UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ended March 31, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12396
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma 73-0970298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 842-2333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of April 30, 2002.
Common Stock $.001333 par value - 1,828,845
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page
----------------------------- ----
Item 1. Financial Statements................................................3
Balance Sheets - March 31, 2002 (Unaudited) and
December 31, 2001......................................................3
Statements of Operations - Three Months
ended March 31, 2002 and 2001 (Unaudited)..............................4
Statements of Shareholders' Equity - Year ended December 31, 2001
and Three Months ended March 31, 2002 (Unaudited)......................5
Statements of Cash Flows - Three Months ended
March 31, 2002 and 2001 (Unaudited)....................................6
Notes to Financial Statements (Unaudited).................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........21
PART II. OTHER INFORMATION
---------------------------
Item 2. Changes in Securities..............................................21
Item 6. Exhibits and Reports on Form 8-K...................................21
Signatures...................................................................25
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
March 31, December 31,
Assets 2002 2001
------ ---------------- ----------------
Current assets:
Cash and cash equivalents $ 37,000 $ 55,000
Accounts receivable, less allowance for doubtful
receivables of $107,000 in 2002 and 2001 123,000 175,000
Inventory 20,000 76,000
Prepaid expenses and other assets 48,000 56,000
Current portion of notes receivable 182,000 180,000
---------------- ----------------
Total current assets 410,000 542,000
---------------- ----------------
Notes receivable 90,000 108,000
Investments and other assets 751,000 652,000
Property, plant and equipment, at cost 4,831,000 4,894,000
Less accumulated depreciation, depletion and amortization 2,156,000 2,184,000
---------------- ----------------
Net property, plant and equipment 2,675,000 2,710,000
---------------- ----------------
Intangible assets, at cost 79,000 48,000
Less accumulated amortization 2,000 2,000
---------------- ----------------
Net intangible assets 77,000 46,000
---------------- ----------------
$ 4,003,000 $ 4,058,000
================ ================
Liabilities and Shareholders' Equity (Deficiency)
-------------------------------------------------
Current liabilities:
Trade accounts payable $ 166,000 $ 156,000
Accrued expenses 375,000 429,000
Current maturities of long-term debt 308,000 307,000
---------------- ----------------
Total current liabilities 849,000 892,000
---------------- ----------------
Long-term debt less current maturities 17,000 19,000
Long-term debt - related entities 2,922,000 2,494,000
Other long-term liabilities 108,000 108,000
Redeemable preferred stock of $100 stated value;
5,000,0000 sharesr authorized; 27,838 shares issued
and outstanding in 2001 and 2000 (note 4) 889,000 889,000
Common shareholders' equity (deficiency):
Common stock of $.001333 par value per share; 7,500,000
shares authorized; 2,123,898 shares issued
and outstanding in 2001 and 2000 3,000 3,000
Capital in excess of par value 38,104,000 38,081,000
Accumulated deficit (37,029,000) (36,568,000)
Accumulated other comprehensive loss (14,000) (14,000)
Treasury stock, 295,053, at cost, in 2001 and 2000 (1,846,000) (1,846,000)
---------------- ----------------
Total common shareholders' equity (deficiency) (782,000) (344,000)
---------------- ----------------
Commitments and contingencies (note 7)
$ 4,003,000 $ 4,058,000
================ ================
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
For the Three Months Ended
------------------------------
March 31, March 31,
2002 2001
-------------- -------------
Revenues:
Coal reclamation $ 1,000 $ 52,000
Carbon dioxide 86,000 126,000
China - -
e-Commerce - -
Other 3,000 5,000
-------------- -------------
90,000 183,000
-------------- -------------
Expenses:
Coal reclamation 119,000 129,000
Carbon dioxide 31,000 24,000
China - -
e-Commerce - -
Selling, general and administrative 253,000 290,000
Depreciation, depletion and amortization 23,000 23,000
Other 15,000 13,000
-------------- -------------
441,000 479,000
-------------- -------------
Operating profit (loss):
Coal reclamation (147,000) (118,000)
Carbon dioxide 47,000 94,000
China - -
e-Commerce (36,000) (51,000)
Other, primarily corporate (215,000) (221,000)
-------------- -------------
(351,000) (296,000)
Other income (expense):
Interest income 27,000 41,000
Interest expense (67,000) (39,000)
Equity in operations of unconsolidated affiliates (31,000) (57,000)
Gain on sale of assets 9,000 17,000
-------------- -------------
Loss from continuing operations before income taxes (413,000) (334,000)
Income tax benefit (expense) (note 6) - 60,000
-------------- -------------
Loss from continuing operations (413,000) (274,000)
Loss from discontinued operations (note 3) (48,000) (310,000)
-------------- -------------
Net loss $ (461,000) $ (584,000)
============== =============
Net loss per average common share outstanding:
Basic and diluted:
Loss from continuing operations $ (0.22) $ (0.15)
Loss from discontinued operations (0.03) (0.17)
-------------- -------------
Net loss $ (0.25) $ (0.32)
============== =============
Weighted average common shares outstanding - basic and diluted 1,829,000 1,829,000
============== =============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity (Deficiency)
Accumulated Total
Capital in Other Common
Common Excess of Accumulated Comprehensive Treasury Shareholders'
Stock Par Value Deficit Income Stock Equity (Deficiency)
-------- --------- ------------ ------------- ---------- -------------------
Balance, December 31, 2000 $ 3,000 $37,986,000 $(34,247,000) $(13,000) $( 1,846,000) $ 1,883,000
Net loss - - (2,321,000) - - (2,321,000)
Comprehensive income:
Foreign currency translation
adjustment - - - (1,000) - (1,000)
--------------
Comprehensive loss - - - - - (2,322,000)
--------------
Reservation of shares pursuant to
deferred compensation plan - 95,000 - - - 95,000
---------- ----------- ------------ -------- ------------ --------------
Balance, December 31, 2001 3,000 38,081,000 $(36,568,000) (14,000) ( 1,846,000) (344,000)
Net loss, three months ended March
31, 2002 (unaudited) - - (461,000) - - (461,000)
Comprehensive income:
Foreign currency translation
adjustment (unaudited) - - - - - -
--------------
Comprehensive loss (unaudited) - - - - - (461,000)
--------------
Reservation of shares pursuant to
deferred compensation plan
(unaudited) - 23,000 - - - 23,000
---------- ----------- ------------ -------- ------------ --------------
Balance, March 31, 2002 (unaudited) $ 3,000 $38,104,000 $(37,029,000) $(14,000) $( 1,846,000) $( 782,000)
========== =========== ============ ======== ============ ==============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
------------------------------
March 31, 2002 March 31, 2001
-------------- --------------
Operating activities:
Cash received from customers $ 226,000 $ 245,000
Cash paid to suppliers and employees (550,000) (574,000)
Interest received 22,000 20,000
Interest paid (6,000) (84,000)
Taxes (paid) refunded - 60,000
------------- -------------
Net cash used in operating activities (308,000) (333,000)
------------- -------------
Investing activities:
Acquisition of property, plant and equipment (5,000) (8,000)
Acquisition of intangibles (11,000) -
Proceeds from sale of assets 62,000 17,000
Investment in and advances to fifty percent-owned
subsidiary in Mexico (4,000) (107,000)
Investment in and advances to fifty percent-owned
subsidiary in China (169,000) -
Advances for notes receivable (2,000) (22,000)
Payments on notes receivable 20,000 89,000
Other 36,000 13,000
------------- -------------
Net cash used in investing activities (73,000) (18,000)
------------- -------------
Financing activities:
Proceeds from term notes 370,000 401,000
Payments on line of credit and term notes (7,000) (5,000)
------------- -------------
Net cash provided by financing activities 363,000 396,000
------------- -------------
Net increase (decrease) in cash and cash equivalents (18,000) 45,000
Cash and cash equivalents at beginning of period 55,000 31,000
------------- -------------
Cash and cash equivalents at end of period $ 37,000 $ 76,000
============= =============
Continued
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
Reconciliation of Net Loss to Net Cash Used in Operating Activities
For the Three Months Ended
--------------------------------
March 31, 2002 March 31, 2001
-------------- --------------
Net loss $ (461,000) $ (584,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 24,000 29,000
Gain on sale of assets (47,000) (17,000)
Equity in operations of unconsolidated affiliates 36,000 296,000
Net cash used by discontinued operations offsetting
accrued impairment loss (4,000) (31,000)
(Increase) decrease in accounts receivable, prepaid expenses
other current assets 28,000 (5,000)
(Increase) decrease in inventories 56,000 (8,000)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities 60,000 (13,000)
-------------- --------------
Net cash used in operating activities $ (308,000) $ (333,000)
============== ==============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 2002 and 2001
(Unaudited)
(1) Summary of Significant Accounting Policies
--- ------------------------------------------
Basis of Presentation
---------------------
The accompanying financial statements and notes thereto have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain disclosures normally prepared in
accordance with accounting principles generally accepted in the United
States have been omitted. The accompanying financial statements and notes
thereto should be read in conjunction with the audited consolidated
financial statements and notes thereto included in The Beard Company's 2001
annual report on Form 10-K.
