<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>green10q93001.txt
<TEXT>

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

                                    FORM 10-Q

(Mark One)
[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
                     For the period ended September 30, 2001

                                       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.)

14185 Dallas Parkway, Suite 650, Dallas, TX                    75254
 (Address of principal executive offices)                    (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

                                                Name of Each Exchange
                Title of Each Class             on Which Registered
                -------------------             --------------------
           Common Stock, $.01 par value        American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark  whether the issuer (1) filed all reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 12 months (or for such shorter  period that the issuer was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                 YES [X] NO [ ]

At November 10, 2001 the issuer had outstanding  approximately  7,265,000 shares
of par value $.01 Common Stock.

<PAGE>

                             GREENBRIAR CORPORATION
                     Index to Quarterly Report on Form 10-Q
                         Period ended September 30, 2001


Part I: Financial Information..................................................3

   ITEM 1: FINANCIAL STATEMENTS................................................3
     Consolidated Balance Sheets...............................................3
     Consolidated Statements Of Operations.....................................5
     Consolidated Statements Of Cash Flow......................................6
     Notes To Consolidated Financial Statements................................7
   ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                         RESULTS OF OPERATIONS................................11

Part II: Other Information....................................................15







                                       2
<PAGE>

                          PART I: FINANCIAL INFORMATION


ITEM 1: FINANCIAL STATEMENTS
----------------------------

                             Greenbriar Corporation
                           Consolidated Balance Sheets
                             (Amounts in thousands)

                                               September 30,      December 31,
Assets                                            2001               2000
                                                (Unaudited)

Current Assets
       Cash And Cash Equivalents                 $  4,460           $  2,287
       Accounts Receivable-Trade                      423                470
       Other Current Assets                         4,657              1,105
                                             ----------------   ----------------

              Total Current Assets                  9,540              3,862

Deferred Income Tax Benefit                         4,750              4,750

Notes Receivable, Net of Deferred
          Gain of $6,090
                                                      310               --

Property And Equipment, At Cost
       Land And Improvements                        8,890              9,716
       Buildings And Improvements                  69,566             75,723
       Equipment And Furnishings                    5,865              6,615
                                             ----------------   ----------------

                                                   84,321             92,054

              Less Accumulated Depreciation        11,540             12,410
                                             ----------------   ----------------

                                                   72,781             79,644

Deposits                                            2,656              3,834

Lease Rights And Other Intangibles                  5,031              9,347

Other Assets                                        1,329              1,151
                                             ----------------   ----------------

                                                 $ 96,397           $102,588
                                             ================   ================



                                       3
<PAGE>
<TABLE>
<CAPTION>

                             Greenbriar Corporation
                     Consolidated Balance Sheets - Continued
                             (Amounts in thousands)

                                                                September 30,        December 31,
Liabilities And Stockholders' Equity                               2001                 2000
                                                                 (Unaudited)
<S>                                                          <C>                  <C>
Current Liabilities
       Current Maturities Of Long-Term Debt                      $   2,352            $   2,538
       Accounts Payable - Trade                                      1,066                1,445
       Accrued Expenses                                                738                1,934
       Other Current Liabilities                                       975                  668
                                                             -----------------    -----------------

              Total Current Liabilities                              5,131                6,585

Long-Term Debt                                                      52,436               50,887

Financing Obligations                                               10,815               10,815

Other Long Term Liabilities                                            275                  657
                                                             -----------------    -----------------

              Total Liabilities                                     68,657               68,944

Preferred Stock Redemption Obligation                               27,167               26,988


Stockholders' Equity
       Preferred Stock                                                   1                  254

       Common Stock $.01 Par Value; Authorized,100,000
              Shares; Issued And Outstanding, 8,560 Shares              84                   76
                And 7,514 Shares, Respectively

       Additional Paid-In Capital                                   56,907               60,219
       Accumulated Deficit                                         (54,052)             (51,526)
                                                             -----------------    -----------------

                                                                     2,940                9,023
       Less Stock Purchase Notes Receivable
              (Including $2,250 From Related Parties)               (2,367)              (2,367)
                                                             -----------------    -----------------

                                                                       573                6,656
                                                             -----------------    -----------------

                                                                 $  96,397            $ 102,588
                                                             =================    =================

</TABLE>




                                       4
<PAGE>
<TABLE>
<CAPTION>

                             Greenbriar Corporation
                      Consolidated Statements Of Operations
                  (Amounts in thousands, except per share data)

