of the Company is of the opinion
     that these  lawsuits  will not have a material  effect on the  consolidated
     results of operations, cash flows or financial position of the Company.

     As  discussed  in Note F, the Company is guarantor of debt of a third party
     in the amount of $1,600,000.

                                      F-29

<PAGE>
<TABLE>
<CAPTION>


NOTE Q - QUARTERLY DATA (UNAUDITED)

     The table below reflects the Company's selected  quarterly  information for
     the years ended  December 31, 2003 and 2002.  Certain 2003 and 2002 amounts
     have  been   reclassified  to  conform  to  the  current   presentation  of
     discontinued operations.

                                                             Year ended December 31, 2003
                                                     ----------------------------------------
                                                      First      Second     Third    Fourth
                                                     Quarter    Quarter    Quarter   Quarter
                                                     -------    -------    -------   -------
<S>                                                  <C>        <C>        <C>       <C>
Revenue                                              $ 1,070    $ 1,118    $ 1,342   $ 1,774
Operating expenses                                     1,266      1,235      1,491     1,819
Net income (loss)                                       (262)      (177)       855      (194)
Income (loss) allocable to common shareholders          (262)      (177)       855      (194)
Income (loss) per common share - basic and diluted      (.38)      (.26)      1.21      (.27)

                                                            Year ended December 31, 2002
                                                    ----------------------------------------
                                                      First      Second     Third     Fourth
                                                     Quarter    Quarter    Quarter    Quarter

Revenue                                              $ 1,237    $ 1,185    $ 1,035    $   965
Operating expenses                                     1,810      1,634      1,520      1,803
Net loss                                                (458)    (1,037)    (4,473)    (2,405)
Loss allocable to common shareholders                   (458)    (1,037)    (4,473)    (2,405)
Loss per common share - basic and diluted               (.64)     (1.45)     (6.23)     (3.35)
</TABLE>


                                      F-30