The accompanying financial statements include the accounts of The Beard
Company and its wholly and majority-owned subsidiaries in which The Beard
Company has a controlling financial interest ("Beard" or the "Company").
Subdidiaries and investees in which Beard does not exercise control are
accounted for using the equity method. All significant intercompany
transactions have been eliminated in the accompanying financial statements.
The financial information included herein is unaudited; however, such
information reflects solely normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
the interim periods presented.
The results of operations for the three-month period ended March 31, 2002,
are not necessarily indicative of the results to be expected for the full
year.
The Company's current significant operations are within the following
segments: (1) the Coal Reclamation ("Coal") Segment, (2) the Carbon Dioxide
("CO2") Segment, (3) the China ("China") Segment, and (4) the e-Commerce
("e-Commerce") Segment.
The Coal Segment is in the business of operating coal fines reclamation
facilities in the U.S. and provides slurry pond core drilling services,
fine coal laboratory analytical services and consulting services. The CO2
Segment consists of the production of CO2 gas. The China Segment is
pursuing environmental opportunities in China focusing on the installation
and construction of facilities which utilize the patented AirLance Compost
Systems(TM) composting technology. The e-Commerce Segment consists of a
71%-owned subsidiary which is pursuing the development of a virtually
secure payment system to be used exclusively for Internet transactions. Its
current focus is to develop licensing arrangements and other fee based
arrangements with companies implementing technology in conflict with its
intellectual property.
As discussed in note 3: (1) In 1999, the Company's Board of Directors
adopted a formal plan to discontinue its interstate travel facilities
business (the "ITF" Segment); (2) in 1999 the Management Committee of North
American Brine Resources ("NABR") adopted a plan to discontinue its brine
extraction/iodine manufacturing business which comprised the Company's
("BE/IM") Segment; (3) in May 2001 the fixed assets of the 50%-owned
company (accounted for as an equity investment) involved in the Natural Gas
Well Servicing ("WS") Segment were sold and in August 2001, the Company
ceased pursuing opportunities in Mexico and the segment was discontinued;
and (4) in March 2001 the Company ceased providing financial support to its
environmental remediation ("ER") subsidiary, its exclusive marketing
license was subsequently cancelled, and the ER Segment was discontinued.
Investments
-----------
The Company owns a 50% interest in ABT-Beard, L.L.C. ("ABT-Beard"), a
company involved in pursuing environmental opportunities in China.
ABT-Beard had no revenues for either the first quarter of 2002 or 2001.
ABT-Beard incurred losses of $146,000 and $176,000 for the first quarter of
2002 and 2001, respectively.
Impact of Recently Issued Accounting Standards Not Yet Adopted
--------------------------------------------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 142
applies to intangible assets acquired individually or with a group of other
assets at acquisition and subsequent to acquisition. According to Statement
No. 142, intangible assets are to be recorded at fair value and goodwill
will not be amortized, but assessed annually for impairment.
In September 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. Statement No. 143 applies to the initial
measurement and subsequent accounting for obligations associated with the
sale, abandonment, or other type of disposal of long-lived tangible assets.
The statement requires that asset retirement obligations be recognized at
fair value when the obligation is incurred.
In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The assets covered by the
statement include those to be held and used or to be disposed of, such as
assets under capital leases of lessees, assets subject to operating leases
of lessors, and prepaid assets. This statement provides guidance for the
recognition and measurement of an impairment loss for certain types of
long-lived assets and expands the scope of discontinued operations.
The Company has adopted FASB Statements No. 142 and 144 effective January
1, 2002 for the fiscal year ended December 31, 2002 and the impact is not
material. The Company will be required to adopt FASB Statement 143
effective January 1, 2003 for the fiscal year ended December 31, 2003. The
Company has not evaluated the effects of Statement No. 143, but does not
believe that adoption of this accounting standard will have a significant
effect on the financial position or results of operations of the Company.
Reclassifications
-----------------
Certain 2001 balances have been reclassified to conform to the 2002
presentation. As described in note 3, the Company discontinued two of its
segments. As a result the 2001 statement of operations has been
reclassified to reflect the two segments' operations as discontinued.
(2) Liquidity and Ability to Fund Operations
--- ----------------------------------------
As a result of the requirement to fund operating losses and the decision to
pursue other investment opportunities, the Company's cash and cash
equivalents decreased $39,000 at March 31, 2002 compared to March 31, 2001.
To mitigate potential liquidity problems, the Company obtained financing of
$1.8 million in 2000, including $1.5 million from an affiliate of the
Company's chairman. Lines from related parties were increased to a total of
$2,350,000 in September of 2001, and were subsequently increased to
$2,725,000 in February of 2002. Of this amount, $2,625,000 is secured by a
pledge of approximately 89% of the Company's working and overriding royalty
interests in the McElmo Dome Unit. The sale of the fixed assets of the
Company's 50%-owned investee in the well testing business in May 2001
resulted in the distribution of $907,000 of cash to the Company and the
reclassification of a portion of a note receivable from long-term to
current. Despite these inflows, working capital deteriorated $89,000 during
the first quarter of 2002.
The Company is focusing on replacing its Coal Segment's revenues and
currently has four major projects in various stages of development, all of
which, subject to arranging necessary financing, are expected to mature
into operating projects during 2002 and 2003. In each case core holes have
been drilled and sample analyses have been completed with favorable
results. The projects are in four different states and involve four
different parties. On three of the projects we are negotiating with the
pond owners concerning the installation of a preparation plant to recover
clean coal. The fourth project involves the transfer of a large amount of
non-recoverable slurry to a new disposal area, and may ultimately result in
the installation of a preparation plant. The first three projects require
the arrangement of necessary financing; the fourth would require no
financing. Negotiations are in progress with a third party to form a joint
venture or limited liability company that would provide the initial working
capital and guarantee the necessary equipment financing on the three
projects. Although the timing of the four projects is uncertain, they are
all considered to have a high probability of activity, subject to obtaining
the necessary financing on the three. However, no definitive contracts have
as yet been signed, and there is no assurance that the required financing
will be obtained or that any or all of the projects will materialize.
After more than three years of development activity by the China Segment,
it appears that its efforts are finally starting to bear fruit. The segment
has signed contracts and formed Cooperative Joint Ventures ("CJV's") with
various Chinese partners which call for the construction of three compost
manufacturing facilities in which the Company will own an interest and
receive an operating fee. The initial plant, located at Baoding in Hebei
Province, broke ground in March of 2001. Construction was delayed due to
cold weather, but is targeted to resume in the spring of 2002. The first
installment (US $61,571, net of tax of approximately $10,000) of the
fabrication license fee for this plant was received in December of 2001,
with the next installment anticipated this summer. A second plant, located
at Qihe City in Shandong Province, is also targeted to resume construction
in the spring of 2002. The third CJV, which calls for the construction of a
plant in the City of Handan, is on indefinite hold. The segment is
currently pursuing 13 other projects, seven of which are considered to have
a high probability for activity. Two of these projects are in the final
stages of contract negotiation, with project construction slated to start
within the next 90 days. In the event these projects materialize they would
result in contracts in which the segment would receive substantial
front-end fees with no equity interest. If the plants currently under
construction progress on schedule, they are projected to generate
fabrication license fees, management fees and installation fees in 2002
which will more than cover the segment's projected overhead as well as its
required injections of registered capital for the projects during the year.
Key to the Company's liquidity is the anticipated settlement of a lawsuit,
in which the Company is a Plaintiff, which has been in progress since 1996.
A Settlement Agreement was signed by the parties in September of 2001. On
May 6, 2002, the federal judge issued the Final Judgment approving the
Settlement and ordered that a settlement fund of $50.4 million in cash be
established to settle the class action lawsuit. Objectors have 30 days from
May 6 to appeal. In companion rulings on the same date the Judge also
approved the allocation of settlement funds among the class members in the
lawsuit. Distribution of the proceeds will be delayed until all appeal
periods have run. The Company anticipates its share of the proceeds will be
in excess of $3.5 million. Distribution of the contemplated proceeds will
have a significant impact upon the Company's liquidity. Although there is
the possibility that appeals could delay the Settlement or that objecting
parties could ultimately cause the Settlement to be overturned, the Company
believes it is unlikely that the Settlement will be overturned.
To further bolster working capital, the Company is currently pursuing a
private placement of $1,200,000 of 10% subordinated notes due September 30,
2003, with warrants to purchase up to 285,000 shares of Company common
stock, to "bridge the gap" until the settlement funds are distributed or
until the anticipated Coal and China projects achieve positive cash flow.