                                                For The Three Month               For The Nine Month
                                                   Period Ended                      Period Ended
                                                   September 30,                     September 30,
                                               2001             2000             2001             2000
                                           -------------    -------------    -------------    -------------
                                                    (Unaudited)                       (Unaudited)
<S>                                        <C>              <C>              <C>              <C>
Revenue
       Assisted living operations             $  8,186         $ 10,263         $ 27,409         $ 31,104
                                           -------------    -------------    -------------    -------------

                                                 8,186           10,263           27,409           31,104
Operating Expenses
       Assisted living community
              operations                      $  5,327         $  6,222         $ 17,053         $ 18,619
       Lease expense                               671            1,217            2,748            3,759
       Depreciation and amortization               783              903            2,442            2,846
       Corporate general and
              administrative                       989            1,067            4,121            3,244
       Write-off of impaired assets
              and related expenses                --               --               --              7,461
                                           -------------    -------------    -------------    -------------

                                                 7,770            9,409           26,364           35,929
                                           -------------    -------------    -------------    -------------

              Operating income (loss)              416              854            1,045           (4,825)

Other income (expense)
       Interest and dividend income           $     71         $    105         $    212         $    321
       Interest expense                         (1,516)          (1,454)          (4,190)          (4,264)
       Net gain on the sale of assets            4,239             --              4,398               74
       Minority Interest                        (3,738)             (84)          (3,880)            (276)
       Other                                        48                8               48               60
                                           -------------    -------------    -------------    -------------

                                                  (896)          (1,425)          (3,412)          (4,085)
                                           -------------    -------------    -------------    -------------

       Net loss                                   (480)            (571)          (2,367)          (8,910)

Preferred stock dividend
       requirement                                --             (1,028)            (160)          (3,103)
                                           -------------    -------------    -------------    -------------

Loss allocable to common
       stockholders                               (480)          (1,599)          (2,527)         (12,013)
                                           =============    =============    =============    =============

Net loss per common share -
       Basic and diluted                      $  (0.06)        $  (0.21)       $   (0.30)        $  (1.60)

Weighted average number
        of common and equivalent
        shares outstanding                       8,348            7,514            8,348            7,514


</TABLE>


                                       5
<PAGE>
<TABLE>
<CAPTION>

                             Greenbriar Corporation
                      Consolidated Statements Of Cash Flow
                             (Amounts in thousands)

                                                                          For the nine month
                                                                      Period Ended September 30,
                                                                        2001             2000
                                                                    --------------   --------------
                                                                      (Unaudited)      (Unaudited)
<S>                                                                 <C>              <C>
Cash flows from operating activities
       Net loss                                                        $ (2,367)        $ (8,910)
       Adjustments to reconcile net loss to net
          cash provided by (used in) operating activities
              Depreciation and amortization                               2,404            2,846
              Gain on sale of assets                                     (4,398)             (74)
              Minority Interest                                           3,880              527
              Write-off of impaired assets and related expenses            --              7,461

              Changes in operating assets and liabilities
                 Accounts receivable                                         47             (335)
                 Other current and noncurrent assets                     (2,554)            (791)
                 Accounts payable and other liabilities                  (1,650)            (533)
                                                                    --------------   --------------

              Net cash provided by (used in) operating activities        (4,638)             191
                                                                    --------------   --------------

Cash flows used in investing activities
       Proceeds from sale of property                                    21,267              645
       Purchase of property and equipment                               (12,284)          (1,068)
                                                                    --------------   --------------

              Net cash provided by (used in) investing
                    activities                                            8,983             (423)

Cash flows from financing activities
       Proceeds from borrowings                                          15,704             --
       Payments on debt                                                 (14,341)            (569)
       Dividends on preferred stock                                        (160)          (1,099)
          Redemption of preferred stock                                  (3,375)          (4,000)
                                                                    --------------   --------------

              Net cash used in financing
                    activities                                           (2,172)          (5,668)
                                                                    --------------   --------------

              NET INCREASE (DECREASE) IN CASH AND                         2,173           (5,900)
                     CASH EQUIVALENTS

       Cash and cash equivalents at beginning of period                   2,287            8,814
                                                                    --------------   --------------

       Cash and cash equivalents at end of period                      $  4,460         $  2,914
                                                                    ==============   ==============

</TABLE>


                                       6
<PAGE>

                   Notes To Consolidated Financial Statements
    For the Unaudited Three and Nine Months Ended September 30, 2001 and 2000

Note A: Basis of Presentation

The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts  of  Greenbriar   Corporation  and  its   majority-owned   subsidiaries
(collectively,  "the Company").  All significant  intercompany  transactions and
accounts have been eliminated.