As of May 13, 2002, the Company had closed on the sale of $455,000 of the
Notes, and had received verbal commitments for the purchase of an
additional $625,000 of Notes which are expected to close within the next
few days. A related party purchased $200,000 of this total. In addition,
the Company expects to generate cash from the disposition of the remaining
assets from the discontinued ITF, BE/IM and WS Segments and from the pay
down of notes receivable, and can sell certain other assets to generate
cash if necessary.
The Company believes that the cash generated from the private debt
placement currently in progress, coupled with the cash generated from the
sale of assets, will be more than adequate to enable the Company to
continue operations until (i) the settlement funds have been received or
(ii) the operations of the projects under development in the Coal and China
Segments have come on stream and the Company is generating positive cash
flow.
(3) Discontinued Operations
--- -----------------------
ITF Segment
In 1999 the Company's Board of Directors adopted a formal plan to
discontinue its interstate travel facilities ("ITF") Segment and recorded a
$1,603,000 estimated loss for the discontinuance in 1998. ITF disposed of a
majority of its assets in 1999, retaining two convenience stores
("C-stores"), including their equipment and inventory, and Beard became
100% owner of ITF.
Beard recorded an additional $420,000 loss in 2000; $60,000 represented
operating losses expected to be incurred by the discontinued ITF Segment
prior to the anticipated disposal date of the remaining assets; $360,000
represented an additional reduction in the estimated realizable value of
the remaining C-stores and related assets as of December 31, 2000. ITF's
revenues and actual operating losses were $7,000 and $31,000, respectively,
for the three months ended March 31, 2001. The actual losses for the three
months ended March 31, 2001 were charged against the loss accrual recorded
in the fourth quarter of 2000.
In December 2001, Beard recorded an additional $100,000 impairment in the
carrying value of the facilities and $14,000 for anticipated operating
losses for the period from December 31, 2001 through the expected disposal
date of the remaining assets. ITF recorded no revenues for the three months
ended March 31, 2002 and incurred $4,000 of losses for the same period
which were charged against the loss accrual recorded in 2001. Included in
the losses was a $2,000 gain on the sale of equipment.
As of March 31, 2002, the significant assets related to the ITF Segment
consisted primarily of the two remaining C-stores and other assets with a
total recorded value of $409,000. The significant liabilities of the
segment consisted of trade accounts payable and accrued expenses totaling
$14,000. Beard is actively seeking opportunities to sell the remaining
C-stores and expects them to be sold by December 31, 2002.
BE/IM Segment
In 1999 the Management Committee of North American Brine Resources ("NABR")
adopted a formal plan to discontinue the business and dispose of its
assets. Beard had a 40% ownership in NABR, which was accounted for under
the equity method. As a result, Beard's share of NABR's operating results
have been reported as discontinued for all periods presented in the
accompanying statements of operations. The joint venture was dissolved in
September 2000 and the Japanese partners received their final distribution
of cash in December 2000, with the Company taking over the remaining assets
and liabilities.
In 1999 Beard recorded a $540,000 loss, which represented its share of
NABR's $1,350,000 estimated loss from the discontinuation of operations.
NABR's loss included $572,000 of anticipated operating losses through April
2000 (the date operations ceased for the larger of its two plants) and
costs of ceasing operations. NABR's revenues for the smaller of the two
plants were $77,000 and none for the three months ended March 31, 2002 and
2001, respectively. NABR's operating losses for the three months ended
March 31, 2002 and 2001 were $37,000 and $24,000, respectively, and were
not anticipated in the loss accruals recorded in 1999. NABR charged $2,000
and $31,000 for the three months ended March 31, 2002 and 2001,
respectively, against the accrual for anticipated expenses related to the
shutdown of the larger of its two plants.
As of March 31, 2002, the significant assets related to NABR's operations
consisted primarily of equipment and inventory with estimated net
realizable values of $68,000 and $20,000, respectively. The significant
liabilities related to NABR's operations consisted primarily of accounts
payable of $15,000 and accrued expenses related to the shutdown of
operations totaling $151,000. The Company is actively pursuing
opportunities to sell NABR's assets and expects the disposition to be
completed by December 31, 2002.
WS Segment
In May 2001 the fixed assets of the 50%-owned company (accounted for as an
equity investment) involved in natural gas well testing operations for the
Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject
to a holdback of $150,000. The Company received $21,000 and $65,000 of the
holdback in June and November, respectively, of 2001. As a result of the
sale all debt of the 50%-owned company was retired and the Company was
relieved of contingent liabilities totaling $512,000. In August 2001 the
Company made the decision to cease pursuing opportunities in Mexico and the
WS Segment was discontinued. In December 2001 all of the sand separators
owned by the 100%-owned company in the WS Segment were sold for $100,000.
The Company is now pursuing the sale of all remaining equipment owned by
the segment.
The segment recorded no revenues for either the first quarter of 2002 or
2001. Beard's share of operating losses from the discontinued segment were
$11,000 and $269,000 for the three months ended March 31, 2002 and 2001
respectively. The loss for the first quarter of 2002 included gains on
sales of equipment totaling $36,000. For the first quarter of 2001, Beard's
share of operating losses from the 50%-owned company were $238,000,
including a $100,000 provision for estimated losses from the
discontinuation of operations. The remaining $31,000 of losses incurred in
the three months ended March 31, 2001 were associated with the operations
of the wholly-owned company and were not anticipated in the loss accrual.
As of March 31, 2002, the significant assets of the WS Segment consisted of
fixed assets with a recorded value of $144,000 and cash and accounts
receivable totaling of $45,000. The significant liabilities of the entity
consisted of trade accounts payable and accrued expenses totaling $60,000.
It is anticipated that all liabilities of the segment will be paid prior to
December 31, 2002.
ER Segment
In March of 2001 the Company determined that it would no longer provide
financial support to ISITOP, Inc., an 80%-owned subsidiary whose operations
had previously comprised the Company's environmental remediation ("ER")
Segment. In May 2001 ISITOP was notified that the segment's exclusive U.S.
marketing license for the chemical used for PAH remediation had been
cancelled, and the segment was discontinued. ISITOP generated no revenues
in 2002 or in 2001. ISITOP's operating losses totaled none and $17,000 for
the three months ended March 31, 2002 and 2001,respectively. ISITOP had no
significant assets or liabilities at March 31, 2002.
(4) Redeemable Preferred Stock
--- --------------------------
The Company's preferred stock is mandatorily redeemable through December
31, 2002, from one-third of Beard's "consolidated net income" as defined.
Accordingly, one-third of future "consolidated net income" will accrete
directly to preferred stockholders and reduce earnings per common share.
The Company's 2002 operations through March 31 were not sufficient to begin
the sharing of the consolidated net income. To the extent that the
preferred stock is not redeemed by December 31, 2002, the shares of
preferred stock can be converted into shares of the Company's common stock.
(5) Loss Per Share
--- --------------
Basic loss per share data is computed by dividing loss attributable to
common shareholders by the weighted average number of common shares
outstanding for the period.
Diluted loss per share in the statements of operations exclude potential
common shares issuable upon conversion of redeemable preferred stock or
exercise of stock options as a result of losses from continuing operations
for all periods presented.
(6) Income Taxes
--- ------------
In accordance with the provisions of the Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), the
Company's net deferred tax asset is being carried at zero book value, which
reflects the uncertainties of the Company's utilization of the future net
deductible amounts. The Company recorded refunds of $41,000 and $19,000 for
federal and state income taxes, respectively, for the three months ended
March 31, 2001. The Company recorded no provision for taxes for the three
months ended March 31, 2002.
At March 31, 2002, the Company estimates that it had the following income
tax carryforwards available for both income tax and financial reporting
purposes (in thousands):
Expiration
Date Amount
---- ------
Federal regular tax operating
loss carryforwards 2004-2009 $ 52,600
Tax depletion carryforward Indefinite $ 5,500
(7) Commitments and Contingencies
--- -----------------------------
In the normal course of business various actions and claims have been
brought or asserted against the Company. Management does not consider them
to be material to the Company's financial position, liquidity or results of
operations.
In connection with the sale of the fixed assets of the Mexican well testing
operations the Company and its 50% partner have each, as to 50%,
indemnified the purchaser from and against any claims, demands, actions,
damages, cause of action, cost, liability, penalties and expense (including
reasonable legal fees) that purchaser or its successors or assigns may
suffer arising from the Mexican subsidiary's failure to file any applicable
tax returns or pay any and all of its taxes which had accrued prior to the
sale date. As of March 31, 2002, the accrued tax liabilities were estimated
to be $3,000, with the Company liable for one-half of such amount.
The Company has an indemnity obligation to its institutional preferred
stockholder and one of its assignees for certain losses (i) arising out of
the ownership and/or operation of Beard Oil's former oil and gas assets,
including environmental liabilities; (ii) arising under any employee
benefit or severance plan; or (iii) relating to any misrepresentation or
inaccuracy in any representation made by the Company or Beard Oil in
connection with the Restructure (collectively, the "Obligations"). Neither
Beard nor Beard Oil is presently aware of any material liabilities existing
as a result of such Obligations.
(8) Business Segment Information
--- ----------------------------
The Company manages its business by products and services and by geographic
location (by country). The Company evaluates its operating segments'
performance based on earnings or loss from operations before income taxes.
The Company had four reportable segments in the first quarter of 2002 and
2001: Coal, Carbon Dioxide, China and e-Commerce.
The Coal Segment is in the business of operating coal fines reclamation
facilities in the U.S. and provides slurry pond core drilling services,
fine coal laboratory analytical services and consulting services. The CO2
Segment consists of the production of CO2 gas. The China Segment is
pursuing environmental opportunities in China, focusing on the installation
and construction of facilities which utilize the patented AirLance Compost
Systems(TM) composting technology. The e-Commerce Segment consists of a
71%-owned subsidiary which is (i) pursuing the development of a payment
system to be used exclusively for Internet transactions and (ii) focusing
on developing licensing agreements and other fee based arrangements with
companies implementing technology in conflict with the Company's
intellectual property.
The following is certain financial information regarding the Company's
reportable segments (presented in thousands of dollars).
General corporate assets and expenses are not allocated to any of the
Company's operating segments; therefore, they are included as a reconciling
item to consolidated total assets and loss from continuing operations
before income taxes reported in the Company's accompanying financial
statements.
Carbon
Coal Dioxide China e-Commerce Totals
---- ------- ----- ---------- ------
Three months ended
------------------
March 31, 2002
--------------
Revenues from
external customers $ 1 $ 86 $ - $ - $ 87
Segment profit (loss) (138) 47 (146) (36) (273)
Segment assets 1,580 404 463 63 2,510
Three months ended
------------------
March 31, 2001
--------------
Revenues from
external customers $ 52 $ 126 $ - $ - $ 178
Segment profit (loss) (100) 94 (176) (52) (234)
Segment assets 1,622 443 5 60 2,130
Reconciliation of total reportable segment loss to consolidated loss from
continuing operations before income taxes is as follows for the three
months ended March 31, 2002 and 2001 in thousands):
2002 2001
--------- ---------
Total loss for reportable segments $ (273) $ (234)
Eliminate loss from China operations accounted for
as an equity investment 146 176
Equity in loss from China operations accounted for
as an equity investment (73) (88)
Net corporate costs not allocated to segments (213) (128)
--------- ---------
Total consolidated loss from continuing
operations $ (413) $ (274)
========= =========
THE BEARD COMPANY AND SUBSIDIARIES
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS
REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE
FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED COSTS AND PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS.
IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY CAN BE IDENTIFIED BY THE USE
OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "INTEND,"
"PROJECT," "ESTIMATE," "ANTICIPATE," "BELIEVE," OR "CONTINUE" OR THE NEGATIVE
THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED UNDER "ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY, OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS. THE COMPANY ASSUMES NO DUTY TO UPDATE OR
REVISE ITS FORWARD-LOOKING STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES OR
EXPECTATIONS OR OTHERWISE.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion focuses on material changes in the Company's
financial condition since December 31, 2001 and results of operations for the
quarter ended March 31, 2002, compared to the prior year first quarter. Such
discussion should be read in conjunction with the Company's financial statements
including the related footnotes.
In preparing the discussion and analysis, the Company has presumed readers
have read or have access to the discussion and analysis of the prior year's
results of operations, liquidity and capital resources as contained in the
Company's 2001 Form 10-K.
The Coal Segment is in the business of operating coal fines reclamation
facilities in the U.S. and provides slurry pond core drilling services, fine
coal laboratory analytical services and consulting services. The CO2 Segment
consists of the production of CO2 gas. The China Segment is pursuing
environmental opportunities in China focusing on the installation and
construction of facilities which utilize the patented AirLance Compost
Systems(TM) composting technology. The e-Commerce Segment consists of a
71%-owned subsidiary which is pursuing the development of a virtually secure
payment system to be used exclusively for Internet transactions. Its current
focus is to develop licensing arrangements and other fee based arrangements with
companies implementing technology in conflict with its intellectual property.
In 1999 the Company adopted a plan to discontinue its ITF Segment, and
those operations were reflected as discontinued operations in 1998. The majority
of the assets of the ITF Segment were disposed of in 1999 and the Company is
pursuing the sale of the remaining assets. In 1999 the Company adopted a plan to
discontinue its BE/IM Segment, and those operations have since been reflected as
discontinued. The Company is now in the process of liquidating those assets. In
March 2001 the Company ceased providing financial support to ISITOP, Inc. and
shortly thereafter its exclusive marketing license was terminated. Accordingly,
the operations of the ER Segment have been reflected as discontinued. In May
2001 the fixed assets of the 50%-owned company (accounted for as an equity
investment) involved in the WS Segment were sold. In August 2001 the Company
ceased pursuing opportunities in Mexico related to the sand separator assets
previously operated in Mexico in the WS Segment, and the Company has since been
pursuing the sale of the segment's remaining assets. As a result, the operations
of the WS Segment have now been reflected as discontinued.
Material changes in financial condition - March 31, 2002 as compared with
December 31, 2001.
The following table reflects changes in the Company's financial condition
during the periods indicated:
March 31, December 31, Increase
2002 2001 (Decrease)
---- ---- ----------
Cash and cash equivalents $ 37,000 $ 55,000 $ (18,000)
Working capital $ (439,000) $ (350,000) $ (89,000)
Current ratio 0.48 to 1 0.61 to 1
During the first quarter of 2002, the Company's working capital decreased
by $89,000 from $(350,000) as of December 31, 2001. Related entities of the
Chairman of the Board made net advances of $365,000 to the Company. $147,000 of
working capital were used to help fund the operations of the Coal Segment. There
were net advances of $169,000 to the Company's joint venture involved in the
pursuit of environmental opportunities in China. The Company received payments
on notes receivable totaling $20,000 during the quarter ended March 31, 2002.
$36,000 was used to fund the startup activities of the e-Commerce Segment. The
remainder of the working capital was utilized to fund other operations.
The Company's principal business is coal reclamation, and this is where
management's operating attention is primarily focused. The Coal Segment
currently has four major projects in various stages of development, all of
which, subject to arranging necessary financing, are expected to mature into
operating projects during 2002 and 2003. In each case core holes have been
drilled and sample analyses have been completed with favorable results. The
projects are in four different states and involve four different parties. On
three of the projects we are negotiating with the pond owners concerning the
installation of a preparation plant to recover clean coal. The fourth project
involves the transfer of a large amount of non-recoverable slurry to a new
disposal area, and may ultimately result in the installation of a preparation
plant.
The first three projects require the arrangement of necessary financing;
the fourth would require no financing. Negotiations are in progress with a
substantial third party to form a joint venture or limited liability company
that would provide the initial working capital and guarantee the necessary
equipment financing on the three projects. Although the timing of the four
projects is uncertain, they are all considered to have a high probability of
activity, subject to obtaining the necessary financing on the three. However, no
definitive contracts have as yet been signed, and there is no assurance that the
required financing will be obtained or that any or all of the projects will
materialize.
After more than three years of development activity by the China Segment,
it appears that its efforts are finally starting to bear fruit. The segment has
signed contracts and formed Cooperative Joint Ventures ("CJV's") with various
Chinese partners which call for the construction of three compost manufacturing
facilities in which the Company will own an interest and receive an operating
fee. The initial plant, located at Baoding in Hebei Province, broke ground in
March of 2001. Construction was delayed due to cold weather, but is targeted to
resume in the spring of 2002. The first installment (US $61,571, net of tax of
approximately $10,000) of the fabrication license fee for this plant was
received in December of 2001, with the next installment anticipated this summer.
A second plant, located at Qihe City in Shandong Province, is also targeted to
resume construction in the spring of 2002. The third CJV, which calls for the
construction of a plant in the City of Handan, is on indefinite hold. The
segment is currently pursuing 13 other projects, seven of which are considered
to have a high probability for activity. Two of these projects are in the final
stages of contract negotiation, with project construction slated to start within
the next 90 days. In the event these projects materialize they would result in
contracts in which the segment would receive substantial front-end fees with no
equity interest. If the plants currently under construction progress on
schedule, they are projected to generate fabrication license fees, management
fees and installation fees in 2002 which will more than cover the segment's
projected overhead as well as its required injections of registered capital for
the projects during the year.