The  statements  have  been  prepared  in  accordance  with  generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions  to  Form  10-Q  and,  accordingly,  do  not  include  all  of  the
information and footnotes required by generally accepted accounting  principles.
These  financial  statements  have not been  examined by  independent  certified
public  accountants,   but  in  the  opinion  of  management,   all  adjustments
(consisting of normal recurring  accruals)  necessary for a fair presentation of
consolidated  results  of  operations,   consolidated   financial  position  and
consolidated  cash flows at the dates and for the periods  indicated,  have been
included.

Operating  results for the three and nine month periods ended September 30, 2001
are not necessarily  indicative of the results that may be expected for the year
ended  December 31, 2001.  For further  information,  refer to the  consolidated
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000.


Note B: Notes Receivable

A portion of the  consideration  received  for the sale of Oak Park  Retirement,
Wedgwood Terrace and Crown Pointe (see Note E:  Dispositions)  was $6,400,000 of
tax -free notes bearing interest of 9.5% annually.  The notes mature on April 1,
2002, June 1, 2002 and August 1, 2002  respectively.  It is anticipated that any
unpaid principal and interest due upon maturity will be refinanced for a 35 year
period.

The  repayment  of the  notes  is  limited  to the cash  flow of the  respective
communities  either from  operations or a subsequent  sale.  In accordance  with
Statement of  Financial  Accounting  Standards  No. 66, the gain  pertaining  to
$6,090,000 of the notes has been deferred until the Company receives payment.




                                       7
<PAGE>
<TABLE>
<CAPTION>

Note C: Long-Term Obligations

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

                                                                   September 30,       December 31,
                                                                        2001               2000
                                                                        ----               ----
<S>                                                                <C>                <C>
Notes payable to financial institutions maturing
     through 2018; fixed and variable interest rates
     ranging from 7.5% to 14%; collateralized by
     property, fixtures, equipment and the
     assignment of rents                                           $     37,111       $     27,991

Notes payable to individuals and companies
     maturing through 2022; variable and fixed
     interest rates ranging from 7% to 11.2%
     collateralized by real property, personal
     property, fixtures, equipment and the
     assignment of rents                                                     56              4,477

Note payable to shareholder maturing on June
     30,2004; bearing interest at 10%                                     3,375                  -

Note payable to the Redevelopment Agency of the
     City of Corona, California, payable into a sinking
     fund semi-annually in increasing amounts from
     $65 to $420 through May 1, 2015; variable
     interest rate of 5.55% at September 30, 2000;
     collateralized by personal property, land, fixtures
     and rents                                                                -              6,895

Mortgage note payable to a financial institution
     maturing in 2003; bearing interest at 6.75%;
     collateralized by property and equipment                            13,972             13,972

Other                                                                       274                 90
                                                                ---------------    ---------------
                                                                         54,788             53,425

     Less: current maturities                                             2,352              2,538
                                                                ---------------    ---------------
                                                                   $     52,436       $     50,887

</TABLE>

The Company operates two communities  that are financed  through  sale-leaseback
obligations.  At the end of the tenth year of the fifteen-year leases (March 31,
2004),  the Company has options to repurchase the communities for the greater of
the sales  prices at the date of the  sale-leaseback  which was  $10,815,000  or
their  current  replacement  costs less  depreciation  plus land at current fair
market  values.  Accordingly,  these  transactions  have been  accounted  for as
financings,  and the  Company  has  recorded  the  proceeds  from  the  sales as
financing  obligations,  classified the lease  payments as interest  expense and
continues to carry the communities and record depreciation.


                                       8
<PAGE>
<TABLE>
<CAPTION>

Note D: Preferred Stock

The following  summarizes  the various  classes of preferred  stock  (amounts in
thousands except per share data):

                                                                       September 30,       December 31,
                                                                           2001                2000
                                                                           ----                ----
<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

   Series D cumulative convertible preferred stock, $.10 par
        value; liquidation value of $3,375; authorized, issued
        and outstanding, 675 shares
                                                                                 -                  68

   Series F voting cumulative convertible preferred stock,
         $.10 par value; liquidation value of $14,000;
         authorized, issued and outstanding, 1,400 shares                        -                 140

   Series G cumulative convertible preferred stock, $.10 par
        value; liquidation value of $4,450; authorized 800
        shares; issued and outstanding, 445 shares
                                                                                 -                  45
                                                                  ---------------------------------------

                                                                                $1                $254
                                                                  =======================================

</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
$25.00  per share in 1993 to $55.55 per share by 2001.  Dividends,  at a rate of
6%, are payable in cash or preferred shares at the option of the Company.

The  Series D  preferred  stock has a  liquidation  value of $5 per share and is
convertible  into common  stock at $10.00 per share.  Cumulative  dividends  are
payable in cash at a rate of 9.5%.

In July 2001 the Series D preferred stock was redeemed from a related party. The
redemption  value of the  preferred  stock  was  $3,375,000.  The  holder of the
preferred  stock was issued a note for  $3,375,000  bearing  interest of 10% and
maturing  on  July  1,  2003.  There  were  certain  limitations  regarding  the
redemption  and  payment of  dividends  with  respect to the Series D  Preferred
stock. The same limitations will apply to the note.


                                       9
<PAGE>

The Series F and Series G preferred shares were sold to one investor in December
1997,  for  $22,000,000,  less  selling  and  offering  costs  of  $453,000.  In
connection  with the sale, the Company  entered into an agreement which provides
that, on the date of conversion,  if the value of the Company's common stock has
not  increased at an annual rate of at least 14% during the period the preferred
shares are  outstanding,  the Company is required to make a Cash  Payment to the
preferred  stockholder  equal  to the  market  price  deficiency  on the  shares
received upon conversion.

The Series F and G preferred  stock had a liquidation  value of $10.00 per share
and each share was  convertible  into .57 shares of common stock. On January 13,
2001 the preferred F and G shares were converted into 1,054,202 shares of common
stock. See further discussion of January 13, 2001 conversion and related dispute
with preferred shareholder at Item 2, Liquidity and Capital Resources.


Note E: Dispositions

In January  2001,  the Company sold its  corporate  office  building in Addison,
Texas and received net cash  proceeds of  $1,477,772  and recorded a gain on the
sale of $406,000.  The  Corporate  office has been  relocated  to  approximately
10,000 square feet of leased space in Addison,  Texas. In addition,  the Company
also sold  certain  garden  homes and  related  property  that were  adjacent to
Camelot  Retirement  in January 2001 and received net cash  proceeds of $866,280
and recorded a loss on the sale of $296,000.

In April 2001 the Company exercised  purchase options on two leased  communities
in Fort Worth,  Texas,  Palm House and Oak Park Retirement,  and  simultaneously
sold  both of the  two  communities.  Per  the  terms  of the  sale of Oak  Park
Retirement,  the Company  retained a fifteen year management  agreement with the
new  owners.  The  gross  proceeds  from the  sales of Palm  House  and Oak Park
Retirement  including  both  cash and  notes  were  $5,200,000  and  $15,280,750
respectively.  The cash  proceeds  from these  sales were  $17,280,750  of which
$4,450,000 was used to repay the mortgage on a retirement community owned by the
Company in Harlingen,  Texas,  Camelot  Retirement.  This mortgage  payoff was a
requirement for the exercise of the purchase  options on Palm House and Oak Park
Retirement.   The  gains  on  the  sale  of  assets  generated  from  these  two
transactions following the payoff of Camelot Retirement were $49,000.

In June 2001 the Company sold a community in Lewiston Idaho,  Wedgwood  Terrace.
Per the terms of this  sale,  the  Company  retained a fifteen  year  management
agreement with the new owners. The gross proceeds from the sale were $830,000 of
notes and  $3,031,250  of cash.  There was no gain or loss on the sale of assets
resulting from this sale.

In August 2001 the Company  sold a community  that it owned sixty  percent of in
Corona California, Crown Pointe. Per the terms of this sale the Company retained
a fifteen year management agreement with the new owners. The gross proceeds from
the sale were $3,950,000 of notes and  $14,371,068 of cash.  There was a gain on
the sale of assets  recorded from this  transaction of $4,239,000.  Greenbriar's
portion  of the gain  was  $537,500  with the  balance  being  allocated  to the
minority investors in Crown Pointe.


                                       10
<PAGE>

Note F: Acquisitions

In July 2001 the Company borrowed  $12,000,000,  the proceeds of which were used
to purchase two assisted living  communities which the Company had under option.
The collateral for the loan is the two assisted living  communities.  In October
2001 these two communities and the allocated debt were transferred to the holder
of the series F and G preferred stock.  See further  discussion of this transfer
at Item 2, Liquidity and Capital Resources.