Key to the Company's liquidity is the anticipated settlement of a lawsuit,
in which the Company is a Plaintiff, which has been in progress since 1996. A
Settlement Agreement was signed by the parties in September of 2001. On May 6,
2002, the federal judge issued the Final Judgment approving the Settlement and
ordered that a settlement fund of $50.4 million in cash be established to settle
the class action lawsuit. Objectors have 30 days from May 6 to appeal. In
companion rulings on the same date the Judge also approved the allocation of
settlement funds among the class members in the lawsuit. Distribution of the
proceeds will be delayed until all appeal periods have run. The Company
anticipates its share of the proceeds will be in excess of $3.5 million.
Distribution of the contemplated proceeds will have a significant impact upon
the Company's liquidity. Although there is the possibility that appeals could
delay the Settlement or that intervening parties could ultimately cause the
Settlement to be overturned, the Company believes it is unlikely that the
Settlement will be overturned.
In 2000 the Company supplemented its $300,000 credit line with a commercial
bank by arranging for borrowings of up to $1,500,000 from affiliates of a
related party. Such lines had been increased to a total of $2,350,000 in
September of 2001, and were subsequently increased to $2,725,000 in February of
2002 to provide additional working capital. To further bolster working capital,
the Company is currently pursuing a private placement of $1,200,000 of 10%
subordinated notes due September 30, 2003, with warrants to purchase up to
285,000 shares of Company common stock, to "bridge the gap" until the settlement
funds are distributed or until the anticipated Coal and China projects achieve
positive cash flow. As of May 13, 2002, the Company had closed on the sale of
$455,000 of the Notes, and had received verbal commitments for the purchase of
an additional $625,000 of Notes which are expected to close within the next few
days. In addition, the Company expects to generate cash from the disposition of
the remaining assets from the discontinued ITF, BE/IM and WS Segments and from
the pay down of notes receivable, and can sell certain other assets to generate
cash if necessary.
The Company believes that the cash generated from the private debt
placement currently in progress, coupled with the cash generated from the sale
of assets, will be more than adequate to enable the Company to continue
operations until (i) the settlement funds have been received or (ii) the
operations of the projects under development in the Coal and China Segments have
come on stream and the Company is generating positive cash flow.
Through the period ending December 31, 2002, the Company's liquidity will
be reduced to the extent it is required to redeem any of the Beard preferred
stock pursuant to the mandatory redemption provisions. See Note 4 to the
accompanying financial statements.
Material changes in results of operations - Quarter ended March 31, 2002 as
compared with the Quarter ended March 31, 2001.
The loss for the first quarter of 2002 was $461,000 compared to $584,000
for the 2001 first quarter. The operating loss in the Coal Segment increased by
$29,000. The operating profit in the CO2 Segment decreased $47,000. The
e-Commerce Segment incurred operating losses of $36,000 for the first quarter of
2002 compared to $51,000 in the first quarter of 2001. The operating loss in
Other activities for the first quarter of 2002 decreased $6,000 compared to the
same period in 2001. As a result, the operating loss for the current quarter
increased $55,000 to $351,000 versus $296,000 in the corresponding quarter of
the prior year.
Operating results of the Company's primary operating Segments are reflected
below:
2002 2001
---- ----
Operating profit (loss):
Coal reclamation $(147,000) $(118,000)
Carbon dioxide 47,000 94,000
China - -
e-Commerce (36,000) (51,000)
----------- -----------
Subtotal (136,000) (75,000)
Other (215,000) (221,000)
----------- -----------
$(351,000) $(296,000)
=========== ===========
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities of the Company.
Coal reclamation
The segment's revenues for the first quarter of 2002 decreased $51,000 to
$1,000 compared to $52,000 for the first quarter of 2001. The segment's
consulting and coring business declined sharply in the current quarter as the
Company focused on the four major projects mentioned above. Operating costs
decreased $10,000 to $119,000 for the first quarter of 2002 compared to $129,000
for the same period in 2001, reflecting the decreased activity level. SG&A costs
decreased $13,000 for the three months ended March 31, 2002 compared to the same
period in 2001. As a result, the operating loss increased $29,000 to $147,000
for the first quarter of 2002 compared to the first three months of 2001.
Carbon dioxide
First quarter 2002 operations reflected an operating profit of $47,000
compared to $94,000 for the 2001 first quarter. The sole component of revenues
for this segment is the sale of CO2 gas from the working and overriding royalty
interests of the Company's two carbon dioxide producing units in Colorado and
New Mexico. Operating revenues in this segment decreased $40,000 or 32% to
$86,000 for the first three months of 2002 compared to $126,000 for the same
period in 2001. CO2 gas is often used as an injectant in secondary and tertiary
recovery processes in the oil and gas industry. The decline in oil prices
beginning in late 2000 and continuing throughout 2001 resulted in a decline in
the demand for CO2 gas for tertiary recovery. This was reflected in the
decreased revenue for the paid volumes to the Company's interest.
e-Commerce
The Company's startup company involved in the development of a secure
Internet purchasing system incurred an operating loss of $36,000 for the first
quarter of 2002 versus an operating loss of $51,000 in the prior year quarter.
The segment had no revenues in either the first quarter of 2001 or 2000. The
reduced loss reflects starpay's shift in focus from the development of its
technology to concentrate on developing licensing arrangements and other fee
based arrangements with companies implementing technology in conflict with
starpay's intellectual property.
Other activities
Other operations, consisting primarily of general and corporate activities,
generated a $6,000 smaller operating loss for the first quarter of 2002 as
compared to the same period last year.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses ("SG&A") in the
current quarter decreased to $253,000 from $290,000 in the 2001 first quarter.
The primary reason for this was a $16,000 decrease in SG&A expenses incurred by
the e-Commerce Segment in the first quarter of 2002 compared to the same period
in 2001 as starpay shifted its focus from the development of its technology to
concentrate on developing licensing agreements and other fee based arrangements
with companies implementing technology in conflict with its intellectual
property. In addition, the Coal Segment incurred $13,000 less in SG&A costs in
the first quarter of 2002 compared to the same period in 2001 as the segment
reduced legal fees and travel costs in its pursuit of projects for its
technology.
Depreciation, depletion and amortization expenses
DD&A expense for the first quarter of 2002 was unchanged from the prior
year's first quarter.
Other income and expenses
The other income and expenses for the first quarter of 2002 netted to a
loss of $62,000 compared to a loss of $38,000 for the same period in 2001.
Interest income was down $14,000 for the first quarter of 2002 compared to the
same period in 2001. Interest expense was $28,000 higher as a result of the
increase in debt, primarily to a related party. The Company realized a gain on
sale of assets for the three months ended March 31, 2002 of $9,000 compared to
$17,000 for the prior year quarter.
The Company's equity in the operations of unconsolidated affiliates was a
loss of $31,000 for the first quarter of 2002 compared to a loss of $57,000 for
the same period in 2001. The Company's equity in the earnings of Cibola
increased $11,000 from $31,000 for the first quarter of 2001 to $42,000 for the
same period in 2002 reflecting Cibola's improvement in operating results. The
Company's equity in the operating losses of its affiliate in China was $73,000
for the first quarter of 2002 compared to $88,000 for the three months ended
March 31, 2001.
Income taxes
The Company recorded refunds of $41,000 and $19,000 for federal and state
income taxes, respectively, in the first quarter of 2001. The Company recorded
no provision for taxes in the first quarter of 2002. The Company has not
recorded any financial benefit attributable to its various tax carryforwards due
to uncertainty regarding their utilization and realization.
Discontinued operations
ITF Segment
In 1999 the Company's Board of Directors adopted a formal plan to
discontinue its interstate travel facilities ("ITF") Segment and recorded a
$1,603,000 estimated loss for the discontinuance in 1998. ITF disposed of a
majority of its assets in 1999, retaining two convenience stores ("C-stores"),
including their equipment and inventory, and Beard became 100% owner of ITF.
Beard recorded an additional $420,000 loss in 2000; $60,000 represented
operating losses expected to be incurred by the discontinued ITF Segment prior
to the anticipated disposal date of the remaining assets; $360,000 represented
an additional reduction in the estimated realizable value of the remaining
C-stores and related assets as of December 31, 2000. ITF's revenues and actual
operating losses were $7,000 and $31,000, respectively, for the three months
ended March 31, 2001. The actual losses for the three months ended March 31,
2001 were charged against the loss accrual recorded in the fourth quarter of
2000.
In December 2001, Beard recorded an additional $100,000 impairment in the
carrying value of the facilities and $14,000 for anticipated operating losses
for the period from December 31, 2001 through the expected disposal date of the
remaining assets. ITF recorded no revenues for the three months ended March 31,
2002 and incurred $4,000 of losses for the same period which were charged
against the loss accrual recorded in 2001. Included in this loss was a $2,000
gain on the sale of equipment.