ITEM 2:       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------------------------------------------------------------------------
              AND RESULTS OF OPERATIONS
              -------------------------


Overview

The Company owns and manages  assisted living  communities that provide housing,
healthcare,  hospitality  and personal  services to seniors.  As of November 10,
2001 the Company  operates 16  communities  in 9 states with a capacity of 1,293
residents, including 3 communities managed for a third party.


Three and nine month periods ended September 30, 2001 compared to three and nine
month periods ended September 30, 2000.


Revenues and Operating Expenses from Assisted Living Operations

Revenues were  $8,186,000  and  $27,409,000  for the three and nine months ended
September 30, 2001 as compared to $10,263,000  and $31,104,000 for the three and
nine months  ended  September  30, 2000.  Community  operating  expenses,  which
consist of assisted living community operations,  lease expense and depreciation
and amortization,  were $6,781,000 and $22,243,000 for the three and nine months
ended September 30, 2001 as compared to $8,342,000 and $25,224,000 for the three
and nine months ended September 30, 2000. There were two communities disposed of
in 2000,  and certain  garden homes and related  property  that were adjacent to
Camelot  Retirement  were sold in the first quarter of 2001,  three  communities
were sold in the second  quarter of 2001 and one community was sold in the third
quarter of 2001.  The revenue from these  communities  that was included in both
the three and nine months ended September 30, 2000 was $2,247,000 and $4,094,000
respectively.  The operating  expenses from these communities that were included
in both the three and nine months ended  September 30, 2000 were  $1,934,000 and
$3,784,000, respectively.

Corporate General and Administrative Expenses

General and  administrative  expenses were $989,000 and $4,121,000 for the three
and  nine  months  ended  September  30,  2001 as  compared  to  $1,067,000  and
$3,244,000  for the three and nine month periods ended  September 30, 2000.  The
increase in the  corporate  general  and  administrative  expenses  for the nine
months  ended  September  30,  2001 is  primarily  a result of the  increase  in
corporate  legal expenses  associated with the litigation with LSOF. See further
discussion of litigation with LSOF at Liquidity and Capital Resources.


                                       11
<PAGE>

Write-off of Impaired Assets and Related Expenses

For the nine months ended September 30, 2000 the Company recorded a write-off of
impaired assets and related expenses of $7,461,000.

In 1992 the Company sold four nursing homes to Southern Care  Corporation  and a
subsidiary  of the Company  entered  into a  management  agreement to manage the
nursing homes.  In 1994 Southern Care  terminated  the management  agreement and
informed  the Company  that they  believed the notes due to the Company from the
sale of the  nursing  homes in 1992 were  invalid.  The  matter  has been in the
courts  since 1995 and legal issues were  resolved in June 2000 when  Greenbriar
was awarded a judgment of $18,688,000 for the notes,  interest,  amounts due for
the  management  contract  and  reimbursement  of legal  fees.  The assets had a
recorded value of $4,525,000.

The Company was informed that the financial  condition of the four nursing homes
had  deteriorated,  that they failed to make the  mortgage  payment to the first
lien holder,  and that the first mortgage  holder  foreclosed on the property in
June 2000. Under the circumstances, the Company wrote off the entire $4,525,000.

The Company  decided to dispose of two assisted living  communities,  which were
not meeting operating performance  expectations.  These communities were written
down to net  realizable  value.  Also, a third  community  whose  operations had
deteriorated  was  written  down based on  management's  estimate of future cash
flows pursuant to the provisions of Statement of Financial  Accounting Standards
No. 121. In addition certain  receivables  associated with these properties were
written off.  These write offs  substantially  account for the  remainder of the
write-off of impaired assets and related expenses.

Interest and Dividend Income

Interest and dividend  income for the three and nine months ended  September 30,
2001 was  $71,000  and  $212,000  compared  to  $105,000  and  $321,000  for the
comparable  periods in 2000.  The decrease in interest  and dividend  income for
both the three and nine  month  periods is a result of less cash  available  for
investment purposes.


Net Gain (Loss) on the Sale of Assets

The net gain on the sale of assets for the three and nine months ended September
30, 2001 was  $4,239,000  and  $4,398,000  respectively.  The  Company  sold its
corporate  office  building in 2001,  which  resulted in a gain of $406,000.  In
addition,  certain  garden  homes and  related  property  that were  adjacent to
Camelot Retirement were sold in 2001 resulting in a loss of $296,000.


                                       12
<PAGE>

In 2001 the Company also exercised purchase options on two leased communities in
Fort Worth,  Texas, Palm House and Oak Park Retirement,  and simultaneously sold
both of the two communities to unrelated  third parties.  The gains on the sales
of assets generated from these two transactions  were $49,000.  The Company also
sold a community in Corona,  California and recorded a gain of $4,239,000 on the
sale. See further discussion of these transactions at Note E: Dispositions.

The 2000 gain of $74,000 is  attributable  to the sale of undeveloped  land that
did not fit into the Company's strategic plans.

Liquidity and Capital Resources

At September 30, 2001, the Company had working capital of $4,409,000.

In April 2001 the Company exercised  purchase options on two leased  communities
in Fort Worth,  Texas and  simultaneously  sold both of the two  communities  to
unrelated third parties.  After exercise of the purchase  options and the payoff
of approximately  $4,450,000 of debt on a third community, the Company generated
$496,000 of cash proceeds. See Net Gain (Loss) on the Sale of Assets and Note E:
Dispositions for additional discussion of these transactions.

On October 3, 2001,  the Company  concluded and closed a  transaction  with LSOF
Pooled Equity,  L.P. to settle and resolve litigation over the amount and nature
of LSOF's ownership of Registrant. The dispute had centered around the number of
shares of the  Company's  common  stock and  extent of control to which LSOF was
entitled upon  conversion  of its Series F and G Preferred  Stock and the amount
then due under a "Make Whole Agreement."  LSOF's position would have resulted in
a change of voting control of the Company to LSOF, which the Company resisted in
the litigation between the parties.

Under  the  terms of the  settlement,  the  Company  repurchased  all of  LSOF's
ownership  interests in the Company,  which amounted to 1,054,202  shares of the
Company's  common  stock,  the  Company  was  relieved  of its  preferred  stock
redemption  obligation,  and LSOF released all claims in exchange for $4,000,000
in cash and the conveyance of 11 assisted living  properties out of the 24 owned
and operated by the Company,  subject to any indebtedness  thereon.  In addition
the  Company  released  LSOF from all  claims.  The  settlement  resulted  in an
increase in  stockholders  equity of  approximately  $13,154,000,  which will be
recorded in the fourth quarter.

On August 3, 2001 the Company sold an assisted  living  property in  California.
The cash  proceeds  from the sale were used to provide  the cash  portion of the
settlement with LSOF.

See further  discussion of this  settlement  with LSOF in the Company's Form 8-K
filed on October 18, 2001.

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


                                       13
<PAGE>

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 form 10Q 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 of subject
area.  These and other risks and  uncertainties  are  detailed in the  Company's
reports  filed with the  Securities  and Exchange  Commission  (SEC),  including
Greenbriar  Corporation's  Annual Reports on Form 10-K and Quarterly  Reports on
Form 10-Q.





                                       14
<PAGE>

                           PART II: OTHER INFORMATION


ITEM 1:      LEGAL PROCEEDINGS
------------------------------


LSOF Pooled Equity L.P. v Greenbriar Corporation
------------------------------------------------

See the discussion of this matter in Part I, Item 2.

The Company has been named as 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.












                                       15
<PAGE>

ITEMS 2-5:   NOT APPLICABLE.
----------------------------

ITEM 6:      EXHIBITS AND REPORTS ON FORM  8-K
----------------------------------------------

a)   Exhibits:  None

b)   Report on Form 8-K:

     Report filed on August 11, 2001 disclosing under Item 5 and filing exhibits
     for the  mortgage  loan and the  settlement  with LSOF  Pooled  Equity L.P.
     described in Part I, Item 2.

     Report  filed on October 18, 2001  disclosing  under Item 2 the  settlement
     with LSOF Pooled Equity L.P. described in Part I, Item 2.











                                       16
<PAGE>

     Signatures

Pursuant  to the  requirements  of the  Securities  and  Exchange  Act of  1934,
registrant  has  duly  caused  this  report  to  be  signed  on  its  behalf  by
undersigned, thereunto duly authorized.


                                                  Greenbriar Corporation



Date: November 10, 2001                      By:  /s/ Gene S. Bertcher
                                                  ----------------------------
                                                  Executive Vice President
                                                  Chief Financial Officer















                                       17

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