As of March 31, 2002, the significant assets related to the ITF Segment
consisted primarily of the two remaining C-stores with a total recorded value of
$409,000. The significant liabilities of the segment consisted of trade accounts
payable and accrued expenses totaling $14,000. Beard is actively seeking
opportunities to sell the remaining C-stores and expects them to be sold by
December 31, 2002.
BE/IM Segment
In 1999 the Management Committee of North American Brine Resources ("NABR")
adopted a formal plan to discontinue the business and dispose of its assets.
Beard had a 40% ownership in NABR, which was accounted for under the equity
method. As a result, Beard's share of NABR's operating results have been
reported as discontinued for all periods presented in the accompanying
statements of operations. The joint venture was dissolved in September 2000 and
the Japanese partners received their final distribution of cash in December
2000, with the Company taking over the remaining assets and liabilities.
In 1999 Beard recorded a $540,000 loss, which represented its share of
NABR's $1,350,000 estimated loss from the discontinuation of operations. NABR's
loss included $572,000 of anticipated operating losses through April 2000 (the
date operations ceased for the larger of its two plants) and costs of ceasing
operations. NABR's revenues for the smaller of the two plants were $77,000 and
none for the three months ended March 31, 2002 and 2001, respectively. NABR's
operating losses for the three months ended March 31, 2002 and 2001 were $37,000
and $24,000, respectively, and were not anticipated in the loss accruals
recorded in 1999. NABR charged $2,000 and $31,000 for the three months ended
March 31, 2002 and 2001, respectively, against the accrual for anticipated
expenses related to the shutdown of the larger of its two plants.
As of March 31, 2002, the significant assets related to NABR's operations
consisted primarily of equipment and inventory with estimated net realizable
values of $68,000 and $20,000 respectively. The significant liabilities related
to NABR's operations consisted primarily of accounts payable of $15,000 and
accrued expenses related to the shutdown of operations totaling $151,000. The
Company is actively pursuing opportunities to sell NABR's assets and expects the
disposition to be completed by December 31, 2002.
WS Segment
In May 2001 the fixed assets of the 50%-owned company (accounted for as an
equity investment) involved in natural gas well testing operations for the
Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject to a
holdback of $150,000. The Company received $21,000 and $65,000 of the holdback
in June and November, respectively, of 2001. As a result of the sale all debt of
the 50%-owned company was retired and the Company was relieved of contingent
liabilities totaling $512,000. In August 2001 the Company made the decision to
cease pursuing opportunities in Mexico and the WS Segment was discontinued. In
December 2001 all of the sand separators owned by the 100%-owned company in the
WS Segment were sold for $100,000. The Company is now pursuing the sale of all
remaining equipment owned by the segment.
The segment recorded no revenues for either the first quarter of 2002 or
2001. Beard's share of operating losses from the discontinued segment were
$11,000 and $269,000 for the three months ended March 31, 2002 and 2001
respectively. The loss for the first quarter of 2002 included gains on sales of
equipment totaling $36,000. For the first quarter of 2001, Beard's share of
operating losses from the 50%-owned company were $238,000, including a $100,000
provision for estimated losses from the discontinuation of operations. The
remaining $31,000 of losses incurred in the three months ended March 31, 2001
were associated with the operations of the wholly-owned company and were not
anticipated in the loss accrual.
As of March 31, 2002, the significant assets of the WS Segment consisted of
fixed assets with a recorded value of $144,000 and cash and accounts receivable
totaling of $45,000. The significant liabilities of the segment consisted of
trade accounts payable and accrued expenses totaling $60,000. It is anticipated
that all liabilities of the segment will be paid prior to December 31, 2002.
ER Segment
In March of 2001 the Company determined that it would no longer provide
financial support to ISITOP, Inc., an 80%-owned subsidiary whose operations had
previously comprised the Company's environmental remediation ("ER") Segment. In
May 2001 ISITOP was notified that the segment's exclusive U.S. marketing license
for the chemical used for PAH remediation had been cancelled, and the segment
was discontinued. ISITOP generated no revenues in 2002 or in 2001. ISITOP's
operating losses totaled none and $17,000 for the three months ended March 31,
2002 and 2001,respectively. ISITOP had no significant assets or liabilities at
March 31, 2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
At March 31, 2002, the Company had notes receivable of $272,000 and
long-term debt of $3,247,000. The notes receivable and long-term debt with a
principal balance of $2,732,000 have fixed interest rates and therefore, the
Company's interest income and expense and operating results would not be
affected by an increase in market interest rates for these items. The Company's
outstanding bank debt totaling $300,000 floats with the prime rate, and a 10%
increase in market interest rates would have increased the Company's interest
expense by approximately $1,000. At March 31, 2002, a 10% increase in market
interest rates would have reduced the fair value of the Company's notes
receivable by $3,000 and reduced the fair value of its debt by $38,000.
The Company has no other market risk sensitive instruments.
PART II. OTHER INFORMATION.
Item 2. Changes in Securities.
The Company's preferred stock is mandatorily redeemable through December
31, 2002 from one-third of Beard's "consolidated net income" as defined in the
Stock Purchase Agreement. Accordingly, one-third of future "consolidated net
income" will accrete directly to preferred stockholders and reduce earnings per
common share. As a result of these redemption requirements, the payment of any
dividends to the common stockholders in the near future is very unlikely. See
Note 5 to the accompanying financial statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this Form 10-Q and are identified by
the numbers indicated:
2 Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2(a) Agreement and Plan of Reorganization by and among Registrant, Beard
Oil Company ("Beard Oil") and New Beard, Inc., dated as of July 12,
1993 (see Addendum A to Part I, which is incorporated herein by
reference; schedules to the Agreement have been omitted). (This
Exhibit has been previously filed as Exhibit 3(b), filed on July 27,
1993 to Registrant's Registration Statement on Form S-4, File No.
33-66598, and same is incorporated herein by reference).
2(b) Agreement and Plan of Merger by and between The Beard Company and The
New Beard Company, dated as of 2(b) September 16, 1997. (This Exhibit
has been previously filed as Exhibit B to Registrant's Proxy Statement
filed on September 12, 1997, and same is incorporated herein by
reference).
2(c) Certificate of Merger merging The Beard Company into The New Beard
Company as filed with the Secretary of State of Oklahoma on November
26, 1997. (This Exhibit has been previously filed as Exhibit 2.1 to
Registrant's Form 8-K, filed on December 8, 1997, and same is
incorporated herein by reference).
3(i) Certificate of Incorporation of The New Beard Company as filed with
the Secretary of State of Oklahoma on September 11, 1997. (This
Exhibit has been previously filed as Exhibit C to Registrant's Proxy
Statement filed on September 12, 1997, and same is incorporated herein
by reference).
3(ii) Registrant's By-Laws as currently in effect. (This Exhibit has been
previously filed as Exhibit 3(ii) to Registrant's Form 10-K for the
period ended December 31, 1997, filed on March 31, 1998, and same is
incorporated herein by reference).
4 Instruments defining the rights of security holders:
4(a) Certificate of Designations, Powers, Preferences and Relative,
Participating, Option and Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof of the Series A
Convertible Voting Preferred Stock of the Registrant. (This Exhibit
has been previously filed as Exhibit 3(c) to Amendment No. 2, filed on
September 17, 1993 to Registrant's Registration Statement on Form S-4,
File No. 33-66598, and same is incorporated herein by reference).
4(b) Settlement Agreement, with Certificate of Amendment attached thereto,
by and among Registrant, Beard Oil, New York Life Insurance Company,
New York Life Insurance and Annuity Company, John Hancock Mutual Life
Insurance Company, Memorial Drive Trust and Sensor, dated as of April
13, 1995. (This Exhibit has been previously filed as Exhibit 4(g) to
Registrant's Form 10-K for the period ended December 31, 1994 and same
is incorporated herein by reference).
10 Material contracts:
10(a) Amendment No. One to The Beard Company 1993 Stock Option Plan dated
August 27, 1993, as amended June 4, 1998. (The Amended Plan supersedes
the original Plan adopted on August 27, 1993. This Exhibit has
previously been filed as Exhibit A, filed on April 30, 1998 to
Registrant's Proxy Statement dated April 30, 1998, and same is
incorporated herein by reference).*
10(b) Form of Indemnification Agreement dated December 15, 1994, by and
between Registrant and eight directors. (This Exhibit has been
previously filed as Exhibit 10(b) to Registrant's Form 10-K for the
period ended December 31, 2000, filed on April 2, 2001, and same is
incorporated herein by reference).
10(c) The Beard Company 1994 Phantom Stock Units Plan as amended effective
October 23, 1997. (This Exhibit has been previously filed as Exhibit
10(b) to Registrant's Form 10-K for the period ended December 31,
1999, filed on April 14, 2000, and same is incorporated herein by
reference).*
10(d) Amendment No. Three to The Beard Company Deferred Stock Compensation
Plan dated November 1, 1995, as amended October 24, 2001. (The Amended
Plan supersedes the original Plan adopted on June 3, 1996. This
Exhibit has previously been filed as Exhibit 99, filed on April 10,
2002, to Registrant's Registration Statement on Form S-8, File No.
333-85936, and same is incorporated herein by reference).*
10(e) Amended and Restated Nonqualified Stock Option Agreement by and
between Richard D. Neely and ISITOP, Inc. ("ISITOP"), dated November
12, 1998. (This Exhibit has been previously filed as Exhibit 10(g) to
Registrant's Form 10-K for the period ended December 31, 1998, filed
on April 15, 1999, and same is incorporated herein by reference).*
10(f) Amended and Restated Nonqualified Stock Option Agreement by and
between Jerry S. Neely and ISITOP, dated November 12, 1998. (This
Exhibit has been previously filed as Exhibit 10(h) to Registrant's
Form 10-K for the period ended December 31, 1998, filed on April 15,
1999, and same is incorporated herein by reference).*
10(g) Nonqualified Stock Option Agreement by and between Robert A. McDonald
and ISITOP, dated November 12, 1998. (This Exhibit has been
previously filed as Exhibit 10(i) to Registrant's Form 10-K for the
period ended December 31, 1998, filed on April 15, 1999, and same is
incorporated herein by reference).*
10(h) Incentive Stock Option Agreement by and between Philip R. Jamison and
Beard Technologies, Inc. ("BTI"), dated May 18, 1998. (This Exhibit
has been previously filed as Exhibit 10(k) to Registrant's Form 10-K
for the period ended December 31, 1998, filed on April 15, 1999, and
same is incorporated herein by reference).*
10(i) Subscription Agreement by and between Cibola Corporation ("Cibola")
and Registrant, dated April 10, 1996. (This Exhibit has been
previously filed as Exhibit 10.1 to Registrant's Form 10-Q for the
period ended June 30, 1996, filed on August 14, 1996, and same is
incorporated herein by reference).
10(j) Nonrecourse Secured Promissory Note from Registrant to Cibola, dated
April 10, 1996. (This Exhibit has been previously filed as Exhibit
10.2 to Registrant's Form 10-Q for the period ended June 30, 1996,
filed on August 14, 1996, and same is incorporated herein by
reference).
10(k) Security Agreement by and among Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996. (This Exhibit has been previously
filed as Exhibit 10.3 to Registrant's Form 10-Q for the period ended
June 30, 1996, filed on August 14, 1996, and same is incorporated
herein by reference).
10(l) Tax Sharing Agreement by and among Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996. (This Exhibit has been previously
filed as Exhibit 10.4 to Registrant's Form 10-Q for the period ended
June 30, 1996, filed on August 14, 1996, and same is incorporated
herein by reference).
10(m) Guaranty Agreement between Registrant and Oklahoma Bank and Trust
Company, dated as of June 7, 1999. (This Exhibit has been previously
filed as Exhibit 10(bb) to Registrant's Form 10-Q for the period ended
June 30, 1999, filed on August 20, 1999, and same is incorporated
herein by reference).
10(n) Letter Loan Agreement by and between Registrant and The William M.
Beard and Lu Beard 1988 Charitable Unitrust (the " Unitrust") dated
April 3, 2000. (This Exhibit has been previously filed as Exhibit
10(cc) to Registrant's Form 10-K for the period ended December 31,
1999, filed on April 14, 2000, and same is incorporated herein by
reference).
10(o) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated September 1, 2000. (This Exhibit has been previously
filed as Exhibit 10(o) to Registrant's Form 10-Q for the period ended
September 30, 2000, filed on November 20, 2000, and same is
incorporated herein by reference).
10(p) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated March 31, 2001. (This Exhibit has been previously filed
as Exhibit 10(p) to Registrant's Form 10-Q for the period ended March
31, 2001, filed on May 21, 2001, and same is incorporated herein by
reference).
10(q) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated June 30, 2001. (This Exhibit has been previously filed
as Exhibit 10(q) to Registrant's Form 10-Q for the period ended June
30, 2001, filed on August 14, 2001, and same is incorporated herein by
reference).
10(r) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated September 30, 2001. (This Exhibit has been previously
filed as Exhibit 10(r) to Registrant's Form 10-Q for the period ended
September 30, 2001, filed on November 19, 2001, and same is
incorporated herein by reference).
10(s) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated January 15, 2002. (This Exhibit has been previously
filed as Exhibit 10(s) to Registrant's Form 10-K for the period ended
December 31, 2001, filed on April 16, 2002, and same is incorporated
herein by reference).
10(t) Amended Letter Loan Agreement by and between Registrant and the
Unitrust dated February 28, 2002.
10(u) Promissory Note from Registrant to the Trustees of the Unitrust dated
April 3, 2000. (This Exhibit has been previously filed as Exhibit
10(dd) to Registrant's Form 10-K for the period ended December 31,
1999, filed on April 14, 2000, and same is incorporated herein by
reference).
10(v) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated September 1, 2000. (This Exhibit has been previously
filed as Exhibit 10(q) to Registrant's Form 10-Q for the period ended
September 30, 2000, filed on November 20, 2000, and same is
incorporated herein by reference).
10(w) Promissory Note from Registrant to the Trustees of the Unitrust dated
October 20, 2000. (This Exhibit has been previously filed as Exhibit
10(w) to Registrant's Form 10-K for the period ended December 31,
2000, filed on April 2, 2001, and same is incorporated herein by
reference).
10(x) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated March 31, 2001. (This Exhibit has been previously filed
as Exhibit 10(t) to Registrant's Form 10-Q for the period ended March
31, 2001, filed on May 21, 2001, and same is incorporated herein by
reference).
10(y) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated June 30, 2001. (This Exhibit has been previously filed
as Exhibit 10(v) to Registrant's Form 10-Q for the period ended June
30, 2001, filed on August 14, 2001, and same is incorporated herein by
reference).
10(z) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated September 30, 2001. (This Exhibit has been previously
filed as Exhibit 10(x) to Registrant's Form 10-Q for the period ended
September 30, 2001, filed on November 19, 2001, and same is
incorporated herein by reference).
10(aa) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated January 15, 2002. (This Exhibit has been previously
filed as Exhibit 10(z) to Registrant's Form 10-K for the period ended
December 31, 2001, filed on April 16, 2002, and same is incorporated
herein by reference).
10(bb) Renewal Promissory Note from Registrant to the Trustees of the
Unitrust dated February 28, 2002.
10(cc) Promissory Note from Registrant to the Trustee of the William M. Beard
Irrevocable Trust "B" (the "B Trust") dated August 31, 2001. (This
Exhibit has been previously filed as Exhibit 10(y) to Registrant's
Form 10-Q for the period ended September 30, 2001, filed on November
19, 2001, and same is incorporated herein by reference).
10(dd) Promissory Note from Registrant to the Trustee of the William M. Beard
Irrevocable Trust "C" (the "C Trust") dated August 31, 2001. (This
Exhibit has been previously filed as Exhibit 10(z) to Registrant's
Form 10-Q for the period ended September 30, 2001, filed on November
19, 2001, and same is incorporated herein by reference).
10(ee) Promissory Note from Registrant to B & M Limited, a General
Partnership ("B&M") dated August 31, 2001. (This Exhibit has been
previously filed as Exhibit 10(aa) to Registrant's Form 10-Q for the
period ended September 30, 2001, filed on November 19, 2001, and same
is incorporated herein by reference).
10(ff) Promissory Note from Registrant to Bank of Oklahoma, N.A. ("BOK")
dated August 30, 2000. (This Exhibit has been previously filed as
Exhibit 10(r) to Registrant's Form 10-Q for the period ended September
30, 2000, filed on November 20, 2000, and same is incorporated herein
by reference).
10(gg) Extension Promissory Note from Registrant to BOK dated September 30,
2000. (This Exhibit has been previously filed as Exhibit 10(s) to
Registrant's Form 10-Q for the period ended September 30, 2000, filed
on November 20, 2000, and same is incorporated herein by reference).
10(hh) Extension Promissory Note from Registrant to BOK dated March 15, 2001.
(This Exhibit has been previously filed as Exhibit 10(w) to
Registrant's Form 10-Q for the period ended March 31, 2001, filed on
May 21, 2001, and same is incorporated herein by reference).
10(ii) Extension Promissory Note from Registrant to BOK dated June 30, 2001.
(This Exhibit has been previously filed as Exhibit 10(z) to
Registrant's Form 10-Q for the period ended June 30, 2001, filed on
August 14, 2001, and same is incorporated herein by reference).
10(jj) Guaranty Agreement between the Unitrust and BOK dated August 30, 2000.
(This Exhibit has been previously filed as Exhibit 10(t) to
Registrant's Form 10-Q for the period ended September 30, 2000, filed
on November 20, 2000, and same is incorporated herein by reference).
10(kk) Guaranty Agreement between W. M. Beard and BOK dated August 30, 2000.
(This Exhibit has been previously filed as Exhibit 10(u) to
Registrant's Form 10-Q for the period ended September 30, 2000, filed
on November 20, 2000, and same is incorporated herein by reference).
10(ll) Asset Purchase and Sale Agreement among Testco Inc. de Mexico, S.A. de
C.V. and ITS-Testco, LLC and PD Oilfield Services Mexicana, S. de R.L.
de C.V., dated May 4, 2001. (This Exhibit has been previously filed as
Exhibit 10(z) to Registrant's Form 10-Q for the period ended March 31,
2001, filed on May 21, 2001, and same is incorporated herein by
reference).
10(mm) Asset Purchase and Sale Agreement between ITS-Testco, LLC and
Inter-Tech Drilling Solutions, Inc., dated May 4, 2001. (This Exhibit
has been previously filed as Exhibit 10(aa) to Registrant's Form 10-Q
for the period ended March 31, 2001, filed on May 21, 2001, and same
is incorporated herein by reference).
*Compensatory plan or arrangement.
The Company will furnish to any shareholder a copy of any of the above exhibits
upon the payment of $.25 per page. Any request should be sent to The Beard
Company, Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City,
Oklahoma 73112.
(b) A report on Form 8-K was filed by the Company on March 28, 2002. The
matters reported include recent developments in the Company's Coal, China
and e-Commerce Segments, progress in the McElmo Dome litigation, the
retention of an investment banking firm to handle a private placement of
notes to accredited investors, the effect of recent developments on the
Company's liquidity, and the resignation of a director.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) THE BEARD COMPANY
HERB MEE, JR.
(Date) May 15, 2002 ___________________________________
Herb Mee, Jr., President and
Chief Financial Officer
JACK A. MARTINE
(Date) May 15, 2002 ___________________________________
Jack A. Martine, Controller and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
------- ----------- ----------------
2(a) Agreement and Plan of Reorganization Incorporated herein by reference
by and among Registrant, Beard Oil
Company ("Beard Oil") and New Beard,
Inc., dated as of July 12, 1993 (see
Addendum A to Part I, which is
incorporated herein by reference;
schedules to the Agreement have been
omitted).
2(b) Agreement and Plan of Merger by and Incorporated herein by reference
between The Beard Company and The New
Beard Company, dated as of 2(b)
September 16, 1997.
2(c) Certificate of Merger merging The Incorporated herein by referencey
Beard Company into The New Beard
Company as filed with the Secretary of
State of Oklahoma on November 26,
1997.
3(i) Certificate of Incorporation of The Incorporated herein by reference
New Beard Company as filed with the
Secretary of State of Oklahoma on
September 11, 1997.
3(ii) Registrant's By-Laws as currently in Incorporated herein by reference
effect.
4(a) Certificate of Designations, Powers, Incorporated herein by reference
Preferences and Relative,
Participating, Option and Other
Special Rights, and the
Qualifications, Limitations or
Restrictions Thereof of the Series A
Convertible Voting Preferred Stock of
the Registrant.
4(b) Settlement Agreement, with Certificate Incorporated herein by reference
of Amendment attached thereto, by and
among Registrant, Beard Oil, New York
Life Insurance Company, New York Life
Insurance and Annuity Company, John
Hancock Mutual Life Insurance Company,
Memorial Drive Trust and Sensor, dated
as of April 13, 1995.
10(a) Amendment No. One to The Beard Company Incorporated herein by reference
1993 Stock Option Plan dated August
27, 1993, as amended June 4, 1998.
(The Amended Plan supersedes the
original Plan adopted on August 27,
1993.)
10(b) Form of Indemnification Agreement Incorporated herein by reference
dated December 15, 1994, by and
between Registrant and eight
directors.
10(c) The Beard Company 1994 Phantom Stock Incorporated herein by reference
Units Plan as amended effective
October 23, 1997.
10(d) Amendment No. Three to The Beard Incorporated herein by reference
Company Deferred Stock Compensation
Plan dated November 1, 1995, as
amended October 24, 2001. (The Amended
Plan supersedes the original Plan
adopted on June 3, 1996.)
10(e) Amended and Restated Nonqualified Incorporated herein by reference
Stock Option Agreement by and between
Richard D. Neely and ISITOP, Inc.
("ISITOP"), dated November 12, 1998.
10(f) Amended and Restated Nonqualified Incorporated herein by reference
Stock Option Agreement by and between
Jerry S. Neely and ISITOP, dated
November 12, 1998.
10(g) Nonqualified Stock Option Agreement by Incorporated herein by reference
and between Robert A. McDonald and
ISITOP, dated November 12, 1998.
10(h) Incentive Stock Option Agreement by Incorporated herein by reference
and between Philip R. Jamison and
Beard Technologies, Inc. ("BTI"),
dated May 18, 1998.
10(i) Subscription Agreement by and between Incorporated herein by reference
Cibola Corporation ("Cibola") and
Registrant, dated April 10, 1996.
10(j) Nonrecourse Secured Promissory Note Incorporated herein by reference
from Registrant to Cibola, dated April
10, 1996.
10(k) Security Agreement by and among Incorporated herein by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(l) Tax Sharing Agreement by and among Incorporated herein by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(m) Guaranty Agreement between Registrant Incorporated herein by reference
and Oklahoma Bank and Trust Company,
dated as of June 7, 1999.
10(n) Letter Loan Agreement by and between Incorporated herein by reference
Registrant and The William M. Beard
and Lu Beard 1988 Charitable Unitrust
(the "Unitrust") dated April 3, 2000.
10(o) Amended Letter Loan Agreement by and Incorporated herein by reference
between Registrant and the Unitrust
dated September 1, 2000.
10(p) Amended Letter Loan Agreement by and Incorporated herein by reference
between Registrant and the Unitrust
dated March 31, 2001.
10(q) Amended Letter Loan Agreement by and Incorporated herein by reference
between Registrant and the Unitrust
dated June 30, 2001.
10(r) Amended Letter Loan Agreement by and Incorporated herein by reference
between Registrant and the Unitrust
dated September 30, 2001.
10(s) Amended Letter Loan Agreement by and Incorporated herein by reference
between Registrant and the Unitrust
dated January 15, 2002.
10(t) Amended Letter Loan Agreement by and Filed herewith electronically
between Registrant and the Unitrust
dated February 28, 2002.
10(u) Promissory Note from Registrant to the Incorporated herein by reference
Trustees of the Unitrust dated April
3, 2000.
10(v) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of the
Unitrust dated September 1, 2000.
10(w) Promissory Note from Registrant to the Incorporated herein by reference
Trustees of the Unitrust dated October
20, 2000.
10(x) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of the
Unitrust dated March 31, 2001.
10(y) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of the
Unitrust dated June 30, 2001.
10(z) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of the
Unitrust dated September 30, 2001.
10(aa) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of the
Unitrust dated January 15, 2002.
10(bb) Renewal Promissory Note from Filed herewith electronically
Registrant to the Trustees of the
Unitrust dated February 28, 2002.
10(cc) Promissory Note from Registrant to the Incorporated herein by reference
Trustee of the William M. Beard
Irrevocable Trust "B" (the "B Trust")
dated August 31, 2001.
10(dd) Promissory Note from Registrant to the Incorporated herein by reference
Trustee of the William M. Beard
Irrevocable Trust "C" (the "C Trust")
dated August 31, 2001.
10(ee) Promissory Note from Registrant to B & Incorporated herein by reference
M Limited, a General Partnership
("B&M") dated August 31, 2001.
10(ff) Promissory Note from Registrant to Incorporated herein by reference
Bank of Oklahoma, N.A. ("BOK") dated
August 30, 2000.
10(gg) Extension Promissory Note from Incorporated herein by reference
Registrant to BOK dated September 30,
2000.
10(hh) Extension Promissory Note from Incorporated herein by reference
Registrant to BOK dated March 15,
2001.
10(ii) Extension Promissory Note from Incorporated herein by reference
Registrant to BOK dated June 30, 2001.
10(jj) Guaranty Agreement between the Incorporated herein by reference
Unitrust and BOK dated August 30,
2000.
10(kk) Guaranty Agreement between W. M. Beard Incorporated herein by reference
and BOK dated August 30, 2000.
10(ll) Asset Purchase and Sale Agreement Incorporated herein by reference
among Testco Inc. de Mexico, S.A. de
C.V. and ITS-Testco, LLC and PD
Oilfield Services Mexicana, S. de R.L.
de C.V., dated May 4, 2001.
10(mm) Asset Purchase and Sale Agreement Incorporated herein by reference
between ITS-Testco, LLC and Inter-Tech
Drilling Solutions, Inc., dated May 4,
2001.